Q1 2025 Equity Residential Earnings Call

Unknown Executive: Standby, we're about to begin. Good day and welcome to the Equity Residential first quarter 2025 earnings conference call and web Today's conference is being recorded.

Please standby we're about to begin.

Good day and welcome to the equity residential first quarter 2025 earnings conference call and webcast.

Today's conference is being recorded at.

Martin McKenna: At this time, I would like to turn the conference over to Mr. Marty McKenna. Please go ahead.

Speaker Change: At this time I would like to turn the conference over to Mr. Marty Mckenna. Please go ahead Sir.

Mark Parrell: Good morning, and thanks for joining us to discuss Equity Residential's first quarter 2025 results.

Marty Mckenna: Good morning, and thanks for joining us to discuss equity residential first quarter 2025 results. Our featured speakers today are mark <unk>, our president and CEO and Michael Miller, Our Chief operating Officer, Bob <unk>, Our CFO and Allen Brackenridge, Our Chief investment officer are here with us as well for the Q&A.

Unknown Executive: Our featured speakers today are Mark Parrell, our President and CEO, and Michael Manelis, our Chief Operating Officer.

Unknown Executive: Both Bob Garechana, our CFO, and Alec Brackenridge, our Chief Investment Officer, are here with us as well for the Q&A. One of our peers will be hosting their call in an hour or so, so we plan to finish in time for that call to begin on time.

Marty Mckenna: One of our peers will be hosting their call in an hour or so should we plan to finish in time for that call to begin on time to be respectful of time for today's Q&A, we're going to ask that you limit yourselves to one question and one follow up and we greatly appreciate your cooperation our earnings release is posted in the investors section of equity apartments Dot com. Please.

Unknown Executive: To be respectful of time for today's Q&A, we are going to ask that you limit yourselves to one question and one follow-up, and we greatly appreciate your cooperation. Our earnings release is posted in the Investor section of EquityApartments.com.

Unknown Executive: Please be advised that certain matters discussed during this conference call may constitute forward-looking statements in 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 untrue because of subsequent events.

Marty Mckenna: Be advised that certain matters discussed during this conference call may constitute forward looking statements in 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 untrue because of subsequent events now I will turn the call over to Mark <unk>.

Mark Parrell: Now, I will turn the call over to Mark Parrell. Thank you, Marty.

Mark Parrell: Good morning, and thank you all for joining us today to discuss our first quarter 2025 results.

Speaker Change: Thank you Marty good morning, and thank you all for joining us today to discuss our first quarter 2025 results I will start us off and Michael Ellis, Our Chief operating officer will speak to our first quarter operating performance and then we'll go ahead and take your questions.

Michael Manelis: I will start us off, then Michael Manelis, our Chief Operating Officer, will speak to our first quarter operating performance.

Mark Parrell: Then we'll go ahead and take your questions. Our first quarter results exceeded our expectations, and we are well-positioned for the primary leasing season. Our operating dashboards continue to show good to excellent demand across all of our markets, with levels of supply the main differentiator in the strength of each market's performance.

Speaker Change: Our first quarter results exceeded our expectations and we are well positioned for the primary leasing season, our operating dashboards continue to show good to excellent demand across all of our markets with levels of supply in the main differentiator and the strength of each market's performance.

Mark Parrell: As is our usual practice in the first quarter, we have not made any changes to our guidance. Like most market participants, we see a higher than usual level of uncertainty in the forward path of the economy, given various recent governmental actions relating to tariffs and other matters. The impact of these actions on the larger economy and on our business are hard to estimate currently and will take some time to unfold. That said, Equity Residential will continue to benefit from powerful supply and demand tailwinds that favor the rental housing sector, including the long-term undersupply of rental housing in our markets, the high cost and low inventory of single-family owned housing, and demographic and social factors that are driving increased rental housing demand, especially for our higher quality communities located in our country's most desirable metro areas.

Speaker Change: As is our usual practice in the first quarter, we have not made any changes to our guidance.

Speaker Change: Like most market participants so we see a higher than usual level of uncertainty in the forward path of the economy given various recent governmental actions related to tariffs and other matters. The impact of these actions on the larger economy and on our business are hard to estimate currently and we will take some time to unfold that.

Speaker Change: Said equity residential we will continue to benefit from powerful supply and demand tailwind that favor the rental housing sector, including the long term under supply of rental housing in our markets the high cost and low inventory of single family owned housing and demographic and social factors that are driving increased rental housing demand, especially.

Speaker Change: For our higher quality communities located in our country's most desirable metro areas.

Mark Parrell: Also being a strong cash flow business with a material dividend and fortress balance sheet and without foreign operations in a time of heightened uncertainty is a definitive positive and may lead to opportunity later. Asset prices so far seem unaffected by higher rates and uncertainty. There are probably several factors at play here, including some sales that closed in the first quarter that were contracted for in an earlier, more stable time, or that involved mandatory reinvestment needs like Section 1031 exchanges. However, we also continue to see a significant number of buyers interested in investing in multifamily assets at five cap rates and below, given their stable cash flow and inflation protection characteristics and secular supply and demand tailwind.

Speaker Change: So being a strong cash flow business with a material dividend and fortress balance sheet and without foreign operations and a time of heightened uncertainty is a definitive positive and may lead to opportunity later.

Speaker Change: Turning to investment matters, we have left unchanged our guidance to $1 5 billion of acquisitions and $1 billion of dispositions in 2025, when we gave guidance we expected to transact very little in the first quarter and that was the case.

Speaker Change: Institutional sales market in the first quarter was reasonably busy with volumes higher than a year ago, but still below pre COVID-19 deal volume levels.

Speaker Change: Asset prices, so far seem unaffected by higher rates and uncertainty there are probably several factors at play here, including some sales that closed in the first quarter that were contracted for an earlier more stable time or that involve mandatory reinvestment needs like section 1031 exchanges.

Speaker Change: However, we also continue to see a significant number of buyers interested in investing in multifamily assets at five cap rates and below given their stable cash flow and inflation protection characteristics and secular supply and demand tailwind for.

Mark Parrell: If apartments continue to evolve as a safe haven trade in real estate and in an increasingly uncertain world, we would expect over time for our companies multiple to reflect that fact and to increase accordingly.

Speaker Change: Apartments continue to evolve as a safe Haven trade in real estate.

Speaker Change: And in an increasingly uncertain world, we would expect over time for our company has multiple to reflect that fact, and the increase accordingly, and with that I'll turn the call over to Michael analysis.

Michael Manelis: And with that, I'll turn the call over to Michael Manelis. Thanks Mark and thanks to everybody for joining us today. I'm going to provide a quick update on our performance and then we'll begin the Q&A session. So overall, we had a good first quarter with same-store revenue growth that exceeded our expectations. The stronger performance was driven by better physical occupancy at 96.5% across the portfolio and resident turnover of only 7.9%, which set the record for the lowest that we have ever reported. This is a continuation of a very favorable prior trend and supports the strength of our centralized renewal process and intense focus on delivering our residents a quality experience.

Speaker Change: Mark and thanks to everybody for joining us today I'm going to provide a quick update on our performance and then we'll begin the Q&A session. So overall, we had a good first quarter with same store revenue growth that exceeded our expectations. The stronger performance was driven by better physical occupancy at 96, 5% across the portfolio and residue.

Speaker Change: <unk> turnover of only seven 9%, which set a record for the lowest that we have ever reported.

Speaker Change: This is a continuation of a very favorable prior trend and supports the strength of our centralized renewal process and intense focus on delivering our residents of quality experience.

Michael Manelis: In addition, blended rate growth of 1.8% in the quarter came in right at the midpoint of our expected range. We saw strength in New York and Washington, D.C., as well as continued improvement in our West Coast markets of Seattle and San Francisco. All of this positions us well to take advantage of the opportunities that the primary leasing season brings. In times of heightened uncertainty, as we see currently, we remind our teams to keep their eyes on their operating dashboards. Tracking Demand, Leasing Velocity, and Pricing Power, all of which are blinking green currently and look in line to slightly ahead of our expectations.

Speaker Change: In addition blended rate growth of one 8% in the quarter came in right at the midpoint of our expected range.

Speaker Change: We saw strength in New York, and Washington, DC as well as continued improvement in our West coast markets of Seattle, and San Francisco All of this positions us well to take advantage of the opportunities that the primary leasing season brings.

Speaker Change: In times of heightened uncertainty as weeks currently we remind our teams to keep their eyes on their operating dashboards.

Speaker Change: <unk> demand leasing velocity and pricing power all of which are blinking Green currently and look in line to slightly ahead of our expectations. We also keep a close eye on job growth expectations and level of new supply in our markets and as we sit here today the job numbers to date have been solid, but we acknowledge less certainty.

Michael Manelis: We also keep a close eye on job growth expectations and level of new supply in our markets. And as we sit here today, the job numbers to date have been solid, but we acknowledge less certainty in the future job growth projections. But what is clear is that we are getting even more positive on less impact from future supply, as we expect the current environment to even further reduce the number of apartment starts this year, as capital allocators hesitate to make big outlays in turbulent times. In addition, the financial health of our residents remains strong. In fact, the average household income of the residents who rented with us in the last 12 months is up from the prior period, and the average rent to income ratios remain very favorable at 20 percent.

Speaker Change: And the future job growth projections, but what is clear is that we are getting even more positive on less impact from future supply as we expect the current environment to even further reduce the number of apartment starts this year as capital allocators hesitate to make big outlays in turbulent times.

Speaker Change: In addition, the financial health of our residents remained strong in fact, the average household income of the residents to rented with us in the last 12 months is up from the prior year period and the average rent income ratios remained very favorable at 20%.

Michael Manelis: Our centralized processes and system transparency provides us with a powerful and immediate feedback loop to any potential shifts in conditions on the ground in our market. As of today, we are not seeing any signs of consumer weakness, which typically shows up and increases the number of lease breaks, unit transfers to lower rent units, increases in delinquencies, or a slowing percent of residents renewing their lease.

Speaker Change: Our centralized processes and system transparency provides us with a powerful and immediate feedback loop to any potential shifts in conditions on the ground in our markets.

Speaker Change: As of today, we are not seeing any signs of consumer weakness, which typically shows up and increases the number of lease breaks unit transfers to lower rent units increases in delinquencies or a slowing percent of residents renewing their leases with us.

Michael Manelis: I'm not going to go around the horn to all markets, but I will highlight a few that have likely been on people's minds.

Speaker Change: I'm not going to go around the horn to all markets, but I will highlight a few that have likely been on People's minds.

Michael Manelis: First, to our nation's capital, there have been a lot of questions on what the impact from government job layoffs in the market will look like. And as of now, we are not seeing an impact. I recently spent a few days in the market touring our assets in DC and northern Virginia. Right now, we are over 97% occupied in the market and producing good rent growth. There are a few stories of residents expressing concern due to job loss, but nothing at the moment that is impacting any of our stats, results or projections for the next 90 days.

Speaker Change: First to our nation's capital there have been a lot of questions on what the impact from government job layoffs in the market will look like and as of now we are not seeing an impact I recently spent a few days in the market touring our assets in DC and Northern Virginia right now we are over 97% occupied in the market and producing good rent growth.

Speaker Change: There are a few stories of residents expressing concern due to job loss, but nothing at the moment that is impacting any of our stats results or projections for the next 90 days in the market. Although I would remind you that we would be a lagging indicator not a leading one.

Michael Manelis: Although I would remind you that we would be a lagging indicator, not a leading one. I can also tell you that we have seen some inbound inquiries from a few West Coast residents needing to relocate to the DC market now that the in-office work is required by the government. It is also important to note that in the past we have seen situations, for example, in Seattle and San Francisco, that experienced layoffs with extended severance periods, and the result was more about a slowing of rent growth than any kind of increase in lease breaks, delinquency, or move out.

I can also tell you that we have seen some inbound inquiries from a few west coast residents needing to relocate to the DC market now that the <unk> office work is required by the government.

Speaker Change: It is also important to note that in the past we have seen situations for example, in Seattle and San Francisco that experienced layoffs with extended severance periods and the result was more about a slowing of rent growth and any kind of increase in lease breaks delinquency or move outs.

Michael Manelis: In terms of supply, the D.C. market is expected to deliver another 12,000 units this year, with a material drop-off projected in 2026. After seeing the peak in the third quarter of 2024, it is clear that our portfolio will continue to see less direct supply throughout 2025 and 2026.

Speaker Change: In terms of supply the D. C market is expected to deliver another 12000 units this year with a material drop off projected in 2026.

Speaker Change: After seeing the peak in the third quarter of 2024. It is clear that our portfolio will see continue to see less direct supply.

Speaker Change: 2025 and 26.

Michael Manelis: On the West Coast, Los Angeles is a bit of a mixed bag. I was just in the market several weeks ago. And while we've been able to build physical occupancy sequentially, and turnover has improved, pricing power remains somewhat elusive. performance is much stronger in the suburban submarkets of Santa Carina and Ventura County than the more urban infill locations with little overall operating impacts from the wildfires earlier this year. We believe that the slow pace of recovery in the entertainment business, along with some quality of life issues, are contributing to this performance. We are hoping that recent increases in tax subsidies will lure more entertainment production and resident demand back to the market.

Speaker Change: On the West Coast, Los Angeles is a bit of a mixed bag.

Speaker Change: Just in the market several weeks ago, and while we have been able to build physical occupancy sequentially and turnover has improved pricing power remains somewhat elusive.

Speaker Change: <unk> is much stronger than the suburban submarkets of Santa Clarita, and Ventura County than the more urban infill locations with little overall operating impacts when the wildfires earlier this year.

Speaker Change: We believe that the slow pace of recovery in the entertainment business, along with some quality of life issues are contributing to this performance we.

Speaker Change: We are hoping that recent increases in tax subsidies were more entertainment production and resident demand back to the market.

Michael Manelis: Now to the tech centers of San Francisco and Seattle. San Francisco is showing the improvement that we talked about at our recent investor day with portfolio wide occupancy running above 97%. Turnover declined in the quarter and although concessions continue to be common in the market, we are seeing opportunities to increase base rents at a pace that is better than we expected.

Speaker Change: Now on to the Tech centers of San Francisco, and Seattle, San Francisco is showing the improvement that we talked about at our recent investor day with portfolio wide occupancy running above 97%.

Speaker Change: Turnover declined in the quarter and although concessions continued to be common in the market. We are seeing opportunities to increase base rents at a pace that is better than we expected.

Michael Manelis: The downtown submarket is demonstrating strong momentum with very stable high occupancy and concessions declining pretty steadily all year so far, both in the percent of applications and dollar amounts being given. And those declines are on top of the increases we are also seeing in base rent, which combined is fueling our net effective prices in the market.

Speaker Change: The downtown Submarket is demonstrating strong momentum with very stable high occupancy and concessions declining pretty steadily all year. So far both in the percent of applications and dollar amounts being given and those declines are on top of the increases. We are also seeing in base rent, which combined is fueling our net.

Michael Manelis: We like what we see from the new mayor and his focus on improving quality of life and promoting local businesses. Tech employment seems stable with more employers pushing a more robust return to office policy, and most of the supply will be delivered in the peninsula and South Bay, which have been among the better performing sub markets for a while. There will be no new supply downtown, which should benefit our portfolio there.

Speaker Change: <unk> prices in the marketplace.

Speaker Change: We like what we see from the new mayor and his focus on improving quality of life and promoting local businesses tech employment seem stable with more employers pushing a more robust return to office policy and most of the supply will be delivered in the peninsula and South Bay, which had been among the better performing submarkets for a while there will be no new supply.

Speaker Change: Downtown which should benefit our portfolio there.

Speaker Change: Seattle also continues to show signs of improvement the return to office from Amazon has been a positive for the market Occupancies at 96, 5% and we saw good rental rate growth in the quarter Tech employment seem stable in this market as well and while we are seeing an impact from new supply in both the downtown in Redmond Submarkets.

Speaker Change: We expect that impact to lessen materially as the year progresses.

Michael Manelis: Turning to our expansion markets in the first quarter, Atlanta, Dallas, and Austin performed pretty much as we expected, given the challenging operating conditions due to the level of competitive new supply impacting our same store assets. Denver's overall demand felt a little weaker than we would have expected in the quarter, which resulted in less pricing powers.

Speaker Change: Turning to our expansion markets in the first quarter, Atlanta, Dallas, and Austin performed pretty much as we expected given the challenging operating conditions due to the level of competitive new supply impacting our same store assets.

Speaker Change: Denver's overall demand felt a little weaker than we would've expected in the quarter, which resulted in less pricing power.

Michael Manelis: As we sit here today, overall, demand across all four markets is showing seasonal improvement heading into the peak leasing season. That being said, concessions are in wide use in these markets, and we continue to have muted expectations for the first half of the year.

Speaker Change: As we sit here today overall demand across all four markets is showing seasonal improvement heading into peak leasing season.

Speaker Change: That being said concessions are in wide use in these markets and we continue to have muted expectations for the first half of the year.

Michael Manelis: Switching to innovation and automation updates, which we've provided details on at our recent Investor Day, we are in the process of expanding the deployment of our conversational AI capabilities across the entire leasing journey. This, along with the broader strategic automation initiative, is designed to reduce manual tasks, accelerate leasing cycles, minimize errors, and ultimately improve our overall efficiency and scalability, all while improving the overall prospect experience. By this time next year, we expect the process from the initial inquiry, the lease signing to be almost entirely automating, giving our customers more self-service and the ability to work with our teams as much or as little as they choose.

Speaker Change: Switching to innovation and automation updates, which we provided details on at our recent Investor day, we are in the process of expanding the deployment of our conversational AI capabilities across the entire leasing Germany. This along with our broader strategic automation initiative is designed to reduce manual tasks accelerated leasing.

Speaker Change: Cycles minimize errors and ultimately improve our overall efficiency and scalability, all while improving the overall prospect experience.

Speaker Change: By this time next year, we expect the process from the initial inquiry the lease signing to be almost entirely automating.

Speaker Change: Giving our customers more self service and the ability to work with our teams as much or as little as they choose.

Michael Manelis: We are very pleased with the momentum we have on the various initiatives relating to both other income generation as well as operating efficiencies and improved customer experience. As we think about the second quarter, we expect to continue to see a sequential build in new lease change and strong, stable performance in terms of retention, achieved renewal rate increases, and occupancy. We have an expectation for blended rate growth of 2.8 to 3.4% in the second quarter and feel really well positioned as we enter the primary leasing season, despite the overall economic ambiguity.

Speaker Change: We are very pleased with the momentum we have on the various initiatives relating to both other income generation as well as operating efficiencies and improve customer experiences.

Speaker Change: As we think about the second quarter, we expect to continue to see a sequential build in new lease change and strong stable performance in terms of retention achieved renewal rate increases and occupancy.

Speaker Change: We have an expectation for blended rate growth of two 8% to three 4% in the second quarter and feel really well positioned as we enter the primary leasing season. Despite the overall economic ambiguity.

Michael Manelis: Our operational agility and strategic focus will ensure that we are not only able to navigate any potential near-term economic headwinds, but are poised to capitalize on future opportunities to deliver sustained value.

Speaker Change: Our operational agility and strategic focus we will ensure that we are not only able to navigate any potential near term economic headwinds, but are poised to capitalize on future opportunities to deliver sustained value.

Unknown Executive: At this time, I will turn the call over to the operator to begin the Q&A session. Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad.

Speaker Change: At this time I will turn the call over to the operator to begin the Q&A session.

Speaker Change: Thank you Matthew I'd like to ask a question. Please signal by pressing star one on your telephone keypad using a speaker phone. Please make sure. Your mute function is turned off tomo your signal to reach our equipment again at a star one to ask a question.

Unknown Executive: Using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our Again, it is star one to ask a question.

Eric Wolfe: We will move first to Eric Wolfe. Hey, thanks. I was curious what you're seeing in terms of acquisition opportunities in SunBell right now. And just given what's happened over the last month with increased macro uncertainty, just curious if that changes your views on SunBell fundamentals over the next year or two, just as you sort of need more job growth to absorb supply, or if it doesn't really matter for your viewers?

Eric Wolfe: We will move first to Eric Wolfe with Citi.

Eric Wolfe: Hey, Thanks, just curious what youre seeing in terms of acquisition opportunities and Sunbelt right now.

Eric Wolfe: Just given what's happened over the last month with this increased macro uncertainty just curious if that changes your views on sunbelt fundamentals over the next year or two.

Eric Wolfe: Just as you sort of need more job growth to absorb supply or if it doesn't really matter for your view on fundamentals in those markets next.

Alec Brackenridge: Hey Eric, it's Alec. So it was an interesting year. The beginning of the year, as Mark mentioned, is showing less transactions activity. And what did close has really been priced in Q4. So there's kind of a lull towards the end of the first quarter. But since then, in the last month or so, things have really picked up. And it's a reflection of two things. One is just that there are lenders that have just kind of had it and they're not extending loans anymore. They're not extending caps on interest rates. So we're seeing some more products starting to come to market.

Alex: Hi, Eric it's Alex.

Alex: So it was an interesting year the beginning of the year as Mark mentioned is showing less.

Alex: Transactions activity and what did close it's really been priced in Q4. So it was kind of a lull towards the end of the of the first quarter, but since then in the last month or so things have really picked up and it's a reflection of two things. One is just that there are lenders that are just kind of had it and they're not extending loans anymore, they're not extending caps on interest rates.

Alec Brackenridge: At the same time, there's a lot of interest in buying that product. So multifamily remains a favorite asset class. And we expect to see that continue. So pricing for deals is around a five cap. People are buying into an environment where they think that the dramatically decreasing supply will offset some uncertainty on the job side, I think. I mean, I think everyone's a little uncertain about where we're headed. But buying in at a good basis in markets that have robust likely future job growth is something that is attractive to us and others. But we anticipate being active.

Alex: So we're seeing some more products starting to come to the market at the same time. There is a lot of interest in buying that product. So multifamily remains a favorite asset class.

Alex: And we.

Alex: We expect to see that continue so pricing for deals is around a five cap people are buying into an environment, where they think that.

Alex: The dramatically decreasing supply.

Alex: We'll offset some uncertainty on the job side I think I mean, I think everyone's a little uncertain about where we're headed but buying in at a good basis in markets that have.

Alex: Robust likely future job growth is something that is attractive to us and others, but we anticipate being active.

Alec Brackenridge: Successful.

Eric Wolfe: And then second question, on your blended spread guidance, can you just talk about how you form that? Is that based off a normal seasonal curve? And sort of what percentage of leases have you already signed for the second quarter so far?

Speaker Change: Got it that's helpful. And then second question on your blended spread guidance can you just talk about how you form that is that based off of normal seasonal curve and sort of what percentage of leases have you already signed for the second quarter. So far.

Michael Manelis: Hey, Eric, this is Michael. So yeah, I think the way that we kind of formulated is we're just looking at new lease change and kind of our understanding of what we expect for the seasonal trend. You know, at the beginning of the year, we said we expected this year to play out with normal rent seasonality. So we're kind of modeling just that kind of sequential build, as we work our way kind of through the peak leasing season. So sitting here today, I mean, the range of 2.8 to 3.4%. It's really based on consistent performance in renewals, because those are numbers that we already have out in the marketplace for the next 90 days.

Alex: Oh.

Alex: Hey, Eric This is Michael So I think the way that we kind of formulated as we're just looking at new lease change and kind of our understanding of what we expect for the seasonal trends at the beginning of the year. We said we expected this year to play out with normal rent seasonality. So we're kind of modeling just that kind of sequential billed as.

Alex: As we work our way kind of through the peak leasing season.

Alex: Sitting here today, I mean, the range of $2 eight to three 4%, it's really based on consistent performance in renewals because those are numbers that we already have out in the marketplace for the next 90 days and we have pretty good transparency and confidence in that range being somewhere right around 5%.

Michael Manelis: And we have pretty good transparency and confidence in that range being somewhere right around the 5%. And then in terms of like what percent of leases we've signed. You know, we're still pretty early in. So obviously, we have all the April months kind of in there. But we have sequential builds happening in volume as well for May and June. So I would say we're still under a third of the transactions from a new lease side. And on the renewal side, just a little bit more kind of predictability and confidence in that kind of 5% range.

Alex: And then in terms of like what percent of leases we've signed.

Alex: We're still pretty early and so obviously, we have all of the April month tenant in there, but we have sequential build happening in volume as well for May and June. So I would say, we're still under a third of the transactions from our new lease side and on the renewal side, just a little bit more.

Alex: Predictability and confidence in that kind of 5% range.

Unknown Executive: That's helpful.

Speaker Change: Got it that's helpful. Thanks.

David Segal: We'll go next to David Segal with Green Street. Hi, thank you. It seems that the Bay Area is continuing to outperform and Seattle is perhaps plateauing a little bit. I'm curious if you have any thoughts on why those markets seem to be diverging slightly this quarter, and if you think one market tends to lead the other.

David: Well go next to David <unk> with Green Street.

David: Hi, Thank you.

Speaker Change: Seems that the Bay area is continuing to outperform in Seattle.

Speaker Change: Perhaps plateauing a little bit I'm curious if you have any thoughts on why those.

Speaker Change: Markets seems to be an emerging slightly this quarter.

Speaker Change: Think one market tends to lead the other.

Michael Manelis: Yeah, hey, David, this is Michael. So I think when you look at both of these markets, I guess I would have you go back to kind of a little bit the sentiment that we laid out on the Investor Day, which is the recovery that we had baked in for the year for both of these markets. You know, sitting here today, if you went back and look at kind of my prepared remarks from last quarter, Seattle kind of had a little bit more momentum in the fourth quarter heading into the first quarter. And right now it's playing out exactly like we see with it, it does show some improvement.

Michael Ellis: Yeah, Hey, David This is Michael So I think when you look at both of these markets.

Michael Ellis: I would have you go back to kind of a little bit the sentiment that we laid out at the Investor day, which is the recovery that we had baked in for the year for both of these markets.

Michael Ellis: Sitting here today, if you went back and look at kind of my prepared remarks from last quarter.

That'll kind of had a little bit more momentum in the fourth quarter heading into the first quarter and right now it's playing out exactly like we see with it does show some improvement sequentially. It is kind of on track with our improvement that we modeled in for the year, San Francisco was a little bit slower to have the head start like Seattle, but right now it's.

Michael Manelis: Sequentially, it is kind of on track with our improvement that we modeled in for the year. San Francisco was a little bit slower to have the head start like Seattle, but right now is really coming out of the gate strong and actually exceeded our expectations. Both of these markets, I would say, you know, have these urban centers that still have this net effective pricing that's improving, but they're still about six to 7% below where they were pre-pandemic. So for us, this means that they still have a lot more room than most other submarkets nationally to go up before hitting kind of at any renter fatigue level.

Michael Ellis: So we are coming out of the out of the gate strong and actually exceeded our expectations. Both of these markets I would say have these urban centers that still have this net effective pricing, that's improving but there's still about 6% to 7% below where they were pre pandemic. So for us this means that they still.

Michael Ellis: Have a lot more room than most other submarkets nationally to go up before hitting kind of at any renter fatigue level. So I wouldn't read too much into any one quarter I would say both of these markets are following that trajectory right now of recovery and still have more room to go but we do like what we're seeing in San for.

Michael Manelis: So I wouldn't read too much into any one quarter. I would say both of these markets are following a trajectory right now of recovery and still have more room to go. But we do like what we're seeing in San Francisco, and you can tell that from my prepared remarks.

Unknown Executive: Great, thank you.

Michael Ellis: Francisco and you can tell that from my prepared remarks.

David Segal: And can you just comment on the relative attractiveness of acquisitions versus buybacks or your developments given, you know, where the shares are trading and say, the transaction markets you've already described? Yeah, it's Mark. Thanks for that question, David. So just comparing those and just having that kind of conversation, we think right now our best opportunity continues to be investing in existing assets in these primary acquisition markets of Dallas, Denver and Atlanta. We're still interested in Austin, but there's such a glut of supply that's probably a little bit later for us to complete our portfolio there.

Michael Ellis: Great. Thank you and.

Speaker Change: Can you just comment on the relative attractiveness of acquisitions versus buybacks or zero developments given.

Speaker Change: Where the shares are trading and stay at the transaction market. So you've already described.

Speaker Change: Yes.

Speaker Change: Yeah, it's mark Thanks for that question David.

Speaker Change: So just comparing those and just having that kind of conversation, we think right now our <unk>.

Speaker Change: Best opportunity continues to be investing in existing assets and these primary acquisition markets of Dallas, Denver, and Atlanta were still interested in Austin, but theres such a glut of supply that's probably a little bit later for us to complete our portfolio there.

Mark Parrell: We like development incrementally more than we did 90 days ago, we're seeing some deals that make some sense to underwrite. There's a lot of risk in development with construction costs, maybe immigration pressures on staffing, but we're being really thoughtful about that. And you may see a few starts there. We are certainly open to a share buyback. We want to be mindful of the uncertainty that's out there for all three of those investment alternatives. And we'll step very carefully.

Speaker Change: We like development incrementally more than we did 90 days ago, we're seeing some deals that make some sense to underwrite theres a lot of risk in development with construction costs, mainly immigration pressures on staffing but.

Speaker Change: We're being really thoughtful about that and you may see a few starts there we are certainly open to a share buyback.

Speaker Change: We want to be mindful of the uncertainty that's out there for all three of those investment alternatives and we'll step very carefully and what I would say is for pretty well all our investment activity now it's going to be more of a recycling exercise, meaning dispositions will fund acquisitions disposition or net cash flow.

Mark Parrell: And what I would say is, for pretty well all our investment activity now, it's going to be more of a recycling exercise, meaning dispositions will fund acquisitions, disposition or net cash flow will fund development, incremental new development activity, and dispositions will fund any share buyback that we do decide to do. So though the guidance does imply net reinvestment, and that could happen at this juncture with this level of uncertainty, we're probably a little more of a match funder. You recall last year, we were incrementally growing, we issued debt, and bought some extra assets there. But it's hard to do that right now with the cap rates, where Alec told you they were in the sunbelt.

Speaker Change: We'll fund development incremental new development activity and dispositions.

Speaker Change: We'll fund any share buyback that we do decide to do so now the guidance does imply net reinvestment.

Speaker Change: And that could happen at this juncture with this level of uncertainty, we're probably a little more of a match funder, you'll recall last year, we were incrementally growing we issue debt and bought some extra assets there, but it's hard to do that right now with the cap rates rally told you they were in the sunbelt.

David Segal: Great, thank you.

Stephen Sakwa: We'll go next to see Sakwa with Evercore ISD. Thanks, good morning. I'm just curious, Michael, if, you know, you're changing anything on the operating side, meaning, are you sending out renewal notices earlier? Are you looking to lock down a resident sooner, just to kind of de-risk the leasing season? Or from your standpoint, you know, these are sort of small bumps in the road, and it's pretty much business as usual.

Speaker Change: Great. Thank you.

Speaker Change: Yes.

Speaker Change: We'll go next to Steve <unk> with Evercore ISI.

Steve: Good morning, I'm, just curious Michael if you're changing anything on the operating side, meaning are you sending out renewal notices early or are you looking to lock down a resident sooner just to kind of derisk the leasing season or from your standpoint. These are.

Michael Manelis: Yeah, hey, Steve, this is Michael. So there's really no change right now, I would say in our renewal process, a lot of the timing that we're doing is also governed by statutes in the markets that have notice periods. And we have a pretty robust process that's, you know, centralized right now. So the minute that that notice kind of is going out into our resident portal, we're having constant communication with those residents, trying to see if we can get kind of those early notices, or get a little bit of that kind of confirmation of their intent to renew with us.

Speaker Change: Small bumps in the road and it's pretty much business as usual.

Speaker Change: Yeah, Hey, Steve This is Michael So there's really no change right now I would say in our renewal process a lot of the timing that we're doing is also governed by statute and the markets that have notice periods and we have a pretty robust process. That's centralized right now so the minute that that notice kind of is going out into our resident portal.

Speaker Change: So we're having constant communication with those residents trying to see if we can get kind of those early notices or get a little bit of that kind of confirmation of their intent to renew with us.

Michael Manelis: So I would say the setup right now is positioned us really well heading into this leasing season. And I don't see us kind of changing anything right now, which is typically, you've got your occupancy bill, right now, you're leaning into rate, you're leaning into the sequential build, not only in volume, but improving pricing. And the retention side of this business right now, I just don't see it changing much, which is we have such a strong percent of our residents renewing, and good transparency into that. And very consistent expectations around our achieved renewal increase.

Speaker Change: I would say the setup right now has positioned us really well heading into this leasing season, and I don't see us kind of changing anything right now which is typically you've got your occupancy build right now youre leaning into rate youre leaning into the sequential build not only in volume, but improving pricing and the retention side of this business right.

Speaker Change: Now I just don't see it changing much which is we have such a strong percentage of our residents renewing and good transparency into that and very consistent expectations around our achieved renewal increases.

Robert Garechana: Okay, maybe one for Bob, just on the expense side, I know the insurance premium was a nice kind of tailwind, certainly for the back half of the year, but maybe just talk about expenses, kind of what you're seeing, any pressure on any line items or anything as it relates to tariffs or materials that could maybe upend the expense growth rate. Yeah.

Speaker Change: Okay, and maybe one for Bob just on the expense side I know the insurance premium was was a nice kind of a tailwind certainly for the back half of the year, but maybe just talk about expenses kind of what you're seeing any pressure on any line items or anything as it relates to terrorists or materials that that could maybe up in the expense.

Robert Garechana: Hey, Steve, it's Bob. Everything is proceeding pretty much in the aggregate the way we would have expected, as reflected in not changing the guidance. As you mentioned, we have a little bit of puts and takes. So insurance is probably a benefit. Real estate taxes trending is slightly ahead. Utilities, we're seeing a little bit more pressure from commodity prices offsetting that. But we're not seeing anything from like an R&M line or anything in the OPEC side from a tariff perspective that is driving a variance in expenses. So, so far, so good early in the year, but feel good about where we sit from an OPEC side.

Speaker Change: Growth rate.

Speaker Change: Yeah.

Speaker Change: Hey, Steve It's Bob.

Steve: Everything is proceeding pretty much in the aggregate the way we would've expected.

Steve: As reflected in not changing the guidance as you mentioned and we have a little bit of puts and takes so insurance is probably a benefit real estate taxes trending is slightly ahead.

Steve: Utilities were seeing a little bit more pressure from commodity prices offsetting that but we're not seeing anything from like an R&M line or anything in the in the Opex side from a tariff perspective that is driving our.

Steve: Driving a variance and expenses so so far so good early in the year, but I feel good about where we sit from an opex side.

Jeffrey Spector: We will move next to Jeff Spector with Bank of America. Great, thank you. First, if you can expand on your comment on your expansion markets, you mentioned that the first half of the year, you're expecting the first half of the year to play out as you, you know, reflected in your guidance.

Speaker Change: Thank you, we'll move next to Jeff Spector with Bank of America.

Jeff Spector: Great. Thank you.

Jeff Spector: First if you can expand on your comment on your expansion markets you mentioned that.

Jeff Spector: That the first half of the year you are expecting the first half of the year play out as you are.

Michael Manelis: Can you talk a little bit more about expectations for, let's say, second half of the year or even 26 at this point?

Jeff Spector: Reflected in your guidance can you talk a little bit more about expectations for let's say second half of the year or even 2006 at this point.

Michael Manelis: Yeah, hey, Jeff, this is Michael. So I think relative to the expansion markets, I would look at we came into the year with an expectation that we were not going to see a lot of pricing power in the first half of the year, that we would see kind of a rent seasonality pick up, you know, heading into a peak leasing season allow us to stabilize occupancy, which ultimately could give us some opportunities in the back half of the year to start raising kind of some of the prices in the market. And so far, it's kind of playing out exactly like how we we thought it would.

Jeff Spector: Yeah, Hey, Jeff. This is Michael so I think relative to the expansion markets I would look at we came into the year with an expectation that we were not going to see a lot of pricing power in the first half of the year that we would see kind of a rent seasonality pick up heading.

Jeff Spector: Heading into peak leasing season allow us to stabilize occupancy, which ultimately could give us some opportunities in the back half of the year to start raising kind of some of the prices in the market and so far it's kind of playing out exactly like how we thought it would.

Michael Manelis: You know, I guess I would frame the expansion markets relative to 2026, which is we're in the process of building some amazing, well balanced portfolios in these markets that, you know, are younger in age require less capital, and are really positioned to deliver some strong revenue growth. Once we get past the absorption of some of the units, when some of these newer acquisitions fold into 2026, which is late in the fourth quarter of this year, I mean, our setup going in is going to be strong and should start to allow us to see some of the recapturing of some of the rate declines that we've been experienced.

Jeff Spector: I guess I would frame the expansion markets relative to 2026, which is we're in the process of building some amazing well balanced portfolios. In these markets that are younger in age require less capital and are really positioned to deliver some strong revenue growth once we get past the absorption of some.

Jeff Spector: The unit when some of these newer acquisitions fold into 2026, which is late in the fourth quarter of this year I mean, our setup going in is going to be strong and should start to allow us to see some of the recapturing of some of the rate declines that we've been experienced but right now our expectations are still pretty muted for this first half of the year.

Michael Manelis: But right now, our expectations are still pretty muted for this first half of the year. And it really won't translate into improving revenue growth until probably get well into 2026.

Jeff Spector: And it really won't translate into improving revenue growth until probably well into 2026.

Alec Brackenridge: Yeah, Jeff, it's Alec, I would just say, got to distinguish among the markets, you know, some of them have this supply balance is coming into play in places like Dallas, Atlanta, and Denver, but there are other markets that really haven't cauterized the bleeding from all the supply that they've been under. And those are places like Austin, where we have three properties, and maybe Charlotte, Phoenix, other markets like that. So there's a difference among the markets.

Jeff Spector: Yeah, no. Thanks, Kevin.

Speaker Change: Alex I would just say got to distinguish among the markets some of them have this.

Speaker Change: Supply balances coming into play in places like Dallas.

Speaker Change: Atlanta.

Speaker Change: And then we're but there are other markets that really haven't cauterize bleeding from all the supply that they've been under and those are places like Austin, where we have three properties.

Speaker Change: And maybe Charlotte Phoenix other markets like that so there is a difference among the markets.

Unknown Executive: Great, thank you.

Unknown Executive: That's helpful.

Jeffrey Spector: And then my follow up, if you could just talk a little bit more about, you know, your comments, I guess, tie your comments on the green, blinking green, the dashboards are good to excellent versus You also discussed, of course, some of the key signposts or things you would see if there were issues.

Speaker Change: Great. Thank you that's helpful. And then my follow up if you could just talk a little bit more about.

Speaker Change: Your.

Speaker Change: <unk> I guess tie your comments on the Green blinking Green. The dashboards are good to excellent versus you also discussed of course some of the key signposts or things you would see if there were issues and you know based on your.

Mark Parrell: Based on your experience, historical data, would you expect at this point, or were you actually concerned at this point you could start to see some of those issues, or it really comes down to jobs, as you talked about, and the strength in the job market, and that's really what we should watch closely to determine the risks around delinquency. move out, lease brace, et cetera.

Speaker Change: <unk> historical data.

Speaker Change: Would you expect at this point or are you, where you actually concerned at this point you could start to see some of those issues or it really comes down to jobs as you talked about the strength in the job market and Thats really what we should watch closely to determine.

Unknown Executive: And what type of historical delay do you see? Thank you.

Speaker Change: The risks around delinquencies move out lease breaks et cetera, and what type of historical delayed AUC. Thank you.

Mark Parrell: So Jeff, it's Mark, I'm going to start and Michael will elaborate. First, we are a lagging, not a leading indicator of changes in the economy. So people, if they lose their jobs, don't immediately give us the keys.

So Geoff it's Mark I'm going to start Michael elaborate first we are a lagging not a leading indicator of changes in the economy. So people if they lose their jobs don't immediately give us the keys. So everything Michaels told you is absolutely accurate, but it doesn't necessarily tell you what's going to happen in the fourth quarter I would also add that our residents tend to be well.

Mark Parrell: So everything Michael's told you is absolutely accurate, but it doesn't necessarily tell you what's going to happen in the fourth quarter. I will also add that our residents tend to be well educated and have many options. So you might remember in the layoffs that occurred in the tech sector in 2022, in Seattle and San Francisco, where we have large portfolios, it's certainly slowed rent growth. But it wasn't a great reversal because those people had decent severance, and they found new jobs because they were highly skilled. So I tell you, job growth matters.

Speaker Change: <unk> and have many options. So you might remember in the layoffs that occurred in the tech sector in 2022 in Seattle, and San Francisco, where we have large portfolios. It certainly slowed rent growth, but it wasn't a great reversal because those people had decent severance and they found new jobs because they were highly skilled so I would tell you the job growth matters.

Mark Parrell: You had a very tough recession, you could have impacts and you would have impacts in our business and every other real estate business. But I'd say right now we're 96.9% occupied. We're in just such a strong position, going into what we think is an opportunity year. And if that changes, I still think we're going to have a pretty good year. Just because of where we're starting, and because our residents, frankly, are very employable. And no matter what happens in a place like DC, if you're a skilled engineer, you're going to find another job in another sector.

Speaker Change: He had a very tough recession, you could have an impact and you would have any impacts in our business and every other real estate business, but I'd say right now we're 96, 9% occupied we're in just such a strong position going into what we think is an opportunity year and if that changes I still think we're going to have a pretty good year.

Speaker Change: Just because of where we're starting and because our residents frankly are very employable and no matter what happens in a place like DC, if you're a skilled engineer youre going to find another job in another sector and <unk>.

Mark Parrell: And, you know, probably from our perspective, there'd be very little interruption in, you know, leasing activity, except maybe some dampening of growth.

Speaker Change: Probably from our perspective, it would be very little interruption in.

Speaker Change: Seeing activity, except maybe some dampening of growth.

Mark Parrell: I think Michael's had enough, so that's... You just said it all. So... Yeah.

Speaker Change: I think Michael you've had enough so that's.

Speaker Change: Yeah.

Speaker Change: Yeah.

Michael Goldsmith: We'll move next to Michael Goldsmith with UBS. Hi, thanks.

Speaker Change: Just set at all.

Speaker Change: [laughter].

Ami Probandt: This is Ami. I'm from Michael.

Speaker Change: Well move next to Michael Goldsmith with UBS.

Unknown Executive: We've seen some increasing rent control.

Ami Probandt: Maryland, Washington State has discussed it. I'm just wondering how you think that some of these recent rent control measures could impact the portfolio.

Speaker Change: Oh this is Amy I'm from Michael.

Speaker Change: Hum.

Speaker Change: Creasing rankings from Maryland, Washington, Steven discussed it. So I'm just wondering how do you think that some of these recent rent control measures could impact the portfolio.

Mark Parrell: Yeah, thank you for that question. So just so everyone has the same information in front of them. Washington State is in the process of passing new rent control, very similar to what's in California now. So the rent cap on renewal is the lesser of 10% or 7% plus CPI. Vacancy decontrol does exist, and there's a 12-year new construction exemption, which is pretty modest.

Speaker Change: Yeah. Thank you for that question.

Speaker Change: So everyone has the same information in front of them why she didn't state is in the process of passing new rent control very similar to what's in California now so the rent cap on renewal is the lesser of 10% or 7% plus CPI.

Speaker Change: They can see decontrol does exist and there is a 12 year, new construction exemption, which was pretty modest.

Mark Parrell: We're very disappointed to see this action by the state of Washington. If you want more housing, and the governor said in his campaign, the new governor, he did, you don't create price controls. This is a disincentive, capital investing in Seattle, and in places around Seattle where more housing is needed. So definitively a negative for this market, which otherwise has taken a lot of steps forward on public safety and just engagement with the business community and making things a better quality of life for their citizens. So we are disappointed. That said, we tell you probably not much effect this year, just given where we are in this market in terms of our ability to raise rents.

Speaker Change: We are very disappointed to see this action by the state of Washington.

Speaker Change: You want more housing in the Governor's setting these campaign the new Governor he did you.

Speaker Change: You don't create price controls this is a disincentive.

Speaker Change: Capital investing in Seattle and in places around Seattle, We're in more housing is needed. So definitively a negative for this market, which otherwise has taken a lot of steps forward on public safety and just engagement with the business community and making things better quality of life for their citizens. So we are disappointed.

Speaker Change: That said, we tell you probably not much effect. This year, just given where we are in.

Mark Parrell: But I think, again, disappointing and discouraging.

Speaker Change: In this market in terms of our ability to raise rents.

Mark Parrell: For Maryland, I'd take it a step further. We have a small portfolio in Maryland. The rent control you refer to, I think, is mostly the Montgomery County rent control, which is suburban Washington, DC. We only have one property subject to those rules, but we are unlikely to invest further in that area in that state. The political climate has become quite poor from a landlord perspective. You can see just across the Potomac in Virginia, where they're encouraging housing production, you see that housing production occurring. And in a state like Maryland, that's become increasingly hostile to housing providers.

Speaker Change: I think again disappointing and discouraging.

Speaker Change: For Maryland, I take it a step further we have a small portfolio in Maryland. The rent control you referred to I think is mostly the Montgomery County rent control, which is suburban Washington D. C. We only have one property subject to those rules, but we are unlikely to invest further in that area in that state.

Speaker Change: The political climate has become quite poor from a landlord perspective, and you can see just across the Potomac in Virginia, where theyre encouraging housing production you see that housing production occurring and then to say like Maryland, that's become increasingly hostile to housing providers you see the amount of investment in those markets, whether it's Baltimore.

Mark Parrell: You see the amount of investment in those markets, whether it's Baltimore or Washington, DC, metro declining. So I think it's unfortunate.

Mark Parrell: I think it's the opposite of the zoning decontrol and public-private partnership that will increase supply and solve the housing shortage. So we'll continue to advocate directly and through our associations against those ill-conceived policies.

Speaker Change: Washington D C Metro declining so I think it's unfortunate I think it's the opposite of that kind of.

Speaker Change: Zoning decontrol and public private partnership that will increase supply and solve the housing shortage. So we will continue to advocate directly and through our associations against those kind of ill-conceived policies.

Ami Probandt: Thanks. And then you addressed some of the moving pieces on expense, but I was wondering if there were any moving pieces within that Maintain Seamster Revenue Guidance.

Speaker Change: And then you addressed some of the moving pieces on expense, but I was wondering.

Speaker Change: There were any moving pieces within that 19 same store revenue guidance.

Robert Garechana: Sorry, Ami, can you repeat the last part? I couldn't quite hear you. Oh, if there were any offsetting pieces within your same store revenue guidance, such as higher occupancy, lower rents, et cetera. Yeah, there's many moving pieces, but at this point, and that's why we provide a range.

Speaker Change: Can you sorry, I mean can you repeat the last part I couldn't quite hear you.

Speaker Change: Well, if there were any offsetting pieces within your same store revenue guidance, such as higher occupancy et.

Speaker Change: That's right.

Robert Garechana: So I think we'll probably be able to give you a better sense on the next earnings call once we've gotten through the Q2 leasing piece. We certainly, as we said in the release, are running ahead of expectations on occupancy, which you saw in the first quarter. We were right on the number as it relates to blended rate and everything else, and the other two big items are really other income and bad debt. We're running mostly in line, but it's early, and Q2 and Q3 are really where you see most of the action when it comes to the red line.

Speaker Change: Yes, there is many moving pieces, but at this point and that's why we provide a range. So I think we'll probably be able to give you a better sense.

Speaker Change: On the next earnings call once we've gotten through the Q2 leasing piece, we certainly as we said in the release are running ahead of expectations on occupancy.

Speaker Change: You saw in the first quarter, we were right on the number as it relates to blended rate.

Speaker Change: And everything else like in the other two big items are really other income and bad debt were running mostly in line, but it's early in Q2 and Q3 are really where you see most of the most of the action when it comes to.

Unknown Executive: Got it.

Unknown Executive: Thank you.

Speaker Change: To the Red line.

Rich Hightower: We'll move next to Rich Hightower with BART. Good morning, everybody. I appreciate a bit of the commentary on D.C. and the prepared comments. Maybe just to drill down a little bit further on the D.C. market, maybe go through who's currently moving in, moving out. Would you say that the range of outcomes in D.C. at this point, given what we know, might be the widest, you know, as far as its potential impact on four-year guidance? You know, what are you, what would you handicap, you know, in terms of the outcome later this year, Ed? Severance for Government Employees runs out and you start to see some of those lagging effects that you've already sort of described.

Speaker Change: Yeah.

Speaker Change: Got it thank you.

Speaker Change: We'll move next to rich Hightower with Barclays.

Hey, good morning, everybody.

Speaker Change: I appreciate the.

Speaker Change: A bit of a commentary on DC in the prepared comments, but maybe just to just to drill down a little bit further on the D C market.

Speaker Change: Maybe go through who who's currently moving in moving out.

Speaker Change: Would you say that the range of outcomes in D. C. At this point given what we know it might be the widest.

Speaker Change: As far as its potential impact on full year guidance.

Speaker Change: What are you what would you handicap.

Speaker Change: In terms of the outcome later this year as.

Michael Manelis: Just help us understand some of the moving parts there again.

Speaker Change: Severance for government employees runs out and you start to see some of those lagging effects that you've already sort of describe just help us understand some of the moving parts here again.

Michael Manelis: Yeah, so Rich, this is Michael. You know, I think when we're drilling in and looking at DC, right, clearly today, when you look at the new move in activities from the demographics, the age, the income levels, there's really nothing that's changing. We capture the employer at time of move in. And we don't keep up with that as they continue to renew with us. You know, we've snapshot the portfolio, we have a sense of kind of the exposure to direct kind of government workers. You also have kind of the the consulting environment around there. And, you know, for us, that's what we're watching.

Michael: Yeah. So rich this is Michael.

Speaker Change: I think when we're drilling in and looking at D. C. Right clearly today when you look at the new move in activities from the demographics. The age the income levels, there's really nothing that's changing we capture the employer at time of move in and we don't keep up with that as they continue to renew with US you know we've snapshot the poor.

Speaker Change: Folio, we have a sense of kind of the exposure to direct kind of government workers. You also have kind of the of the consulting environment around there and for US. That's what we're watching we're trying to understand if you really see a pullback in contracts and some of those consulting and <unk>.

Michael Manelis: We're trying to understand if you really see a pullback in contracts in some of those consultings and see job loss in those firms. That's what we're trying to pay attention to the exposure is still pretty small. But it's really hard to quantify your direct exposure to all businesses, kind of that that support this market. But right now, I feel like we've got the right level of transparency in, and we're just not seeing anything like from the lease breaks from the commentary to suggest that we should be concerned. But again, I think as Mark spoke, you know, some of these folks have severances that go all the way into Q3, even in Q4.

Speaker Change: Job loss and those firms that's what we're trying to pay attention to the exposure is still pretty small, but it's really hard to quantify your direct exposure to all businesses kind of that that support this market, but right now I feel like we've got the right level of transparency in and we're just not seeing anything like from the lease.

Speaker Change: <unk> from the commentary to suggest that we should be concerned, but again I think as mark spoke some of these folks had severance is that go all the way into Q3, even in Q4 and we'll just see you know if they are able to pick up new jobs, and we probably won't see any impact from this and rich. It's mark I just wanted to quantify some of the numbers we see.

Michael Manelis: And we'll just see, you know, if they're able to pick up new jobs, we probably won't see any impact from this.

Mark Parrell: And Rich, it's Mark, I just want to quantify some of the numbers we see, with the understanding that we only get an employer's name at the beginning of their leasing journey with us. So 10-11% of our residents in DC showed an employer, a federal government entity. Some of that did include, for example, defense department people, and stuff that may be less affected by these layoffs. And then when we could sort of trace it to a wee guest, or folks that were directly employed at consulting firms in this area, the number got closer to 15%. And as Michael said, there's some estimation in that process.

Speaker Change: With the understanding that we only get an employer's name at the beginning of their leasing.

Speaker Change: Bernie with us, so 10 or 11% of our residents in D. C showed an employer a federal government entity. Some of that did include for example, the defense Department people and stuff there may be less affected by these layoffs and then when we could sort of trace it to a weak guest were folks that were directly employed at consulting firms in this.

Mark Parrell: DC is getting to be a much more diversified economy. I mean, Amazon has their HQ2 there, they have significant operations there, Volkswagen's headquarters is there. I mean, there's just a lot of other employers. So this is not a one horse town like it used to be. And I guess we have a reasonable degree of confidence that we're going to get through this.

Speaker Change: Here are the numbers got closer to 15% and as Michael said, there's some estimation in that process do you see is getting to be a much more diversified economy. I mean, Amazon has their HQ2 there they have significant operations. There Volkswagen's headquarters is there I mean, there's just a lot of other employers. So this is not a one horse town.

Speaker Change: Like it used to be and I guess, we havent a reasonable degree of confidence that we're going to get through this.

Unknown Executive: Okay, that's helpful, Color Guys.

Rich Hightower: I guess, you know, one follow up just on the, I guess, extraordinarily low turnover rates in the portfolio. And obviously, you know, in a quarter where new lease growth is negative and renewals are positive, you're obviously benefiting from the fact that people stay in place.

Speaker Change: Okay. That's helpful color guys I guess, one follow up just on the I guess extraordinarily low turnover rates in the portfolio and obviously.

Speaker Change: In a quarter, where new lease growth is negative in renewals are positive you're obviously benefiting from the fact that people stay in place.

Rich Hightower: You know, would you say that for whatever variety of reasons, there's sort of a new normal in that metric?

Speaker Change: Would you say that.

Rich Hightower: And I know, Michael, you mentioned you're not changing revenue management per se, but you know, what would it mean if that metric ticked up? Could you identify reasons why that might happen or might not happen? You know, how should we think about that in particular?

Speaker Change: Whatever variety of reasons, there's sort of a new normal in that metric and I know, Michael you mentioned, you're not really changing revenue management per se, but.

Speaker Change: What would it mean, if that metric ticked up could you identify reasons why that might happen or might not happen you know how should we think about that in particular.

Michael Manelis: Yeah, so Richard, Michael, again, so I think relative to the turnover, we said this in our outlook for the year, right? We've been in a period of time where we've had really low resident turnover. We modeled for that to continue this year. The fact that the first quarter came in even lower than kind of historical norms, it really isn't a testament, one, to what is happening in kind of the macro economy. When there's ambiguity, people tend to bunker down, right? And so retention could go up. But we've also put a lot of effort as a company into our centralized renewal process, a lot of effort into ensuring that we're delivering the right customer experience.

Speaker Change: Yeah, So rich Michael again, so I think relative to the turnover. We said this in our outlook for the year right. We've been in a period of time, where we've had really low resident turnover, we modeled for that to continue this year. The fact that the first quarter came in even lower than kind of historical norms. It really isn't.

Testament, one to what is happening in kind of the macro economy. When when there's ambiguity people tend to bunkered out right and so retention could go up but we've also put a lot of effort as a company into our centralized renewal process a lot of effort into ensuring that we're delivering the right.

Michael Manelis: So I think that is also fueling some of the retention numbers that we see kind of playing out.

Speaker Change: <unk> experience. So I think that is also fueling some of the retention numbers that we see kind of playing out and in the near term for the next several quarters. We just don't see any kind of change to that process.

Unknown Executive: And in the near term for the next civil court, we just don't see any kind of change to that process. All right, great.

Alexander Goldfarb: We'll go next to Alexander Goldfarb with Piper. Hey, good morning, morning out there. Two questions.

Speaker Change: Alright, great. Thank you.

Speaker Change: We'll go next to Alexander Goldfarb with Piper Sandler.

Mark Parrell: First, Mark, just want to go back to your comment that apartments are a lagging indicator, not a future. Just curious, given that you guys are leasing probably 30, 60, 90 days out, and can see the pace of signed leases and a sense of certainly the property managers have a sense of people's, you know, smiles or frowns on their faces. Isn't there a sense that apartments are forward-looking because of that leasing activity that you can see what's going on over the next, call it, three, four months of activity?

Alexander Goldfarb: Hey, good morning, good morning out there two questions first Mark I just wanted to go back to your comment that apartments are a lagging indicator not a future just curious given that you guys are leasing probably 30 60 90 days out.

Alexander Goldfarb: And can see the pace of signed leases and a sense of certainly the property managers have a sense of peoples.

Speaker Change: Miles or frowns on their faces.

Speaker Change: Isn't there a sense that apartments are forward looking because of that leasing activity that you can see what's going on over the next call. It three four months of activity.

Mark Parrell: Yeah, I'm gonna have Michael elaborate too on this. There's there's some truth to that, but also say people could be uncomfortable about their jobs and their job situation, but they still need a place to live. So they're still going to go out there and renew, they're still going to go out there and talk to us about a new unit if they don't like their living situation. People have things happen in their lives, whether it's divorces, marriages, coupling and uncoupling, that causes demand in Michael's world that has nothing to do with the economy. So I guess I'd say to you, it's not like we don't have some inkling of what's going on.

Speaker Change: Yeah, I'm going to have Michael elaborate too on this there is some truth to that but also say people could be uncomfortable about their jobs and their job situation, but they still need a place to live.

Speaker Change: There's still going to go out there and renew theres still going to go out there and talk to us about our new unit if they don't like their living situation people have things happened in their lives, whether it's divorces marriages coupling and uncoupling that causes demand in Michael's world that has nothing to do with the general economy. So I guess I would say to you it's not.

Mark Parrell: And we've shared that, I think, pretty fully with you just now. It's just that some of that can occur later in the process, people don't immediately stop, you know, moving with their parents or stop their leasing process with us if they feel insecure about their job.

Speaker Change: We don't have some inkling of what's going on and we've shared that I think pretty fully with you. Just now it's just that some of that can occur later in the process people don't immediately stop moving with their parents or.

Mark Parrell: That's different than, for example, the hospitality sector where people might just stop going on vacation. And that's just what they do. And they can do that on a dime. They need to live somewhere and they're going to probably live with us if they have even some reasonable degree of comfort that they'll get a job at some point. So I wouldn't say we aren't an indicator. I just don't think we're the same sort of indicator you're implying in your question that it's like absolutely clear that we can see the inflection point.

Speaker Change: Stop their leasing process with us if they feel insecure about their job.

Speaker Change: That's different than for example, the hospitality sector, where people might just stop going on vacation and that's just what they do and they can do that on a dime they need to live somewhere and they're going to probably live with us if they have even some reasonable degree of comfort that they'll get a job at some point. So I wouldn't say, we aren't an indicator I just don't think we're the same sort of indicator you're implying in your <unk>.

Speaker Change: Question that it's like absolutely clear that we can see the inflection point.

Mark Parrell: And then second question is, you know, following up on the rent control question, just, you know, in California, Sacramento is debating, you know, sort of exempting urban residential from CEQA. It sounds pretty optimistic, but you guys are probably closer to it. So do you think that this is a good thing and that it will finally start to curtail the powers of CEQA? Or when you guys look at the legislation, you see ways that CEQA could work around to continue to inhibit development of residential in the urban areas? Yeah, I think it's a great question. Observation.

Speaker Change: And then second question is.

Speaker Change: Following up on the rent control question, just on California, Sacramento is debating sort of exempting urban residential from sequel, it sounds pretty optimistic but you guys are probably closer to it. So do you think that this is a good thing and that it will finally start to curtail the powers of secret or when.

Speaker Change: You guys look at the legislation you see ways that sequel could work around to continue do inhibit development of residential in the urban areas.

Mark Parrell: Loved your piece on that. You know, we're hopeful. I mean, it's got a ways to go yet. And there is opposition to it. But I think what you're seeing is policymakers, and these are all democratic policymakers looking at it and saying, how can I make it easier to build more units? And CEQA is an impediment to that. So let's move that out of the way. I think that's the message. And they're doing that pretty consistently. The National Multihousing Conference is here in Chicago this week, and talked to a number of people there. And in California, they really are working to comply with the state level rules about permitting more units.

Yeah, I think it's a great question and observation loved your piece on that.

Speaker Change: Yes, we're hopeful I mean, it's got a ways to go yet.

Speaker Change: There is opposition to it but I think what youre seeing as policymakers and these are all democratic policymakers looking out and saying how can I make it easier to build more units and seek was an impediment to that so let's move that out of the way I think that's the message and they're doing that pretty consistently the national multi housing.

Speaker Change: <unk> is here in Chicago, this week and talked to a number of people there and in California. They really are working to comply with the state level rules about permitting more units and we see that even in places like Orange County, where theres been a lot of opposition Theres a few holdouts, but my money is on the state making these local.

Mark Parrell: And we see that even in places like Orange County, where there's been a lot of opposition, there's a few holdouts, but my money's on the state, making these localities create more units. So I think Alex, Alex, you're exactly right that it's a positive and it's good. Whether this bill gets through or not, in its current form, I'd say probably is a little 5050. But it's a good thing. And I think policymakers knowing they need to make it easier to build in California, boy, isn't that a sea change from five or 10 years ago, right? Amen to that.

Speaker Change: <unk> create more units so I think Alex Alex you're exactly right that it's a positive and it's good weather. This bill gets through or not in its current form I would say probably is little 50, 50, but it's a good thing and I think policymakers, knowing they need to make it easier to build in California boy isn't at a sea change from five or 10 years ago right.

Unknown Executive: Listen, thank you.

Speaker Change: Amen to that listen thank you.

Nicholas Yulico: We'll go next to Nick Yulico with Scotia. Thanks, good morning. First question is just in terms of, you talked about potentially starting some new developments.

Speaker Change: Thank you.

Speaker Change: Well go next to Nick <unk> with Scotiabank.

Speaker Change: Thanks. Good morning first question is just in terms of.

Alec Brackenridge: Can you give us a sense for, you know, how construction costs might be getting impacted now, you know, from from tariffs, any perspective, just on a real time basis? Yeah, so Nick, it's Alec, it's interesting, because absent the tariffs, it felt like costs were coming down in a lot of markets, maybe zero to 5%, depending on the market and depending on how overheated it got. But then the tariffs have obviously introduced an element of uncertainty that really depends on how a number of variables and obviously which items get taxed and what the tariff is and the makeup of your project.

Speaker Change: You talked about potentially starting some new developments can you just give us a sense for how construction costs might be getting impacted now.

Speaker Change: From from tariffs any perspective, just on a real time basis.

Speaker Change: Yes, so Nick it's Alec it's interesting because.

Speaker Change: Absent the terrorists tariffs it felt like costs were coming down and a lot of markets, maybe zero to 5% depending on the market and depending on how overheated a god, but then the tariffs have obviously introduced an element of uncertainty that really depends on how a number of variables, obviously, which items get.

Speaker Change: Tax and what what the tariff is and to.

Alec Brackenridge: Having said all that, the developers that I talk to and that we talk to as we look at joint venture opportunities are also seeing that potential increase offset by contractors getting really hungry. They see the pipeline dwindling, and so they're accepting less of a margin, and so that might balance off so the costs won't go up that much.

Speaker Change: To make up for your project, having said all that the.

Speaker Change: The developers that I talked to and we talked to you as we look at joint venture opportunities are also seeing that potential increase offset by contractors getting really hungry they see the pipeline dwindling.

Speaker Change: So they're accepting less of a margin and so that might balance off so the costs won't get go up that much having said all of that even.

Alec Brackenridge: Having said all that, even with no change in costs, it's really hard to make deals underwrite right now. So it really doesn't change the supply dynamic that much, I guess is my net conclusion, and that's that supply will continue to decline during the course of the year.

Speaker Change: No change in cost, it's really hard to make deals underwrite right now so it really doesn't change the supply demand dynamic that much I guess is my neck conclusion and that the supply will continue to decline during the course of the year.

Unknown Executive: Okay, thanks.

Nicholas Yulico: And then second question is just going back to DC, you know, I know you gave a bunch of commentary, which was helpful on the exposure there. I guess what I'm wondering is, if you've done a, you know, sort of an extra layer of analysis, kind of similar to what you did the investor day, when you looked at, you know, your exposure to certain job sectors versus the national average, you used a location quotient.

Speaker Change: Okay. Thanks, and then second question is just going back to D C.

Speaker Change: You gave a bunch of commentary, which is helpful on the exposure there I.

Speaker Change: I guess, what I'm wondering is if you've done a sort of an extra layer of analysis kind of similar to what you did at the Investor day. When you looked at your exposure to certain job sectors versus the national average you used to location quotient.

Mark Parrell: I guess I'm wondering if you've done anything similar to that in terms of, you know, DC, meaning that you have, you know, more or less exposure to these types of jobs that could be potentially cut, and whether there's also perhaps a locational issue on your sub markets there, just kind of a gut feel on, you know, whether certain impact sub markets might be impacted more, and whether you even have, you know, product in that market in DC. Thanks.

Speaker Change: I guess I'm wondering if you've done anything similar to that in terms of D. C. Meaning that you have you know more or less exposure to these types.

Speaker Change: Types of jobs that could be potentially cut and whether there's also perhaps a locational issue on your submarkets. There just kind of a gut feel on whether certain impact submarkets might be impacted more than whether you even have product in that market in D. C.

Mark Parrell: Yeah, Nick, it's Mark. Thanks for that question. We're levered about the same to government jobs as the GDP of that area. So we think it's 11 12% is federal government. And then of course, there's these harder to measure other, you know, consultants and alike in DC. So we think our numbers basically follow what the market has in terms of employment and, you know, economic power drivers. We've looked at our assets one by one in this market. And it's sort of what you would expect. I mean, we have some assets very close to the Pentagon, for example, that have pretty high federal government employee usage.

Speaker Change: Yes, Nick it's mark Thanks for that question.

Speaker Change: Our levered about the same to government jobs as the GDP of that area. So we think it's 11, 12% is federal government and then of course, there's these harder to measure other consultants and alike. In D. C. So we think our numbers basically follow what the market has in terms of employment and economic.

Speaker Change: Power drivers, we've looked at our assets one by one in this market and it's sort of what you would expect I mean, we have some assets very close to the Pentagon for example that have pretty high federal government employee usage.

Mark Parrell: I wonder if those jobs are going anywhere. So but there wasn't anything we looked at that we found terribly surprising. Some of the Maryland properties, and again, we have a pretty small portfolio there that are new and near NIH also had a fair bit of exposure. I wonder if those scientists aren't employable elsewhere. But where exactly they go, I'm not sure. So my guess is that is more NIH employment than federal defense spending. So it's sort of a mixed bag. And I wouldn't say there's anything we saw that made us particularly anxious, like we're levered to one department or another.

Speaker Change: I wonder if those jobs are going anywhere.

Speaker Change: So, but there wasn't anything we looked at that we've found terribly surprising.

Speaker Change: Some of the Maryland properties and again, we have a pretty small portfolio. There that are new and near NIH also had a fair bit of exposure I wonder if those scientists arent employable elsewhere, but where exactly they go I'm not sure. So my guess is that is more NIH employment in federal defense spending.

Speaker Change: So it's sort of a mixed bag and I wouldn't say there is anything we saw that made us.

Mark Parrell: It's pretty broad based portfolio.

Speaker Change: Particularly anxious like we're levered to one department or another it's pretty broad based portfolio.

Unknown Executive: Great. Thanks, Mark.

Haendel Juste: We'll go next to Haendel St.

Speaker Change: Great. Thanks, Mark.

Michael Manelis: Juste, Ms. Hey, guys. So first question is on San Francisco. I think I heard you mention earlier, Mark, that that you are at 97% base rents going up, but that concessions are still prevalent. So maybe can you add some color, clarify that, seems a bit of a bizarre situation, and then maybe put some numbers around the level of concessions you're seeing in the San Francisco market today versus a year, a quarter, or a year ago. Thank you.

Speaker Change: Thank you.

Speaker Change: Well go next to Handel St Juste with Mizuho.

Speaker Change: Hey, guys.

Speaker Change: So first question is on San Francisco, I think I heard you mentioned earlier mark that.

Speaker Change: That you were at 97 times base rents going up but that concessions are still prevalent.

Speaker Change: Some color or clarify that seems a bit of a bizarre situation and then maybe put some numbers around the level of concessions you are seeing in San Francisco market today versus a year a quarter or a year ago.

Michael Manelis: Hey Haendel, this is Michael. So yeah, San Francisco is actually over 97% occupied. Net effective pricing is up 6% plus since the beginning of the year there. And what we're seeing, and I think I said this in my prepared remarks, concessions are more common right now, still in that downtown area, they are pulling back. So just to give you some frame of reference, at the beginning of the year, we were probably like 45% of our applications receiving a month. Today, we're probably closer to like a third of our applications receiving two weeks. But we're seeing the properties that we're competing against are still offering concessions in the marketplace.

Speaker Change: And this is Michael so San Francisco is actually over 97% occupied net effective pricing is up 6% plus since the beginning of the year, there and what we're seeing and I think I said. This in my prepared remarks concessions are more common right now still in that downtown area. They are pulling back.

Speaker Change: So just to give you some frame of reference at the beginning of the year, we were probably like 45% of our applications receiving a month today, we're probably closer to like a third of our applications receiving two weeks, but we're seeing the properties that we're competing against are still offering concessions in the marketplace.

Michael Manelis: And it's still an expectation of prospects coming around. How long those hold on in the marketplace? I don't know. But at this point, what we're more interested in is just where is that net effective price. So if base rents are moving up, but persistent concessions stay at two weeks, that's okay. Right. So we're, we're kind of indifferent right now, we're watching the pricing curve, we're watching the demand. But we feel really well positioned right with occupancy over 97%. And the sequential build and net effective pricing occurring each and every week. And whether or not concessions continue to pull back from this point forward, through the leasing season, I think it's still uncertain for us.

Speaker Change: And it's still an expectation of prospects coming around how long those hold on in the marketplace I don't know, but at this point what we're more interested in is just where is that net effective price. So if base rents are moving up but persistent concession stay at two weeks. That's okay. Right. So we're we're kind of indifferent right now we're <unk>.

Speaker Change: Watching the pricing curve, we're watching the demand, but we feel really well positioned right with occupancy over 97% and the sequential build of net effective pricing occurring each and every week and whether or not concessions continue to pull back from this point forward through the leasing season, I think it's still uncertain for us we're almost indifferent.

Michael Manelis: But we're almost indifferent.

Michael Manelis: got it got it appreciate that color uh maybe one on boston we haven't talked much about boston's important market you got seeing a little bit of I'm wondering if it's maybe just tough comps or if there's anything in particular that perhaps you're seeing that you can speak a lot on.

Speaker Change: Got it got it appreciate that color maybe one on Boston, we haven't talked much about Boston important market for you guys are seeing a little bit.

Speaker Change: Loving there I'm wondering if it's a.

Maybe just tough comps or was there anything in particular that perhaps you've seen some of them.

Michael Manelis: Yeah, and this is Michael again. So yeah, I think Boston for us, I mean, it felt a little bit weaker in the first quarter from I would say the new lease change or just the overall pricing on new leases. It is a very seasonal market. So the new lease change was more negative, but the volume of transactions was really low. Looking at our stats for the last kind of four to five weeks, I will tell you, it looks pretty stable to us. We have momentum now heading into the leasing season. We have pretty stable occupancy there.

Speaker Change: Yeah.

Speaker Change: Michael again, so yeah, I think Boston for US I mean, it felt a little bit weaker in the first quarter from I would say the new lease change or just the overall pricing on new leases. It is a very seasonal market. So the new lease change was more negative, but the volume of transactions was really low.

Speaker Change: Looking at our stats for the last kind of four to five weeks I will tell you it looks pretty stable to us we have momentum now heading into the leasing season, we have pretty stable occupancy there.

Michael Manelis: You know, I think for us, you know, we've talked a lot about DC and some of the headline risk. We're watching the headline risks in Boston, because some of that pullback in the funding, research funding on top of kind of the life science and bio slowdown, is what we're trying to understand the impact on overall demand. So far, it feels okay. Like I said, looking at April, looking at kind of the forward for May. But I do think we have a little bit of that forward risk there on the overall demand in that market.

Speaker Change: I think for us we.

Speaker Change: Talked a lot about D C and some of the headline risks we're watching the headline risks in Boston, because some of that pullback.

Speaker Change: In the funding research funding on top of kind of the life science and bio slowdown is what we're trying to understand the impact on overall demand. So far it feels okay. Like I said looking at April looking at kind of the forward for May but I do think we have a little bit of that forward risk there on the overall demand in there.

Unknown Executive: But nothing that over right now is telling us that we need to revise kind of guidance for the full year of the market. Thank you.

Speaker Change: That market.

Speaker Change: But nothing that over right now is telling us that we need to revise kind of guidance for the full year of the market.

Adam Kramer: We'll go next to Adam Kramer with Morgan Stanley. Hey guys, thanks for the time here. I wanted to ask about Washington, D.C. again. I know it's been talked about a few times here, but just maybe if you could quantify on the demand side. I know this return to office theme has come up a bunch. Maybe just quantify, again, to the extent that you can, I know everyone's crystal balls are a little bit cloudy at this point, but just where we are in that return to office cycle.

Speaker Change: Okay.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: We'll go next to Adam Kramer with Morgan Stanley.

Speaker Change: Hmm.

Speaker Change: Hey, guys. Thanks for the time here.

Speaker Change: Just wanted to ask about Washington D. C. Again, I know, it's been talked about a few times here, but just maybe if you could quantify on the demand side I know this return to office theme.

Speaker Change: Come up a bunch maybe.

Speaker Change: Maybe just quantify again to the extent that you can I know everyone's crystal ball is a little bit cloudy at this point, but because where we are in that return to office cycle.

Mark Parrell: Do you think it's still early days, people have been hesitant to come back to office, or are we maybe 75, 80, 85% of the way through, people have already been called back, and maybe we're in just the later stages of that demand?

Speaker Change: Do you think it's kind of still early days to Goldman has been to come back to office or.

Speaker Change: Maybe 75 to 80, 85% of the way through people who've already been called back and maybe we're in the later stages of that of that demand.

Mark Parrell: Yeah, it's Mark. We don't have any particular insight to share with you. We have a few folks in other markets on the West Coast, for example, that are federal workers and said they wanted to take advantage of our coast to coast transfer program and move from a West Coast market to DC because now they're required to be in the office. But that is really a handful of people. It isn't a deluge of people.

Speaker Change: Yeah. It's mark that's we don't have any particular insight to share with you. We have a few folks in other markets on the West Coast for example at our <unk>.

Speaker Change: Federal workers and said they wanted to take advantage of our coast to coast transfer program and move from a west coast market to D. C. Because now they're required to be in the office, but that is really <unk>.

Mark Parrell: So I don't have any sense of the RTO cycle. A bunch of us have been in DC lately, it did feel more activated on the street than it has in a while. So that's probably all I'd have to share there for you.

Speaker Change: Handful of people it isn't a deluge of people. So I don't have any sense of the <unk> cycle.

Speaker Change: Bunch of us have been in DC lately. It did feel more activated on the street than it has in a while so that's probably all I'd have to share there for you.

Mark Parrell: I appreciate that, Mark. And then Maybe just on development, I think you mentioned a little bit earlier, you know, kind of a greater possibility of starting development versus 90 days ago. Just wondering what that's a function of? You know, I would have thought with tariffs and immigration impacts, you know, it would be harder across the board to kind of start development. Maybe just what kind of, you know, what are the kind of drivers of that statement you made earlier? And what are you guys seeing in real time in the development? Yeah, I agree with you.

Alright, I appreciate that Mark.

Speaker Change: Maybe just on developments I think you mentioned little bit earlier kind of a greater possibility of starting development versus 90 days ago. Just wondering what that is a function of I would've thought with tariffs and immigration impact it would be harder across the board to kind of start developments, maybe just what kind of what are the what are the kind of dry.

Speaker Change: I'm not saying that you made earlier and what are you guys seeing in real time in the development of that.

Mark Parrell: There's more uncertainty. This hurdle rate, this sort of 6% bogey we've put out there for current rent yield, you got to feel really comfortable about that. I think with appropriate contingencies, which is what the team's underwriting, you can get yourself a little bit more comfortable. You know, we do look at that relative to acquisitions. And with some acquisition cap rates being lower than five, it starts to look more appealing and developing certainly when no one else can or very few can and delivering two or three years out in some of these markets we're trying to grow in, that may be a pretty good play.

Speaker Change: Yes, I agree with you there is more uncertainty this hurdle rate this sort of 6% bogie, we've put out there for current rent yield he got a feel really comfortable about that I think was appropriate contingencies, which is what the team's underwriting you can get yourself a little bit more comfortable.

Speaker Change: We do look at that relative to acquisitions and went to some acquisition cap rates being lower than five it starts to look more appealing and developing certainly when no one else can or very few can and delivering two or three years out in some of these markets. We're trying to grow in that may be a pretty good place. So that's the way we're thinking about it but it.

Mark Parrell: So that's the way we're thinking about it. But it is not going to be a very significant move, it'll be, you know, three assets or something or two or something like that, that we really think we can deliver at a six or better yield at a cost that makes sense in a sub market that we like.

Speaker Change: It is not going to be a very significant move it'll be.

Speaker Change: Three assets or something or two or something like that that we really think we can deliver at a six or better yield at a cost that makes sense in a sub market that we like.

Mark Parrell: And that complements our acquisition efforts.

Unknown Executive: Great, thanks for the time. Thank you.

Speaker Change: That complements our acquisition efforts.

Speaker Change: Oh, great. Thanks for the time.

Julien Blouin: I'll go next to Julien Blouin with Goldsmith. Hi there. Thank you for taking my question. Michael, you were speaking earlier about on the renewal side, things trending into April. I guess, can we have the same discussion on the new lease side? I know we generally try to stay away from monthly disclosures, but just given the amount of uncertainty out there, is there any sort of trends or data points you can give us into April? Yeah.

Speaker Change: Yes.

Speaker Change: We'll go next to Julian Blue line with Goldman Sachs.

Speaker Change: Hi, there. Thank you for taking my question Michael.

Speaker Change: Michael you were speaking earlier about.

Speaker Change: On the renewal side things trending into April.

Speaker Change: I guess could we have the same discussion on the new lease side I know, we generally try to stay away from monthly disclosures, but just given the amount of uncertainty out there is there any sort of trends or data points, you can give us into April.

Michael Manelis: So hey, Julien, it's Michael. Yeah, I mean, I think you kind of hit it, which is we're going to stay away from giving any kind of monthly stats. I think all of these things are really best viewed over longer periods of times as trends. You know, I think you could pick up from my commentary, you can pick up from the guidance that we put out there on the blend for the second quarter, you can see the sequential improvement that we're putting out there with the blends. And you could see my stability and renewal performance, which tells you that April obviously has the trajectory in line with what you would expect, which is seasonal, sequential improvement, heading into the peak leasing season.

Speaker Change: Yes.

Speaker Change: Hey, Julien, it's Michael Yeah, I mean, I think you kind of hit it which is we're going to stay away from giving any kind of monthly stats I think all of these things are really best viewed over longer periods of times as trends.

Speaker Change: I think you could pick up from monetary you can pick up from the guidance that we put out there on the blend for the second quarter you can see the sequential improvement that we're putting out there with the blend and you could see my stability and renewal performance, which tells you that April obviously has the trajectory in line with what you would.

Michael Manelis: And I'll be honest, even looking past April into May and June, there's nothing that we see yet to suggest that we're not going to continue to see that sequential build, which will manifest itself into new lease change, sequentially building as well. Okay, great. Thank you.

Speaker Change: We expect which is seasonal sequential improvement heading into the peak leasing season, and I'll be honest, even looking past April into May and June there is nothing that we see yet to see.

Speaker Change: Suggest that we're not going to continue to see that sequential build which will manifest itself into new lease change sequentially building as well.

Unknown Executive: That's all for me.

Speaker Change: Okay, great. Thank you that's all for me.

John Kim: We'll go next to John Kim with BMO Capital Markets. Thank you. In Boston, that was a market where it looks like you built up some occupancy during the quarter.

Speaker Change: Yeah.

Speaker Change: We'll go next to John Kim with BMO capital markets.

John Kim: Thank you.

Michael Manelis: And I was wondering if that contributed to the new lease rates kind of softening and if there are any other markets where you're going to be a little bit more defensive and build up occupancy as you head towards the second, third quarter. Yeah.

Alexander Goldfarb: In Boston that was a market where it looks like you built up some occupancy during the quarter and I was wondering if that contributed to the new lease rates kind of softening and if there are any other markets, where youre going to be a little bit more defensive in donuts occupancy as you head towards.

Michael Manelis: Hey, John, it's Michael. So, you know, I think Boston, we clearly had a lean in, even in the fourth quarter, you know, some of these more seasonally pronounced markets will lean into occupancy in the shoulder period. So that could have played a little bit into the softness on the new lease chain. But like I said, we're coming into kind of the leasing season now and getting a little bit of that sequential build. You know, in terms of other markets right now on the defense, I think, look, if the expansion markets were still in kind of a defensive position, you know, the occupancies today are 95 and a half percent if they hold and get, you know, are stable heading into the leasing season.

John Kim: Second and third quarter.

John Kim: Yeah.

John Kim: Hey, John it's Michael so.

John Kim: Boston, We clearly had to lean in even in the fourth quarter. Some of these more seasonally pronounced markets, we'll lean into occupancy in the shoulder periods.

John Kim: So that could have played a little bit into the softness on the new lease change, but like I said, we're coming into kind of the leasing season, now and getting a little bit of that sequential build.

John Kim: In terms of other markets right now on the defense I think looking at the expansion markets. We're still in kind of a defensive position. The occupancies today are 95, 5%, if they hold and get stable heading into the leasing season that should manifest itself into what I thought would happen in the second half of the year, which may be used.

Michael Manelis: That should manifest itself into what I thought would happen in the second half of the year, which maybe you start to see a little bit lessening of the concession use or a little bit inching up on price.

Michael Manelis: There's really not any other markets. I mean, we got pockets that were up against supply, you know, in L.A., you know, Hollywood, Midwilshire, things like that, that I would say anywhere where we're up against direct competitive supply, you're going to see us lean in a little bit more onto the occupancy, take our foot off the gas a little bit on the rates, regardless of what season I'm dealing with. Okay.

John Kim: To see a little bit lessening of the concession use or a little bit inching up on price.

John Kim: Really not any other markets I mean, we got pockets that we're up against supply.

John Kim: In L. A Hollywood mid Wilshire or things like that that I would say anywhere where we're up against direct competitive supply youre going to see us lean in a little bit more onto the occupancy take our foot off the gas a little bit on the rates, regardless of what season I'm dealing with.

Michael Manelis: And on DC, you've done a great job answering all the questions on the call today about it, and it's been very resilient. One of the metrics that you provided the investor day were 12 lease breaks that you had in the market, partially offset by incoming demand from the West Coast. I was wondering if that number had moved up meaningfully since late February. No, I mean, yeah, it's, it's higher. But again, every single month, we would have lease breaks due to job loss. So I think the tracker, right, the last I looked was like 28 total over the course of like, more than two months.

Speaker Change: Okay and on D C. You've done a great job answering all the questions on the call today about it and it's been very resilient.

Speaker Change: One of the metrics that you provided at the Investor Day, where 12 lease breaks that you had in the market, partially offset by incoming demand from the west coast.

Speaker Change: I was wondering if that number has moved up meaningfully since late February.

Speaker Change: No I mean, yes it is.

Speaker Change: Higher but again every single month, we would have lease breaks due to job loss. So I think the tracker right. The last I looked was like 28 total over the course of like more than two months. So it's just it's nothing at the end of the day. When you just think about lease breaks that occur in the marketplace. We're just not seeing anything to signal.

Unknown Executive: So it's just, it's nothing at the end of the day, when you just think about lease breaks that occur in the marketplace, we're just not seeing anything to signal that this is anything other than what you would normally experience. Right, thank you. So we're going to just as a note. Just one second, Jess, we're going to take one more question just to be respectful of a start time for our peer.

Speaker Change: That this is anything other than what you would normally experience.

Speaker Change: Great. Thank you.

Speaker Change: So we're going to just as a note.

Unknown Executive: So please go ahead with the next question. Certainly.

Speaker Change: One second Jeff we're going to take one more question just to be respectful of our start time for our peer. So please go ahead with the next question.

Bradley Heffern: We'll take our final question from Brad Heffern with RBC Capital Markets. Yeah, everybody. Thanks.

Speaker Change: Certainly we will take our final question from Brad Heffern with RBC capital markets.

Mark Parrell: Can you just give your long term perspective on LA? You've obviously been trading out of it some and it's had more than its fair share of issues over the past few years, but been some articles floating around about the low number of shoot days, other cities taking a larger share of the movie and TV, TV business. So does that give you any incremental concern? Yeah, that's a perceptive comment. And I think Michael alluded to that in his remarks. I do think we see Los Angeles as weaker than we would have hoped. And the entertainment industry and the strikes last year, I think a lot of people sort of figured out content creators, where else to go to create content that might be cheaper.

Brad Heffern: Yes, hi, everybody. Thanks.

Brad Heffern: Can you just to give you a long term perspective on la <unk>, you've obviously been trading out of it Tom and it's had more than its fair share of issues over the past few years, but there's been some articles floating around about the low number of shoot days other studies, taking a larger share of the movie and TV TV business. So does that give you any incremental concern.

Brad Heffern: Yes, that's a perceptive comment and I think Michael alluded to that in his remarks I do think we see Los Angeles as weaker than we would have hoped and the entertainment industry and the strikes last year I think a lot of people sort of figured out content creators and where else to go to create content that might be cheaper.

Mark Parrell: And I think that is a bit of a drag in that area. I think the film credits are helpful. I also think maybe compared to the other West Coast markets, they just haven't done as good a job creating quality of life, improvements and attractiveness to business. I think Los Angeles has a longer way to go than what you see San Francisco and Seattle doing.

Brad Heffern: And I think that is a bit of a drag in that area. I think the film credits are helpful. I also think maybe compared to the other west coast markets. They just haven't done as good a job creating quality of life.

Brad Heffern: Improvements and attractiveness to business I think Los Angeles has a longer way to go than what you see San Francisco and Seattle doing so.

Mark Parrell: So I do think LA is an area of focus in terms of our capital allocation, I would expect to own less in that market. I do think it's a big market. Prop 13 is a huge benefit to our returns in that market. I do think it's pretty diversified employer base, but it is lagging lately. And I do think a little of that is public policymaking that needs to improve a great deal.

Brad Heffern: I do think L. A as an area of focus in terms of our capital allocation I would expect on less in that market I do think it's a big market prop 13 is a huge benefit to our returns in that market do you think it's pretty diversified employer base, but it is lagging lately and I I.

Brad Heffern: I do think a little of that is public policymaking that needs to needs to improve a great deal.

Unknown Executive: Okay, so we will be available later this afternoon for any follow up questions. I want to thank everyone for your interest in Equity Residential today, and have a good day. Thank you.

Brad Heffern: Yeah.

Speaker Change: Okay. So we will be available later this afternoon for any follow up questions I want to thank you everyone for your interest in equity residential today and have a good day. Thank you.

Unknown Executive: Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time. Everyone.

Speaker Change: Thank you, ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time.

Speaker Change: Every one of them.

Speaker Change: Yeah.