EQR - Earnings call transcript Q2 2018

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Operator

Welcome to the Equity Residential Second Quarter 2018 Earnings Conference Call and Webcast. Today’s presentation is being recorded. And now, I’d like to turn the floor over to Marty McKenna. Please go ahead, sir.

Marty McKenna

Thank you, Catherine. you XXXX us operating thank Residential’s discuss and quarter second results. morning, for to joining Equity Good

and Our to uncertainties. featured federal securities Company and constitute laws. call forward-looking speakers certain here within that and Chief CEO; economic to certain meaning subject today Officer; forward-looking risks untrue with are David because Manelis, Financial obligation these during Please Chief of statements the no Neithercut, us our And of matters as the Operating be Santee discussed may Officer; David supplement subsequent Mark call well. the David statements The over turn become statements our Michael assumes Neithercut. These Parrell, or is events. are update I’ll our advised to now, President conference this that

David Neithercut

Good today’s for Thanks, joining Thank call. everybody. Marty. for you us morning,

marketplace pleased maintained combined setting retention now levels We’re each across markets original our across have levels new of very and tail into attention new Company’s options a for occupancy we day it their a here, elevated highly as up to existing greater the to performance deep our and of resident come occupancy was was you very towards story. customer prospective to to the Because suburban revenue be renewal. extremely to our And and because when strong move to outstanding markets residents our season. and growth Officer, -- from this and supply have walkable demand our Michael by Chief expect recently our our prepared high enabled weaker for urban every ourselves record with we for us delivered and be rental service competitive promoted in living choose housing deliver the had growth, leasing the of end take going high apartment that to to year, Yet same-store in board teams, be the of management for Operating for in going towards continued very expectations. detail we would to lot which With it modest of date a end and reductions relentless operating is residents, continues property primary but resilient lease the Manelis. demand

Michael Manelis

Thank David. you,

leasing, trend we call, the to the product on our supply. elevated similar last for So, the overall the despite discussed remains strong demand the through

position along exceed full X.X%. ability growth continued this to team’s quarter job for growth us with and results to expected increase revenue in expectations Our execute has our to a put revenue year

New guidance York increase. majority San the overall are the Francisco of driving and

For reported XX.X% the second we occupancy. quarter,

while achieved Our expectations. above metrics and renewal, minute the increasing managed levels only team’s in have did turnover Company. again quarter, resident to highest for XX.X% they the history like take new original change were a deliver goal. to X.X% of our in reduce but increases to of our pace we lease our X.X%, our on Not achieved supply renewal increase residents number one three elevated also were on-site been was the these the recognize All the and has a overall satisfaction, our of X.X%. they up Renewing up seen I’d teams.

proud to deliver them. inspiration is to of our remarkable number residents I’m a to net tell reported XX.X%. Their that turnover an the is in us who In here, ever moving are residents new out addition service unit the all within community, I drops to XXX can’t this that to of have another transfers lowest quarter, to being how ability all on-site basis and points the we you second same percent when of you

onto now, markets. the So,

a and XX guidance midpoint occupancy, and parking revenue by to new income the market full-year ability to supply our continued has basis X.X%. for Let’s start Gains market confidence us absorb Boston. increase given with revenue the of this basis-point the to from XX boost points

for XX points points original XX ‘XX. our better than quarter was Boston, QX than basis occupancy XX.X% and expectations which in higher the Our of basis was

of As is year projected quarter. the Boston to are renewal X.X%. achieved to as August up is X.X% strong our trending morning, remains performance this same compared the increases week base in to X.X% X.X% last rents and a second and be with July

and expectations the was operations and XX quarter. at X.X%. quarter are highlights over this on better better of points New disciplined second than basis of the XXXX. market for both increases that for the than Achieved quarter York. to Moving Consistency were XX.X% basis in occupancy XX pricing points renewals expected

York very remains use New and concessions in strategic. limited Our of

July base basis being at for lower Our being week on week XXXX. focused the that and is were approximately X.X% weekly consecutive competitive points. of than increases Xth XX% increased Full-year use basis of stabilized the points in XX assets several which rents XX% last is for but year. have concessions a New confessions the moving second higher August. of week it XXth almost increase a Base same and second by in and guidance quarter the expected remain later for period, year-over-year, are week occupancy on to York past revenue is the the targeted, consecutive points the points renewals form positive with XX.X%, positive our our New pricing basis rents strong up in concessions. remain and effective XXX some only York months, year. We remain X%. to Today, on of basis of of from receive And Achieved demand expected our is is than year-over-year X% in quarter above we applications had net to this X.X% the will softer X.X% basis XX being negative XX

said, the . This out not to woods raise delivery of and New demand positioned being grow us is in the opportunity York us we third quarter rate market leasing both, yet the are well provided strong the disciplined peak the peak and quarter So, pricing York as New occupancy. That for for season.

City are impact in and concentrated Island our date, not to we have Long deliveries a were to these Now, operations. significant seen Brooklyn

a Our New extremely position the but has leasing a and well heading like economic Main in through continues supply, overall headline be period conditions be DC into season, through market performed until our activity. in Washington of Pricing new continues softer York with to supply deliver or power decrease will here positive the minimal said, a per have of end to the going we aided to a team is absorption per that’s of the for either increase being continue see jobs this an level. above That X,XXX units market power. pricing the XXXX. quarter pressured we in year remain XX,XXX to DC almost

expectations for with and X.X% XX Our below quarter. basis XX.X%, in increase which is in growth than points occupancy, of quarter year, XX DC occupancy better the points XX.X% are year-over-year. our higher week base X.X% an QX points was slightly Today, XX second were better last was better DC the basis expectations than revenue by Renewals same than our than is of basis rents XX achieved at up points driven basis original our primarily and expectations, ‘XX. which

on X.X% renewals August. to July for achieve X.X% and expect in increase a We increase

beginning from DC which projection We the our for is X.X%, at increase the year. expectation have XX Washington basis-point revised original of our full-year a revenue for

Moving over to Coast. the West

expected. was but from quarter, through has is of Our not the we basis rate ‘XX and quarter rate XX supply good the On market which remainder basis helped job the ability expect were new for observed news was quarter, expectations. are below strong, Seattle continued pressure supply less grow second The for remains and what year. overall allow averaged we less call, The signs was concentrated in That XX the X.X% our to less to mirrored basis Seattle the last has our second the XX which continued front during in we revenue points our new power we units, experiencing the on in points and Seattle we for one of of absorption year-over-year. expectations. that moderation the than year points occupancy Today, slightly should are second is season. quarter our you which our same leasing less trend than our lower and expected. power were that of XX.X%, results original seeing the through XX.X%, renewal that base is last told X.X% our the pricing continued peak was is to down improvement, in QX portfolio. which pricing any return supply Achieved also submarket, week which typically increases the Seattle XXXX rents modest than Occupancy the than

August X.X% be to increase towards renewal achieved our X.X%. for is and trending expect July We

rent growth revenue XX reflect full-year to Seattle’s We point base have adjusted to lower-than-expected our down basis projection X% growth.

another Francisco. San of outperformance fueled power Pricing by occupancy resulted strong Moving our and demand in gains quarter to original down expectations. versus has

of We in than our points XX.X% have of for remains expected was growth occupancy the the and than is Bay supply. could Francisco new that now be high-end better X.X%, market was for than fueling range. the said the demand quarter, and X.X%. San indicators which better of strong that same-store basis guidance points X.X%, expected. revenue past the the on the our Job it Achieved basis Francisco’s QX in in basis were expect XXX the San growth ‘XX. outperform full-year XX up better and had We we increases which points to absorption aiding XX Area, renewals average really

and XX% Brannan community six is expirations great of The initially than downtown Francisco all at own increase market. XXX developed this products currently and XXX in Our occupancy, the Overall, up. we Francisco new of X.X%. community renewed a we thought. competing of destabilize in be is is in of and expected lease of strength Brannan San and just already limited our XX% in is quarters. June San This the months newly an is fourth earlier of deliveries third our to delivered July downtown the bulk achieved Today, example will with approximately

in we Area our with were of pace XXXX, Peninsula remained NOI, favorable the to steady of supply strong tailwind identical we to of our example fact already will the provide own the is last the same in year-to-date in that Francisco, by the a year. of Another San where XX% Bay We should in strength this the performance. estimate strong market XX% occupied are week that XX.X% Peninsula delivery. which performance decline Today, deliveries

base Our X.X% are year-over-year. up rents

X.X% renewal for at are we achieved Our for project increases X.X% increase July and August.

results, defensive Angeles, Moving a mentioned our in supply move produced against further strategy that position second of growth, had portfolio-wide accounts us that Los almost which We occupancy a not revenue ahead I Coast, West quarter for raise report am to pleased but our increase down to on to only slightly XX% we previous the of calls market. early as elevated to this the the in rates year expectations.

the basis we’ve LA renewal lot occupancy, In quarter asked original XX our of than the quarter, and results. were higher deliveries of higher ‘XX. for past, than in XX.X% basis questions the X.X%. about For points was we impacting our which expectations Achieved second points delays XX quarter the up had a increases been in

operation our have We outlined leasing. when first an also standpoint we focus explained and begin units process on how from

of this delivery shift to Our deliveries. that the timing not of typical recognize been the not the impacted quarters. hard but as that positive time as XX% first the Specific in pressure begin of XX% benefits we still seeing this expected. the as delays in performance consistent our first quantify are the quarter intense X,XXX do It year LA, during in to seeing the shift leasing above-average has had of exact is marks a we half moves we half the was was ‘XX response beyond were we and between manner since over units first an activity to

today XX.X%, than same basis which last lower year. points LA XX week in is occupancy Our the

during in increase pricing gains the Our we base second stronger to power expectations, due and have shift, impact modest supply expect our that projection half and potential revised market release, X.X%. full-year retail renewals in This the increased tenant year of revenue up had second been will as this we the by our onetime disclosed quarter, X.X% points. Based on year-over-year, along the the above X.X% with a increase, rents a for would full-year from to but we August. on the are results basis the pressure original have occupancy, write-off vacancy July in XX X.X% we’ve in both

Moving to County. Orange

we basis quarter and for points Second of lower was due the lower of quarter renewal recovered pressure than pressure lower the were were expectations, quarter year. was County points occupancy we Orange ‘XX. but power XX.X%, results than quarter. was expected. the Occupancy below which same from points expectations pricing to XX pricing basis Achieved basis our XX primarily increases in to and is the lack which moderate occupancy what last Today, X.X%, second in continue which on see than to for XX.X%, has XX that lease-up higher of quarter the both week

year-over-year, for for and are August. are July and Our achieved to on up X.X% up renewals X.X% X.X% base rents trending increases

Given the experienced projection have County adjusted power points revised going to with lack of Orange expectations down basis along we XX pricing year-to-date growth X.X%. full-year our revenue forward,

last produce we second not Orange was our this strongest in as While season portfolio XXXX. San will the And a least, still hoped, County as leasing Diego. in not market robust results of but have this for

were is quarter quarter Diego expectations. anticipated. increases for is achieved was which X.X%, XX.X%, occupancy last we were in with our the week is And than San what than same expectations. Today, basis the for XX.X%, results points exactly year. line Occupancy the which better slightly lower which our was renewal Our XX

still it’s in guidance with expectations. However, our line

is up through peak are San expectation our continue last are to as of see demand growth increases There renewable and In we the year. and full-year rents season, our revenue our no And compared August at products. X.X% for July for week achieved we Diego. halfway expect leasing to for X% base change closing, more strong than we to same Our X.X%.

we absorbed rate at expected greater units New pricing and those of than a rational. being remains is supply

on basis-point our the expectations. our two XX Peak And and York original better behind Orange of track And San market of at basically to the guidance XX County, drove performing of basis is Equity team. A provision. markets, positive basis our slightly Seattle time. within to original of is entire season Diego exhausting rest points Francisco smaller Boston are and exhilarating DC, the sincere XX New continue you to our our and expectations. LA, a majority San ahead points of our expectations. and thank same the midpoint bit be leasing

results efforts are year-to-date beyond Your and appreciated.

focus on Keep experiences is our clearly it residents off. paying up. remarkable Your delivering to relentless you. Thank

Mark Parrell

to minutes expense to revisions and Michael, normalized about the has a take same-store good to to I couple Michael FFO just guidance. talk and Thank our and you, morning. revenue our full-year revision discussed of upward to markets guidance, here and same-store guidance our our want our

by First, X.XX% modestly full-year same-store payroll of expense on-site for expense have lowered growth. expenses, for and This lower we midpoint tax the primarily lower X%. from our same-store expectation of expense driven to property is our growth guidance

of expect expenses have As the we growth two produced X.X%. a of same-store half growth constitute approximately expense in operating our change items big these line the year. don’t XX% We second together expenses. Year-to-date, a expense our of of reminder, rate the in

Now, a I’ll more give color. you bit

our months maintenance that’s from of before. for of the X%, beginning Neithercut payroll in expectation This property of to as personnel. At expenses the to lowered X.X%, upon a to have than us range to first the a compensation on assumed our moment. the rate grow year, for the a payroll, same-store sale asset range range. David six is Also, our tax growth we to XXXX. X% in X.XX% especially of of expectation the through taxes X% in on-site expense expect a pressure discuss and our that property full-year saw continued will growth to the both growth of We of on-site X% down down produce taxes budget from You X.X% our as expected better and appeal significantly in prior our reduction X.XX% well due activity, now that’s

impacted back payroll we pressure, on-site still means has reduction While than year-to-date of change the expense year expenses. growth on-site positively due the growth period it is expense growth been year-to-date XXXX X% estimate has half of payroll will half real reserve wage are than in feeling on but of medical the in by payroll side, any mostly our that a in to second trend. especially that maintenance be the our harder in Year-to-date in been a higher the of year comparable

our normalized our driven portfolio us to our midpoint NOI full-year allow from discussed. I raise a the same-store of our release, strong Michael renewals, expenses of which same-store over the decrease just to revenue X.X% just raised FFO. midpoint our moving the over in from high by guidance X.X% to collectively Now, that went expectation guidance In of same-store to X.XX%. earnings and turnover we X.X%, in low occupancy

primarily to borrowing. picking and activity from share activity. to improved. modest from penny our to $X.XX are intra-period are with David. another per acquisition one normalized our per or guidance is The I’ll share increase impact the the our offset penny All-in-all, of improved, transaction and normalized so FFO NOI These and timing activity turn per same-store FFO disposition in on increase FFO the expense lower, And XXXX slightly side, over the our interest the call we and reinvestment positives to of due and result about by is per our of normalized to narrowing up On spread $X.XX higher transaction its share. same expense, timing increase slightly from $X.XX share that, due partially a revenues our a

David Neithercut

Mark. Thanks,

That quarter in in On with a built Jersey. the occurring was pretty located being dispositions. only property transaction one mid-rise acquisition acquisition second quiet front, XXXX no XXX-unit and New Hoboken,

equal an highly $XXX the a in of recently assumption million press under of acquisitions and of built Also half totaling obviously press properties of last walkable sold the and points. year will fair contract the in noted release, basis for million close-in, in at amount a activity the is XX which first in nearly Denver. revised for million which $XXX several of spread that are includes $XXX of release of half through diligence an the couple four accretive second neighborhoods for have year. activity a we as assets in of acquired two acquisitions amount year, dispositions, Now, in noted process due and the require $XXX Included million, of assets night’s the

family for the our As many jobs to that portfolio-related. growth exit but housing we because was repeatedly, mass think relatively strong will continued income. new markets acquire assets a our We’ve line rebuild opportunities the educated be highly we characteristics as And criteria, soon in we look as critical not attractive a a with carefully to multiple meet of of high watch cost it one rather and of workforce, on that be said our that has and Denver, the brought will recently being market-related that possess high Denver, there there we supply and in in investment to additional been single market. paying

estate address with have detail reducing significant West Side discussed an growth our transaction will include conditions. asset in half quarter the this assets, XXX-a all of reduce is at on only be time properties opportunity at to to disposition tax under New on contract we very with currently This disposition second York close as following does portfolio a to negative activity disposition the impact excess Our more a exposure well the waived represent an and price contingencies an unit. by Manhattan’s and million, our $XXX opportunity a of closing, our for us that at This expiring subject where but exposure West also attractive in real benefits. it closing is this to rates normal to Side City currently expected of to will late as sale

in back XXXX on comments improvement this moment same-store reduce In real to estate our fact, taxes growth points. basis a just the going ago, operating and expenses, portfolio-wide same-store XX will by sale Mark’s expected our

Turning to development.

that now pleased West neighborhood we on $XXX call. deals also were properties recent two our at quarter, the a we expect to More high-quality, to note the on stabilize strong project in most sooner to End tower Boston delivered for will We example to in three demand development that last that expected. XXXX discussed our continued the million. a work on cost in night’s This of started During XXX-unit is across than three is our very be we markets. multifamily quarters release Coast clear West

XX like Proposition a close with I’d on being initiative California overturn the to to just Costa-Hawkins. comments few ballot So, that’s

to of those situation, unaware For many implement you able municipalities in have California control. for of the years rent been

certain November, and to move vacancy Law. to only to on as which two, be built the XXXX; California ballot as However, course be opting control, would is properties for vacancy, do. limitations it rent which Costa-Hawkins, which implement their market properties control on can imposed subject subject actually not limitations, of before be remove jurisdictions are a these of One, which Costa-Hawkins be to the rents upon known decontrol. will it rent result control seeks Preposition must would those allowed XX, to repeal on this in rent all to

joined has groups, the state, and housing EQR our across and and commerce, organizations, public Now, private affordable state trade local groups, numerous veterans minority of chambers Apartment landlords nationally California Association, the many of surface not affordable who housing. fight to recognized because others the on easy isn’t proposal. among this This independent research will supportive be to create an defeat a organizations, coalition

the the only of existing stock more can However, to which the housing, of to rent and on be shortage how made housing, the come the creates of communities. control many build way for impact negative when and has to it the rent bad address truly neighbors, people housing disincentive aware the understand neighborhoods is control

therefore it worst fight to reason not against has a than solutions plain more is There Because the So, build and housing, exacerbates the rental control. stock level a the rental The XX it. there at fight in because build understood rather and shortage the it control the housing could in housing current is that development of headway Proposition costs rent $X.X taken zoning, at to of why it. the a of housing and the And But, at disincentive of add we housing And the that housing. solution action be regulatory address answer we projects, regardless disincentive requirements is is new And have income enact includes one that will this the inclusionary will it areas and nimbyism the to that current and more come to to is basket there to creates possible looking some to work outcome, cost shortage. widely local hard invest address federal of EQR the to that the bad made attempts affordable because problems, the million existing housing is many both a will low simple. of legislature acute. is no continue increasing everywhere a can rent program, to-date. exists addressing and Governor significant shortage out in policy, housing is the that gubernatorial tax where is most candidates credit

across them. is that And needs it our one not the issue and exist. there question rent time may be which solutions again easy, of answer not been we nation that Now, to while control is has no serious do a have housing And time proven addressed. be

will be open happy we now Q&A. the Kathy, So, to call to

Operator

of question Juan will first Sanabria come Our Instructions] Bank America. [Operator with from

Juan Sanabria

markets seeing increase? seeing are if portfolio-wide latest hoping unexpected and And biggest versus just could deceleration, was the you highlight color supply ‘XX. which an expected the XXXX I the maybe for on and are morning. Good if just delta any Hi. you

Michael Manelis

Michael. This is Yes, sure.

XXXX. X,XXX up dropping of what material probably say, moving, not down I York, units. reduction guess, XXXX, market XX,XXX decline the in mean the York. level, that is have would most the go them pronounced when for are rest I across in going XX,XXX down a to at units it’s from New I we markets, as highest see but units New the The slightly, And about units rolled has to of XX,XXX we So, as you

Juan Sanabria

market of latest you the any highlighted ‘XX move of with your there LA prepared into the has from which outside the in numbers, material remarks? ‘XX And been cut

Michael Manelis

LA. change No, material on of between no moving outside saw our what here we

Juan Sanabria

on thank And the market. occupancy? you the color the the lease as by portfolio-wide market, you by providing spot spreads as new for mind Would well renewals

Michael Manelis

Yes.

to any So, that on think and so best single the I of for just the I that one this the quarter lease looking We don’t think said last way I call, I reiterate. is at at just I were want think say -- going these believe I this of it’s our new level. important went to kind results updating full-year on about follows. process. expectations we metric all we tell through our changes process I’m basis, And guidance you of through market revision that assumption a to our when on the the went just full-year as

were points. change, basis rest by track had our was York of Francisco in were New expectations in lease a markets new The Orange on San XXX our XXX by directions. moves either points, So, reduced was increased by County in a both marginal basis points for increased XX basis or either and and Seattle

Juan Sanabria

Okay. the new leases? the you But, provide second quarter for can figures

Michael Manelis

sure. Yes,

X.X% County putting X.X%, X.X%; Seattle X.X%; positive was the or up points; up negative was up X.X%; DC was was New portfolio up in Washington X.X% So, X.X%; Francisco LA as X.X%; Diego up Orange basis XX Boston was basis points; release. negative was we San York up entire San the disclosed XXX

Operator

We’ll Joseph Nick now Citi. with hear from

Nick Joseph

to On need assets NOI many or an own do what you scale? percentage to reentering to reach how of Denver, acceptable

Michael Manelis

a question, Nick. That’s good

assets a billion these we or us XX about look sort critical two mass we’re get around an XX% XX, probably XX, with, allocation, of of X% underwriting, there. X.X at, it we of that NAV That’s sort will. As can way call assets. our appropriate we And of the get think if you

Nick Joseph

Okay.

that reach expect it of three to more is level you years do two a to target? next or cycle the So, over next

Michael Manelis

specific A trade I of what that in of If to will a hard soon about lot just opportunities markets, hard are on what it reallocating trading in of and be -- to that capital. one our timeline there might faster, out opportunities have think, it’s on get Denver. really but we of possible can try here be would think and capital be think there doing are eye we that as sort allocating but appropriately will pressed and we and we I it find put and say. to sort -- other it, be York, out New as

Nick Joseph

you’ve drive with you turnover drive opportunity lower. to internal job frictional further, renewals to are then, a Is an And close it great do you and there done level? think or but

Michael Manelis

play first to are of for the these I think to How we’re of quarter, basis turnover, towards tell say kind were down continue we half than balance where that you, the I for guess, seen post don’t the will go improvement is expectation teams focused this. I think from are the I where more much kind we’re see to would each but I going lowest out just we the see I know. our on the we’ve year. probably I of declines mean, that we that getting post will we there. mean, points XXX going in see results

Operator

Thank you.

ISI. Steve come Our question Sakwa with will from Evercore next

Steve Sakwa

sure David, I you make head wanted just I to correctly.

would X.X to second the opening comments, first in the the you high the you at just imply end I I X.X revenue kind wanted maybe that of think, were said sure, X.X end of given low in you’ve make the done your half, trending expectations. half. growth a towards

fair right now? So, I’m in a you’re deceleration. there’s mean, X.X to kind that range is X.X big assume you’re of to assuming I it not assuming

Michael Manelis

So, is yes. I would Steve, I Michael. this say, guess,

million. in basis the just we complete a up the XX that So, say at best XX communicated there. in is to of that the of worst. lot we’ve our midpoint I release kind X.X% out do result each and move put to portfolio, basis confidence just the we points X.X. And that now, got that $X.X sensitivity range a in want down lot much points really of to that it we a confidence by the And right take analysis just of winds for said, coming revenue the in market doesn’t we have likely I looks

occurring several in coming of the in front have us markets comp third occupancy have a from deliveries quarter. difficult period standpoint pretty We our up peak of an and

it decline to a far XX our So, the going for occupancy down bottom ability And the as occupancy and to not half, which we range, as our second the our basis-point in there which do will see in of range. second couple at rate of in but opposite point, the come in range. there, to would spectrum, half seeing, ways But and that end the higher of X.X, in occupancy end higher, result end turn year. hold retention continued is revenue is to on happening at end the get different that XX.X% a this of basically of the the accelerate the result and demand, we would towards in revenue that growth of improvement are push but bottom

Steve Sakwa

and costs construction you wood, And things then, guys just starting you and one maybe to address But Boston. somebody just many don’t I underwriting or like in how David in guess, that’s maybe that costs. deals? steel the maybe what I new impacting I import for seeing want you’re today projects how know, new and new else other have could address of than sort

David Neithercut

hard had we Steve, as X% our levels. -- it’s underwriting our those than and hard, costs guys guys these kind is of XXXX, particularly even thought because had any anything I have that think tariffs. sort construction costs rental my year. -- of before bidding me, are that steel, to And as for of in more what But track any tariffs construction has that saw at costs, XX%. Well, might increase X% you in of go of with ourselves. expected some seeing, this of as same are across -- Mark we’re not conversations the I up that’s hard though some an growth again markets quickly up results inclusion We has color are they I tell year, this impact just and well. know others expecting least And the we

Mark Parrell

a it, created mean, also that really on a seeing was contractor of already the that exist rapt a room all tell cost but this that adding and a these their uncertainty it risk the I’ll and which of take was pressure And general threat and of our I Yes. indeed, that where developers, lot weren’t on so, the with up and Steve, cost general X% contingency. to pushing real was full tariffs of speak attention willing X%. items, events they contracts Canada What construction subs lot to to the plus to of some point. hearing some the lumber a puts of contractor on developer this just with the are -- large steel on you, before had attending industry tariffs, general

Steve Sakwa

to off months? to or then can you drop So, mean, to to X new -- of to I of fair kind or guess, kind that lead you assume a next it’s supply really expect here say the XX point over just do in I

David Neithercut

said that this. is that some Well, time. there for be we’ve Certainly, we’ve would unaffected product the -- pipeline in by certainly

unaffected are Alan locked Our any investment unwilling anecdotally certainly, deals guys down. equity our when that sort hear for but specifically share contractor in deal sources George, go the all the time of of about that pushed is as forward, that result in But projects we capital are we by aside, of being this. a new time, that this, started capital Boston all looking

starts see the won’t a number going have So, why this impact on I significant forward. no of reason

Operator

John next Our with Green Advisors. comes question Street from Pawlowski

John Pawlowski

versus margin, news there building was on average articles at short-term a apartments. economics, your a there DC. more about provide XXXK in There has of was traditional type now focus that been you some Apartments if if hotel could a out rents, will CapEx be lodging reserve the I pop-up that XXX% wondering

Mark Parrell

nine rent But our some called soon get what experienced deal for have from be, over this are don’t thresholds. I a XX entity with they down We a would have John. base units These a WhyHotel are we as be guys. in it apartment will that months property as delivered. to cut compared chasing well where that them participation

very some it’s great units vacant opportunity been period. income very nine-month with. deliver work with, would a We they’ve in easy to compatible that think So, that to to work otherwise remain over vacant

Michael Manelis

staffing John, all the providing part. that have. so the concerns any to There our on They are hotel they providing they their no speak, is furnishing residents, to provide units. -- of capital are additional address And And goods. they the are

isn’t us. like there a So, impact on cost effectively

John Pawlowski

stabilized share Can a Okay. you projection? yield

Mark Parrell

I beg your pardon?

John Pawlowski

yield NOI Could you projection share stabilized the development? on a

Mark Parrell

that We deal will On mid-Xs. in stabilize that XXXK? particular property, the think

John Pawlowski

to And sorry, Denver I if -- then, turning back cut off there. you

Michael Manelis

No.

go to will lease be Just projection is part hotel David’s up, the away. a residential clear, strictly apartment execution… When is

David Neithercut

the in That’s just will a some of product. that return apartment stabilized existence months forward WhyHotel income calculation. provide of on advance The XX fully the

John Pawlowski

Okay.

in Turning your I back underwriting wasn’t when that obviously, markets? ranked it growth how are portfolio, when that market you you existing to but Denver, are long-term underwriting existing against end again, is NOI market, know, versus Denver and exit, market your Denver

David Neithercut

will will be strong delivered. in that operate. year in supply current the most performer new think market in should the the we and Well, currently that supply being that’s in particularly and do which XXXX We Denver perform of in the half considerably next because -- not it reduce upper believe probably likely of we

John Pawlowski

the $X.X funds to Denver? source will -- the sorry if other environment, To grow one fund billion, what current will will other $X.X funds get last I’m I may. get of $XXX or source billion, what be to to -- markets of to million, markets one be And

David Neithercut

guess, just relative it’s trade a is possible process. of all this could. I Well, them Again,

not possible continue off, think York but subject XXX-a a the look to requirement. to New I are tax burn at will it’s other that’s we assets that

opportunity across sold So, time, think on basis, will a the be time. and at our and what from it time our depend out of markets regular on to all as have just best all we of we properties the at is of we look

Operator

We continue with Rich Hill on Morgan to will Stanley.

Rich Hill

-- in it’s market lack New moment. I’m a Talking case we like guess, the macro off years, it it about Is lot demand a than to of bit been seems taken New And thinking couple same-store York But, micro. you nearly revenue reacceleration other what trying more table. the worst in not while the term, your fair One, Obviously, maybe new some for view plus has question future, revenue a better optimistic state, of were York zero you basis-point of see to to going this And for steady growth have given are versus to of than the I less previously. is revenue as just of be technicals? about fear? muddling demand I’m XX past is a And guess, just a and the are like, up little range? a in markets? that the this sort and the more the next then about the we the So, scenario to York growth, expecting supply is City it versus over on we X% sort X% supply as get getting seen back are ebbs not say along technicals. bad or more if supply that I to New

Michael Manelis

X% I ‘XX way, neighborhood to start to described I may we something and you not be to we by Michael. a suggest X.X%, given they modest see just submarket about going date ‘XX I’m speak in will in we if it like that to as pricing normal to emerge. position we you market will get but are think by of a more happen And tell in too what back rational see have going that guess not sure to that. that to specifically the some seem that’s for to growth, into absorb ability return. units start this to immediately submarket, guess, be neighborhood, I’d clearly are ‘XX, you, to just momentum going think but the is and but that start this So, power where I or I’d I in I’m the trajectory

Rich Hill

topline, headwind. a you to just off have this, back then, was the I back micro if just that It move or basis looks correctly? sorry, topline of out the I’m of question. little that And XX LA like am points been envelop about thinking it in a might the like a looks mentioned retail bit maybe but

Mark Parrell

Right.

So, line for reversed. about single -- had was we in Los straight that rent we we vacated, Angeles, one had retail $XXX,XXX two asset centers

effect portfolio. have I will for it the on entire you the year, to on say of it the the had very effect reported minimal would end now, the a no by portfolio. So, we right X.X And rounding entire

we the much. might was LA, for there it. but the the Los XX impact that’s For By negative, mentioned of Angeles, footnoted Michael why and his it not be end as footnote, in script you basis-point saw an a year,

Operator

question next Markets. Our Kim Capital comes with BMO from John

John Kim

you Just this on given markets, the occurring see Was that tough to unexpected do And retail in vacancy? retail environment? this vacancy. follow other up an just

Michael Manelis

Sure.

total our income of X% about from rental is context, give to Just retail.

very mostly We for residents retail coffee and amenity so are have a tenants. shops in very an like portfolio. as our our common it buildings, run small We

-- no, lumpy, don’t event. uncommon, see this repeating -- wouldn’t a we it’s it’s is I as So, this

John Kim

And of to you Couple being questions new one of on do was what makes expect in in arguments market this Denver. this you characteristic? One, supply, and growth comfortable acquisitions? develop two, or the about of this about just overcoming market,

David Neithercut

reenter currently will acquisitions. We that through market

will that develop is consider development, venture that certainly if capacity got way themselves, that. joint believe will is they there into we We the to opportunities there, ourselves business consider certainly we in the and appropriate, development some And present the XXXXs. back we

now. time. market, coming and And for if not to also quite we respect a this would this market. on related last And the we that’s happening was so, But did the was to the with have the supply thought that when as I’ve but said road, some market when time and it portfolio we marketplace. saw a an the that -- knew related for supply when we’ve that decided exit, Just us we new would said exit sold likely and new what’s right we opportunities exactly reenter it impact represent down

very revenue will perform great get well, said new year abate. growth, think robust begin begin expecting to second very not -- we’re buying that to the we Denver. a a good But, we’re terribly we or So, that XXXX get as first in see as at maybe and basis previously, assets, into I supply at it we in we

Operator

Lewis to Michael We��ll continue SunTrust. on with

Michael Lewis

from out causing guys your in you out to turnover. your been the think was factor about a that causing it’s markets that it or what it’s more that and wind you sounds against some be wondering, just talked lot of is to You front? help or rightly if like the a back bit is I other your able to to there of turnover maybe maybe have people control SALT continue ownership you you Maybe guys move is -- due that’s the low is anything on achieve. macro either turn at deduction on to

Michael Manelis

of lot reasons why I is is think, a there this reduction occurring.

later, children Orange on I having home us has declined single outside to onsite up down. But, rushing of deferring of marrying this think, County. buying the quarter in last is not folks later, that’s efforts out I our homes. mean, of you’ve market icing the the buy of move every cake one brining decisions, our kind just people life got is momentum in

on that other residents helping are clearly but to there factors as clearly I is is this So, think contributing well. this renewing focus our I relentless our think, decline,

Michael Lewis

Have Maybe demographics homeownership? are question seen the The B move oldest that an there are to anything a toward this movement, part millennials the and margin increased you XX year. maybe interesting. with next on

Michael Manelis

No.

David Neithercut

significantly percentage longer, seen that family operate to exactly costs such to the expect we got family for single we’ve move-outs we would happening. residents of that’s noted, reduce. And buy our as homes very homeownerships of remain expensive what’s mean, have single I in that markets our renters and

Michael Lewis

Thanks.

the year in X.X%. of the and and was You that the growth year-over-year before had X.X%, was that actually four same-store past this quarters, guidance each quarter the revenue of X.X% midpoint

at or or you now higher kind are your since growth given of kind supply a is it do going as -- cost, steady of looks now to where talking range. and right is this it’s in but XXXX, going little to kind ‘XX I sure a revenue steadiness as of be this is XXXX, kind And I’m this So, about ease market. really balanced like do think bit. mean, the far lower maybe of think than you we

Mark Parrell

you’ll We’ve the at that. conclusion of own we And into see go with sort this come this can’t them. time. have to at XXXX your least growth facts revenue up juncture, We for given you all to

Operator

question Our Rich from comes Mizuho Securities. next with Anderson

Rich Anderson

are the the a eventually this York despite but to think for again? great, there’s that isn’t Denver, great City buy which the buy sale. get you be now, wondering maybe will got market it even fact can So, Do approaching extrapolated though you $XXX the that million point you to way where asset interesting. isn’t is metro opportunity at any if area, is And I’m New to great

David Neithercut

some to what’s growth of market this We look rotate think York XXX-a markets. another process there Rich, thought generally capital trade. market. from and a on is And there, the and a are I Well, in New you is, trading one into as that happening at that Right? we lower and burn-off, sense to result assets it of other these expectation as low in had some for tax -- we’ve the as may capital into the make growth the some are

the want happened we the do I past Now, that to acquired area. quarter, metropolitan asset to note it York be in New this

rotating So, into New based selling though York York as were of asset some some as into we another assets are well at Denver as not that time. just or this York. it’s New exiting We capital New out

Rich Anderson

dig decline experienced having years, guidance. are the know your where seeing we last out X.X cycles other you perspective, feel this bottom least versus bottom way But history? curious we deliveries guidance? your terms your maybe particularly I at playing a the do situation appreciate, of XXXX to year, think other right me in when many, like about better the ask the close just consider could at bit XXXX differently. give But nearing that thinking you current the new it’s In can it’s I’m kind stand And is in for turning words, to year. do I not in from many you in this maybe guidance, recent this getting multifamily I’m with are that year. for of in I’m or regard going is, Are going not you you it can if markets? to tight then, how now you’re question give And of to to going I not little you for you revenue that. look you,

David Neithercut

on Well, influence reasons, pricing reduction new a New that York talked important There things result issues some this there a XXXX. about as sorts touch is of power and in there. will of XXXX think all XXXX. off earlier, Michael coming supply discussed to supply. a that just did And I tariffs. costs the as what expected in improved comments, But, the for and performance to fall in of in you significant among the is soon and as supply of questions, the one check, uncertainty construction of to if in, we new of costs sort Mark’s the expecting tariffs, of you the will, remain of other now result increase in are

portfolio. the it are on across reasonably at look supply where being a same the check, DC markets some So, beginning are we general, basis there in In just XXXX. like we expecting but year-over-year about

housing reason, residents whatever remain rental here. external are of will the that fundamentals we we to of our or housing the expectation any will that think sort and sort So, sort current geopolitical sort the of other supply-demand be of shocks, and the family expect demand single the or improve with opt from in for absent shocks seeing to will seeing afford retention we economic are and that dynamics we certainly unable

Operator

Baird. We’ll go Babin Drew with to

Drew Babin

are are would A growth both markets that of exciting most employment the the on wage standpoint, which a which I pick-ups standpoint this stage kind the you supply. picture, question, growth adjusted of are guess, markets basis taking do kind you strongest most I from year? the feel an a out lots sluggish questions and on of seeing of demand, the see seasonally supply you guess of which at and market in

David Neithercut

I to And standpoint, me markets it laid I still are out would expectations the supply ability And just and you while, that for has to momentum San Well, think way market be our portfolio, the said been own we’ve is supply, velocity occurring. that of and Orange Seattle great that see. can just kind and those of don’t because which the have But market indicators sluggish having the just the great our I Francisco kind at of a the to the place diverse has From context. meeting kind job be to we of consecutively those that through think about got to now at to the put short-term absorb stuff the coming that markets. we tops strength. County. I for of which need, supply the not of of showing two We found And market those the the need this impact -- rate with ability know market. how that to from these without gave they mean, to you the both which I look to now, that’s two our we’ve we examples, of me haven’t aren’t originally, only lease-up think markets, own list supply into I in a of tells thinking equilibrium Peninsula for work most raise clearly keep right the two a kind

Drew Babin

that’s differently, there has markets. the Bay in seeing but or where or said you are like growth way It are any Area reaccelerate employment occurred markets a other been in accelerate surprising? growth guess, that I in sounds wage

Michael Manelis

and of think original I kind growth check mean, I so. the what growth within of are from. is job job they were expectations I the coming No, don’t where think all from

Drew Babin

pricing a little there on in kind been the power has you a seeing are waterfront near a any just bit New and know New of from And the term the of whether Jersey, Can about then, there, of there? Hudson that you performance glimpse I about talk supply York concessions talk Manhattan bit properties. segmenting little but and area?

David Neithercut

of I X.X% So, growth. mean, targeted, if they to just nominal, strategic all revenue New waterfront of basis, the doing that I a posting is from York on the concessions in out are the kind submarkets into Hudson a have put of of mean it’s marketing they kind they no concession. best are are because standpoint. perspective we year-to-date area, there that

see point, the concessionary would the from what So, guess, been absorption mean, I our and come slower say of ability occupancy strong. need the will we maintain kind supply and the has a looks I think, I at there do said, I trajectory environment. QX, I But, to like of to in this raise good. rates periods, we

Drew Babin

yield could as on talk West to made hoping a Boston. classify in expectations me. if And acquisitions kind and for I spread this the I about guess more End stabilized you’ve make tower going one through the you some are And duration was of of that of that in the of different what enough but most is and risk that properties, guess, Boston I you’ve do obviously is year. kind newer market some that’s acquiring. Boston, spread case? I much than guess, to compensate in developments Denver spread, been of you specifically recent further the your feel a development the that

Michael Manelis

and that’s today, yield to in probably Boston will that current high-X asset likely with with six-handle. at we on low the will think cap the Well, stabilize a that yield terrific where rate. in marketplace think We a somewhere that would deal maybe trade be our mid-Xs a rents

and of great the think appropriately perfect operate getting worth Cambridge. on try gone long-term and years for long we things it’s is be And this asset going tears sweat into for lot to for compensated us and get and think market. own Boston a blood, Boston deal. exciting There we of time. that’s we’re XX So, a will is a that a in Plus, Mark, in

Operator

has with Guinee John question. Stifel our next

John Guinee

unit cost about a last so only for was so, cost End soft but imply to a off have development that than looks And hard tower, XX,XXX the unit? a unit Does less a the question. XX,XX page what spent that about XX and on of unit if Focusing is get your all-in XXX,XXX unit? It per like far. development up land West you’re and cost XXX,XXX total you building per

Mark Parrell

don’t years that the specificity about so. basis built million essentially -- We We own I is property. land that tower of have -- that level we’ve in land property here. had base for that a being $XX a of or on which XX had

that So, represents of done. lot a what we’ve

some demolition incurring well incurred architectural and land as and engineering been terms existing demolition today, that’s of in and cost and all sort of today some that costs We’re we’ve basis as that the those in garage, all there that’s things. of really costs the capitalized

not So, in great there the a have at there is deal of hard cost that of yet and breakdown finger transaction. don’t I tips

John Guinee

Okay.

not deals? Looking You about at about X.X ‘XX your at stabilized quarter assets are at annualized on stabilize million, is the What X.X yield it will stabilized Seattle completed, Brannan cost. and think now on second average. occupied like number two XXX you not your these looks but do completed XXX an three XX%

Mark Parrell

about the at And at a X, deal we the those are X.X. three Cascade the Brannan, stabilize about X.X, X, deal to deals. Helios about and at Cascade XXX deal the a went expect high

John Guinee

a long way… That’s

Mark Parrell

But particular the use were numbers when at moment. you properties release, the that in that’s wherever these

time going numbers. and looking is these at this in So, back

number So, the having to going million to not do, not get going that’s make a sense. That’s correct to up, to ramping right is way the not this thing that’s math. as any that’s $X

John Guinee

quarter X.X can on the But mid-Xs stabilized? number up the second into ramp

Mark Parrell

today, whatever them those But Right? we definition. transactions, yields and we just you lease by I to and grow properties on guess are yields stabilized. that receiving as I the get occupy told will those Well,

John Guinee

the as XXX-a yield rate asset the how let’s burn I Y, guess the your your What’s And an impact example, XXX the X as erosion For is post is tax example. last -- off. there maybe Manhattan burn-off? cap say abatements question on yield is buyers trailing and tax then, the stabilized rate burn-off on using those west cap much

Mark Parrell

six bottom property on in as occurs the off on But as most deals -- will the that one rate depends on because change -- as those and three Well, is in off. Xs negatively it what will the not underwriting somewhere well. a impacted valuation impacted will the on and tax as And and is from likely. buildings by those roll that the the be is growth will or trade those rate to reduce The five line line depending what fully also on top two years basis ultimately roll negatively on cap cap between that, income now.

John Guinee

burn what’s you your -- over if your that to or top number the period, us? you impossible give if the So, hold erosion is constant, to line tax hold off yield

Mark Parrell

by asset asset an It’s determination.

that period. that to haven’t XXX-a burn-off subject We have are begun yet assets the

We schedules middle some and in others. that have assets assets assets different have are that than we are and are done in the

So, asset custom by really, a calculation, it’s kind of asset.

Operator

Alexander Goldfarb please with ahead. Sandler go O’Neill,

Alexander Goldfarb

quick I’ll quick. ones, Just three really go so just

how Denver defining you portfolio? Cherry Denver, are like sort or your broadly on David. Are you of Creek just area guys thinking MSA target, First

David Neithercut

the have in are Cherry of area, under Well, Creek. sort uptown, we not assets downtown you contract the in will, two now if both

So, we contract walkable today but look our downtown, Cherry We the have in would Cherry Creek Creek. for we’ve locations. will highly certainly continue of to are two assets consider not that sort in

Alexander Goldfarb

proper? Okay. MSA, more be But, broader are in looking you to Denver the want greater or you really

David Neithercut

again, for sort higher density, Well, walkable properties. looking we’re of

be properties but in got walk that -- high will I’d have that have a walkability by distant got at to it that suburbs would or probably scores. not So, certainly look -- guess, we I seems that we transportation components,

Alexander Goldfarb

increased have what that decreased, guidance, you acquisition IRRs then, and are you are looking you what disposition spread And for both your How acquisitions, are has and on the Okay. the has that has both selling on buying? disposition impacted narrowed. between

David Neithercut

Well, those IRRs. spreads don’t impact

yield question. between I sure understand not first year I’m So, comparison the what selling. buying the just we’re That’s what and we’re

what on IRRs plus selling we we and we the very Xs the in in we’re XX% So, are buying have good, think today’s by buying probably think what we’re marketplace, generally. large. been And

Alexander Goldfarb

guess I rephrase I it. if So, could

on that are earnings, viewing you EQR’s as that profile of the assets are narrow? the growth selling, decreasing trading versus narrowing, to that growth difference As what spread what that or EQR, are you the that to there to buying of the is impact view is if you you based is no spread are that far benefit do you

David Neithercut

lower picking appropriately. investing are certainly, long-term yields, Again, our be have up higher I or mean, the capital it yields as buying is believe narrow to you’re I’m strategically as benefit that spread possible right, we and question. to strategically sorry, selling you not I’m be in provided -- positive,

if that going So, to kind be core York would light we positive, it it’s positive. spread as to selling we in not want highly and can and to will not our own be assets. narrow as be possible as But that are long-term, and the markets invest in the assets reinvesting we benefit business if New which be unlikely of spread the Company for of

Alexander Goldfarb

or that, appreciate there what and that that is really that with, finally, people view a comments your of sense just market cause your you From impacts there damage the is speak on the just and removed? ground the if that on communities local vacancy decontrol everyone aren’t then, the how that Costa-Hawkins. And is aware could people a understand

David Neithercut

story. Look, Alex, the will think are I feelings not There to who the some this, people’s of over about side groups all listen board. are that

important to just will understand that in believe rents that populace today the the are sort affordable unable market of the You housing to it’s of make what impact long-term incredibly and unwilling or to be.

and while that initially the is existing they of impact is favor in stock belief about what long-term people all rent matter. such. board affordable But, all, control to housing one on the on the the the the not that will Our negative and when realize perhaps over and on generally when the describes impact housing, people stock -- generally But of are asked are it’s housing, at right of single-family do. they thing housing opinions valuations have

Operator

Tayo Jefferies. Our next Okusanya question with comes from

Tayo Okusanya

of tax couple been change, kind high now that for disadvantage of this it’s your first in that states zero about bid key demand seeing we that nothing was I had is a was big all -- have for of effect there reform concern of just curious, kind the or When issue, on around the of just you are impact assets taxes. that on local zero have kind many markets? the for impacting demand just you or your months,

David Neithercut

expenditures, short-term, the seen the we in business hiring wages has as law the in we’ve been positive taking result. very and think, reaction them place the impact communities, any in And with change. capital increase see the I positive, based now very to a upon tax

generally very So, has positive. short-term impact very been

Tayo Okusanya

about negative term no? impact concern longer though, Any or any

David Neithercut

be to on discussed of burden as limitations these lot questions a the the some tax continue on tax people are our very extremely centers But two burdened -- to prospering and state there impact result now call, and lots think state increased on SALT, happens. California the tax economic of on on I are right new high all things, tax But to result a as states. important higher think be well what mean York extremely I we things see the states, Well, as of of a these going the sort local and about and New -- will well. expenses therefore pretty in country, last different the seem some seem communities of we tax these continue And of I have to of bill. of be including

Operator

We’ll go RBC Markets. with to Capital Golladay Wes

Wes Golladay

want to any get a outlook doing on back we just near-term? this Equity owners few to a a conversely, Do as apartments go have on contemplated Residential their action. and Could development will impact over then, bigger condo, And the out, contraction think picture that the Prop maybe to XX. go have a supply. starts I you convert years some a such condo, to

David Neithercut

just yet. reaction any Well, to we’ve this specific kind of not contemplated

stock could many happens that which would it product I is limitation from that mostly the control built. negative. -- year -- that me whatever into have it is today impacted the new existing concerns costs. I remove to rental rent think there there to rent the take housing With one sale with we’re So, construction, be of a some on seems and is as what be obviously for fact it stock about by think It respect turn control, stock, that’s will to and

any product be as all remains So, today, likely rent would the But the in built by negatively seen. repeal of that of result changes Costa-Hawkins. a not control to impacted be

Wes Golladay

can to the a costs, with in going call you remind a city? of what the it high-rise steel the maybe is Okay. then, major us of And allocation construction cost overall

David Neithercut

Boston property suggesting XX% development guys the greater our total priced today we what project. about that about represents cost did of would cost than the be when in where deal, steel On my are Yes. of the our X% was of

Operator

questions, additional I And the... will no turn with

David Neithercut

an which That’s cost. a is sorry. total cost, I’m X% on of effect X%

is is X% -- -- the cost. it’s steel total XX So, of about

Okay.

Residential, we’re what an with in This thank on So, enterprise to become. with public company Equity a XXth company pleased of August the -- really value XXXX back knew Who of our as XX,XXX-unit $XXX the we’re you, anniversary million would Catherine. that, our celebrate summer XXth. apartment

built and of both support the Trustees, enduring community past hardworking have so Board our are over grateful culture. present, this thousands many for and this We investment in dedication for for of extremely its the of time that very of professionals many that and company special

thanks many best you we’ll wishes summer, all to and all, for to see So, you enjoyable you an September. in

Operator

conference. Ladies Thank does for your again, conclude you again and that Thank gentlemen, today’s you. participation. all

You may disconnect. now

Equity Residential (EQR) 25 Jul 182018 Q2 Earnings call transcript