Q4 2024 Elme Communities Earnings Call
Yes.
[music].
Speaker Change: Good day and welcome to the communities fourth quarter 2024 earnings Conference call.
As a reminder, today's call is being recorded.
Speaker Change: At this time I would like to turn the call over to your host Amy Hopkins Vice President Investor Relations. Amy. Please go ahead.
Speaker Change: Good morning, and thank you for joining our fourth quarter earnings call. Today's event is being webcast with a slide presentation that is available on the investors section of our website and will be available on a webcast replay statements made during this call may constitute forward looking statements and involve known and unknown risks and uncertainties, which may cause actual results to differ materially.
Speaker Change: It takes no duty to update them as actual events unfold, we refer to certain of these risks in our SEC filings reconciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement which was distributed yesterday and can be found on the investors page of our website.
Speaker Change: On the call today will be Paul Mcdermott, our CEO, Anthony Butcher, our C O L and Steve price that our CFO and with that I will turn the call over to Paul.
Paul McDermott: Thanks, Amy welcome everyone and thank you for joining us this morning.
Paul McDermott: I'll start by addressing the announcement, we made in conjunction with our earnings release.
Paul McDermott: I will also cover our 2024 achievements and the impact of the new administration's focus on government efficiency.
Paul McDermott: Tiffany will discuss our operating trends and platform initiatives and Steve will discuss our 2025 outlook.
Paul McDermott: Yesterday, we announced that the board of Trustees has launched a review to evaluate strategic alternatives.
Paul McDermott: This decision is consistent with our commitment to act in the best interest of the company and our shareholders and to focus on maximizing shareholder value.
Paul McDermott: We remain very confident about the long term prospects of our portfolio and the continued success of our value add renovation pipeline and platform initiatives. However shares of Elm continues to trade at a discount to our estimate of the company's private market value.
Paul McDermott: While we regularly evaluate credible alternative opportunities to maximize value on behalf of our shareholders. After extensive board led strategic planning. The board has decided that a formal proactive process is appropriate at this time.
Paul McDermott: As such the <unk> Board of Trustees has initiated the formal view and retained financial and legal advisors.
Paul McDermott: As is always the case with this type of process. There is no guarantee the review will result in any transaction or a specific outcome and we don't intend to disclose developments unless and until the company determines that disclosure is appropriate or required.
Paul McDermott: While there isn't more we can say about the process. At this time, we are confident we are taking the right steps to maximize value for shareholders.
Paul McDermott: For the rest of the call we will focus on our financial results other business initiatives and outlook.
Paul McDermott: Turning to 2024 highlights operationally it was a significant year as we advanced our multi year platform initiatives.
Paul McDermott: We reached a key milestone with the successful launch of our shared services Department Elm resident services, which streamlines, our resident account management collections.
Paul McDermott: Collections and renewal processes and improved our operating efficiency.
Paul McDermott: We also launched phase one of our managed Wi Fi initiative and the related NOI growth will be ramping up throughout 2025.
Paul McDermott: I'm proud of the transformation efforts put in by our teams last year and look forward to continuing to progress our initiatives and platform efficiency. This year.
Paul McDermott: Turning to the priorities of the New administration, there has been plenty of speculation so we'll stick to the facts and whats happening on the ground.
Paul McDermott: The Washington Metro is widely recognized for its diverse and growing private sector economy.
Paul McDermott: Like 97% of job growth over the last 12 months has been driven by industry other than the federal government.
Paul McDermott: Federal jobs, only represent about 11% of regional employment as over 80% of the $2 1 million civilian positions in the federal government across the country are located outside the D. M D.
Paul McDermott: Elms direct exposure to federal jobs is limited.
Paul McDermott: The two thirds of our Washington Metro resident base for whom we have detailed job level data only 6.2% work at non department of defense Federal government agencies, and the Washington Metro area.
Paul McDermott: 4% work at federal contractors.
Paul McDermott: For community level exposure slide 11 of our latest investor presentation maps, the departments and agencies, where we have the highest exposure and provides concentrations approximate communities.
Paul McDermott: Overall, our highest direct exposure to non D O D Federal government jobs at the community level is in the low double digits.
Paul McDermott: In terms of what we're seeing on the ground or demand trends across the Washington Metro remained solid and in line with our expectations and seasonal norms.
Paul McDermott: The Washington Metro area was a top performing market in 2024, and we believe it is positioned for another strong year in 2025.
Paul McDermott: Net inventory ratios remain low and the high cost of housing create sustained demand for value oriented rental options.
Paul McDermott: The region is positioned to continue to thrive offering a highly skilled workforce advanced technology infrastructure and entrepreneurial atmosphere and unmatched global connections.
Paul McDermott: We are confident in the growth prospects of our Washington Metro portfolio and look forward to gaining more clarity soon and keeping you updated during future calls.
Paul McDermott: And with that I'll turn it over to Tiffany.
Speaker Change: Thanks, Paul starting with supply demand dynamics in our markets. Overall, we are well positioned as we believe L. A submarkets will face less supply pressure than the U S and sunbelt markets generally with projected average annual net inventory growth of 2.2% over the next four quarters, while the U S in sunbelt.
Speaker Change: Our expected to see a 2.8% and four 6% growth respectively.
Speaker Change: Our D N V portfolio remains very well insulated from new supply with quarterly net inventory ratios, averaging one 7% in L. A submarkets this year below the regional average of 2% based on current expectations on.
Speaker Change: On the demand side, the trends are healthy and stable supported by the limited availability of high quality housing that is affordable to middle income residents. We anticipate another year of favorable supply demand dynamics in the D. M D.
Speaker Change: In Atlanta, we expect to see gradual improvement in the supply dynamics with a more significant improvement in 2026.
Speaker Change: The weighted average net inventory ratio peaked at four 3% in the first half of 'twenty 'twenty four across our Atlanta, Submarkets and is expected to remain relatively flat in 2025 compared to the 3.8% in the fourth quarter of 2024.
Speaker Change: On a positive note annual absorption has been very strong and is expected to be nearly 40% higher in 2025 compared to 2024 in L. A submarkets, which should help to balance the impact of new deliveries as the year progresses.
Speaker Change: Turning to operating trends same store blended lease rate growth averaged one 3% in the fourth quarter and one 8% in January 2025, same store pool same store occupancy averaged 95% during the fourth quarter up 20 basis points sequentially.
Speaker Change: Pension rates remain above historical levels at our move outs to own remained very low during the fourth quarter at eight 5% as there is limited existing inventory in homeownership remains unaffordable or many middle income renters.
Speaker Change: On a year to date basis same store occupancy has trended up slightly averaging 95, 1%. We are targeting an average occupancy range of 95 to 95, 5% for the year, which reflects a more normalized year in the D. M D compared to strong occupancy gains in 2024.
Speaker Change: We are expecting an improvement in our Atlanta portfolio in the second half of the year as delinquency related occupancy pressure subsides and the supply demand dynamic and imbalance improves.
Speaker Change: Turning to renovations, we completed about 500 full renovation in 2024 at an average cost of $17000 per unit, achieving an average renovation ROI of approximately 17% in.
Speaker Change: In 2025, we expect to complete another 500 full renovation.
Speaker Change: Similar cost per unit, yielding a targeted 17% ROI.
Speaker Change: Our renovation program, we are targeting communities that have the greatest potential for outsized rent growth and maintain flexibility to adjust the pace of renovation as market demand shifts lastly.
Speaker Change: Lastly, I'll speak to our operating initiatives in 'twenty 'twenty four we captured approximately one 8 million of additional NOI growth from these initiatives, which is in line with expectations that we communicated it started the year.
Speaker Change: In 2025, we expect to capture 1.8 million of additional cumulative growth, which will mark the achievement of our three year target of four point to five to 4.75 million announced in early 2023.
Speaker Change: Beyond our three year target we are in the process of rolling out managed Wifi and expect to capture 300 to 600000 of additional NOI in 2025 from phase one of our initiatives which include seven communities looked.
Speaker Change: Looking forward once phase one of our managed Wifi initiative has been fully integrated into our lease role, which we expect to occur in mid 2026, we expect to capture approximately $1 million 2 million and a half of additional NOI per year with further upside from future phases.
Speaker Change: I'll turn it over to Steve to cover our 2025 outlook.
Steve: Thanks, Tiffany turning to our 2025 guidance and related assumptions, we expect same store multifamily revenue growth to range from 2.1% to three 6% in 2025.
Steve: Embedded revenue growth, where the growth that has already been captured based on 2020 for leasing was about 70 basis points at the start of the year.
Steve: And 80 basis points at the end of January.
Steve: The building blocks that add up to the mid point of our guidance range include approximately 1% of rent growth driven primarily by our Washington Metro portfolio.
Steve: 0.7% of growth in fee income from our operational initiatives Approx.
Steve: Approximately 25 basis points of bad debt improvement.
Steve: And approximately 20 basis points of occupancy growth.
Steve: Moving on to expenses same store operating expenses are projected to range from 275% to 4.25% for the year.
Steve: Non controllable expenses are projected to grow 2% to 3% and controllable expenses are projected to grow between four and 5% which includes technology expenses related to our managed Wi Fi and other ROI initiatives.
Steve: Watergate 600, NOI is expected to range from 11, five to 12 point to $5 million, representing a decline of approximately 6% at the midpoint.
Steve: Due to an anticipated decline in occupancy over the course of the year and higher utility expenses.
Steve: We expect occupancy to end the year between 81, and 82% representing a decline of approximately 3% compared to current occupancy of 84, 7%.
Steve: While the sale of Watergate 600 is not included in our guidance, we continue to look to opportunistically monetize the property.
Steve: Interest expense is expected to range from 37.35 to $38 $35 million for the year.
Steve: In December we executed the first of two one year extension options on our $125 million term loan, which is now set to expire in January 2026, and we have no other debt maturing before 2028.
Steve: Our balance sheet remains in very good shape with annualized adjusted net debt to EBITDA of five seven times during the fourth quarter over 60% of our total capacity available on our line of credit and no secured debt.
Steve: Turning to core F O. The drivers over 2025 core <unk> per share at the midpoint include four cents of growth from our same store multifamily portfolio offset in part by a one cent decline from Warner Gate 601 cent decline from higher G&A and a half cent decline from other item.
And with that I'll turn it back to Paul.
Steve: To wrap it up our 2025 outlook reflects another good year of performance from our Washington Metro portfolio and improving trends in Atlanta.
Steve: Cross Elm Submarkets in the D. M V strong supply demand dynamics and limited value oriented housing options create a favorable leasing environment.
Steve: In Atlanta, we anticipate a gradual improvement in market dynamics paving the way for a strong 2026.
Steve: Before turning to Q&A, we'd like to reiterate that we do not have any additional information or updates to provide at this time regarding the strategic review beyond the information we've already provided therefore, we request that you focus your questions on our results business initiatives.
Steve: And outlook.
Steve: We appreciate your cooperation.
Steve: And now operator, I'd like to open it up for questions.
Speaker Change: Thank you at this time, we'll be conducting a question and answer session.
Speaker Change: If you would like to ask a question. Please press star one on your telephone keypad.
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Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: One moment, please while we pull for questions.
Speaker Change: Thank you.
Speaker Change: Our first question is coming from Anthony <unk> with J P. Morgan Your line is live.
Speaker Change: Great. Thank you and good morning.
Speaker Change: I guess my first question revolves around just the you know the potential impact of what's happening with the new administration in your market.
Speaker Change: You all have been effectively a pure play in that market for a long long time, and they've been sort of changes in different agencies, moving people and doing things of that nature like what's been the experience in the past when there is you know say a big change.
Speaker Change: In the government near a property like is there a way to put some brackets around you know how that has affected leasing of rents.
Speaker Change: Or any anecdotes there would be helpful.
Tony: Tony It's Paul.
Tony: Let's go back to in it and you know just.
Speaker Change: In terms of regional impacts I think the last you know.
Speaker Change: Event, we would probably would've had would've been sequestration and that that had a tremendous impact on the industry just in terms of.
Speaker Change: Really kind of paralyzing some of the progress some of the leasing some of the growth, but I would say we're in a different time now.
The federal government, probably back then really was.
Speaker Change: Probably the central H engine that drove our economy I think know technology has really taken over and we really are seeing still a tremendous amount of growth, especially in the northern Virginia, where the bulk of our residential portfolio in the D. M V is located.
Speaker Change: I think what is whats obviously different about this time is there a dozen.
Speaker Change: There appears to be you know.
Speaker Change: Our macro strategy of addressing government expenses, but it seems a little a fractured right now moving forward. So.
Speaker Change: In terms of you know we look back as I said in my remarks, when we look back at the growth in the private sector, we look where the growth is coming from and it's not coming from the federal government and it really hasn't been coming from the federal government for the last decade. So we're very comfortable.
Speaker Change: And grant can talk about you know our resident composition some of the demographics associated with that but we feel very comfortable about you know.
Grant: The the businesses that are growing here in the private sector and its respective impact on our residential base Grant do you want to add any more color to that sure. Just speaking generally just to reiterate what was in the script and as in Slide 11. There was referred to is that you know if you look at non D O D federal jobs.
Job in the Washington region, our exposure is about six 2% and if you drill down to any single agency were sub 1% for any single agency and so the word many times, we're talking you know 1234 or five people sort.
Grant: Sort of the typical exposure to any single agency once you get outside the us.
Grant: Good good.
Grant: Hum.
Grant: Adjacent agencies.
Grant: Okay. Thank you for that and then just my follow up question can you give us any update or thoughts on where market cap rates might be for you know the types of assets typically in your and your buybacks.
Tony: Tony again, it's Paul.
Tony: I'll just start off and kind of give you some macro observations on what we're seeing in the capital markets.
Tony: For core deals.
Tony: We're really seeing a buyer's today's buyer kind of looking for that nine to 11, IRR and that's translating into a four and a half to a five cap for core plus deals, we're seeing ranging in that $4 75 to five in a quarter again, depending on the type of leverage folks shooting for an $11.
Tony: A 13% IRR and then value add.
Tony: It's more in that five to five and a half space. We've seen it go up to six.
Tony: Or even a touch higher depending on the vintage of the product with <unk>.
Tony: Those buyers looking for leveraged 13 to 15.
Tony: For our for our type of product. We are we think we're in that that value add space.
Tony: And so we feel very comfortable about the strength of our portfolio moving forward you know when we look.
Tony: When we look around at the markets right now and the reason why we're.
Tony: Optimistic about this year, there's just a tremendous amount of liquidity in the debt markets.
Tony: The gse's, both Fannie and Freddie both have $73 billion in allocations for a total of 146 billion definitely seeing a pickup in the bridge market, especially on lease up deals and and life companies are back and they're being pretty aggressive on those 50% to 55% LTV deals.
Tony: A lot of seller a lot of private equity sales coming to the market.
Speaker Change: We're seeing a tremendous amount of B O V is being conducted in this region are some merchant builders, but I think the larger P firms that are looking at maybe opportunistically redeploying other capital into other asset classes and geographies. The other thing I'd know Tony is there we're definitely seeing bigger deals are coming back now.
Speaker Change: You know I think late 'twenty two.
Speaker Change: 23, and last year, particularly a lot of in that 40% to 75 space, even the deals we've seen come out you know.
Speaker Change: Since January one you know a couple of deals over $100 million. So people are are definitely moving to the island and a number of the originators that we talked to really are term. They use you know just about getting out and getting in front of the market the buying.
Speaker Change: We've just seen buyers all across the spectrum and I think our big macro takeaway from this is we're continuing to see a tremendous amount of capital flow into the living sector in general and so we think that you know I think the numbers that I saw 'twenty 'twenty four we saw about 130.
Speaker Change: <unk> 7 billion.
Speaker Change: <unk> done in transaction volume this year I think the numbers people are forecasting or more towards like 150 billion. So.
Another big year ahead are we think.
Speaker Change: There are going to be a lot of recaps coming before some of these liquidations, but I would tell you even going back to our you know what we feel was a good acquisition a dru at Hill's.
Speaker Change: The discount to replacement costs are shrinking.
Speaker Change: And you know that that was a key element for us and we think.
Speaker Change: They're going to continue to you.
Speaker Change: You know to decline as the year progresses.
Speaker Change: Okay, great context, thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question is coming from Jamie Feldman with Wells Fargo. Your line is life.
Jamie Feldman: Great. Thank you and good morning, just a couple of follow ups with some of the comments you made on the call.
Speaker Change: I guess to start you mentioned.
Speaker Change: Your your lease rates through the year can you talk about your your view on seasonality I mean, it just seems like Theres a lot of moving pieces in the D. C market this year do.
Speaker Change: Do you think you'll see acceleration.
Speaker Change: Acceleration into Q3, Q drop off so you're thinking things get better into <unk>. So could you maybe talk through your outlook.
Speaker Change: Outlook for new leases and blends.
Speaker Change: I'm sorry, Jamie on the walls.
Speaker Change: Absolutely Jamie this is Stephanie bunch are happy happy to walk through that I would say if you are looking at just the Washington D. C portfolio, we are expecting another normal year I've seasonal growth in the Washington D. C area, you know with obviously peak.
Speaker Change: Peak leasing occurring during our spring and summer leasing season in Atlanta are we expect to see gradual improvement throughout the year as we continue to see improvement in the supply demand dynamics in that market them. If you want to look at the portfolio as a whole are where.
Speaker Change: <unk>, our new lease rate growth to be between a decline of 2% and a positive a half percent are for the full year, we expect renewal lease rate growth of between 3% to 5.25% renewed.
Speaker Change: Renewal lease rate growth continues to be a strong.
Speaker Change: Driver of growth for Us and then blended lease rate growth, we're protecting between a one in a quarter and 3% for the portfolio overall.
Speaker Change: Okay. Thank you for that.
Speaker Change:
Speaker Change: And then I guess, just thinking about you know.
Speaker Change: Your outlook for the year I mean are you on hold now trying to you know sell asset.
Speaker Change: You know move into other markets a watergate is that on hold or do you think are you guys just going to kind of continue with the plan you have and just you know they are strategic.
Speaker Change: Strategic review is more of a sideshow.
Speaker Change: Well, Jamie I mean, we put out our 2025 guidance. So all of the underlying assumptions are in there and then as far as you know our operations go. We are you know in terms of you mentioned expansion markets I think what we are most focused on is being.
Speaker Change: Is getting the best performance, we can out of the assets that we currently own right now.
Speaker Change: And you know Tiffany and her team are doing an outstanding job in terms of the new initiatives the renovations.
Speaker Change: There are other capital allocations that we think are going to be accretive for our shareholders.
Speaker Change: As we you know we want to keep our eye on the ball day to day.
Speaker Change: And all of the operations that we have throughout the company as we go undergo this strategic review process.
Speaker Change: Okay.
Speaker Change: And then I guess thinking specifically about Watergate.
Speaker Change: I think we're getting a little more optimistic you'd get some leasing done there I think the Kennedy center was out there as a potential option.
A lot of change going on there could you update us on the conversations around the Kennedy Center, specifically or just your leasing prospects. There and then I know you include a one cent dragging guidance for operating that for the full year. If you were to sell it do you think that takes your numbers up or down further.
Speaker Change: Well I think just right now I mean, you know we have good Walt on the property.
Speaker Change: And I think Theres a lot of.
Speaker Change: Good activity we've had.
Speaker Change: No renewal in place renewals.
Speaker Change: That took place in 2024.
Speaker Change: As I mentioned.
Speaker Change: I believe on the last call we are in discussions with our largest tenant that.
Speaker Change: That is a 27 exploration and we feel good about the prospects there and we're just we're also in discussions with some of the smaller tenants for renewal in place and obviously better for us better from a ti standpoint from a.
Speaker Change:
Speaker Change: Free rent standpoint, so collectively I think overall, we're feeling good.
Speaker Change: Concurrently the Tony is I mean, excuse me Jamie is as we said in the past.
Speaker Change: We will be opportunistic.
Speaker Change: As we look at the capital markets I would say not only has the D. C market improved in terms of the type of activity that we're seeing.
Speaker Change: In the marketplace from from a leasing standpoint with tenants.
Speaker Change: The thought seemed to take place in 2024, and so we're definitely seeing more activity now I think even more another arrow in the quiver for a buyer is is the liquidity in the debt markets and we're actually seeing C. M. B S deals done on office.
Speaker Change: Product downtown so we feel like the environment is coming towards us we feel like we have some headwinds now instead of I guess, some tailwind instead of headwinds and so we're going to try to be opportunistic, but you know we've got a job to do at Watergate It and that is to get it to the highest the highest leasing percentage of it.
Speaker Change: We can get and were going to continue on that path.
Speaker Change: Okay.
Speaker Change: So if you were to sell it do you think that's accretive or dilutive.
Speaker Change: The earnings I'm, not going to speculate on the type of pricing that we're gonna get Jamie right now we haven't we haven't really tested the market. So.
Speaker Change: We'll both move forward and.
Speaker Change: Hopefully we can hopefully we can have something positive to say in future calls.
Speaker Change: Okay.
Speaker Change: And then I mean, I know you said not to talk about the strategic review, but I guess this would have been a question even before you announce this can you talk about the frictional cost if you were to sell the company.
Speaker Change: Whether there's you know taxes that people need to factor into any vs or comp or is there any other pieces because I think the market naturally goes to like here's the N V. But then theres always a drag on that but can you just talk through some of those moving pieces.
Speaker Change: Yeah.
Speaker Change: Jamie what I can say first of all thank you for the thoughtful question, what what I can say is the board and the management team are committed to acting in the best interest of the company and its shareholders.
Speaker Change: Theres no timetable or deadlines set for the completion of this board led strategic review.
Speaker Change: We'll provide an update if and when appropriate but beyond.
Speaker Change: Beyond the information in our release, we don't have any information to share or updates beyond that to provide at this time.
Speaker Change: Okay. So you can't get into the frictional costs.
Speaker Change: That's correct Jamie.
Speaker Change: Got it okay.
Speaker Change: And then just final question then.
Speaker Change: You talked about your composition of jobs in the portfolio I think you said for two thirds. If you were to just take a guess at the remaining one third would the numbers be pretty similar or is there something different we should be thinking about.
Speaker Change: Terms of the employers.
Speaker Change: Jamie This is grant I think you could extrapolate that out and say the composition would be similar.
Speaker Change: Okay, Alright, great. Thanks, and good luck with everything.
Speaker Change: Thank you Jamie.
Speaker Change: Thank you.
Speaker Change: Our next question is coming from John Pawlowski with Green Street. Your line is live.
John Pawlowski: Hey, good morning, Thanks for the time.
Speaker Change: <unk> with Tiffany your point's well taken on Y M D.
Speaker Change: D. C is more insulated from potential shocks of federal employment I'm, just curious like on the ground and the considerable uncertainty Ah forget job losses and types of job losses, but the uncertainty.
Speaker Change: Growing around the tenant base.
Speaker Change: Pick your favorite lead indicator of foot traffic.
Speaker Change: You know it closing rates on tours are you seeing any kind of leading indicators to suggest that the uncertainty around employment is leading to a pause in leasing decisions and tenants in the market.
Speaker Change: John Thanks for the question Yeah year to date, we are seeing very normal seasonal leasing trends, we have not seen any atypical impact on traffic or leasing across any of our key metrics.
Speaker Change: The outlook overall for the D. N V in terms of supply demand dynamics remains incredibly strong.
Speaker Change: And we think that our mid market rent positions us well.
Speaker Change: S class b demand trends tend to be more consistent relative to other asset classes well, obviously, we continue to monitor all.
Speaker Change: All of the new developments very closely we'll have to see how it plays out over the next few months, but based on what we're seeing on the ground today and our class B position that we think we are positioned well to have another good year in the D. M D.
Speaker Change: Okay, then last one for me.
Speaker Change: Atlanta same store the sequential growth rate was quite high now.
Speaker Change: A few properties can really move the needle, but was this a function of bad debt an improvement in volatility and bad debt I think there was about 6% to 6% sequential growth in Atlanta This quarter any color there would be helpful.
Speaker Change: Yeah, John This is Steve and Youre right for about half of it. So we had 6% sequentially and I'm about half of it was an improvement in bad debt that we saw in the quarter in Atlanta. The other portion of it was a business interruption insurance proceeds from a a property down there that had a fire earlier.
Speaker Change: In 2024.
Speaker Change: Okay. Thank you for the time.
Speaker Change: Okay.
Speaker Change: Thank you once again, ladies and gentlemen, if you have any questions you May press star one on your telephone keypad.
Cole Bardawil: Our next question is coming from coal Bardawil with Wolfe Research Your line is live.
Hey, guys. Thank you very much for the time I just had one question on occupancy in D. C. You mentioned it was going to be more of a normalized year are you expecting any occupancy erosion. This year in 2020 five or are you kind of expecting it to hold relatively flat.
Speaker Change: Yeah, we obviously, we had a very strong year of occupancy in the D. N V last year.
Speaker Change: Being in the 96% range and we expect the dnb to remain in that 96% range next year and then we obviously are expecting a gradual improvement in occupancy in Atlanta.
Speaker Change: Okay got it.
Speaker Change: And then just one more just I noticed in D. C. Maryland, you had some pretty high property operating expenses. This quarter I was just curious are there any big drivers for that.
Speaker Change: Yeah, so call and and in D C in the fourth quarter. So.
Speaker Change: One the on the property.
Speaker Change: For non controllable that we saw in D C and it's on the utility side is we saw a couple of true ups at some properties that hit in the fourth quarter and really drove that in in the DMV.
Speaker Change: Okay.
Speaker Change: Awesome. Thank you.
Speaker Change: Yeah.
Speaker Change: Thank you as we have no further questions in line at this time I will hand.
Speaker Change: The call back over to Mr. Mcdermott for any closing remarks.
Speaker Change: Yes, we'd like to thank everyone for their time today and we're looking forward to seeing many of you and talking to you in person over the coming weeks.
Speaker Change: Thank you everyone.
Speaker Change: Thank you. This does conclude today's conference and you may disconnect. Your lines at this time and we thank you for your participation.