Q2 2024 Equity Residential Earnings Call

Operator: Good day and welcome to the Equity Residential Second Quarter 2024 Earnings Conference Call-In Today's conference, At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Unknown Executive: Good day and welcome to the Equity Residential second quarter 2024 earnings conference call webcast. Today's conference is being recorded.

Good day and welcome to the equity residential second quarter 2024 earnings Conference call and webcast. Today's conference is being recorded at this time I would like to turn the conference over to Marty Mckenna. Please go ahead.

Martin McKenna: At this time, I would like to turn the conference over to Marty McKenna. Please go ahead. Good morning, and thanks for joining us to discuss Equity Residential second quarter 2024 results.

Martin J. McKenna: Good morning, and thanks for joining us to discuss Equity Residential's second quarter 2024 results. Our featured speakers today are Mark Parrell, our President and CEO, Michael Manelis, our Chief Operating Officer, and Bob Garechana, our Chief Financial Officer. Alec Brackenridge, our Chief Investment Officer, is here with us as well for the Q&A. Our earnings release is posted in the investor section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.

Good morning, and thanks for joining us to discuss equity residential second quarter 2024 results. Our featured speakers today are Mark <unk>, our president and CEO, Michael <unk>, Our Chief operating officer, and Bob <unk>, Our Chief Financial Officer, Alec Brackenridge, Our Chief investment Officer is here with us as well for the Q&A.

Martin McKenna: Our featured speakers today are Mark Parrell, our President and CEO, Michael Manelis, our Chief Operating Officer, and Bob Garechana, our Chief Financial Officer, Alec Brackenridge, our Chief Investment Officer, here with us as well for the Q&A.

Martin McKenna: Our earnings release is posted in the Investor section of equityapartments.com. Please be advised, and certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties.

Speaker Change: Our earnings release is posted in the investors section of equity apartments Dot com. Please be advised that certain matters discussed during this conference call may constitute forward looking statements within the meaning of the federal Securities laws. These forward looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become <unk>.

Martin McKenna: The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.

Mark: True because of subsequent events now I will turn the call over to Mark <unk>.

Martin J. McKenna: Now, I will turn the call over to Mark Parrell. Thank you, Marty. Good morning, and thank you all for joining us today.

Mark Parrell: Now I will turn the call over to Mark Parrell. Thank you, Marty. Good morning, and thank you all for joining us today. I will start us off, and then Michael Manelis, our Chief Operating Officer, will discuss our second quarter 2024 revenue results and outlook, as well as give some recent highlights from what we call our property operations innovation machine. Then, Bob Garechana, our Chief Financial Officer, will discuss our expense results and updated normalized funds from operations guidance, and then we'll take your questions. Looking at our quarterly results, same-store revenues increased 2.9%, and same-store expenses rose only 2.7%, which led to same-store NOI growth of 3%, and an increase in our NFFO per share of 3.2%.

Mark J. Parrell: I will start us off, and then Michael Manelis, our Chief Operating Officer, will discuss our second quarter 2020 revenue results and outlook, as well as give some recent highlights from what we call our property operations innovation machine. And then Bob Garechana, our Chief Financial Officer, will discuss our expense results and updated normalized funds from operations guidance. And then we'll take your questions.

Mark: Thank you Marty good morning, and thank you all for joining US today, I will start to soften and Michael <unk>, Our Chief operating officer will discuss our second quarter 2024 revenue results and outlook as well as give some recent highlights from what we call our property operations innovation machine and then Bob <unk>, Our Chief Financial Officer will discuss our <unk>.

Mark: <unk> results and updated normalized funds from operations guidance and then we'll take your questions.

Mark J. Parrell: Looking at our quarterly results, same store revenues increased 2.9%, and same store expenses rose only 2.7%, which led to same store NOI growth of 3% and an increase in our NFFO per share of 3.2%. So far this year, our revenue performance has exceeded expectations, as steady demand across all of our markets has met limited supply in our coastal established markets. As a reminder, approximately 94% of our NOI comes from our coastal established market.

Speaker Change: Looking at our quarterly results same store revenues increased two 9% and same store expenses rose only two 7%, which led the same store NOI growth of 3% and an increase in our <unk> per share of three 2%. So far this year, our revenue performance has exceeded expectations as Steph.

Mark Parrell: So far this year, our revenue performance has exceeded expectations as steady demand across all of our markets has met limited supply in our coastal established markets. As a reminder, approximately 94% of our NOI comes from our coastal established markets. Michael will get into the details shortly, but the northeastern markets of Boston, New York, and Washington, D.C., as well as Seattle, are our standouts relative to our expectations back in January. Our expansion markets of Atlanta, Austin, Dallas, Fort Worth, and Denver, which together constitute 6% of our NOI, continue to have good demand but remain under pressure from continuing high levels of supply, with our Atlanta and Austin portfolios most impacted.

Speaker Change: Demand across all of our markets is met limited supply in our coastal established markets. As a reminder, approximately 94% of our NOI comes from our coastal established markets Michael will get into the detail shortly but the northeastern markets of Boston, New York, and Washington D C as well as Seattle, our standouts relative.

Mark J. Parrell: Michael will get into the details shortly, but the northeastern markets of Boston, New York, and Washington, D.C., as well as Seattle, are standouts relative to our expectations back in January. Our expansion markets of Atlanta, Austin, Dallas, Fort Worth, and Denver, which together constitute 6% of our NOI, continue to have good demand but remain under pressure from continuing high levels of supply, with our Atlanta and Austin portfolios most impacted. Putting all of this together, this led us to increase our same store revenue guidance by 70 basis points at the midpoint to 3.2%.

Michael: To our expectations back in January.

Michael: Our expansion markets of Atlanta, Austin, Dallas Fort worth in Denver, which together constitute 6% of our NOI continue to have good demand, but remain under pressure from continuing high levels of supply with our Atlanta and Austin portfolios most impacted.

Mark Parrell: Putting all of this in the blender, this led us to increase our same-store revenue guidance by 70 basis points at the midpoint to 3.2%. Underlying these positive results and outlook are several trends that continue to support rental housing performance, including high homeownership costs, limited for-sale inventory, and a steady, though moderating employment picture. We continue to see high levels of retention among our residents due to elevated homeownership costs, with homeownership costs hitting record levels last month, making rental housing a good value alternative. We also see a steady employment picture in our target higher-earning-renor demographic, leading to sustained good levels of demand.

Michael: Putting all of this in a blender this led us to increase our same store revenue guidance by 70 basis points at the midpoint to three 2%.

Mark J. Parrell: Underlying these positive results and outlook are several trends that continue to support rental housing performance, including high home ownership costs, limited for sale inventory, and a steady though moderating employment picture. We continue to see high levels of retention among our residents due to elevated homeownership costs, with homeownership costs hitting record levels last month, making rental housing a good value alternative. We also see a steady employment picture in our target higher earning renter demographic, leading to sustain good levels of demand.

Michael: Underlying these positive results and outlook are several trends that continue to support rental housing performance, including high homeownership costs limited for sale inventory in a steady, though moderating employment picture, we continue to see high levels of retention among our residents due to elevated homeownership costs with homeownership crossing.

Michael: Our record levels last month, making rental housing a good value alternative we also see a steady employment picture in our target higher earning renter demographic leading to sustained good levels of demand in the second quarter. We saw a continuation of total employment growth across nearly all of our markets.

Mark J. Parrell: In the second quarter, we saw a continuation of total employment growth across nearly all of our markets. Drilling down to office-using employment, we saw a return to positive growth in Q2 for the first time in several quarters, with strong numbers posted by Washington, D.C., Los Angeles, and Atlanta. And, of course, lifestyle factors like delayed marriage and childbearing, which we've talked about on prior calls, continue to be positive factors. The expense side of the equation is similarly positive news as we continue to utilize our sector-leading innovation machine to drive improvements in both our cost structure and our resident service experience.

Mark Parrell: In the second quarter, we saw a continuation of total employment growth across nearly all of our markets. Drilling down the office using employment, we saw a return to positive growth in Q2 for the first time in several quarters, with strong numbers posted by Washington, D.C., Los Angeles, and Atlanta. And, of course, lifestyle factors like delayed marriage and child bearing, which we've talked about on prior calls, continue to be a positive effect.

Michael: Drilling down the office using employment, we saw a return to positive growth in Q2 for the first time in several quarters with strong numbers posted by Washington, DC, Los Angeles, and Atlanta and of course lifestyle factors like delayed marriage in childbearing, which we've talked about on prior calls continue to be a positive factor.

Mark Parrell: Director. The expense side of the equation is similarly positive news as we continue to utilize our sector-leading innovation machine to drive improvements in both our cost structure and our resident service experience. We lowered the same store expense midpoint of our annual guidance by a full percentage point to 3%, leading to a new same store NOI guidance midpoint of 3.25% for the year, which is 145 basis points better than our prior midpoint.

Michael: <unk>.

The expense side of the equation is similarly positive news as we continue to utilize our sector, leading innovation machine to drive improvements in both our cost structure and our resident service experience, we lowered the same store expense midpoint.

Mark J. Parrell: We lowered the same store expense midpoint of our annual guidance by a full percentage point to 3%, leading to a new same-store NOI guidance midpoint of 3 points, 2.5% for the year, which is 145 basis points better than our prior midpoint. My appreciation to all my outstanding on-site and corporate colleagues, their hard work and dedication to our customers and to supporting each other.

Michael: Of our annual guidance by a full percentage point to 3% leading to a new same store NOI guidance midpoint of $3 two 5% for the year, which is a 145 basis points better than our prior midpoint.

Mark Parrell: My appreciation to all my outstanding on-site and corporate colleagues, their hard work and dedication to our customers and to supporting each other. Switching to capital allocation, we are seeing more transaction activity as the interest rate climate stabilizes and sellers and buyers' cap rate expectations coalesce around 5%. Transaction volumes in our markets in the second quarter of 2024 was almost triple what it was in the first quarter and double what it was in the second quarter of 2023. As you saw in our release during the second quarter, we acquired one property in suburban Boston, and subsequent to the end of the quarter, we acquired a property in Atlanta and one in Dallas.

Speaker Change: My appreciation to all my outstanding onsite and corporate colleagues their hard work and dedication of our customers and to supporting each other.

Mark J. Parrell: Switching to capital allocation, we are seeing more transaction activity as the interest rate climate stabilizes and sellers and buyers cap rate expectations coalesce around 5%. Transaction volumes in our markets in the second quarter of 2024 were almost triple what they were in the first quarter and double what they were in the second quarter of 2023. As you saw in our release, during the second quarter, we acquired one property in suburban Boston, and subsequent to the end of the quarter, we acquired a property in Atlanta and one in Dallas.

Speaker Change: Switching to capital allocation, we are seeing more transaction activity as the interest rate climate stabilizes and sellers and buyers cap rate expectations coalesce around 5%.

Speaker Change: Transaction volumes in our markets in the second quarter of 2024 was almost triple what it was in the first quarter and double what it was in the second quarter of 2023 as.

Alex: As you saw on our release during the second quarter, we acquired one property in suburban Boston and subsequent to the end of the quarter, we acquired a property in Atlanta and one in Dallas, Alex <unk>, Our Chief investment Officer is here to answer your specific questions in a moment, but generally speaking we are buying recently built properties in our expansion markets.

Mark J. Parrell: Alec Brackenridge, our Chief Investment Officer, is here to answer your specific questions in a moment. But, generally speaking, we are buying recently built properties in our expansion markets at a basis that compares well to replacement costs and underwriting a 5% forward cap rate with our pro forma assuming further degradation of rents, but also assuming the benefits in year one of our more focused delinquency and vacancy management processes. In year two, as we get the acquired properties fully integrated into our superior operating platform, we are assuming that we can pod the acquired properties with our other nearby properties as we obtain scale in these markets and efficiently share employees across properties as we do in our coastal established markets.

Mark Parrell: Alec Brackenridge, our chief investment officer, is here to answer your specific questions in a moment, but generally speaking, we are buying recently built properties in our expansion markets at a basis that compares well to replacement costs and underwriting a 5% forward cap rate with our pro forma, assuming further degradation of rents, but also assuming the benefits in year 1 of our more focused delinquency and vacancy management processes. In year 2, as we get the acquired properties fully integrated into our superior operating platform, we are assuming that we can pod the acquired properties with our other nearby properties as we obtain scale in these markets and efficiently share employees across properties as we do in our coastal established markets.

Alex: At a basis that compares well to replacement cost and underwriting a 5% forward cap rate with our pro forma assuming further degradation of rents, but also assuming the benefits in year, one of our more focused delinquency and vacancy management processes and.

Alex: In year, two as we get to the acquired property is fully integrated into our superior operating platform. We are assuming that we can pod the acquired properties with our other nearby properties as we obtain scale in these markets and efficiently share employees across properties as we do on our coastal established markets, while we acknowledge the current.

Mark Parrell: While we acknowledge that current rent levels are weak in these expansion markets and likely the remains shown in the near term, in the longer term, we see relief on the way that starts in these oversupplied markets have collapsed, and deliveries in 2026 and in 2027 are likely to be much lower than both current levels and historical levels. These expected lower supply levels underpin our property acquisition underwriting in outer years where we expect a significant rental rate recovery. We are excited to acquire these properties at a basis that we see as highly favorable and add properties with strong cash flow growth prospects once supply levels normalize in a few years.

Mark J. Parrell: While we acknowledge that current rent levels are weak in these expansion markets and likely to remain so in the near term, in the longer term, we see relief on the way that starts when these oversupplied markets have collapsed, and deliveries in 2026 and in 2027 are likely to be much lower than both current levels and historical levels. These expected lower supply levels underpin our property acquisition underwriting in outer years, where we expect a significant rental rate recovery.

Rent levels are weak in these expansion markets and likely to remain so in the near term and the longer term, we see relief on the way and it starts in these oversupplied markets have collapsed and deliveries in 2026 and in 2027 are likely to be much lower than both current levels and historical levels.

Alex: These expected lower supply levels underpin our property acquisition underwriting in outer years, where we expect a significant rental rate recovery.

Mark J. Parrell: We are excited to acquire these properties at a basis that we see as highly favorable and add properties with strong cash flow growth prospects once supply levels normalize in a few years. The entire equity team also looks forward to demonstrating our core competencies of smartly acquiring and efficiently integrating new acquisitions. And with that, I'll turn the call over to Michael Manelis. Thanks, Mark. And thanks to everyone for joining us today.

Speaker Change: We are excited to acquire these properties at a basis that we see as highly favorable and add properties with strong cash flow growth prospects once supply levels normalize in a few years the entire equity team also looks forward to demonstrating our core competencies of smartly acquiring and efficiently integrating new acquisitions and with <unk>.

Mark Parrell: The entire equity team also looks forward to demonstrating our core competencies of smartly acquiring and efficiently integrating new acquisitions.

Michael Manelis: And with that, I'll turn the call over to Michael Manellus. Thanks, Mark, and thanks to everyone for joining us today. This morning, I will review our second quarter 2024 operating performance, as well as provide some highlights of our increased same-store operating guidance. As you saw in our release, our overall operating fundamental will remain healthy, driven by good demand across our portfolio and a strong renewal process that resulted in low resident turnover and strong occupancy of 96.4% for the quarter. As Mark mentioned, we are benefiting from what we see as a solid job picture across the country, keeping our residents well-employed with growing wages, as well as very little competitive new supply in our established markets.

Speaker Change: That I will turn the call over to Michael <unk>.

Michael L. Manelis: This morning, I will review our second quarter 2024 operating performance as well as provide some highlights of our increased same store operating guidance. As you saw in our release, our overall operating fundamentals remain healthy, driven by good demand across our portfolio and a strong renewal process that resulted in low resident turnover and strong occupancy of 96.4% for the quarter. As Mark mentioned, we are benefiting from what we see as a solid job picture across the country, keeping our residents well employed with growing wages, as well as very little competitive new supply in our established market.

Michael: Thanks, Mark and thanks to everyone for joining US today. This morning, I will review, our second quarter 2024 operating performance well provide some highlights of our increased same store operating guidance.

Michael: You saw in our release, our overall operating fundamentals remain healthy driven by good demand across our portfolio and a strong renewal process that resulted in low resident turnover and strong occupancy of 96, 4% for the quarter.

Michael: As Mark mentioned, we are benefiting from what we see is a solid job picture across the country, keeping our residents well employed with growing wages as well as very little competitive new supply in our established markets. The rent to income ratio on new move ins during the quarter remained stable at around 20% not surprisingly we are also.

Michael Manelis: The rent income ratio on new movements during the quarter remains stable at around 20%. Not surprisingly, we are also benefiting from a very low percent of our residents moving out to buy homes. About 7.5% of our moveouts gave bought home as the reason. This is the lowest number we have seen in any given quarter. That, along with the benefits of our centralized renewal process, has made our year-to-date results on renewals, both in terms of the volume of residents renewing and the achieved renewal rate increases, a key driver to our outperformance. As has been the case for a while now, our East Coast markets are the best performers, with occupancies around 97%.

Michael L. Manelis: The rent-to-income ratio on new move-ins during the quarter remains stable at around 20%. Not surprisingly, we are also benefiting from a very low percent of our residents moving out to buy homes. About 7.5% of our move-outs bought homes as the reason. This is the lowest number we have seen in any given quarter.

Speaker Change: Benefiting from a very low percent of residents moving out to buy homes about 75% of our move outs gave bought home as the reason. This is the lowest number we have seen in any given quarter.

Michael L. Manelis: That, along with the benefits of our centralized renewal process, has made our year-to-date results on renewals, both in terms of the volume of residents renewing and the achieved renewal rate increases, a key driver of our outperformance. As has been the case for a while now, our East Coast markets are the best performers, with occupancies around 97%. On the West Coast, Seattle is performing particularly well, and San Francisco is showing improvement, but not quite at the pace of Seattle.

Speaker Change: That along with the benefits of our centralized renewal process has made our year to date results on renewals. Both in terms of the volume of residents renewing and the achieved renewal rate increases a key driver to our outperformance.

Speaker Change: As has been the case for a while now our east coast markets are the best performers with Occupancies around 97% on the West Coast, Seattle is performing particularly well in San Francisco is showing improvement, but not quite at the pace as Seattle.

Michael Manelis: On the West Coast, Seattle is performing particularly well, and San Francisco is showing improvement, but not quite at the pace as Seattle. Our Southern California markets have good demand but are feeling some pressure on pricing. In our expansion markets, we continue to feel the impact of new supply, as expected, but have been able to maintain occupancy at or above 95% given the strong demand in those markets. Overall, we continue to see improvements in the eviction process times as the court systems work through their backlogs, and the number of long-standing delinquent residents continues to decline. This trend continues to support our view that we will see overall improvement in bad debt net contribute 30 basis points to our same-store revenue for the full year.

Michael L. Manelis: Our Southern California markets have good demand but are feeling some pressure on prices. In our expansion markets, we continue to feel the impact of new supply, as expected, but have been able to maintain occupancy at or above 95% given the strong demand in those markets. Overall, we continue to see improvements in the eviction process times as the court systems work through their backlogs, and the number of long-standing delinquent residents continues to decline.

Speaker Change: Our southern California markets have good demand, but are feeling some pressure on pricing.

Speaker Change: In our expansion markets, we continue to feel the impact of new supply as expected, but have been able to maintain occupancy at or above 95% given the strong demand in those markets.

Speaker Change: <unk>, we continue to see improvements in the eviction process times as the court systems work through their backlogs and the number of long standing delinquent residents continued to decline.

Michael L. Manelis: This trend continues to support our view that we will see overall improvement in bad debt net contribute 30 basis points to our same store revenue for the full year. Given all of these trends, we have revised our full year same store revenue guidance midpoint to 3.2%, which includes an assumption of seasonal moderation in both new lease and renewals and a normal decline in occupancy later in the year. Now, a little more color on the individual marks.

Speaker Change: This trend continues to support our view that we will see overall improvement in bad debt net contribute 30 basis points to our same store revenue for the full year.

Michael Manelis: Given all of these trends, we have revised our full year same-store revenue guidance midpoint to 3.2%, which includes an assumption of seasonal moderation in both new lease and renewals, and a normal decline in occupancy later in the year.

Speaker Change: Given all of these trends we have revised our full year same store revenue guidance midpoint to three 2%, which includes an assumption of seasonal moderation in both new lease and renewals and a normal decline in occupancy later in the year.

Michael Manelis: Now a little more color on the individual markets. Starting in Boston, the market is performing in line with our expectations, which assume that it would be one of our best markets in 2024. Occupancy is holding strong amidst the highly seasonal summer leasing months as compared to past years when we often saw declining occupancy as residents churned in and out more frequently. Overall, strong retention in the second quarter, along with continued new lease growth, has positioned us well as we finish the primary leasing season. We are seeing good performance in both our urban and suburban portfolios here, but the urban portfolio produced stronger results in the quarter.

Speaker Change: Now a little more color on the individual markets starting in Boston the market is performing in line with our expectations, which assume that it would be one of the best markets in 2020 for occupancy is holding strong amidst the highly seasonal summer leasing months as compared to past years, when we often saw a declining occupancy.

Michael L. Manelis: Starting in Boston, the market is performing in line with our expectations, which assume that it will be one of our best markets in 2024. Occupancy is holding strong amidst the highly seasonal summer leasing months, as compared to past years when we often saw declining occupancy as residents churned in and out more frequently. Overall, strong retention in the second quarter along with continued new lease growth has positioned us well as we finish the primary leasing. We are seeing good performance in both our urban and suburban portfolios here, but the urban portfolio produced stronger results in the quarter.

Speaker Change: As residents churned in and out more frequently.

Speaker Change: Overall strong retention in the second quarter, along with continued new lease growth has positioned us well as we finished the primary leasing season.

Speaker Change: We're seeing good performance in both our urban and suburban portfolios here, but the urban portfolio produced stronger results in the quarter.

Michael Manelis: The market has a stable employment picture and little new competitive supply being delivered in 2024. New York continues to perform very well. We think this market probably has the best supply-demand dynamics in the country for the next couple of years. We are over 97% occupied, with both new leases and renewals coming in better than expected. Overall, the economy in New York feels healthy, with a solid and increasingly diversified employment base. In fact, the private sector employment in New York is at an all-time high. All indications are that this market will continue to show strength through the remainder of the leasing season.

Michael L. Manelis: The market has a stable employment picture and little new competitive supply being delivered in 2024. New York continues to perform very well. We think this market probably has the best supply and demand dynamics in the country for the next couple of years. We're over 97% occupied, with both new leases and renewals coming in better than expected. Overall, the economy in New York feels healthy, with a solid and increasingly diversified employment base. In fact, private sector employment in New York is at an all-time high.

Speaker Change: The market has a stable employment picture and little new competitive supply being delivered in 2024.

Speaker Change: New York continues to perform very well, we think this market probably has the best supply demand dynamics in the country for the next couple of years, we were over 97% occupied with both new leases and renewals coming in better than expected.

Speaker Change: Overall, the economy in New York feels healthy with a solid and increasingly diversified employment base in fact, the private sector employment in New York is at an all time high.

Speaker Change: All indications are that this market will continue to show strength through the remainder of the leasing season.

Michael L. Manelis: All indications are that this market will continue to show strength through the remainder of the leasing season. Washington, DC, continues to be a real standout performer for us in 2024. The market is over 97% occupied and showing great rental rate growth. Demand feels good across all of our submarkets, and we expect this to continue. But we'll be keeping an eye on new supply deliveries in the back half of the year, as we have felt isolated periods of pressure in the central DC submarket.

Michael Manelis: Washington, D.C. continues to be a real standout performer for us in 2024. The market is over 97% occupied and showing great rental rate growth. The man feels good across all of our submarkets, and we expect this to continue, but we will be keeping an eye on new supply deliveries in the back half of the year, as we have felt isolated periods of pressure in the central D.C. submarket. In Los Angeles, a generally stable employment picture is leading to good demand in the market. Traffic and applications are up, and our second quarter occupancy, while slightly below where we wanted it to be, is up 70 basis points from the second quarter of 2023.

Speaker Change: Washington D. C continues to be a real standout performer for us in 2020 for the market is over 97% occupied and showing great rental rate growth.

Speaker Change: Demand feels good across all of our Submarkets and we expect this to continue but we will be keeping an eye on new supply deliveries in the back half of the year as we have felt isolated periods of pressure in the central DC Submarket.

Michael L. Manelis: In Los Angeles, a generally stable employment picture is leading to good demand in the market. Traffic and applications are up, and our second quarter occupancy, while slightly below where we wanted it to be, is up 70 basis points from the second quarter of 2023. During the quarter, our new lease change was negatively impacted by some concentrated new supply in Hollywood and mid Wilshire, as well as some shadow supply coming into the market in downtown and West L.A. submarkets from eviction.

Speaker Change: In Los Angeles, a generally stable employment picture is leading to good demand in the market traffic and applications are up and our second quarter occupancy while slightly below where we wanted it to be is up 70 basis points from the second quarter of 2023.

Michael Manelis: Thank you. During the quarter, our new lease change was negatively impacted by some concentrated new supply in Hollywood, Midwilshire, as well as some shadow supply coming into the market in downtown and West LA submarkets from evictions. Our suburban deals in Ventura and Santa Clarita, which did not experience this, are leading the pack. We are already seeing marked improvement to the new lease change in the third quarter, but we expect this stat to continue to be volatile as the market works through filling these units. Which remains a catalyst to our revenue growth. Rounding out the rest of Southern California, San Diego and Orange County are continuing to see good demand, but we are seeing some price sensitivity, with residents willing to move farther out in these markets for affordability reasons.

Speaker Change: During the quarter, our new lease change was negatively impacted by some concentrated new supply in Hollywood mid Wiltshire, as well as some shadow supply coming into the market in downtown and West L. A submarkets from evictions or.

Michael L. Manelis: Our suburban deals in Ventura and Santa Clarita, which did not experience this, are leading the pack. We are already seeing marked improvement to the new lease change in the third quarter, but we expect this debt to continue to be volatile as the market works through filling these units, which remains a catalyst for our revenue growth. Rounding out the rest of Southern California, San Diego and Orange County are continuing to see good demand, but we are seeing some price sensitivity with residents willing to move farther out in these markets for affordability reasons.

Speaker Change: Our suburban deals in Ventura, and Santa Clarita, which did not experience. This are leading the pack.

Speaker Change: We are already seeing marked improvement to the new lease change in the third quarter, but we expect this debt to continue to be volatile as the market works through filling these units, which remains a catalyst to our revenue growth.

Speaker Change: Rounding out the rest of southern California, San Diego and Orange County are continuing to see good demand, but we are seeing some price sensitivity with residents willing to move farther out in these markets, where affordability reasons now for the markets that may be of most interest San Francisco, Seattle, and our expansion markets of Dallas Fort Worth Denver Atlanta.

Michael L. Manelis: Now for the markets that may be of most interest, San Francisco, Seattle, and our expansion markets of Dallas, Fort Worth, Denver, Atlanta, and Austin. San Francisco and Seattle continue to perform better than expected, with Seattle outperforming the most.

Michael Manelis: Now for the markets that may be of most interest: San Francisco, Seattle, and our expansion markets of Dallas Fort Worth, Denver, Atlanta, and Austin. San Francisco and Seattle continue to perform better than expected, with Seattle outperforming the most. Remember that we entered the year with relatively modest expectations and the potential for upside in both of these markets. And San Francisco demand feels good right now, and we are seeing some of the best weeks in terms of traffic and application volume. We continue to see really positive signs in the downtown sub market in regards to the quality of life issues. Property crime is down, and the city's nightlife scene is thriving. Recent reports that Salesforce is pushing harder on retail return to office should have a positive impact on the city. Looking forward, there is little new supply coming to the market.

In Austin.

Speaker Change: San Francisco and Seattle continued to perform better than expected with Seattle outperforming the most remember that we entered the year with relatively modest expectations and the potential for upside in both of these markets in San Francisco demand feels good right now and we are seeing some of the best weeks in terms of traffic in application volume.

Michael L. Manelis: Remember that we entered the year with relatively modest expectations and the potential for upside in both of these markets. In San Francisco, demand feels good right now, and we are seeing some of the best weeks in terms of traffic and application volume. We continue to see really positive signs in the downtown submarket in regards to quality of life issues. Property crime is down, and the city's nightlife scene is thriving.

Michael L. Manelis: Recent reports that Salesforce is pushing harder on the return to office should have a positive impact on the city. Looking forward, there is little new supply coming to the market, overall starts are way down, and there have been no new starts of competitive product for the last three quarters, which supports improving conditions for the next couple of years. As I mentioned earlier, Seattle is really showing signs of recovery. Occupancy is 96.2%, and our renewal performance remains strong.

Speaker Change: We continue to see really positive signs in the downtown Submarket in regards to the quality of life issues property crime is down in the city's nightlife scene is thriving.

Speaker Change: Recent reports that Salesforce is pushing harder on return to office should have a positive impact on the city.

Speaker Change: Looking forward there is little new supply coming to the market overall starts are way down and there have been no new starts of competitive product for the last three quarters, which supports improving conditions for the next couple of years.

Michael Manelis: Overall starts are way down, and there have been no new starts of competitive product for the last three quarters, which supports improving conditions for the next couple of years. As I mentioned earlier, Seattle is really showing signs of recovery. Occupancies 96.2% are renewal performance remains strong. We're feeling good about both the quality of life issues in the market as well as fractions and places like South Lake Union from the return to office of companies like Amazon. The tech employment here looks solid as we see more postings for positions in both the city of Seattle and the Bellevue Redmond area and looking at our migration patterns.

Michael L. Manelis: We're feeling good about both the quality of life issues in the market as well as the traction in places like Southlake Union from the return to office at companies like Amazon. The tech employment here looks solid as we see more postings for positions in both the City of Seattle and the Bellevue-Redmond area.

Speaker Change: As I mentioned earlier, Seattle was really showing signs of recovery Occupancies 96, 2%. Our renewal performance remains strong we're feeling good about both the quality of life issues in the market as well as traction in places like South Lake Union from the return to office of companies like Amazon.

Speaker Change: The tech employment here look solid as we see more postings for positions in both the city of Seattle, and Bellevue Redmond area and.

Michael L. Manelis: And looking at our migration patterns, we are also seeing more people come to us from the farther out suburbs, which is an additional demand driver for our assets. Also, we expect our large concentration of properties in central Seattle to benefit from a newly completed $800 million infrastructure project that better connects downtown to the waterfront and creates a spectacular new park for our residents to enjoy. We are excited to join in the effort to enhance downtown Seattle with our newly completed $8 million improvement of the Staircase Plaza at our 761-unit Harbor Steps apartment. Our steps and the associated new retail there are another way to connect the city down to the newly activated waterfront park.

Speaker Change: And looking at our migration patterns. We are also seeing more people come to us from the further out suburbs, which is an additional demand driver to our assets.

Michael Manelis: We are also seeing more people come to us from the farther out suburbs, which is an additional demand driver to our assets. Also, we expect our large concentration of properties in central Seattle to benefit from a newly completed 800 million dollar infrastructure project that better connects downtown to the waterfront and created a spectacular new park for our residents to enjoy. We are excited to join in the effort to enhance downtown Seattle with our newly completed 8 million dollar improvement of the staircase plaza at our 761 unit Harbor Steps apartments. Our steps and the associated new retail; there are another way to connect the city down to the newly activated waterfront park.

Speaker Change: Also we expect our large concentration of properties in central Seattle to benefit from our newly completed $800 million infrastructure project that better connects downtown to the waterfront and created a spectacular new part for our residents to enjoy.

Speaker Change: We are excited to join in the effort to enhance downtown Seattle with our newly completed $8 million improvement of the staircase Plaza at our 761 unit Harbor steps apartments.

Speaker Change: Our steps and the associated new retail there are another way to connect the city down to the newly activated waterfront Park.

Michael Manelis: At this point, the Seattle market is positioned to do well, but there is supply coming later this year, and we need to see if the demand and pricing holds through the third order.

Michael L. Manelis: At this point, the Seattle market is positioned to do well, but there is supply coming later this year, and we need to see if the demand and pricing holds through the third quarter. Switching to the expansion markets, there are really no surprises here. We continue to see demand, but it's a challenging operating environment for both new leases and retention, given the amount of new supply. Right now, the pressure on new leases makes renewing residents the number one priority in these markets.

Speaker Change: At this point the Seattle market is positioned to do well, but there is supply coming later this year and we need to see if the demand and pricing holds through the third quarter.

Michael Manelis: Looking to the expansion markets, there's really no surprises here. We continue to see demand, but it's a challenging operating environment for both new leases and retention, given the amount of new supply. Right now, the pressure on new leases makes renewing residents the number one priority in the market. Overall, the expansion markets are performing in line with our expectations, with Dallas and Denver leading the way. Looking forward, we're excited to grow our portfolio and create operating scale in these markets that continue to demonstrate long-term demand from our target affluent renter demographic.

Speaker Change: Wishing to the expansion markets, there's really no surprises here, we continue to see demand, but it's a challenging operating environment for both new leases and retention given the amount of new supply right.

Speaker Change: Right now the pressure on new leases makes renewing residents the number one priority in these markets.

Michael L. Manelis: Overall, the expansion markets are performing in line with our expectations, with Dallas and Denver leading the way. Looking forward, we're excited to grow our portfolio and create operating scale in these markets, which continue to demonstrate long-term demand from our target affluent renter demographic. And finally, on the innovation front, this past quarter, we began testing a new AI resident assistant that we anticipate could handle 75% of general resident inquiries, including the ability to help residents triage basic service requests and then automatically submit those that require a visit from our service members.

Speaker Change: Overall, the expansion markets are performing in line with our expectations with Dallas and Denver, leading the way looked.

Speaker Change: Looking forward, we're excited to grow our portfolio and create operating scale in these markets that continue to demonstrate long term demand from our target affluent renter demographic.

Michael Manelis: And finally, on the innovation front, this past quarter we began testing a new AI resident assistant that we anticipate could handle 75% of general resident inquiries, including the ability to help residents triage, basic service requests, and then automatically submit those that require a visit from our service members. In addition, we continue to see promising results with a self-guided tour experience app that increases tour availability to meet the needs of our prospects. We are very excited about these initiatives as they will continue to create future operating efficiencies while providing a more seamless customer experience. I want to give a shout out to our amazing teams across our platform for their continued dedication to innovation, enhancing customer service, and their exceptional disciplined approach to expense management.

Speaker Change: And finally on the innovation front this past quarter, we began testing a new AI resident assistant that we anticipate could handle 75% of general resident inquiries, including the ability to help residents triage basic service request and then automatically submit those that require a visit from our service members.

Robert A. Garechana: In addition, we continue to see promising results with a self-guided tour experience app that increases tour availability to meet the needs of our prospects. We are very excited about these initiatives as they will continue to create future operating efficiencies while providing a more seamless customer experience. I want to give a shout out to our amazing teams across our platform for their continued dedication to innovation, enhancing customer service, and their exceptional disciplined approach to expense management. With that, I'll turn the call over to Bob.

Speaker Change: In addition, we continue to see promising results with the self guided tour experience App that increases tour availability to meet the needs of our prospects. We're very excited about these initiatives as they will continue to create future operating efficiencies, while providing a more seamless customer experience.

Bob: I wanted to give a shot out to our amazing teams across our platform for their continued dedication to innovation enhancing customer service and their exceptional disciplined approach to expense management with that I will turn the call over to Bob.

Bob Garechana: With that, I'll turn the call over to Bob. Thanks, Michael. Mark and Michael went over the drivers of our 70 basis point improvement and same-store revenue at the midpoint. So I'll focus on our revisions to same-store expense and NLI guidance, along with normalized FFO. Turning the same-store expenses, expense management continues to be a core competency for the team. Our revision reflects this with a 100 basis point reduction at the midpoint, which is now below the low end of our prior range. This reduction reflects really solid year-to-day performance driven by three major categories: repairs and maintenance, payroll, and utilities.

Robert A. Garechana: Thanks, Michael. Mark and Michael went over the drivers of our 70 basis point improvement in same store revenue at midpoint, so I'll focus on our revisions to same store expense and NOI guidance along with normalized FFO. Turning to our expenses, expense management continues to be a core competency for the team.

Bob: Thanks, Michael Mark and Michael went over the drivers of our 70 basis point improvement in same store revenue at the midpoint. So I'll focus on our revisions to same store expense and NOI guidance, along with normalized <unk>.

Robert A. Garechana: Our revision reflects this with a 100 basis point reduction at the midpoint, which is now below the low end of our prior range. This reduction reflects really solid year-to-day performance driven by three major categories, repairs and maintenance, payroll, and utilities. These categories make up about half of our same store expenses, and all three have growth that is either flat or negative year to date. While we expect growth to accelerate in the second half of this year, given more challenging 2023 comparisons, we still anticipate delivering very low growth of around three percent for the full year. This is yet again a reflection of the value in our platform from harnessing innovation, technology, and efficiency to deliver outstanding results and a tribute to our capable team.

Bob: Turning to same store expenses expense management continues to be a core competency for the team. Our revision reflects this with a 100 basis point reduction at the midpoint, which is now below the low end of our prior range.

Bob: This reduction reflects really solid year to date performance driven by three major categories.

Bob: Repairs and maintenance payroll and utilities these categories make up about half of our same store expenses and all three have growth that is either flat or negative year to date.

Bob Garechana: These categories make up about half of our same-store expenses, and all three have growth that is either flat or negative year-to-date. While we expect growth to accelerate in the second half of this year, given more challenging 2023 comparisons, we still anticipate delivering very low growth of around 3% for the full year. This is yet again a reflection of the value in our platform from harnessing innovation, technology, and efficiency to deliver outstanding results and attribute to our capable team. With these revenue, expense, and expense improvements, we are increasing our same-store NLI growth outlook and now expect same-store operating margin expansion for this full year.

Bob: We expect growth to accelerate in the second half of this year given more challenging 2023 comparisons we still anticipate delivering very low growth of around 3% for the full year.

Bob: This is yet again, a reflection of the value in our platform from harnessing innovation technology and efficiency to deliver outstanding results and attribute to our capable team.

Robert A. Garechana: With these revenue expense and expense improvements, we are increasing our same store NOI growth outlook and now expect same store operating margin expansion for the full year, something of a rarity in the apartment sector today. This NOI growth is the main driver of our 4 cents or 100 basis point improvement to NFFO growth reflected at the midpoint of our guidance. Page 2 of the release provides a detailed reconciliation of our revised NFFO guidance for your reference. One final note before I turn it over to the operator. This quarter, we enhanced our capital expenditure disclosure with the intent of providing stakeholders better insight into the value-enhancing CAFX activities we undertake.

Bob: With these revenue expense and expense improvements, we are increasing our same store NOI growth outlook and now expect same store operating margin expansion for the full year.

Bob Garechana: Something of a rarity in the apartment sector today. This NLI growth is the main driver of our 4-cent or 100 basis point improvement to NFFO growth reflected at the midpoint of our guidance. H2 of the release provides a detailed reconciliation of our revised NFFO guidance for your reference.

Bob: Something of a rarity in the apartment sector today.

Bob: The NOI growth is the main driver of our <unk> are 100 basis point improvement to <unk> growth reflected at the midpoint of our guidance.

Bob: Page two of the release provides a detailed reconciliation of our revised <unk> guidance for your reference.

Bob Garechana: One final note before I turn it over to the operator. This quarter we enhanced our capital expenditure disclosure with the intent of providing stakeholders better insight into the value-enhancing capex activities we undertake. In 2024, these activities primarily consist of unit renovations, technology spend, and sustainability initiatives that are discretionary and provide positive return on investments through enhanced revenue growth, additional income, or reduced expenses. These projects are often some of the best risk-adjusted returns we can make. With this new disclosure, we also believe that we are presenting our capex spend more in line with our industry peer.

Speaker Change: One final note before I turn it over to the operator this quarter, we enhanced our capital expenditure disclosure with the intent of providing stakeholders better insight into the value enhancing capex activities, we undertake.

Operator: In 2024, these activities primarily consist of unit renovations, technology spend, and sustainability initiatives that are discretionary and provide positive return on investments through enhanced revenue growth, additional income, or reduced expenses. These projects are often some of the best risk-adjusted returns we can make. With this new disclosure, we also believe that we are presenting our CapEx spend more in line with our industry peers. With that, I'll turn it over to the operator.

Speaker Change: In 2020 for these activities primarily consist of unit renovations technology spend and sustainability initiatives that are discretionary and provide positive return on investments through enhanced revenue growth additional income or reduced expenses.

Speaker Change: These projects are often some of the best risk adjusted returns we can make.

Speaker Change: With this new disclosure. We also believe that we are presenting our capex spend more in line with our industry peers.

Unknown Executive: Partners.

Unknown Executive: With that, I'll turn it over to the operator. Thank you. If you are dialed in via the telephone and would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question.

Speaker Change: With that I'll turn it over to the operator.

Speaker Change: Okay.

Operator: Thank you. If you are dialed in via the telephone and would like to ask, please signal by pressing star 1 on your telephone. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our customers.

Speaker Change: Thank you.

Speaker Change: <unk> via the telephone and would like to ask a question.

Speaker Change: Signal by pressing star one on your telephone keypad.

Speaker Change: You are using a speaker phone. Please make sure your mute function is turned off.

Speaker Change: Military equipment.

Operator: Again, please press star 1 to ask. Your first question comes from the line of Eric Wolfe. Hey, thanks. I was hoping you could go into greater detail on what you're expecting in terms of seasonality for the rest of the year. And I asked the question, in part, because it looks like you did around 2.4% employment rate growth for the first half, and you're guiding for 2.5 in the third quarter. So it feels like you're guiding for no deceleration in the fourth quarter, but we're trying to understand if that's actually, Hey, Eric, this is Michael. And I guess I'll just start out; I'll give you a little bit of color.

Speaker Change: Again, Please press star one to ask a question.

Eric Wolfe: Your first question comes from the line of Eric Wolfe with City. Hey, thanks. I was hoping you could go into greater detail on what you're expecting in terms of seasonality for the rest of the year. And I'd ask the question in part because it looks like you did around 2.4% employment rate growth for the first half. You're guiding the 2.5 and the third quarter. So it feels like you're guiding the acceleration in the fourth quarter, but you're trying to understand if that's actually the case.

Speaker Change: Your first question comes from the line of Eric Wolfe with Citi.

Eric Wolfe: Hey, Thanks, I was hoping you could go into greater detail on what you're expecting in terms of seasonality for the rest of the year and I ask the question in part because it looks like you did around two 4% and blended rate growth for the first half and what you're guiding to $2 five in the third quarter. So it feels like youre guiding the modem.

Speaker Change: Elevation in.

In the fourth quarter, but just trying to understand if that's actually the case.

Michael Manelis: Eric, this is Michael.

Michael L. Manelis: So first and foremost, I think specific to the third quarter, right now, we expect a very stable kind of achieved renewal rate increases of around four and a half percent and slight seasonal moderation of new lease change. We do have a little bit of an easier comp in September from the declines that we saw last year, so it may hold up a little bit better than expected. But we didn't include kind of a lot of that in the initial forecast right now.

Speaker Change: Hey, Eric This is Michael and I guess I'll just start out I'll give you a little bit of color.

Michael Manelis: And I guess I'll just start out. I'll give you a little bit of color. So first and foremost, I think specific to the third quarter. Right now, we expect very stable kind of achieve renewal rate increases around 4.5%. And slight seasonal moderation of new lease change. We do have a little bit of an easier comp in September from the declines that we saw last year. So it may hold up a little bit better than expected, but we didn't include kind of a lot of that in the initial forecast right now. Overall, for us, I think the key takeaway should be that we originally modeled kind of this full year blended rates to be about 2%.

Michael: First and foremost I think specific to the third quarter right. Now, we expect very stable kind of achieved renewal rate increases around four 5% and slight seasonal moderation of new lease change, we do have a little bit of an easier comp in September from the declines that we saw last year. So it may hold up.

Michael: A little bit better than expected, but we didn't include kind of a lot of that in the initial forecast right now.

Michael L. Manelis: Overall, for us, I think that the key takeaway should be that we originally modeled kind of this full year blended rates to be about 2%, and right now, we're expecting them to be closer to like the mid tubes.

Michael: Overall for us I think that the key takeaway.

Should be that we originally modeled kind of this full year blended rates to be about 2% and right now we're expecting them to be closer to like the mid tubes.

Michael Manelis: And right now, we're expecting them to be closer to like the mid tubes. And a lot of that is going to depend on the mix of the renewals and new lease transactions, both in the third and fourth quarter. But if we just look at the snapshot today, I mean, the portfolios are over 96% occupied; our application volumes remain solid. And our net effective pricing trend curve is more in line with a normal year as compared to the slightly muted curve that we initially modeled. So I think right now we feel like we're in a really good spot for July, and all of our dashboards, all of these metrics just point to kind of normal seasonal deceleration curves, both in the third quarter and fourth quarter.

Michael: A lot of that is going to depend on the mix of the renewals and new lease transactions bolt in the third and fourth quarter, but if we just look at the snapshot today I mean, the portfolios over 96% occupied our application volumes remained solid and our net effective pricing trend curve is more in line with a normal year as compared to the slightly.

Michael L. Manelis: And a lot of that is gonna depend on the mix of the renewals and new lease transactions both in the third and fourth quarter. But if we just look at the snapshot today, I mean, the portfolio's over 96% occupied, our application volumes remain solid, and our net effective pricing trend curve is more in line with a normal year as compared to the slightly muted curve that we initially modeled. So I think right now we feel like we're in a really good spot for July, and all of our dashboards, all of these metrics just point to kind of normal seasonal deceleration curves both in the third quarter and fourth quarter. That's helpful.

Michael: Muted curve that we initially model. So I think right now we feel like we're in a really good spot for July and all of our dashboards. All of these metrics just point to kind of normal seasonal deceleration curves both in the third quarter and fourth quarter.

Michael Manelis: That's helpful. And then, as far as L.A., you mentioned some of the pricing weakness you're seeing predictions.

Speaker Change: Okay. That's helpful and then as far as La you mentioned some of the pricing weakness you're seeing addictions. So I was wondering when you would expect that impact to sort of make its way through the market and what type of improvement you would expect to see once that happens.

Michael Manelis: So it's wondering when you would expect that impact to sort of make its way through the market and the type of improvement you would expect to see once that happens. Yeah, I mean, I think specific L.A., so first and foremost, right, we were focused on the occupancy build. We mentioned that on the last quarter call that we were doing some concessions. We were able to see a year-over-year lift in occupancy of about 70 basis points. And the new lease change in L.A., you know, it was less than what we anticipated by staying negative in the third quarter.

Michael L. Manelis: And then, as far as LA is concerned, you mentioned some of the pricing weakness you've seen from addictions. So I was wondering when you would expect that impact to sort of make its way through the market and what type of improvement you would expect to see once it does. Yeah, I mean, I think specific to LA. So first and foremost, right, we were focused on the occupancy build.

Speaker Change: Yeah, I mean, I think specific to L. A so first and foremost right. We were focused on the occupancy build.

Michael L. Manelis: We mentioned on the last quarter call that we were doing some concessions, and we were able to see a year over year lift and occupancy of about 70 basis points. And the new lease change in LA, you know, it was less than what we anticipated by staying negative in the third quarter. And a lot of that was really based on the impact that we saw new supply in some key submarkets of Hollywood, mid Wilshire, and downtown.

Speaker Change: We mentioned that on the last quarter call that we were doing some concessions we were able to see a year over year lift in occupancy of about 70 basis points and the new lease change in L. A.

Speaker Change: Was less than what we anticipated by staying negative in the third quarter and a lot of that was really based on the impact that we saw new supply in some key submarkets of Hollywood mid Wilshire in downtown So I think when we think about DLA performance for us in like the recovery, it's literally we have upside.

Michael Manelis: And a lot of that was really based on the impact that we saw a new supply in some key submarkets of Hollywood, Midwinter and downtown. So I think when we think about the L.A. performance for us and like the recovery, clearly we have upside built in for us. I still think for the balance of this year, we're going to continue to feel some of the pressure from the supply and those isolated submarkets. You know, the start numbers are materially down, so that bodes well for future year performance.

Michael L. Manelis: So I think when we think about the LA performance for us and like the recovery, clearly we have upside built in for us. But I still think for the balance of this year, we're going to continue to feel some of the pressure from the supply in those isolated submarkets. You know, the start numbers are materially down.

Speaker Change: <unk> built in for US I still think for the balance of this year, we're going to continue to feel some of the pressure from the supply in those isolated submarket.

Speaker Change: The start numbers are materially down so that bodes well for future year performance. So in my mind I think you should just expect as we continue to work through this year and get ourselves into next year for 2025, we're going to have some upside potential on the recovery, but we really like the total revenue story right now because we are filling these unit.

Michael L. Manelis: So that bodes well for future year performance. So in my mind, I think you should just expect, as we continue to work through this year and get ourselves into next year for 2025, we're going to have some upside potential on the recovery.

Michael Manelis: So, in my mind, I think you should just expect, as we continue to work through this year and get ourselves into next year for 2025, we're going to have some upside potential on the recovery. But we really like the total revenue story right now because we are filling these units with paying residents. So despite the new lease change stat that you kind of see being a little softer in the third quarter, the total revenue is still producing a pretty strong number for us.

Alexander Brackenridge: But we really like the total revenue story right now because we are filling these units with paying residents. So despite the new lease change stat that you kind of see being a little softer in the third quarter, total revenue is still producing a pretty strong number for us.

Speaker Change: With paying residents. So despite the new lease change stat that you kind of see being a little softer in the third quarter total revenue was still producing a pretty strong number for us.

Stephen Sakwa: Thank you. Your next question comes from the line of Steve Sakwa with Evercore ISI. Thanks, good morning. Michael, could you maybe just speak a little bit more about the renewals? I know it was 5% in the quarter.

Speaker Change: Got it thank you.

Operator: Thank you. Your next question comes from the line of Steve Sakwa with Evercore ISD. Thanks. Good morning.

Stephen Thomas Sakwa: Your next question comes from the line of Steve <unk> with Evercore ISI.

Michael L. Manelis: Michael, could you maybe just speak a little bit more about the renewals? I know it was 5% in the quarter, but how did that trend kind of April, May, June? And then where are you sending out renewal notices today for kind of the July, August, and maybe September timeframe?

Steve: Thanks, Good morning, Michael could you, maybe just speak a little bit more about the renewals I know it was 5% in the quarter.

Michael Manelis: How did that trend kind of April, May, June, and then where are you sending out renewing notices today for kind of the July, August, and maybe September? Yeah, so first, I think the renewal performance through the quarter has been pretty stable for us right around that 5% mark. And I think as we look at the third quarter, like I said, we have a lot of confidence right now. We have quotes out in the marketplace for the next 90 days that range between like six and a half and seven percent. We're negotiating still a little bit more than norm.

Steve: How did that trend kind of April May June and then where are you sending out renewal notices today kind of the July August and maybe September timeframe things.

Michael L. Manelis: Yeah, so first, I think the renewal performance through the quarter has been pretty stable for us right around that 5% mark. And I think as we look at the third quarter, like I said, we have a lot of confidence right now; we have quotes out in the marketplace for the next 90 days that range between like six and a half and 7%. We're still negotiating a little bit more than usual.

Speaker Change: Yeah. So first I think the renewal performance through the quarter has been pretty stable for us right around that 5% Mark and I think as we look at the third quarter like I said, we have a lot of confidence right now we have quotes out in the marketplace for the next 90 days that range between like six five and 7% were negotiating.

Speaker Change: Still a little bit more than norm and we think this kind of a slight bias towards occupancy clearly in some of like the expansion markets and even like the la market that I just discussed makes sense for us from a total revenue standpoint. So I think we expect even as we work our way through the third quarter pretty stable renewal performance results and.

Michael Manelis: And we think this kind of slight bias towards occupancy clearly in some of like the expansion mark. And even like the L.A. market that I just discussed makes sense for us from a total revenue standpoint. So I think we expect, even as we work our way through the third quarter, pretty stable renewal performance results. And we'll achieve somewhere right around that 4.5% mark.

Michael L. Manelis: And we think this kind of slight bias towards occupancy clearly in some of the expansion markets and even in the LA market that I just discussed makes sense for us from a total revenue standpoint. So I think we expect pretty stable renewal performance results, and we'll achieve somewhere right around that four and a half percent mark. Okay, thanks.

Speaker Change: We will achieve somewhere right around that four 5% Mark.

Adam Kramer: Okay, thanks. And then maybe on the capital deployment front, either for Alec or Mark, and you sort of sounds like everything is somewhere in and around 5 caps.

Speaker Change: Okay. Thanks, and then maybe on the capital deployment front, either for Alex or Mark can you sort of it sounds like everything is somewhere in and around five caps.

Alec Brackenridge: I guess how are you thinking about IRR hurdles today and has that really changed as kind of the stock price has gone up and, you know, bond pricing, bond yields have certainly come down. Sorry. I guess, are you changing your underwriting criteria at all from an IRR perspective?

Speaker Change: I guess, how are you thinking about IRR hurdles today and has that really changed as kind of the stock price has gone up then.

Speaker Change: <unk> pricing our bond yields have certainly come down. So are you I guess are you changing your your underwriting criteria at all from an IRR perspective.

Alec Brackenridge: Hey Steve, it's Alec. And you're right. We're pricing things that are generally say newer or new product in saying 80 to 120 million dollar price range typically in the suburbs. And what we've been buying has been in our expansion mark that around a five cap. And when we filter in relatively some slightly negative rank growth in the first year, offset by some operating platform improvements, flat year two, and then a recovery in year three, which may be 5%. You know, for the next couple of years, as you're into 20, half of 27 and half of 28, you know, you're getting to a number it's around at eight.

Alexander Brackenridge: And then maybe on the capital deployment front, either for Alec or Mark, it sort of sounds like everything is somewhere in and around five caps. I guess, how are you thinking about IRR hurdles today? And has that really changed as the stock price has gone up and, you know, bond pricing, bond yields have certainly come down? So are you changing your underwriting criteria at all from an IRR perspective? Hey, Steve, it's Alec.

Speaker Change: Hey, Steve It's Alan Yes, and you're right. We're pricing things that are generally say newer new product into an $80 million to $120 million price range.

Speaker Change: Typically in the suburbs and what we've been buying has been had been our expansion marked at around a five cap.

Speaker Change: And when we filter in.

Speaker Change: Relatively.

Speaker Change: Some some slightly negative rent growth in the first year.

Speaker Change: Offset by some operating platform improvements flat year or two and then a recovery in year, three which may be 5% for the next couple of years as you are into 'twenty half of 2007 and half of 28 Youre getting to a number it's around an eight and that's a that's a deal that works for us and fits within our cost of capital.

Alexander Brackenridge: And you're right, we're pricing things that are generally newer or new products in say, an 80 to $120 million price range, typically in the suburbs, and what we've been buying has been our expansion market around a five cap. And when we filter in, you know, relatively, some slightly negative rank growth in the first year, offset by some operating platform improvements, flat year two, and then a recovery in year three, which may be 5%.

Alec Brackenridge: And that's a deal that works for us and fits with our cost of capital.

Alec Brackenridge: Great, thanks.

Alexander Brackenridge: You know, for the next couple years, as you're into 20, half of 27 and half of 28, you know, you're getting to a number that's around an eight. And that that's a deal that works for us and fits within our cost account. Great day.

Speaker Change: Great. Thanks.

Adam Kramer: Your next question comes from the line of Adam Kramer with Morgan Stanley. Great, thanks. Maybe just focusing on the expansion markets. Want to kind of hear your view on maybe the potential progression of new lease growth, marketing growth as fall. And if you can even kind of compare it to kind of typical seasonality, obviously more supply there. So just want to know kind of how do you think that some belt will play out this fall relative to typical seasonal patterns.

Michael L. Manelis: Your next question comes from the line of Adam Kramer with. Great, thanks. Maybe just focusing on the expansion markets, I want to kind of hear your view on maybe the potential progression of new lease growth, and market ring growth this fall. And if you can even kind of compare it to kind of typical seasonality, obviously, more supply there. So just want to know kind of how the Sun Belt will play out this fall relative to typical seasonal patterns? Yeah, this is Michael.

Speaker Change: Your next question comes from the line of Adam Kramer with Morgan Stanley.

Adam Kramer: Great. Thanks, maybe just focusing on the expansion markets want to kind of hear your view on maybe the potential progression of new lease growth market rent growth. This fall.

Adam Kramer: We kind of compare it to kind of typical seasonality, obviously more supply there. So I just wanted to know kind of how do you think that something that will play out this fall relative to typical seasonal patterns.

Michael L. Manelis: So I think I would just start by saying what we think about the new lease change performance in the expansion market. So far, there's nothing that's really surprised us. I mean, what you're seeing today is that we have a lot of former residents moving out that never received a concession. We're averaging anywhere between 35 to 50% of applications receiving about six weeks.

Adam Kramer: Yeah.

Michael Manelis: Yeah, and this is Michael. So I think I would just start by saying we think about the new lease change performance in the expansion markets. So far, there's nothing that's really surprised us. I mean, what you're seeing today is that we have a lot of former residents moving out that never received the concession. We're averaging anywhere between like 35% to 50% of applications receiving about six weeks. That's what's driving some of that new lease change. And I think as we think about the balance of the year and the seasonality, the interesting thing about these markets is that one, they definitely demonstrate a little less demand seasonality.

Michael: And this is Michael So I think all I would just start by saying as we think about the new lease change performance in the expansion markets. So far there's nothing that really surprised us I mean, what youre seeing today is that we have a lot of former residents moving out that never received a concession we're averaging anywhere between like 35% to 50.

Michael: Percent of applications, receiving about six weeks, that's what's driving some of that new lease change and I think as we think about the balance of the year and the seasonality. The interesting thing about these markets is that one they definitely.

Michael L. Manelis: That's what's driving some of that new lease change. And I think as we think about the balance of the year and the seasonality, the interesting thing about these markets is that one, they definitely demonstrate a little less demand seasonality, meaning that they don't drop off in demand quite as much in the shoulder seasons as some of the coastal markets do. So I think we have this opportunity that we could just kind of stay in the zone that we've been in.

Michael: Demonstrate a little less demand seasonality.

Michael Manelis: Meaning that they don't drop off in demand quite as much as some of the shoulder seasons in the shoulder seasons is some of the coastal markets do. So I think we have this opportunity that we could just kind of stay in the zone that we've been in, but we expect challenging operating conditions in those markets for the balance of the year. You can look at the new supply that's coming in; you look at kind of how we're balancing the trade offs between occupancy and rate. And I think we just expect that we're going to be in this place for the next couple of quarters.

Michael: Meaning that they don't drop off in demand quite as much as some of the shoulder in the shoulder seasons as some of the coastal markets too. So I think we have this opportunity that we could just kind of stay in the zone that we've been in but we we expect challenging operating conditions in those markets for the balance of the year you can.

Michael L. Manelis: But we expect challenging operating conditions in those markets for the balance of the year; you can look at the new supply that's coming in, you look at kind of how we're balancing the trade-offs between occupancy and rate, and I think we just expect that we're going to be in this place for the next couple of quarters. I don't necessarily forecast that we're going to see, you know, marked deceleration from this point forward.

Michael: Look at the new supply that's coming in you look at kind of how we're balancing the trade offs between occupancy and rate and I think we just expect that we're going to be in this place for the next couple of quarters.

Michael Manelis: I don't necessarily forecast that we're going to see, you know, mark the acceleration from this point forward, but I think we would clearly expect to have difficult operating conditions for the balance of the year.

Michael: Not necessarily forecast that we're gonna see marked deceleration from this point forward, but I think we would clearly expect to have difficult operating conditions for the balance of the year and just to be fair Adam It's mark.

Mark J. Parrell: But I think we should clearly expect to have difficult operating conditions for the balance of the year. And just to be fair, Adam, it's mark, you know, these are markets we don't have very large, meaning Denver now has 10 assets. That's a meaningful portfolio. But in some of these markets, we're still building up our portfolio. So we're telling you what we see on the ground.

Mark Parrell: And just to be fair at them, it's Mark; you know, these are markets.

Mark Parrell: We don't have very large exposed.

Adam Kramer: These are markets, we don't have very large exposure to.

Mark Parrell: Joseph. I mean, in Denver now with 10 assets, that's a meaningful portfolio, but some of these markets we're still building up our portfolio. So we're telling you what we see on the ground. It's certainly not maybe accept as to Denver comprehensive. There, you know, the portfolio will get larger. But I would say we ran in these markets till about 2015. We understand the impact of supply. And I think Michael's comments are generally applicable. But again, our knowledge on the ground is more for Denver and a little bit less for those other markets as we build the portfolio out.

Adam Kramer: I mean in Denver, now with 10 assets, that's a meaningful portfolio, but some of these markets. We're still building up our portfolio. So we're telling you what we see in the ground. It's certainly not maybe accept as to Denver comprehensive there the portfolio will get larger but I would say we ran in these markets till about 2015, we understand.

Mark J. Parrell: It's certainly not, maybe except as to Denver comprehensive, where the portfolio will get larger. But I would say we have been active in these markets till about 2015. We understand the impact of supply, and I think Michael's comments are generally applicable.

Mark J. Parrell: But again, our knowledge on the ground is more for Denver and a little bit less for those other markets as we build the portfolio out. The other thing I guess I would just add besides the read through to a broader market is that a lot of the assets we own are brand new in areas where a lot of the new supply is being built. So that's why we kind of say we expected those difficult operating conditions.

Adam Kramer: The impact of supply and I think Michael's comments are.

Adam Kramer: Generally applicable, but again our knowledge on the ground is more for Denver, and a little bit less for those other markets as we build the portfolio out there. The other thing I guess I would just add besides the read through to a broader market is not our numbers is that a lot of the assets. We own are brand new in areas, where a lot of the new supply is being built so that's.

Mark Parrell: The other thing I guess I would just have besides to read through to a broader market is not our numbers is that a lot of the assets we own are brand new in areas where a lot of the new supply is being built. So that's why we kind of say we expected those difficult operating conditions. But again, it's playing out kind of like we expected. Yeah, and we bought those assets knowing that and really depending on last capex in the long run, a better resident base. I mean, we had a lot of reasons we thought these assets, even though they would face that supply.

Adam Kramer: Why we kind of said we expected those difficult operating conditions.

Mark J. Parrell: But again, it's playing out kind of like we expected. Yeah, and we bought those assets knowing that and really depended on less CapEx in the long run for a better resident base. I mean, we had a lot of reasons.

Adam Kramer: But again, its playing out kind of like we expected and we bought those assets knowing that and really depending on less capex in the long run a better resident base I mean, we had a lot of reasons. We thought these assets, even though they would face that supply were better than may be owning deep suburban assets that add outdated figure.

Mark J. Parrell: We thought these assets, even though they would face that supply, were better than maybe owning deep suburban assets that, you know, had outdated physical plants and outdated unit layouts and just would require a lot more CapEx over time. Great, thanks. That's really helpful.

Mark Parrell: We're better than maybe owning deep suburban assets that you know, I had outdated physical plants and outdated unit layouts and just would require a lot more capex over time.

Adam Kramer: Nicole plants and outdated unit layouts, and just would require a lot more capex over time.

Mark Parrell: Great, thanks.

Michael L. Manelis: And I thought that the blended rate for established market disclosure that you guys added this quarter relative to the kind of whole portfolio, I thought that was really helpful and just kind of showing the impacts of these markets, maybe just a startup to be fixated on supply here. But I think you guys have some interesting color on kind of the Seattle supply cycle, maybe hitting a little bit later this year. Just wondering, kind of among the established markets, is this the market that you kind of have, you know, you're watching most closely in terms of supply? Are there others that maybe have a similar cadence in terms of deliveries, maybe later than, you know, a later peak than the national peak in terms of deliveries?

Adam Kramer: That's really helpful. And I thought that the blended rate for established market disclosure that you guys added this quarter relative to the kind of whole portfolio. I thought that was really helpful and just kind of showing the impacts of these markets.

Speaker Change: Great. Thanks, that's really helpful and I thought the blended rate for established market disclosure that you guys added this quarter relative to the kind of whole portfolio I thought that was really helpful and just kind of showing the impact of these markets, maybe just startup to be fixated on supply here.

Michael Manelis: Maybe just a startup to be fixated on supply here. But I think you guys have some interesting color on the Seattle supply cycle. Maybe hitting a little bit later this year. Just wondering, kind of among the established markets.

Speaker Change: Thank you guys have some interesting color on kind of the Seattle supply cycle, maybe hitting a little bit later this year, just wondering kind of among the established markets is this the market that you kind of have you're watching most closely in terms of supply or are there others that maybe have a similar cadence in terms of deliveries. Maybe later then.

Michael Manelis: Is this the market that you kind of have, you know, you're watching most closely in terms of supply, or are there others that maybe have a similar cadence in terms of deliveries, maybe later than, you know, a later peak than the national peak in terms of deliveries.

Speaker Change: Later peaked in the national peak in terms of deliveries.

Michael Manelis: Yeah, Adam, this is Michael again. I really do believe that it is the Seattle market outside of the expansion markets that we just talked about. It's the Seattle market right now that we're going to have probably the most focused because it was back at loaded. There are a few more deals coming online in Redmond where we have a concentration of newer assets that will go head to head. And really outside of that, when you look at this overall level of competitive supply pressure, which for us, we kind of define by the proximity, one, two-mile radius is depending on the market.

Michael L. Manelis: Yeah, hey, Adam, this is Michael again. I really do believe that it is the Seattle market outside of the expansion markets that we just talked about. It's the Seattle market right now that we're probably going to have the most focus because it was back half loaded. There are a few more deals coming online in Redmond, where we have a concentration of newer assets that will go head to head. And really outside of that, when you look at this overall level of competitive supply pressure, which for us, we kind of define by the proximity of one to two mile radiuses, depending on the market, we have some isolated pockets, like in the Korea Town area and a little bit of central DC that I mentioned in some of my prepared remarks, where we know we're going to continue to feel some limited, you know, pressure from supply.

Michael L. Manelis: Yeah. Adam This is Michael again, I really do believe that it is the Seattle market outside of the expansion markets that we just talked about it's the Seattle market right now that we're gonna have probably the most focused because it was back half loaded there are a few more deals coming online in Redmond, where we have a concentration of newer.

Michael L. Manelis: Assets that will go head to head and really outside of that when you look at this overall level of competitive supply pressure, which for us we kind of defined by the proximity one two mile Radiuses, depending on the market. We have some isolated pockets like in the Korea town area and a little bit of Central D. C that I mentioned in some of my prepared with.

Michael L. Manelis: But outside of those areas, we really feel like we're in a good spot, a good spot from a less pressure from the supply coming online bet on the balance of the, Great. Thank you so much for all the color.

Michael Manelis: We have some isolated pockets, like in the Korea Town area and a little bit of central DC that I mentioned in some of my prepared remarks, where we know we're going to continue to feel some limited, you know, pressure from the supply. But outside of those areas, we really feel like we're in a good spot from a less pressure from the supply coming online, back in the balance here.

Michael L. Manelis: <unk>, where we know we're going to continue to feel some limited pressure from the supply but outside of those areas. We really feel like we're in a good supply spot from a less pressure from the supply coming online and the balance of the year.

Adam Kramer: Great. Thanks so much for all the color.

Speaker Change: Great. Thank you so much for all the color.

Michael L. Manelis: Yeah.

Joshua Dennerlein: Your next question comes from the line of Josh Denner Line with Bank of America. Please go ahead. Yeah, hey guys, Mark, just wanted to follow up on a comment you had in your opening remarks on potting of the Dallas and Atlanta acquisitions. What kind of uplift do you expect from that potting effect for that? I think your one underwriting of call 5% and then does that potting effect assume additional properties in those classes? Masters. Thanks.

Michael L. Manelis: The next question comes from the line of Josh Dennerlein with Bank of America. Yeah, hey, guys. Um, Mark, just wanted to follow up on a comment you had in your opening remarks on potting in Dallas and Atlanta. What kind of uplift do you expect from that potting effect versus Underwriting of Calls 5%, and then does that potting effect assume additional properties in those clusters? Hey Josh, this is Michael.

Joshua Dennerlein: Your next question comes from the line of Josh <unk> with Bank of America. Please go ahead.

Josh: Yeah, Hey, guys Mark just wanted to follow up on a comment you had in your opening remarks on parting of the Dallas and Atlanta acquisitions.

Josh: What kind of uplift do you expect from that parting effect for side. Thank you.

Speaker Change: Year, one underwriting of call it 5% and then does that parting effect assume additional properties in those clusters.

Michael Manelis: Yeah. Hey, Josh. This is Michael.

Michael L. Manelis: So I'll just talk in general about how we're approaching potting, which to us is really just sharing resources across assets. Today, we have about 65% of our properties that are already functioning with some level of shared resources. As we think about going into these expansion markets, clearly, we need acquisitions to create those opportunities to create the density because the proximity of assets to each other really does facilitate the upside. And I think what you see is the benefits coming from potting.

Josh: Yeah, Hey, Josh This is Michael So I'll just talk in general about how we're approaching parting, which to US is really just sharing resources across assets today, we have about 65% of our properties that are already functioning with some level of shared resources as we think about going into the.

Michael Manelis: So I'll just talk in general like about how we're approaching potting, which does is really just sharing resources across assets today. We have about 65% of our properties that are already functioning with some level of shared resources. As we think about going into these expansion markets, clearly we need the acquisitions to create those opportunities to create the density because the proximity of assets to each other really does facilitate the upside. And I think what you see is the benefits coming off of potting. Clearly, you see that show up in our payroll growth numbers, and that is what we would expect going forward in those expansion markets.

Josh: These expansion markets clearly, we need the acquisitions to create those opportunities to create the density because the proximity of assets to each other really does facilitate the upside and I think what you see as the benefits coming off of parting clearly you see that show up in our payroll growth numbers and that is what we would expect.

Michael L. Manelis: Clearly, you see that show up in our payroll growth numbers. And that is what we would expect going forward in those expansion markets. But there are also opportunities in the service side of the business, as we think about leveraging resources differently, that take our dependency on third-party contractors off, that kind of keeps that R&M number down as well. And just to elaborate, it's Mark on that.

Speaker Change: Going forward in those expansion markets, but theres also opportunities in the service side of the business as we think about leveraging resources differently that take our dependency on third party contractors, all that kind of keeps that R&M number down as well and just to elaborate its mark on it it depends on where the asset is in some cases, we're buying asset.

Mark Parrell: But there's also opportunities in the service side of the business as we think about leveraging resources differently that take our dependency off of third-party contractors, off that kind of keeps that R&M number down as well.

Mark Parrell: And just elaborate, it's Mark on that. It depends on where the asset is. In some cases, we're buying assets that are a ways out from what we have in contemplation or own already. So if it's an asset that's nearby, for example, in central Atlanta, we own assets in Midtown already. And so only more there shared services are an obvious play. We've bought assets in the northeast quadrant of the suburbs that assets a little further out. There isn't as much shared service opportunity there. So it's a little bit asset by asset as well.

Mark J. Parrell: It depends on where the asset is. In some cases, we're buying assets that are a ways out from what we have in contemplation or own already. So if it's an asset that's nearby, for example, in Central Atlanta, we own assets in Midtown already. And so owning more of their shared services is an obvious play.

Speaker Change: It's that are a ways out from what we have in contemplation or own already so if it's an asset that's nearby for example in central Atlanta, we own assets in Midtown already and so owning more of their shared services are an obvious play we bought assets in the northeast quadrant of the suburbs that assets a little further out there isn't as.

Michael L. Manelis: We bought assets in the northeast quadrant of the suburbs, that are a little further out. There isn't as much shared service opportunity there, so it's a little bit asset by asset as well. Okay. I appreciate that.

Josh: <unk> shared service opportunity there, so it's a little bit asset by asset as well.

Mark Parrell: Okay, appreciate that. Maybe just stepping back, just how should we think about maybe the margin expansion opportunity across your portfolio years ahead?

Speaker Change: Okay. I appreciate that maybe just stepping back just how should we think about maybe the margin expansion opportunity across your portfolio mirrors ahead.

Mark J. Parrell: Maybe just stepping back, just how should we think about maybe the margin expansion opportunity across your portfolio in the years ahead? So I'm going to start, and I don't know if Bob may elaborate on this, a little bit right now with inflation tailing off. I really thought about margin expansion more in terms of just blunting the rate of inflation in our expenses. Right now, I think what technology is allowing us to do is really harvest expense savings and not sacrifice on the service side. Michael Manelis has spoken about this.

Josh: Hmm.

Mark Parrell: So I'm going to start. Now Bob may elaborate on this. So a little bit right now with inflation tailing off. I really thought about margin expansion more in terms of just blunting the rate of inflation in our expenses. Right now, I think what technology is allowing us to do is really harvest expense savings than not sacrifice on the service side. Michael Manellus has spoken to this. We're really shifting more to our revenue focus. So I think you're going to see us talk more about ways that we can provide additional services to our residents or be more efficient on that revenue line, as opposed to just simply continuing to screw down expenses.

Bob: So I'm going to start and I don't know Bob May may elaborate on this a little bit right now with inflation tailing off I really thought about margin expansion more in terms of just blunting the rate of inflation in our expenses right now I think what technologies, allowing us to do is really harvest expense savings and not sacrifice on the service side.

Mark J. Parrell: We are really shifting more to a revenue focus, so I think you're going to see us talk more about ways that we can provide additional services to our residents or be more efficient on that revenue line, as opposed to just simply continuing to cut expenses. There'll always be opportunities there.

Josh: Michael analysis spoken to this we're really shifting more of our revenue focus so I think youre going to see us talk more about ways that we can provide additional services to our residents would be more efficient on that revenue line as opposed to just simply continuing to screw down expenses to always be opportunities there.

Bob Garechana: There'll always be opportunities there. But I think we're getting to a point on expenses where there's probably more opportunity on the revenue line for a bit.

Mark J. Parrell: But I think we're getting to a point on expenses where there's probably more opportunity on the revenue line for a bit. I don't know, Bob, if there's anything you'd add on the margin side there. No, and obviously, the revenue opportunity helps the margin even more so than the expense side, right? So being able to drive that kind of top-line revenue opportunity coupled with the expense discipline that we've demonstrated and continue to demonstrate, we think that we can deliver a margin that is approaching 70% or, hopefully, even better as we kind of layer in these innovations and this technology and just the team operates at maximum efficiency.

Josh: Think we're getting to a point on expenses, where there's probably more opportunity on the revenue line for a bit.

Bob Garechana: I don't know Bob, but there's anything you'd add on the margins right there. No, and clearly, obviously the with the revenue opportunity helps the margin even more so than the expense side, right? So being able to drive that kind of top line revenue opportunity coupled with the expense discipline that we've demonstrated and continue to demonstrate, you know, we think that we can deliver a margin that is, you know, you know, approaching 70 percent or hopefully even better as we kind of glare in these innovation and this technology and just the team operates at maximum efficiency.

Josh: Bob if there's anything you'd add on the margin side, there now and clearly obviously that with the revenue opportunity helps the margin even more so than the expense side right, so being able to drive that kind of topline revenue opportunity coupled with.

Unknown Attendee: Expense discipline that we've demonstrated and continue to demonstrate we think that we can we can deliver a margin that is you know.

Unknown Attendee: Approaching 70% or hopefully even better as we kind of layer in these innovation in this technology and just the team operates at maximum efficiency.

Mark J. Parrell: There's just the number of ideas that the group has that we're testing is the highest number we've ever seen. So when you think about both expense and revenue opportunities, there's a lot of open, you know, experiments. And one of the great things about our platform is that we can test it on three or four assets. If it works well for us and for our residents, we can roll it out. And if it doesn't, well, that's fine.

Bob Garechana: There's just the number of ideas that the group has that we're testing is the highest number we've ever seen. So just when you think about both expense and revenue opportunities, there's a lot of open, you know, experiments. And one of the great things about our platform is we can test it on three or four assets. If it works well for us and for our residents, we can roll out, and if it doesn't, well, that's fine. We'll go on to the next idea.

Unknown Attendee: Just the number of ideas that the group has that were testing is the highest number we've ever seen so just when you think about both expense and revenue opportunities. There's a lot of open.

Speaker Change: Paramount's in one of the great things about our platform is we can testing on three or four assets. If it works well for us and for our residents we can rollout and if it doesn't we'll that's fine we'll go onto the next idea. So I think that's what's exciting about where we sit in our journey.

Bob Garechana: So I think that's what's exciting about where we sit in our journey.

Speaker Change: Oh.

Speaker Change: Yeah.

Anthony Paolone: Next question comes from the line of Anthony Paolone with JP Morgan. Yeah, thanks. Just to follow up on the op-x side there. So, you know, given all these initiatives, do you think we are back to a two to three percent expense growth range for the next couple of years?

Mark J. Parrell: We'll go on to the next idea. So I think that's what's exciting about where we sit on our journey. Your next question comes from the line of Anthony Pallone with JPMorgan. Yeah, thanks.

Speaker Change: Your next question comes from the line of Anthony <unk> with J P. Morgan.

Mark J. Parrell: Just to follow up on the OPEC side there. So, you know, given all these initiatives, do you think we're back to a two to 3% expense growth range for the next couple of years? Tony, it's Mark. I'll start; Bob will correct me as usual.

Speaker Change: Yeah. Thanks, just to follow up on the Opex side. There. So given all of these initiatives do you think we are back to a 2% to 3% expense growth range.

Speaker Change: Our range for the next couple of years.

Mark Parrell: Anthony, it's Mark. I'll start; Bob will correct me as usual. I think it's going to be hard to say that with property taxes being 45% of our expense load. We've got a little, and we footnoted 421A burn off pressure there. So I think that number is easily going to be three plus and close to four at times in the next couple of years. And so it's going to be a little bit difficult for us to push that number below three consistently, I would think, without seeing some other big innovation occur. We'll continue to challenge Mr. Manellas to do that, but I think the property tax part is pretty uncontrollable.

Mark J. Parrell: I think it's going to be hard to say that with property taxes being 45% of our expense load. We've got a little, and we footnoted for 21 a burn off pressure there. So I think that number is easily going to be three plus and close to four at times in the next couple of years. And so it's gonna be a little bit difficult for us to push that number below three consistently, I would think, without seeing some other big innovation occur. We'll continue to challenge Mr. Manelis to do that.

Speaker Change: Hey, Tony It's Mark I'll start Bob Correct me as usual I think it's going to be hard to say that with property taxes being 45% of our expense load.

Unknown Attendee: Got a little and we footnoted $4 21, a burn off pressure there. So I think that numbers easily going to be three plus and close to four times in the next couple of years and so it's all going to be a little bit difficult for us to push that number below three consistently I would think without seeing some other big innovation occur.

Mark J. Parrell: But I think the property tax part is pretty uncontrollable. I do see some opportunity in insurance; I hope we get some benefit there, especially if the hurricane season isn't too bad. We don't own in those markets, but it's all very much connected. So I don't know, Bob, if there's something you'd add on the expense side.

Unknown Attendee: We will continue to challenge Mr. Matt Ellis to do that but I.

Unknown Attendee: I think the property tax part is pretty uncontrollable.

Mark Parrell: I do see some opportunity and insurance. I hope we get some benefit there, especially if the hurricane season is in too bad. We don't own in those markets, but it's all very much connected.

Speaker Change: Do see some opportunity in insurance I hope, we get some benefit there, especially if the hurricane season isn't too bad we don't own in those markets, but it's all very much connected so I don't know Bob if theres something you'd add on the expense side, but to me. The challenge would be property taxes are tough to take advantage and we do have some like Mark mentioned this year, we had some step.

Bob Garechana: Bob, if there's something you'd add on the expense side, but to me, the challenge would be property taxes are tough to manage. And we do have some, like Mark mentioned, this year we had some step up in 421a. We will continue to have some more step up. But I think what we can kind of endeavor, or what we do endeavor to promises, depending on the context, is if a completion is x, we endeavor to perform the best we can at x minus. And so that's what those initiatives will do, and we continue to pressure Michael to deliver.

Robert A. Garechana: But to me, the challenge would be property taxes. They are tough to manage, and we do have some, like Mark mentioned this year. We had some steps up in 421 a, and we will continue to have some more steps up. But I think what we can kind of endeavor or what we do endeavor to promise, depending on the context, is, if you know, if inflation is x, we endeavor to perform the best we can at x minus, right?

Unknown Attendee: Up and 420 <unk>, we will continue to have some more step up.

Michael L. Manelis: But I think what we can kind of endeavor are what we do endeavor to promise is depending on the context is if inflation is X we endeavor to to perform the best we can at X minus right and so that's what those initiatives will do and we continued to pressure Michael two to deliver [laughter]. Okay.

Mark Parrell: Okay.

Robert A. Garechana: And so that's what those initiatives will do, and we continue to pressure Michael to deliver. Okay. Thanks.

Anthony Paolone: Thanks. And then just my second one, I know these are not big dollars, free QR, but I notice that your advocacy costs are up a lot, you know, in the quarter versus say what you were spending in 2022 and even into 2023.

Speaker Change: And then just my second one I know these are not big dollars free cure, but I noticed that your advocacy costs are up a lot.

Speaker Change: In the quarter versus say, what you were spending in 2022 and even into 2023. So can you maybe just step back and give us a sense as to how youre thinking about the regulatory landscape and if anything's changed there and perhaps whether.

Mark Parrell: So can you maybe just step back and give us a sense as to how you're thinking about the regulatory landscape, and if anything's changed there. And perhaps whether, you know, some of the risk there has shifted to the federal level, or if it's still just very much a local matter. Yeah, thanks, Tony. There's a few things in that. So I'll try and go through it.

Speaker Change: Some of the risk there is shifted to the federal level or if it's still just very much a local matter.

Mark J. Parrell: And then just my second one, I know these are not big dollars for EQR, but I noticed that your advocacy costs are up a lot over, you know, the quarter versus, say, what you were spending in 2022 and even into 2023. So can you maybe just step back and give us a sense as to how you're thinking about the regulatory landscape and if anything's changed there, and perhaps whether, you know, some of the risk there has shifted to the federal level, or if it's still just very much a local matter? Yeah, thanks, Tony. There's a few things in that, so I'll try and go through them.

Speaker Change: Yeah. Thanks, Toni is a few things in that so I'll try and go through it but first directly when you have a year like this with the California ballot initiative Youre going to see a lot more spending. So this is going to be much more akin to 2018 2020 levels of spend on our side when we fought and successfully fought off.

Mark Parrell: But first, directly, when you have a year like this with the California ballot initiative, you're going to see a lot more spending. So this is going to be much more akin to 2018, 2020 levels of spend on our side, when we fought and successfully fought off ballot proposals with the rest of the industry on rent, controlling California. So I would expect that number to be 10 million or more this year, and that's what sort of contemplated in the numbers. There's a Reg G sort of reconciliation towards the back, but that's in there. And that's something we would expect.

Mark J. Parrell: But first, directly, when you have a year like this with the California ballot initiative, you're going to see a lot more spending. So this is going to be much more akin to the 2018-2020 levels of spending on our side when we fought and successfully fought off ballot proposals with the rest of the industry on rent control in California. So I would expect that number to be 10 million or more this year. And that's what's sort of contemplated in the numbers. There's a Reg G sort of reconciliation towards the back, but that's in there.

Speaker Change: Ballot proposals with the rest of the industry on rent control in California. So I would expect that number to be $10 million or more this year and thats whats sort of contemplated in the numbers. There is a reg G reconciliation towards the back but that's in there and that's something we would expect in a lot of that spend will occur in <unk>.

Mark J. Parrell: And that's something we would expect. And a lot of that spend will occur in the third quarter in contemplation, of course, of the election in November in California. So a lot of the regulatory effort right now for the industry and for our company is focused on California. It is something we've beaten on two prior occasions by more than 20 points.

Mark Parrell: And a lot of that spend will occur in the third quarter in contemplation, of course, of the election in November in California.

Speaker Change: Third quarter in contemplation of course of the election in November in California. So a lot of the regulatory effort right now for the industry and for our company is focused on California. It is something we've beaten off two prior occasions by more than 20 points. So voters I think are very sophisticated and hearing the <unk>.

Mark Parrell: So a lot of the regulatory effort right now for the industry and for our company is focused on California. It is something we've beaten off to prior occasions by more than 20 points. So voters, I think, are very sophisticated and hearing the arguments against right control. I think it's really interesting in California that the forces of anti-housing, the people who don't want a single unit of housing built in places like Orange County. Love this measure, know that rent control means left production of housing, and I think people in California see that. So we're optimistic.

Mark J. Parrell: So voters, I think, are very sophisticated in hearing the arguments against rent control. I think it's really interesting in California that the forces of anti-housing, the people who don't want a single unit of housing built in places like Orange County, love this measure because they know that rent control means less production of housing. And I think people in California see that.

Speaker Change: Arguments against rent control I think it's really interesting in California that the forces of anti housing that people, who don't want a single unit of housing built in places like Orange County.

Speaker Change: Love This measure no that rent control means less production of housing and I think.

Speaker Change: People in California see that so we're optimistic we can again help educate the voters in California and went on this measure again in terms of federal versus state I think there's just more activity that's more relevant at the state level state and local is where most of our focus is we did think that the president's statement about rent <unk>.

Mark J. Parrell: So we're optimistic. We can, again, help educate the voters in California and win on this measure again. In terms of federal versus state, I think there's just more activity that's more relevant at the state level. State and local are where most of our focus is. We did think the president's statement about rent control was not productive. We talked to a lot of people in the administration, and a lot of those conversations were much more constructive than that sort of directly political proposal that came out that we think isn't going anywhere, but it's not helpful.

Mark Parrell: We can again help educate the voters in California and win on this measure again in terms of federal versus state. I think there's just more activity that's more relevant at the state level. State and locals were most of our focuses.

Mark Parrell: We did think the president's statement about rent control is not productive. We talked to a lot of people in the administration, and a lot of those conversations are much more constructive than that sort of directly political proposal that came out, that we think isn't going anywhere, but it's not helpful. So I do think most of the effort here is on the state and local side. We certainly are working with the two candidates for president, trying to educate staffs and talk to them about the opportunity to encourage supply at the federal level, and that that's something constructive the federal government can do.

Speaker Change: Troll was not productive.

Speaker Change: We talked to a lot of people in the administration and a lot of those conversations are much more constructive than that sort of directly political proposal that came out that we think isn't going anywhere but it is not helpful. So I do think most of the effort here is on the state and local side. We certainly are working with the two candidates for president and try and educate.

Mark J. Parrell: So I do think most of the effort here is on the state and local side. We certainly are working with the two candidates for president, trying to educate staff and talk to them about the opportunity to encourage supply at the federal level and that that's something constructive the federal government can do. And so that conversation is ongoing with both the Harris campaigns and the Trump campaigns. But that's a focus on the federal side more as an educational. In the states, it's both electoral and educational.

Speaker Change: Staffs and talk to them about the opportunity to encourage supply at the federal level and Thats something constructive the federal government can do and so that conversation is ongoing with both the Harris campaigns in the Trump campaign, but that's our focus on the federal side more as educational understates its both electric.

Mark Parrell: And so that conversation is ongoing with both the Harris campaigns and the Trump campaigns, but that's a focus on the federal side more as educational on the states. It's both electoral and education.

Speaker Change: We're all an educational.

Mark Parrell: Thanks. That's really helpful. Appreciate it.

Speaker Change: Okay. Thanks, that's really helpful. I appreciate it.

Mark Parrell: Thanks, Tony.

Tim: Thanks, Tim.

Michael Goldsmith: The next question comes from the line of Michael Goldsmiths with UBS. Good morning. Thanks a lot for taking my questions. With the increase in the occupancy guidance, is that we're like stronger demand or an intent to lean more heavily into occupancy in the back half of the year and related to that? Can you talk about which markets maybe where you're seeing occupancy build versus those where you may be pushing rate? Thanks.

Mark J. Parrell: Thanks. That's real helpful. Thanks, Tony. My next question comes from the line of Michael... Good morning. Thanks a lot for taking my questions. With the increase in occupancy guidance, does that reflect stronger demand, or an intent to lean more heavily into occupancy in the back half of the year and related to that? Can you talk about which markets maybe where you're seeing occupancy build versus those where you may be pushing rates? Yeah, hey, Michael.

Tim: Your next question comes from the line of Michael Goldsmith with UBS.

Michael Goldsmith: Good morning, Thanks for taking my questions with the increase in the occupancy guidance does that reflect stronger demand.

Michael Goldsmith: I tend to lean more heavily into occupancy in the back half of the year and related to that can you talk about which markets, maybe where you're seeing occupancy build versus those where you may be pushing rate.

Michael Manelis: Yeah, Amy. Well, so first and foremost, I think recognizing the gains that we've seen in occupancy year to date is a lot of the driver to the increase because we are modeling for kind of normal seasonality to occur, which would allow that occupancy to start drifting back down. Probably towards the later part of Q3 and into Q4. So I think for us right now, East Coast stands out, right? I've got all three of our, you know, established markets on the East Coast running 97% plus. I don't know that I would say that, you know, overall I have a theme that we're biased towards occupancy.

Michael L. Manelis: So first and foremost, I think recognizing the gains that we've seen in occupancy year to date is a lot of the driver for the increase because we are modeling for kind of normal seasonality to occur, which would allow that occupancy to start drifting back down, probably towards the later part of Q3 and into Q4. So I think for us right now, the East Coast stands out, right? I've got all three of our established markets on the East Coast running 97% plus.

Speaker Change: Yeah, Hey, Michael So first and foremost I think recognizing the gains that we've seen in occupancy year to date is a lot of the driver to the increase because we are modeling for kind of normal seasonality to occur which would allow that occupancy to start drifting back down probably towards the later part of Q3 it into Q4.

Michael Goldsmith: <unk>.

Speaker Change: So I think for US right now East coast stands out right I've got all three of our <unk>.

Speaker Change: Established markets on the East coast running 97% plus.

Michael L. Manelis: I don't know that I would say that, you know, overall, I have a theme that we're biased towards occupancy. I think we're looking at the market and the sub-market, and we're really focused on how do we maximize revenue. And in several of our markets and sub-markets, we saw really good demand, which meant we were going to put our foot down on the gas with rates and see what we could achieve and hold back some of that occupancy.

Speaker Change: I don't know that I would say that overall I have a.

Speaker Change: Theme that we're biased towards occupancy I think we're looking market and sub market. We're really focused on how do we maximize revenue and in several of our markets and Submarkets. We saw really good demand, which meant we were going to put our foot down on the gas with rate and see what we could achieve and hold back some of that occupancy.

Michael Manelis: I think we're looking market and sub market. We're really focused on how do we maximize revenue and in several of our markets and submarkets. We saw really good demand, which meant we were going to put our foot down on the gas with rate and see what we could achieve. And hold back some of that occupancy, and in other markets, like the expansion markets and even LA, we had demand, but we saw this opportunity, and we know what conditions are going to be like kind of for the next quarter or so, and we thought we would lean towards the occupancy.

Speaker Change: And in other markets like the expansion markets and even L. A we had demand, but we saw this opportunity and we know what conditions are gonna be like kind of for the next quarter or so and we thought we would lean towards the occupancy you saw I think every market and sub market has a different kind of strategic approach to it but overall right now I would say that the raise.

Michael L. Manelis: And in other markets, like the expansion markets and even LA, we had demand, but we saw this opportunity, and we know what conditions are going to be like, kind of for the next quarter or so, and we thought we would lean towards occupancy.

Michael Manelis: So I think every market and sub market has a different kind of strategic approach to it, but overall right now, I would say that the raises are more indicative of what we've seen so far with the ability to achieve outsized occupancy gains. And just expect normal seasonal drop-offs to occur for the balance of the year.

Speaker Change: As more indicative of what we've seen so far with the ability to achieve outsized occupancy gains and just expect normal seasonal drop off to occur for the balance of the year.

Mark Parrell: Thanks for that. And as a direct follow-up, right, you talk about the kind of like the expectations for a normal seasonal back half of the year. So if you take the blended spread expectations, it looks like it, you know, you took it from two to maybe the mid two percent range and assuming a typical seasonal year. Like, should we be thinking about the earn in as we sit today for 2025 is one and a quarter percent, and within that, like, what are the factors that could change that over the coming months.

Michael L. Manelis: So I think every market and sub-market has a different kind of strategic approach to it. But overall, right now, I would say that the increase is more indicative of what we've seen so far, with the ability to achieve outsized occupancy gains and just expect normal seasonal drop-offs to occur for the balance of the year. Thanks for that. And as a direct follow-up, right, you talked about kind of like the expectations for a normal seasonal back half of the year.

Speaker Change: Thanks for that and as a direct follow up you talk.

Speaker Change: About the kind of like the expectations for a normal seasonal back half of the year. So if you take the blended spread expectations it looks like it.

Michael L. Manelis: So if you take the blended spread expectations, it looks like it, you know, you took it from two to maybe the mid 2% range and assumed a typical seasonal year. Like, should we be thinking about the earnings per share as we sit today for 2025 is one and a quarter percent? And within that, like, what are the factors that could change that? And Michael, it's Mark.

Speaker Change: Took it from two to maybe the mid 2% range and assuming a typical seasonal year.

Speaker Change: We be thinking about the earn in as we sit today for 2025 is 1.25% and within that what are the factors that could change that over the coming months.

Mark Parrell: And Michael, it's Mark. So we're not going to speculate about the earning yet. I think it's just too early to have that that conversations. Got it.

Mark J. Parrell: So we're not going to speculate about the earn-in yet. I think it's just too early to have that conversation. Got it. If in that case, can I ask another question about that, right, like the NOI guidance grew by or moved higher by 145 basis points, and the FFO guidance grew by 100 basis points? So can you just walk through some of the moving pieces and overhead and other things that may have limited the flow through during the period?

Speaker Change: And Michael it's Marc So we're not going to speculate about the earn in yet I think it's just too early to have that conversation.

Michael: Got it.

Bob Garechana: In that case, can I ask another question in that right, like the NOI guidance grew by or moved higher by 145 basis points, and the FFO guidance grew by a hundred basis points. So can you just walk through some of the moving pieces and overhead and other that may have limited the flow through during the period.

Speaker Change: In that case can I ask another question in that.

NOI guidance grew by or moved higher by 145 basis points in your <unk> guidance grew by 100 basis points. So can you just walk through some of the moving pieces in overhead and other that may have limited the flow through during the period.

Speaker Change: Right.

Bob Garechana: Yeah, hey, Michael, it's Bob. And I think there's a forward wreck in the earnings release that can help you. But it is basically the main contributions, NOI growth offset in part by overhead growth. That the good portion of that overhead growth is actually coming from property management and is related to legal costs associated with defense. And unfortunately, we do live in an environment where we are, you know, sometimes facing litigation, regulation by litigation, or attempts at regulation by litigation. In our regular way, kind of defense costs for various cases go through that property management line item, and we include those in normalized FFO.

Robert A. Garechana: Yeah. Yeah. Yeah, hey Michael, it's Bob.

Speaker Change: Yeah, Hey, Michael its Bob.

Speaker Change: And I think there's a forward rack and that in the earnings release that can help you, but it is basically the main contribution is NOI growth offset in part.

Robert A. Garechana: And I think there's a forward rec in the earnings release that can help you. But it is basically the main contribution is NOI growth offset in part by overhead growth, and a good portion of that overhead growth is actually coming from property management and is related to legal costs associated with defense. Unfortunately, we do live in an environment where we are, you know, sometimes facing litigation, regulation by litigation, or attempts at regulation by litigation, and our regular way kind of defense costs for various cases go through that property management line item, and we include those in normalized FFO.

Speaker Change: By overhead growth that the a good portion of that overhead growth is actually coming from property management and is related to legal costs associated with defense. Unfortunately, we do live in an environment where.

Speaker Change: We are sometimes facing litigation regulation by litigation or attendance at regulation by litigation in our regular way kind of defense costs for various cases go through that property management line item and we include those in normalized <unk> and so.

Bob Garechana: And so a good portion of the increase or the two cent production that you saw in that wreck is associated with legal costs, and the remaining is just kind of your regular way compensation. A cruel adjustments and the typical stuff you see in the second quarter, but that's basically getting you down to the reconciling you down to the force and increase in the hundred basis points versus the 145 basis point different.

Speaker Change: A good portion of the increase or the <unk>.

Robert A. Garechana: And so a good portion of the increase or the two cent production that you saw in that rec is associated with legal costs. And the remaining is just kind of your regular compensation, accrual adjustments, and the typical stuff you see in the second quarter. But that's basically getting you down to the reconciling you down to the four cent increase in 100 basis points versus 145 basis points difference. Thank you very much. Good luck in the back.

Speaker Change: Production that you saw in that in that rack is associated with legal costs and the remaining is just kind of your regular way compensation.

Speaker Change: Accrual adjustments in the typical stuff you see in the second quarter.

Speaker Change: But that's basically getting you down to be reconciling you down to the <unk> increase in the 100 basis points versus the 145 basis points.

Speaker Change: France.

Unknown Executive: Thank you very much. Good luck in the back half.

Speaker Change: Thank you very much good luck in the back half.

Unknown Executive: Thank you.

David Siegel: Next question comes from the line if David Siegel with Green Street Advisors, please go ahead. Thank you. I was curious if you could provide your thoughts on the spread between renewal and release pricing being several hundred dips. How sustainable do you feel like that is, and do we think that may return to a more normalized spread layer this year or more of a next year change?

Mike: Thanks, Mike.

Operator: Thank you. Thank you. Your next question comes from the line David: Hi, thank you.

Speaker Change: Your next question comes from the line of David Siegel with Green Street Advisors. Please go ahead.

Michael L. Manelis: I was curious if you could provide your thoughts on the spread between renewal and new lease pricing being several hundred BIPs. How sustainable do you feel that that is? And do we think that that may return to a more normalized spread later this year or more of a next year change? Hey, David. This is Michael.

David Siegel: Hi, Thank you I was curious if you could.

Speaker Change: Provide your thoughts on spreadsheets.

Spread between renewal and new lease pricing being several hundred bps.

Speaker Change: How sustainable do you feel like that is and do we think that that may return to a more normalized rate later this year or more of a next year.

Speaker Change: Change.

Michael L. Manelis: So we've looked at the data going all the way back in time between these spreads, and it's not uncommon for the spreads to be 300 to 400 basis points different from each other, clearly looking at the second quarter. I do think you're going to see a little bit of tightening in that spread going forward. I think with a little bit of that moderation of the renewals, just based on kind of where pricing is today in the marketplace, you'll see a little bit of that compression, but I don't think they're going to be sitting right on top of it.

Michael Manelis: Hey, David, this is Michael. So we've looked at the data going all the way back in time between these spreads, and it's not common for the spreads to be 300 to 400 basis points different from each other, clearly looking at the second quarter. I do think you're going to see a little bit of tightening in that spread going forward. I think with a little bit of that moderation of the renewals just based on kind of where pricing is today in the marketplace. You'll see a little bit of that compression, but I don't think they're going to be sitting right on top of each other because it's fairly normal for us to maintain a spread between those two stats.

Speaker Change: Hey, David This is Michael so we've looked at the data going all the way back in time between these spreads and it's not uncommon for the spreads to be 300 to 400 basis points different from each other clearly looking at the second quarter I do think youre going to see a little bit of tightening in that spread going forward.

Speaker Change: I think with a little bit of that moderation of the renewals just based on kind of where pricing is today in the marketplace, you'll see a little bit of that compression, but I don't think they're going to be sitting right on top of each other because it's fairly normal for us to maintain a spread between those two steps.

Michael L. Manelis: Each other because it's fairly normal for us to maintain a spread between those two stats. Great, thank you. And I was curious if you could give the numbers for what the last release was in 2Q and where that sits at this point in the summer. Yeah, so I think first, let me just explain it.

Michael Manelis: Great.

Michael Manelis: Thank you, and I was curious if you could give the numbers for what the lost at least was in two queue and where does that sit at this point in the summer. Yeah, so I think first let me just explain it at the beginning of the year with our portfolio was in a moderate game to least position. We were about 60 basis points game, and since then we've seen that pricing trends sequentially tick up and follow kind of a more normal rent seasonality curve, and it's put us back into a loss to lease environment. Again, as of the middle of July, or lost to lease in the portfolio was negative 3.6%.

Speaker Change: Great. Thank you and I'm just curious if you could.

Speaker Change: The numbers for what the loss to lease was in <unk> and where does that sit at this point in the summer.

Michael L. Manelis: At the beginning of the year, our portfolio was in a moderate gain-to-lease position; we were about 60 basis points ahead. And since then, we've seen that pricing trend sequentially tick up and follow kind of a more normal rent seasonality curve, and it's put us back into a loss-to-lease environment. As of the middle of July, our loss-to-lease in the portfolio was negative 3.6%.

Speaker Change: Yeah. So I think first let me just.

Speaker Change: Explained at the beginning of the year with our portfolio was in a moderate gain to lease position. We were about 60 basis points gain and since then we've seen that pricing trend sequentially tick up.

Speaker Change: And follow kind of a more normal rent seasonality curve and it's put us back into a loss to lease environment as of the middle of July our loss to lease in the portfolio was negative three 6%, so a little bit less than kind of what you would've saw in historical years, but a lot of that is just due to the expansion market pricing as well.

Michael Manelis: It's a little bit less than kind of what you would have saw in historical years, but a lot of that is just due to the expansion market pricing as well as kind of what we were seeing in the Los Angeles market. I do think it's important for everyone to remember that game to lease. It's just a snapshot like point in time where you mark all leases in place to the market and they don't directly translate into like a full year revenue number growth. A lot of that has to do with the timing of who moves out, but again, I'm going to reiterate kind of what I said before, which is when I snapshot the portfolio sitting at the end of July today.

Michael L. Manelis: So a little bit less than kind of what you would have seen in historical years, but a lot of that is just due to the expansion market pricing, as well as what we were seeing in the Los Angeles market. I do think it's important for everyone to remember that gain on lease is just a snapshot, a point in time where you mark all leases in place on the market, and they don't directly translate into like a full year revenue number growth. A lot of that has to do with the timing of who moves out.

Speaker Change: Kind of what we were seeing in the Los Angeles market I do think it's important for everyone to remember that gain to lease. It's just a snapshot point in time, where you mark all leases in place to the market and they don't directly translate into like a full year revenue number growth a lot of that has to do with the timing of who moves out.

Speaker Change: But again I'm going to reiterate kind of what I said before which is a nice snapshot the portfolio sitting at the end of July today, we like the position were at both from a pricing trend from an occupancy from an application volume and even with the loss to lease of three six we feel like we're in a really good spot for late July.

Michael L. Manelis: But again, I'm going to reiterate kind of what I said before, which is when I snapshot the portfolio, sitting at the end of July today, we like the position we're in both from a pricing trend, from an occupancy rate, and even with a loss to lease at 3.6, we feel like we're in a really good spot for late July to deal with kind of the balance of the year. It is amazing.

Michael Manelis: We like the position we're at both from a pricing trend, from an occupancy, from an application volume, and even with a loss to lease at 3.6. We feel like we're in a really good spot for late July to deal with kind of the balance of the year.

Speaker Change: To deal with kind of the balance of the year.

Michael Manelis: Amazing. Thank you.

Speaker Change: Amazing Thank you.

Ryan Nikuliko: The next question comes from Ryan of Nikuliko with Skishebank. Thanks. Just going back to Los Angeles. I know you mentioned some supply impact, but imagine it could be some demand impact as well from some of the disruption going on in Hollywood TV film industry. Can you just talk a little bit about any trend you are seeing and kind of exposure to that sector within the region? Yeah, and if this is Michael, so I haven't seen anything right now in our numbers for us when we're looking at 10 more residents are coming to us from the industries.

Operator: Thank you. Your next question comes from the line of Nick Ulicow. Thanks. Just going back to Los Angeles, I know you mentioned some supply impact, but I imagine there could be some demand impact as well from some of the disruption going on in Hollywood, TV, and the film industry. Can you just talk a little bit about any trends you are seeing and the kind of exposure to that sector within the region? Yeah, and this is Michael.

Speaker Change: The next question comes from the line of Nick <unk> with <unk>.

Speaker Change: Bank.

Nick: Thanks, just going back to Los Angeles, I know you mentioned some supply impact but.

Nick: I imagine there could be some demand impact as well from some of the disruption going on in Hollywood television film industry can you just talk a little bit about any trends you are seeing.

Speaker Change: And kind of exposure to that sector within the region.

Michael L. Manelis: So I haven't seen anything right now in our numbers for us when we're looking at times when residents are coming to us from the industries. I don't have an overly heavily concentrated kind of bucket that says I'm tied to like the studio activity. I think there are a lot of peripheral jobs that are all dependent upon the activity of the studios. But right now, the demand actually feels pretty good for us in LA.

Michael: Yeah, and if this is Michael so I haven't seen anything right now in our numbers for us when we're looking at 10 or residents are coming to us from the industries I don't have an overly heavily concentrated kind of bucket that says I'm tied to like the studio activity I think theres a lot of.

Michael Manelis: I don't have an overly heavily concentrated kind of bucket that says I'm tied to like the studio activity. I think there's a lot of peripheral jobs that are all dependent upon that activity of the studios, but right now the demand actually feels pretty good for us in LA. What we're dealing with right now is that you have a lot of what I would say is this shadow supply occurring in the market where units not only in our own portfolio, but in all the properties we compete against, getting through the court system, getting through the eviction process.

Michael: Peripheral jobs that are all dependent upon that activity at the studios, but right now the demand actually feels pretty good for us in L. A.

Speaker Change: What we're dealing with right now is that you have a lot of what I would say is the shadow supply occurring in the market where units not only in our own portfolio, but in all of the properties, we compete against getting through the court system getting through the eviction process and Thats really just bringing additional supply.

Michael L. Manelis: What we're dealing with right now is that you have a lot of what I would say is this shadow supply occurring in the market, where units not only in our own portfolio but in all the properties we compete against are getting through the court system and going through the eviction process. And that's really just bringing additional supply to the market.

Michael Manelis: And that's really just bringing additional supply to the market. So you look at demand; you look at the fact that the occupancy is holding strong 95 and a half percent plus. There's demand in the marketplace. It's just that you got a lot more units coming into that market through this eviction process. And I think you just got to give it another couple quarters for us to work through the absorption of those units. Okay, great, thanks.

Michael L. Manelis: So you look at demand, you look at the fact that the occupancy is holding strong at 95 and a half percent plus there's demand in the marketplace; it's just that you got a lot more units coming into that market through this eviction process. And I think you just got to give it another couple of quarters for us to work through the absorption of those units. Okay, great.

Speaker Change: Out of the market. So you look at demand you look at the fact that the occupancy is holding strong 95, 5% plus there's demand in the marketplace. It's just that you got a lot more units coming into that market through this eviction process and I think you just got to give it another couple of quarters for us to work through the absorption of those units.

Speaker Change: Yeah.

Alexander Brackenridge: And then just, you know, one of the questions about the transaction market, if you could talk a little bit more about maybe what you're seeing out there in terms of how buyers are, you know, underwriting assets, in terms of, you know, rent growth for the next several years, how much that could be impacting an initial sort of cap rate expectation. Hey, Nick, it's Alec.

Speaker Change: Okay, great. Thanks, and then just.

Ryan Nikuliko: And then just, you know, one of the questions on the transaction market, if you could talk a little bit more about maybe what you're seeing out there in terms of how buyers are, you know, underwriting assets, in terms of, you know, rent growth for the next several years, how much that could be impacting like an, you know, initial sort of capric expectation.

Speaker Change: One other question is on the transaction market. If you could talk a little bit more about may be what youre seeing out there in terms of how buyers are.

Speaker Change: Underwriting assets in terms of.

Speaker Change: Rent growth for the next several years, how much that could be impacting like in.

Speaker Change: Initial sort of cap rate expectation.

Alec Brackenridge: Hey, Nick, it's Allocate. Really? It depends where you're underwriting that opportunity in the expansion markets. As I said, most people are slightly negative and flat the first couple of years and then seeing a pop as supply goes away in a more urban setting, say in San Francisco, where there's still some recovery coming. It's a different underwrite, but probably starting at the same capric. There haven't been a whole lot of trades, but there are deals on the market right now, and my understanding is probably going to trade for around a five. And that buyer is expecting, you know, better things coming.

Alexander Brackenridge: It really depends where you're underwriting that opportunity. In the expansion markets, as I said, most people are slightly negative and flat for the first couple of years, and then see a pop as supply goes away. In a more urban setting, say in San Francisco, where there's still some recovery coming, it's a different underwrite, but probably starting at the same cap rate. There haven't been a whole lot of trades, but there are deals on the market right now, and my understanding is they're probably going to trade for around a five, and that buyer is expecting better things.

Speaker Change: Hey, Nick its Alex it really depends where you're underwriting that opportunity in the expansion markets. As I said, most people are slightly negative and flat. The first couple of years, and then seeing a pop as supply goes away.

Speaker Change: In a more urban setting say in San Francisco, where there's still some recovery coming it's a different underwrite, but probably starting at the same cap rate there hasn't been a whole lot of trades, but they're deals on the market right now and my understanding is they're probably going to trade for around a five and that that buyer is expecting better things coming they're not seeing the supply.

Alexander Brackenridge: They're not seeing the supply issues, obviously, that we are in the expansion markets, but they're expecting that the city continues to improve and that rent growth is a little outsized for the next few years. However you slice it, it does seem like the magic number is a five right now, and that number works well for us. We're going to be active both on the acquisitions and dispositions side. Appreciate it. Thanks.

Alec Brackenridge: They're not seeing the supply issues, obviously, that we are in the expansion markets, but they're expecting that the city continues to improve and that, you know, rent growth is a little outside for the next few years.

Speaker Change: Issues, obviously that we are in the expansion markets, but they are expecting that the city continues to improve and that rent growth is little outside for next few years. So however, you slice it does seem like the magic numbers of five right now and that that number works well for us.

Alec Brackenridge: So however you slice it, does seem like the magic number is a five right now, and that, that, that number works well for us. You know, we're, we're going to be active both on the acquisitions and disposition sides.

Speaker Change: We're gonna be active both on the acquisitions and disposition side.

John Came: Appreciate it. Thanks.

Speaker Change: Appreciate it thanks.

John Came: Next question comes from the line of John Came with BMO Capital Markets. Thank you. It looks like new lease rent softened a bit in June relative to May. I know it's only 20 basis points, but I was wondering if you can comment on rent peaking earlier than what you've seen historically. And also as part of that, do you expect new lease pricing in the third quarter to potentially be flat or negative?

Operator: Your next question comes from John Kim with BMOK. Thank you. It looks like new lease rents softened a bit in June relative to May, but I know it's only 20 basis points.

Speaker Change: Your next question comes from the line of John Kim with BMO capital markets.

John P. Kim: Thank you.

Speaker Change: It looks like new lease rents softened a bit in June relative to me I know, it's only 20 basis points.

Robert A. Garechana: But I was wondering if you can comment on rents peaking earlier than what you've seen historically. And also, as part of that, do you expect new lease pricing in the third quarter to potentially be flat or not? Hey, John. It's Bob.

Speaker Change: But I was wondering if you can comment on rents, peaking earlier than what you've seen historically.

Speaker Change #100: And also as part of that do you expect new lease pricing in the third quarter to potentially be flat or negative.

Bob Garechana: Hey, John, it's Bob.

Robert A. Garechana: I'll start with kind of a monthly commentary, and then I'll pass it off to Michael to give you some trends. And, to be honest with you, while your inference is not incorrect, based on the information you have, one of the challenges of producing these monthly numbers, particularly when they are interim numbers, which is where you would have gotten those or that inference for June, is that they were interim numbers, and the final was different.

Speaker Change #100: Hey, John It's Bob I'll start with kind of the monthly commentary and then I'll pass it off to Michael to give trends and and to be honest with you. While your inference is not incorrect based on the information you have one of the challenges of producing these monthly numbers, particularly when they are interim.

Michael Manelis: I'll start with kind of the monthly commentary, and then I'll pass it off to Michael to give trends. And, to be honest with you, while your inference is not incorrect based on the information you have. One of the challenges of producing these monthly numbers, particularly when they are interim numbers, which is where you would have gotten those or that inference for June, is that they were interim and the final was different. So if you actually peel back the onion and look at the quarter, monthly by monthly, on June was our best number on new lease and on blend.

Michael: Numbers, which is where you would've gotten those are that in France for June is that they were in trauma in the final was different so if you actually peel back the onion and look at the quarter monthly by monthly.

June was our best number on new lease and on blend.

Michael Manelis: April and May were slightly lower, which is very typical and very normal.

Speaker Change #101: April and May were slightly lower which is very typical and very normal but it is it gets confusing when youre producing these monthly numbers that our preliminary that change over time, which is one of the reasons why we don't think it is helpful to provide that degree of disclosure when youre not in meaningful inflection point. So that's why we're.

Michael Manelis: But it is against confusing when you're producing these monthly numbers that are preliminary that change over time, which is one of the reasons why we don't think it's helpful to provide that degree of disclosure when you're not in. Meaningful inflection point, so that's why we're moving away from those that you, but to reiterate and answer specifically, June was actually the best month in terms of spread on new lease and blend, and I'll pass over to Michael on the outlook.

Michael: Moving away from those so June but to reiterate an answer specifically June was actually the best month in terms of spreads on new lease and blend and I'll pass it over to Michael on the outlook. Yeah. So in terms of rent, peaking I guess I would tell you going all the way back in time from like 2005, we kind of understand the rent.

Michael Manelis: Yeah, so in terms of rent speaking, I guess I would tell you going all the way back in time from like 2005, we kind of understand the rent. The rent seasonality components and rents typically would peak somewhere in that July to the second week of August timeframe. For the last two years, we've seen what we've described as almost like a double peak where rents peaked in June and then they soften down a little bit and then they come back up in that August period. Right now we're in a little bit of that kind of mix where we've decelerated a little bit in the last couple of weeks, but we've got good volume, we've got strong application.

Michael: Rent seasonality components and rents typically would peak somewhere in that July for the second week of August timeframe for the last two years, we've seen what we've described it as almost like a double peak where rents peaked in June than they soften down a little bit and then they come back up in that August period, right now we're in a little bit of that kind of mix where we'd be.

Robert A. Garechana: So if you actually peel back the onion and looked at the quarter monthly by monthly, June was our best number. For the last two years, we've seen what we've described as almost like a double peak where rents peaked in June, then they softened down a little bit, and then they came back up in that August period. Right now, we're in a little bit of that kind of mix where we've decelerated a little bit in the last couple of weeks, but we've got good volume.

Michael: Salaried at a little bit in the last couple of weeks, but we've got good volume. We've got strong application. So my guess is we'll see kind of that pricing trend line pick up a little bit regardless, whether we pick up and have a double peak or not I'll tell you. Our rents today are up 7% from where they were at the beginning of January that's about 40 basis points.

Michael Manelis: So my guess is we'll see kind of that pricing trend line pick up a little bit. Regardless of whether we pick up and have a double peak or not, I'll tell you our rents today are up 7% from where they were the beginning of January. That's about 40 basis points stronger than a normal rent seasonality curve and definitely stronger than kind of the muted expectations that we started the year. So I think we like the rent level position that we're at right now. Whether we get a little bit more acceleration for the next couple of weeks really doesn't impact kind of our full year outlook.

Robert A. Garechana: We've got strong application, so my guess is we'll see kind of that pricing trend line pick up a little bit, regardless whether we pick up and have a double peak or not. I'll tell you, our rents today are up 7% for most of the month from where they were at the beginning of January.

Michael: Other than a normal rent seasonality curve and definitely stronger than kind of the muted expectations that we started the year. So I think we like the rent level position that we're at right now whether we get a little bit more acceleration for the next couple of weeks really doesn't impact kind of our full year outlook.

Michael Manelis: Okay, and then if I could ask about turnover, it went up a little bit, but still, they'll put the low compared to where it's been historically at 11.7 percent.

Michael L. Manelis: That's about 40 basis points stronger than a normal rent seasonality curve and definitely stronger than kind of the muted expectations that we started the year. So I think we like the rent level position that we're at right now; whether we get a little bit more acceleration for the next couple of weeks really doesn't impact our full-year outlook. Okay, and then if I could ask about turnover, it went up a little bit, but it's still relatively low compared to where it's been historically at 11.7%. But can you discuss any differences between your established and expansion markets in terms of turnover? Hey John, this is Michael.

Speaker Change #102: Okay, and then if I could ask you about.

Speaker Change #103: Turnover, it went up a little bit, but still relatively low.

Speaker Change #104: Compared to where it's been historically at 11, 7%, but can you discuss any differences between your established and expansion markets on turnover.

Michael Manelis: But can you discuss any differences between your established and expansion markets on turnover? Yeah, John, this is Michael. So I turn over clearly in the expansion markets is higher right now than the established markets. So the renewal process that the residents have a lot of choices in the market, we're working really hard to do it, but the percent of residents renewing is more like in the mid to high 40s, not the 55 to 60 percent that we see across the established markets. And I guess I would look at that overall turnover number, and even in those established markets, tell you it's still pretty low, right?

Michael L. Manelis: So, turnover clearly in the expansion markets is higher right now than in the established markets. You know, the renewal process, the residents have a lot of choices in the market. We're working really hard to do it, but the percent of residents renewing is more like in the mid to high 40s, not the 55 to 60 percent that we see across the established markets.

Speaker Change #104: Yeah, Hey, John This is Michael so I turnover clearly in the expansion markets is higher right now than the established markets.

Speaker Change #105: The renewal process. The residents have a lot of choices in the market, we're working really hard to do it but the percent of residents renewing as more like in the mid to high Forty's not the 55% to 60% that we see across the established markets and I guess I would look at that overall turnover number and even in those established markets tell you.

Michael L. Manelis: And I guess I would look at that overall turnover number, and even in those established markets, it's still pretty low, right? And you could see, compared to all of our historical trends right now, that we are at kind of historical lows for turnover across all of these markets. And that's just a good position for us to be in right now.

Speaker Change #105: It's still pretty low right and you could see that kind of versus all of our historical trends right. Now that we are at kind of historical lows for turnover across all of these markets and that's just a it's a good position for us to be in right now.

Michael Manelis: And you can see that kind of versus all of our historical trends right now, that we are at kind of historical lows for turnover across all of these markets. And that's just a good position for us to be in right now.

Jamie Feldman: Great, thank you. Your next question comes from the line of Jamie Feldman with Wells Fargo. Great, thank you.

Speaker Change #106: Great. Thank you.

Speaker Change #106: Okay.

Michael L. Manelis: Thank you. The next question comes from the line of Jamie Feldman with Wells Fargo. Great, thank you.

Speaker Change #106: Your next question comes from the line of Jamie Feldman with Wells Fargo.

Michael L. Manelis: I guess sticking with the turnover topic, I mean, are there any markets where you're actually seeing an inflection point for turnover rising? And, you know, similarly, any markets where you can flag price sensitivity more than others, or an inflection point for price sensitivity more than others, kind of tying into some of the comments INVH made on their call that there are some markets where they're seeing a change. Yeah, I mean, I think I said in my prepared remarks, we saw in Southern California, clearly in Orange County, in San Diego, just a little bit of a willingness to move further out for a lower price point.

James Colin Feldman: Great. Thank you I guess sticking with the turnover topic I mean are there any markets, where you're actually seeing an inflection point of turnover rising.

Michael Manelis: I guess sticking with the turnover topic, I mean, are there any markets where you're actually seeing an inflection point of turnover rising? And you know, similarly, any markets where you can flag price sensitivity more than others or an inflection point in price sensitivity more than others, kind of tying into some of the comments I envied on their call that there are some markets where they're seeing the change. Yeah, I mean, I think I said in my prepared remarks we saw in Southern California clearly in the Orange County and San Diego, just a little bit of a willingness to move further out for a lower price point.

James Colin Feldman: And similarly, any markets, where you can flag price sensitivity more than others or an inflection point in price sensitivity more than others kind of tying into some of the comments I'm VH made on their call that there are some markets, where theyre seeing a change.

Michael L. Manelis: You can see that in the reasons for moving out, kind of showing up in those markets. The overall numbers, though, when you look at the move out reasons, are increased to expensive, which is one of those areas that residents could denote when they're moving out. Actually, it was about 16% of our move outs. And that actually ticked up a little bit from the first quarter, but it remains well below what our historical norms were for that stat, which was more like 20%.

Speaker Change #108: Yeah, I mean, I think I said in my prepared remarks, we saw in southern California, clearly in the Orange County, and San Diego, just a little bit of a willingness to move further out for a lower price point, you can see that and the reasons for move out.

Michael Manelis: You can see that in the reasons for move out, kind of showing up in those markets. The overall numbers, though, when you look at the move-out reasons, are increased to expensive, which is one of those areas that residents could denote when they're moving out. Actually, was about 16% of our move-outs. And that actually ticked up a little bit from the first quarter, but remained well below what our historical norms were for that stat, which was more like 20%. And that really just continues to support this notion that our residents remain in really good financial shape and aren't really kind of feeling that immediate pressure.

Speaker Change #108: Kind of showing up in those markets. The overall numbers, though when you look at their move out reasons.

Speaker Change #108: Our increased too expensive, which is one of those areas that residents could denote when theyre moving out actually was about 16% of our move outs and that actually it ticked up a little bit from the first quarter, but remains well below what our historical norms of work for that stat, which was more like 20% and that really just continues to support.

Michael L. Manelis: And that really just continues to support this notion that our residents remain in really good financial shape and aren't really kind of feeling that immediate pressure. But as I said in the prepared remarks I did this last quarter, we saw a little bit of that in Southern California kind of play out. And it's something we're just going to continue to watch. But the overall rent to income ratios in the portfolio for new residents coming in are right at 20%, which continues to support this notion that they're in good financial shape.

Speaker Change #108: This notion that our residents remain in really good financial shape and are really kind of feeling that immediate pressure, but as I said in the prepared remarks I did this last quarter, we saw a little bit of that in southern California kind of play out.

Michael Manelis: But, as I said in the prepared remarks, I did this last quarter; we saw a little bit of that in Southern California kind of play out. And it's something we're just going to continue to watch. But the overall rent income ratios and the portfolio for new residents coming in is right at 20%, which continues to support this notion that they're in good financial shape.

And it's something we're just going to continue to watch, but the overall rent to income ratios in the portfolio for new residents coming in is right at 20%, which continues to support this notion that they are in good financial shape.

Jamie Feldman: Okay, thanks for that. And I appreciate your comments on the political environment.

Michael L. Manelis: Okay, thanks for that. And I appreciate your comments on, you know, the political environment, but I guess just sticking with DC specifically. I mean, it sounds like either way, we're going to have a change in administration. Just historically, how does that market tend to trend around a presidential election around a change in administration, just in terms of the demand, and you know what we should expect at the end on the occupancy side, ends and outs, and very stable.

Speaker Change #109: Okay. Thanks for that and I appreciate your comments on the political environment, but I guess, just sticking with D. C. Specifically I mean, it sounds like either way, we're going to have a change in administration, just historically, how does that market tend to trend.

Michael Manelis: But I guess just sticking with DC specifically, I mean, it sounds like either way we're going to have a change in administration. Just historically, how does that market tend to trend around a presidential election, around a change in administration, just in terms of demand, and what should we expect at the end on the occupancy side? It’s ins and outs and very stable, actually. We've looked at this, trying to see if the actual administration's completely changed out what happens. Right now, we can't see anything in the data to suggest that there's a material impact to our overall demand drivers there.

Speaker Change #110: And presidential election around a change in administration just in terms of demand and what should we expect it to be on the occupancy side.

Michael L. Manelis: Actually, we've looked at this trying to see if the actual administrations completely change what happens. Right now, we can't see anything in the data to suggest that there's a material impact on our overall demand drivers there. Seating is pretty smooth, just through 25, barring just normal seating.

Speaker Change #111: Ins and outs and very stable actually we've looked at this trying to see if the actual administrations completely change out what happens right now we can't see anything in the data to suggest that there's a material impact to our overall demand drivers there.

Speaker Change #110: Yeah.

Michael Manelis: Feeding is pretty smooth just through 25. Sorry, I'm just normal. Yeah, I think, I think it's available.

Speaker Change #112: Seating is pretty smooth just through twenty-five barring just normals, yeah. I think it's just stable yeah, I think the federal government is a bit of a bit of a monolith.

Michael L. Manelis: Yeah, I think it's just stable. Yeah. I think the federal government's a bit of a monolith; it just keeps going. Okay, thank you. Thank you. The next question comes from the line of Haendel. Hey, good morning out there.

Unknown Executive: Yeah, I think the federal government's a bit of a, a bit of a monolith. Okay, thank you.

Speaker Change #110: [laughter].

Speaker Change #113: Okay. Thank you.

Unknown Executive: Thank you.

Speaker Change #114: Your next.

Speaker Change #115: Your next question comes from the line of handheld sandwiches.

Mizuho.

Michael L. Manelis: Thanks for taking my question. Michael, could you help me provide a little bit more color on the West Coast portfolio, what you're seeing concession-wise across LA, San Fran, and Seattle, and what your expectations are for blended rate growth for those markets in the second half versus the mid-2% portfolio average? Thanks.

Speaker Change #116: Hey, good morning out there. Thanks for taking my question micro hoping you provide a little bit more color on the west coast portfolio, what youre seeing concession wise across la San Fran and Seattle and what your expectations are for a blended rate growth in those markets in the second half of the mid 2% portfolio average.

Michael Manelis: A little bit more color on the West Coast portfolio, what you're seeing concession-wise across LA, San Fernando, Seattle, and what your expectations are for blended rate growth for those markets in the second half or the mid 2% portfolio. Average, thanks. Yeah, so first, concessions for us in the portfolio do remain concentrated in the West Coast, and it's really downtown. San Francisco, the city of Seattle, and Los Angeles. And for us right now, the volume of concessions in those markets, it's really ranging about 15% in Los Angeles, just receiving under a month, and in Seattle and San Francisco were more like 30 to 40%, right around a month in those downtown areas.

Michael L. Manelis: Yeah, so first, concessions for us in the portfolio do remain concentrated in the West Coast, and it's really downtown San Francisco, the city of Seattle, and Los Angeles. And for us right now, the volume of concessions in those markets is really ranging about 15% in Los Angeles, just receiving under a month. And in Seattle and San Francisco, we're more like 30 to 40% right around a month in those downtown areas.

Speaker Change #117: Yeah. So first.

Speaker Change #118: Concessions for us in the portfolio do remain concentrated in the west coast and its really downtown.

Speaker Change #118: San Francisco, the city of Seattle, and Los Angeles.

Speaker Change #119: And for US right now the volume of concessions in those markets, it's really ranging about 15%.

Speaker Change #119: In Los Angeles, just receiving under a month and in Seattle, and San Francisco were more like 30% to 40% right around a month in those downtown areas. So I think for US we expect that the concessions.

Michael Manelis: So I think for us, we expect that the concessions are going to be stable here for the next couple of months, and then we do anticipate a little bit of an acceleration in the back half of the third quarter and in through the fourth quarter, and that's just kind of looking at what we've seen from a demand seasonality standpoint, where our expectations are. Our overall concession use did come in a little better than we expected. It was 25% lower sequentially from the first quarter, and about 7.5% lower than the second quarter of 23. In terms of like the stats as to how to think about the third quarter there, we do have a little bit of an easier comp coming at us in Seattle and San Francisco.

Speaker Change #119: Are going to be stable here for the next couple of months and then we do anticipate a little bit of an acceleration in the back half of the third quarter and in through the fourth quarter and that's just kind of looking at what we've seen from a demand seasonality standpoint, where our expectations are our overall concession use did come in a little better than we <unk>.

Michael L. Manelis: So I think for us, we expect that the concessions are going to be stable here for the next couple of months, and then we do anticipate a little bit of an acceleration in the back half of the third quarter and through the fourth quarter. And that's just kind of looking at what we've seen from a demand seasonality standpoint, where our expectations are. Our overall concession use did come in a little better than we expected.

Speaker Change #119: Expected it was 25% lower sequentially from the first quarter and about seven 5% lower than the second quarter of 'twenty three in terms of like the stats as to how to think about the third quarter. There I mean, we do have a little bit of an easier comp coming at us in Seattle and San Francisco. So my guess is the new lease that fit.

Michael L. Manelis: It was 25% lower sequentially from the first quarter and about seven and a half percent lower than the second quarter of 23. In terms of the stats as to how to think about the third quarter there, I mean, we do have a little bit of an easier comp coming at us in Seattle and San Francisco.

Michael Manelis: So my guess is the new least that could hold up a little bit better, not a lot of impact on the rules. We expect the stability there, and I think in Los Angeles. I don't anticipate a material change because, like I said, the pockets that we're feeling supply pressure. We don't anticipate that abating, and I think we're going to continue to work through some of the excess inventory from the eviction process. And that's going to take us through the year.

Michael L. Manelis: So my guess is the new lease stack could hold up a little bit better, with not a lot of impact on the renewals. We expect stability there, and I think in Los Angeles, I don't anticipate a material change because, like I said, the pockets that we're feeling supply pressure on, we don't anticipate that abating. And I think we're going to continue to work through some of the excess inventory from the eviction process, and that's going to take us through the year. So I just don't have a specific number I can give you for the quarter.

Speaker Change #119: Hold up a little bit better not a lot of impact on the renewals, we expect the stability there and I think in Los Angeles, I don't anticipate a material change because like I said the pockets that we're feeling supply pressure, we don't anticipate that abating and I think we're going to continue to work through some of the excess inventory from the eviction process.

Speaker Change #119: And that's going to take us through the year. So I just don't have a specific number I would give you for the quarter I just think we've got different scenarios playing out across those markets.

Michael Manelis: So I just don't have a specific number I would give you for the quarter. I just think we've got different scenarios playing out across those markets.

Michael L. Manelis: I just think we've got different scenarios playing out across those markets. Got it. Got it. That's very helpful. And Mark, maybe one for you.

Mark Parrell: Got it. That's that. That's very helpful.

Speaker Change #120: Got it got it that's very helpful.

Mark Parrell: And Mark, maybe one for you. I guess I'm curious. If any of you asked if you bought here. And early third quarter, Atlanta and Dallas were from Lanar as they monetize their court terra portfolio. And I'm curious on your view of all of the portfolio trade that they had with KKR. Seemed like a lot of that portfolio could fit your wheelhouse. Newer assets, some coastal, some Sunbelt exposure. So I'm curious if you took a run at it and any interest in the remaining assets that they may not have sold yet. Thanks.

Speaker Change #120: And Mark maybe one for you I guess I'm I guess I'm curious.

Alexander Brackenridge: I guess I'm curious if any of the assets you bought here in early third quarter, Atlanta and Dallas, were from Lennar as they monetized their Quartera portfolio, and I'm curious about your view overall of the portfolio trade that they had with KKR. It seems like a lot of that portfolio could fit your wheelhouse, newer assets, some coastal, some sunbelt exposure.

Mark: If any of the assets you bought here in early third quarter, Atlanta, and Dallas, where from Lamar as they monetize their tariff portfolio and I'm curious on your view overall of the.

Speaker Change #121: The portfolio trade that they had with KKR seems like.

Speaker Change #122: A lot of that portfolio could fit your wheelhouse and newer assets.

Speaker Change #123: Some coastal from Sunbelt exposure. So I'm curious if you took a run at it.

Speaker Change #124: And then the interest and the remaining assets that they may not have filled yet.

Speaker Change #123: Yeah.

Alec Brackenridge: Hey, hand out, Alec. Yes, we did take a look at that portfolio. And no, we didn't end up with any of those assets. We were interested in a subset of the assets that KKR ended up taking down. So they included things that KKR wanted that we didn't want. So, unfortunately, I'll say the 38 assets; there were about nine that were a good fit for us. And that wasn't a big enough chunk for us to prevail relative to KKR as much bigger off.

Alexander Brackenridge: So I'm curious if you took a run at it and whether you had any interest in the remaining assets. Hey, Haendel, it's Alec. Yes, yeah, we did take a look at that portfolio. And no, we didn't end up with any of those assets. We were interested in a subset of the assets that KKR ended up taking down. So they included things that KKR wanted that we didn't want, frankly. So unfortunately, of, say, the 38 assets, there were about nine that were a good fit for us. And that wasn't a big enough chunk for us to prevail relative to KKR's much bigger offer.

Alex: Hey, Alex Alec.

Alexander David Goldfarb: Yes, we did take a look at that portfolio and no. We didn't end up with any of those assets. We were interested in a subset of the assets that KKR ended up taking down so they they included things that KKR wanted to we didn't want frankly, so unfortunately of say the 38 assets. There were about nine that were a good fit for us and.

Alexander David Goldfarb: That wasn't a big enough chunk for us to prevail relatives KKR is much bigger offered.

Alec Brackenridge: Okay, so the one here in the early third quarter had nothing to do with Monar. Okay, thank you.

Speaker Change #126: Okay. Okay.

Alexander Brackenridge: Okay. Okay. So the ones here in the early third quarter had nothing to do with Lennar.

Speaker Change #127: Okay. So the one here in early third quarter had nothing to do with Lidar. Okay. Thank you.

Alec Brackenridge: Bracken.

Speaker Change #126: Right.

Okay.

Alexander Goldfarb: Your next question comes from the line of Alexander Goldfarb with Piper Sandler. Hey, good morning out there. Thanks. And Mark, hopefully that apartment education extends to Albany here in New York; definitely could use it. So two questions here. The first is in the second quarter; you guys took a sizeable, I guess, you know, it's called commercial dispute and construction defects charge. So maybe you could just walk a little bit more through that and, you know, maybe just, you know, a little background. And if there are any other projects that could witness, or this is just something that had been brewing for a while and finally came to fruition.

Speaker Change #126: Yes.

Operator: Okay. Thank you. Your next question comes from the line of Alexander Goldfarb. Hey, good morning out there.

Your next question comes from the line of Alexander Goldfarb with Piper Sandler.

Alexander David Goldfarb: Hey, good morning out there.

Robert A. Garechana: Thanks. And Mark, hopefully, that apartment education extends to Albany here in New York. I definitely could use it. So two questions here. The first is in the second quarter, you guys took a sizable, It's called a Commercial Dispute and Construction Defects Charge. So maybe if you could just walk a little bit more through that and, you know, maybe just a little background and if there are any other projects, fitness, or this is just something that had been brewing for a while and finally came to fruition. Hey Alex, it's Bob.

Speaker Change #126: Thanks.

Speaker Change #126: And Mark hopefully that apartment education extends to Albany here in New York definitely.

Speaker Change #128: Use it.

Alexander David Goldfarb: So two questions here. The first is in the second quarter, you guys took a sizable I guess.

Alexander David Goldfarb: Called commercial dispute and construction defects charge.

Alexander David Goldfarb: If you could just walk a little bit more through that and.

Speaker Change #129: Maybe just a little background and if there's any other projects that could fitness or this is just something that had been brewing for a while and finally came to fruition.

Bob Garechana: Hey, Alexus Bob. So we did take a charge that you can see on page 27. It's about $9 million. A portion of it was from a commercial dispute, which was basically a dispute related to a brownleast. So a very unique, bespoke situation that is not recurring in any regards.

Robert A. Garechana: So we did take a charge, which you can see on page 27. It's about $9 million. A portion of it was from a commercial dispute, which was basically a dispute related to a Brown lease. So, a very unique, bespoke situation that is not recurring in any way. So that was a portion of it. And unrelated to that, on a separate asset, there was a construction defect that was identified. It isn't that uncommon to have these kinds of small construction defect issues where you have a situation, and then a few quarters later, sometimes years later, you recover that amount from the insurance company of the contractor or builder or from them themselves. So, it's nothing systemic or anything that is recurring in nature. There are just two unique situations.

Unknown Attendee: Hey, Alex it's Bob.

Unknown Attendee: So we did take a charge that.

Speaker Change #130: You can see on page 27, and it's about $9 million a portion of it was from a commercial dispute which was basically a dispute related to a ground lease so a very unique bespoke situation.

Speaker Change #130: Situation that is not recurring in any regard.

Bob Garechana: So that was a portion of it, and unrelated to that, on a separate asset, there was a construction defect that was identified at a property, and we took a reserve around that construction defect. We are pursuing the parties involved in the construction of the asset. So there is an opportunity in the future to potentially recover some of that. This isn't that uncommon to have these kind of small construction defect issues where you have a situation, and then a few quarters later, sometimes years later, you recover that amount from the insurance company of the contractor or builder, or from them themselves.

Speaker Change #130: So that was a portion of it and unrelated to that on a separate asset there was a construction defect that was identified.

Speaker Change #130: At a property and we took a reserve around that construction defect. We are pursuing the parties involved in the construction of the asset. So there is an opportunity in the future to potentially recover some of that.

Speaker Change #130: This isn't that uncommon to have these kind of small construction defect issues, where you have a situation and then a few quarters later, sometimes years later you recover that amount.

Speaker Change #130: From the insurance company at the contractor or builder or from them themselves so but.

Bob Garechana: So, but it's nothing systemic or nothing that is recurring in nature.

Speaker Change #130: But it's nothing systemic or nothing.

Bob Garechana: There's just two unique situations. Okay.

Speaker Change #130: That is recurring in nature. There is just two unique situations.

Robert A. Garechana: Okay, and then the second question is, you know, as you guys look at the landscape, and everyone sort of has the same playbook, right? Supply is plummeting late 25 to early 28, and these are going to be great years for multifamily. Given your degree of existing assets, are you guys thinking more about buying more existing assets to benefit as presumably rents really improve during this time period? Or is your view that you'd rather invest more in joint developments, whether it's pre-sale or JV developments, what have you, in getting more into development activity to have a product that may come?

Mark Parrell: And then the second question is, you know, as you guys look at the landscape and everyone sort of has the same playbook, right? Supply is plummeting late 25 to early 28 going to be these great years for multi-family. Given your degree of existing assets, are you guys thinking more about buying more existing assets to benefit as, presumably, rents really improved during this time period? Or your view is you'd rather invest more in joint developments, whether it's pre-sales or JV developments, what have you, in getting more into development activity to have product that may come off and deliver sometime during this period.

Speaker Change #131: Okay and then the second question is you know as.

Speaker Change #132: As you guys look at the landscape and everyone sort of has the same playbook right supply is plummeting late 'twenty five to early 'twenty eight gonna be these great years for multifamily.

Speaker Change #134: Given your degree of existing assets are you guys thinking more about buying more existing assets to benefit as presumably rents really improved during this time period or your view is you would rather invest more in joint developments.

Speaker Change #133: Developments, whether it's pre sales or TV developments, what have you in getting more into development activity.

Speaker Change #135: That may come up and deliver sometime during this period, just trying to figure out what you guys view as more advantageous to buy existing assets or to invest in development, given what looks to be a healthy two to three years that are coming after the supply wave currently delivers.

Robert A. Garechana: Often deliver sometime during this period just trying to figure out which you guys view is more advantageous to buy existing assets or to invest in development given what looks to be a healthy two to three years that are coming after the supply wave currently delivered. Alex, it's Mark. Thanks for that question. We're open to buying existing streams of income, and we're open to developing assets. We'll do either, and we're doing both. But right now, our lean is towards existing assets.

Mark Parrell: Just trying to figure out which you guys view as more advantageous: to buy existing assets or to invest in development, given what looks to be a healthy two to three years that are coming after the supply wave currently delivers.

Mark Parrell: Alex, it's Mark. Thanks for that question. We're open to buying existing streams of income or open the developing assets. We'll do either, and we're doing both, but right now our lean is towards the existing assets. I mean, we think there's still going to be quite a bit sold. You saw the common I made about transaction volumes going up. A lot of non-natural owners, just people that are developers that are in assets with shorter term bank debt, that we think are going to sell, may not quite be at the fire sale prices people expected a couple of years ago, but they're still going to be good values compared to replacement cost.

Robert A. Garechana: We think they're still going to be quite a bit sold. We saw that comment I made about transaction volumes going up a lot of non-natural owners, just people that are developers that are in assets with shorter-term bank debt that we think are going to sell and may not quite be at the fire sale prices people expected a couple of years ago, but there's still going to be good values compared to replacement costs.

Alex It's mark Thanks for that question.

Speaker Change #136: Open to buying existing streams of income and are open to developing assets, we'll do either and we're doing both but right now our lean is towards the existing assets, we think theres still going to be quite a bit sold or you saw the comment I made about transaction volumes going up a lot of non natural owners just people that are developers.

Speaker Change #136: Our in assets with shorter term bank debt that we think are going to sell in may not quite be at the fire sale prices people expected a couple of years ago, but there's still going to be good values compared to replacement cost and we like that basis. There may be a play on development. Later, you may see more opportunities there you've got construction crossed issues you've got.

Robert A. Garechana: And we like that basis. There may be a play on development later, you may see more opportunities there, but you've got construction cost issues, you've got execution issues, all across the industry still. And you've got funding markets. So right now, again, the lean is towards the existing assets.

Mark Parrell: We like that basis. There may be a play on development later. You may see more opportunities there. You've got construction cross issues. You've got execution issues all across the industry still, and you've got funding issues. I think development in a read is just very challenging at scale because you either have to pre-fund yourself and carry that cash to the detriment of shareholders, or you have to go naked and hope that at the time you need the money, the capital markets are hospitable and you're able to raise it in an accretive fashion. So we like development.

Speaker Change #136: Execution issues all across the industry still and you've got funding issues I think development in a REIT is just very challenging at scale because you either have to pre fund yourself and carry that cash to the detriment of shareholders or you have to go naked and hope that at the time you need the money the capital markets are hospitable and you're able to.

Speaker Change #136: Raise it in an accretive fashion. So we like development, we like it up to a limit and that limit usually is about what our free cash flow is it was about $250 million a year. Because then we can sort of self funded and not worry too much about the external capital markets. So right now again, the leanest towards the existing assets.

Mark Parrell: We like it up to a limit, and that limit usually is about what our free cash flow is. It's about 250 million a year because then we can sort of self-funded and not worry too much about the external capital markets. So right now again, the lean is towards the existing assets. Thank you.

Speaker Change #137: Thank you.

Speaker Change #138: Thank you.

Unknown Executive: This does conclude today's question in the answer session.

Mark J. Parrell: Thank you. Thank you. This does conclude today's question and answer session. I will now turn the call back to Mark Parrell for any additional questions. Well, thank you all for your time and interest on the call today. We appreciate it. Good day. Everyone else has left the call. [inaudible] Thank you for your participation. You may now,

Speaker Change #138: This does conclude today's question and answer session I will now turn the call back to Matt Cabral for any additional and closing remarks.

Mark Parrell: I will now turn the call back to Mark Parrell for any additional and closing remarks. Thank you all for your time and interest on the call today. We appreciate it.

Matt Cabral: Well. Thank you all for your time and interest on the call today, we appreciate it good day.

Unknown Executive: Good day.

Unknown Executive: This does conclude today's call. Everyone else has left the call. Thank you for your participation, and you may now disconnect.

Speaker Change #140: This does conclude today's everyone else has left the call.

Speaker Change #141: Thank you for your participation you may now disconnect.

Speaker Change #140: