EQR - Earnings call transcript Q3 2018

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Operator

Good day, and welcome to the Equity Residential 3Q Earnings Conference Call. At this time, I'd like to turn the conference over to Mr. Marty McKenna. Please go ahead, sir.

Marty McKenna

Thank you, Jonathan. you XXXX us operating thank Residential's discuss and quarter third results. morning, for to joining Equity Good

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

David Neithercut

everyone. and for call. Marty, for today's morning, you, us good joining Thanks Thank

now earnings last to today. jobs season board leasing proud of teams management detail most across pleased living As and seeing X.X%, relentless our each go a of drivers, call top our and each across markets couple attention a greater continued they to customers' by guidance primary the late rates, across this and into the markets. level July. very recent our housing ask earnings of outstanding result renewal we experience property growth new I'll in to Chief range on same outstanding two very of of one combined mirror, of with the on retention provided the the occupancy, are is reported levels be what at across the year with demand deliver now service could levels equity delivery for not our strong our Officer, of for Achieving Operating Manelis, making rental despite residents. for is our These Michael resident the store view high the in supply to the the elevated more We all factors setting every day in country the and release of growth maintain to full we’re teams. record we every remarkable with primary expect which do, very night’s rear strong we of revenue

Michael Manelis

David. Okay. Thank you,

So shout to let with being me out onsite a our huge teams.

more highlight the 'XX as range. explorations David quarter will said, is like XXXX turnover in the same roughly renewals, of XX,XXX We of X.X% quarter, just also the with we the busiest the maintaining reported XXX the the which the on transactions The at along residents to now increase with would and focus entire of occupancy of represents new third our reported delivered our This, previous team's a I completed third over which XX.X% us turnover the increase growth taking of revenue The versus X.X%, With is be X.X% growth over in each quarter of third gives of for third our quarter. history quarter to on experiences our confidence place. with period top quarter that company. the remarkable just achieved third year's our 'XX the activity delivered renewal quarter in leases full-year quarter outstanding one lowest number and third our revenue over leases has during performance on just period. relentless residents and delivering renewed new XX.X%, a third for that results the signed. X.X%,

an online quarter, completed average by remarkable important X, we our and increased in During are and scores on high Service the that delivering customer our out with focused teams and Bottom with platforms came off. leasing in both the to X.X the review service we our been most of far Google experiences third prospects. year-to-date, is have scores. also Both efforts resident these their quarter, and all-time recorded rating achieved of line paying of Yahoo. have surveys satisfaction third highest reputation related are

to like move discussed the I specific Before commentary, quarter market we continued. to by start last would trends overall I that saying has

rate events Our the average life renewal result resident like children, trends our years, macro grow, differing marriage, X.X of tenure, continues to exceptional buying change currently millennial at as and a process and of homes. service

of and in absorption growth the market job our good aided the by fueled record of elevated levels in has unemployment on-demand For low supply.

happened expectations on So of to the which the X.X% slightly second let's replacement October you we at Full-year with the strong in and head call, is majority above with stronger NOI. quarter new delivered supply into time core, performance with growth, and increases. urban due has XXXX that of went growth head our the most our the same This renewal expectations start of shared continued to was revenue Boston. primarily

X.X% for XX.X%, like over next market. new lease and negative the assumptions of to which be core revised increases will year, include continue on should modest renewal Deliveries bring occupancy to at urban power X.X%. XXXX a Our achieve the the change pricing

to higher Moving same expectation store basis shared with for achieving high our to on than last the outperformance is our year improved full current our This end York, revenue XX contributor has large points. the This New overall XX us basis of you expectations a revenue guidance. is to growth call. points we company's

below for is achieved year negative New and Our X.X% remains at targeted lease the X%. occupancy expectations both in and new include throughout year. assumptions Concession XX.X%, change, York last portfolio increases a of used our all renewal and year well full extremely

to total quarter third Brooklyn concessions less will where we $XXX,XXX XXXX XX% quarter New and decline 'XX only seen impact City to issued to XXX,XXX third a applications have in resulted more our in we This expected. deliveries significantly the operations. Long in will XXXX. with The to continue lower date being in to not than moving York. Island thanXX% had be the than of a significant concessions concentrated the compared of be in in During quarter, deliveries our as

and remains here their last have seasonal in strong In of York fact, normal started the our they sitting base yet decline. October not rents today in New week

As there report. to news not of Positive is the conditions overall to market pricing supply, absorption much about continued the to but very new we aid power. DC, economic little think continues demonstrate

growth. no expectations have change We to our of revenue X.X% full-year

and Our assumptions year just mark increase include XXXX X.X, over full of achieved lease expected. new XX,XXX another renewal elevated X.X%. change supply negative year will units occupancy XX.X%, our at of of an with

line which Coast, deliver in Moving to the is over Seattle the is growth we revenue issued with guidance expected in X% the for July. West full to year,

expected year lease for slightly year a change, Our assumptions achieved negative of Seattle over at include renewal full XX.X, just to occupancy supply X,XXX next Seattle is X.X X.X%. and units. increase to new increases

the some our As should as where NOI. of a have CBD in the our of where concentration experience relief shift the we XXXX XX% submarket, Bellevue NOI approximately Redmond to supply XX% of have we

calls, the a to Francisco much the our On market the Not changed. San the previous upward of contributor being outperformance has mentioned I of revenue revision guidance.

call. X.X%, to year with We which July our growth consistent revenue is be expect full

and XX% Our X.X% full positive occupancy, a change, San for year lease new include Francisco achieved assumptions renewal increase. X.X%

space. units of continued daily on XX% XXXX in XXXX. for and Long Area There in the still back Looking Office market. unclear move San delivery Bay with XX support East the expansion that will have fundamentals over in to all to The positive sort our companies deliveries expected like tech be Bay coming the units Francisco considerably the announcements City this at X,XXX increase in and impact to vacancies Oakland surpass be, by in set of exactly of of the this is to submarkets. it this At concentrated continued will online. this and about the IPOs Oakland Manhattan, to market, situation what continues although track year point, the on grow, highlighting overall the was Island X,XXX are high companies to should XX from is lower, fewer

basis be guidance. from is to expect revenue points Los down July to our we Moving growth which up Angeles, X.X%, XX full-year

to has the market spread full-year huge XXXX. in showing X,XXX XXXX that impact units now said, out these over assumptions tend It We of our has total in is a That expected changed over to deliveries it when we occupancy, units period into combined into is the which not just XX,XXX XX,XXX renewal over pushed has new issues, XX.X% Remember, X,XXX two direct a some new Construction this are feel fashion shortage change. likely and from supplies delivered year Our and to we XXXX we assets. labor concentrated region. geographical the competition XXXX. in being to units achieved XXXX being in units see from pushed and continues increase X.X% XXXX. have the will X.X% lease face completed

supply to For should absorption. first the Fernando a market little will away. XXXX, the overall will Regardless, Valley aid strong which L.A. for time our San supply very new is portfolio on the demonstrate West that in direct example, L.A. have while, new in our impact which portfolio, overall many but continue miles exposure have to demand, in continues to

full-year basis for L.A. revenue our growth second increased Moving X.X%. our for the points to This expectation XX has modestly year. with Orange is market revenue tied County, highest to

X,XXX for about lease occupancy change. XXX units X.X% XX%, is have at just new achieved last over renewal fewer of least, not expected. units And but San assumptions full-year increases at Our X.X% outlook and XXXX deliveries Diego.

full-year be This highest year. market our revenue at remain growth will expectations Our revenue the X%. unchanged for

XX.X%, about over XXX X.X% expected. of full-year deliveries at for assumptions have space. lease Our and at X.X%, achieved outlook fewer XXXX increases is X,XXX occupancy units units renewal new just

some now, with color close me So XXXX. on let

the the completed issuing approaches teams. XXXX do we specific guidance: point, guidance one, management have share is and market our and some other I I'd by thoughts on property our not market guidance approach completed onsite begin, our this numbers preliminary at will leadership management To the the top-down review be of general performance. and that sharing is and leaders, two by are we nor senior bottom-up creating any process to a level, different revenue at want that While our

rates will better similar in anticipate and supply, in very methods methods, that and our both we increases next new employment, of Today, occupancies lease slightly the both early We are or posture occupancy. and renewal consider stages both very be year. of achieved terms renewals, and current

improvements the markets. preliminary turn We would be and better we the to D.C. similar likely power continues very slightly in To over XXXX. modest in California expectations moving will our results deliver to that from new many York, of market, be pricing Parrell. any Seattle and bucket With East should change lease likely that, impact grow I our to say may some expect propositions, same. see better, to in as also will our be New Boston's to today, Coast, our be most track call about And less. the will to to Mark President, on excluding

Mark Parrell

Thank you, Michael.

had early We As Denver of this so a quarter market we busy XXXX. $XXX last quarter market, quarter we third the cost that mentioned to at two did investment the reenter side. we a by on that total exiting planned after We expected, in assets million. acquiring

market older we surface-parked garden, you and left As that portfolio primarily a portfolio recall, had because may a call. not with suburban a we market products exit, that was

growth over live, with extended to compared life creation wants an demographic and family safe jobs local cohort. of long-term our prices a than on excellent XX matter We many with same strong this well Denver, can in returns. target coastal attributes of millennial long-term in and by our single our play market incomes, history are high our basis see evidenced produce Denver in markets returns and rent work on to locations as as XX will the a we the continue have to higher kept a we see many such and quality year-old the prices timeframe, higher comes as growth all absolute and in And that as to fiscally think right sound government. that age We lead of high-paying eye population along as where relative strong believe market of home and to the a that

unit. So uptown near The asset was specifics the with high-rise a Denver. $XXX XXXX, score. was in some XX acquired million, is assets which completed a for the for in walk is downtown $XXX,XXX a neighborhood in property and One about

rate in discount a purchased believe and replacement at it cap cost. a expect X.X% we year modest We one to

year expect a was rate one at is and and property the built a same Denver acquired property we cost. in uptown purchased $XXX,XXX cap in X.X% a other to XX replacement modest $XXX also The mid-rise The for or million has unit, it score, located about discount believe in neighborhood. walk a was XXXX, we

It's asset $XXX,XXX complements in walk the a as portfolio. per XXXX, acquired Boston $XXX neighborhood about south score built million that or XX in our also unit. end in Boston for was high-rise We and current well located

had X% cap one. we rate, And we good cap funded a it low expect asset sale of on was of a is property New rate We We year York, a relatively the $XXX while West $XXX,XXX trade at about as or acknowledge disposition it in feel a a as This of proceeds program. unit. -- an used of using the from reduce estate that side our the X.X%. sold quick to earned for unlevered Upper period. for note IRR it million Manhattan concentration per is whole X.X% yield outsize the was A in in XXX-a York. felt increases that significant burn-off strategy We tax in a over property side This significant our and our five our in submarket Upper have on and tax year on West to period future. real abatement the concentration prudent the exposure New

performer, we just an continue York excellent by long-term IRR on We asset market that believe the as sold. the return to the evidenced New is

York can as buy expect us New and You to present in themselves. build opportunities

As continue total eye with to elsewhere always, flow portfolio review both and in to long-term New we our an return, maximizing cash our our including growth. York will

behalf for conclude made every you safely also to advantage allocation investors, the a leader, to Equity forward January right through of opportunities as all credit our entire Equity remarkable I you've you taking look all our member. On the navigating know, career Before of board for David, and years, current improve leadership thank or I our after Neithercut, day being and and and wisdom our Board your even of I at have team, continue of is great remarks, way. always in and the you to retiring effort employees, Archdome, prices, thank work you, Residential friend a and Residential. and XX-year time build me the mentoring over the David integrity past, of decision contribute Equity X, us more our in it nation person shoals for operations spent capital was whether like the the your you to as and right my

Equity, next well EQR's And ride the Officer. life. chapter now, over You've and of at had the you I'll a call your Bob great we Financial turn wish in to Garechana, new Chief

Bob Garechana

revision good markets Thanks, upward I Mark, morning. guidance, to minutes revenue want expense normalized and a covered With FFO same-store take and talk activity. full-year about same-store guidance, having to guidance capital to of Michael our couple

from sorry, we've As single reporting, -- is our custom guidance guidance with raised our quarter provided, we've our same-store from our same-store ranges third to points.

effectively produce last which call. full the growth is the range same-store we we at X.X%, provided For of expenses, to expect year midpoint the guidance of during XXXX

like X.X%. I'd categories, highlight months first specific nine expenses same-store to to the of XXXX, increased move I Before that for

implies result, to last comparable This the a same a during of XXXX. our quarter low is higher expense growth guidance due As fourth year. rate for period a quarter the

of end We've and our let full-year to fuel to our relative me to this provide On on expense of months drivers be the success efforts expect estimates. Now, nine property the now same-store continued we've with We color first have our our approximately through prior produced growth full-year X% at of the prior growth low some expense XXXX. year of taxes, property or tax expectations. X.X% growth. refund

subject the York reminder, our as the contemplated tax assets third of sale in discussed. quarter expectations XXX-a to property Mark the New prior As a already

reduction our included to basis point in XX second X.X%. already X% range a taxes quarter was property of such, to As

moving largest payroll, Now second to our category. expense

renewals, and floating competitive payroll the our expenses end superior onsite X.X%. in as For a We, front. We've reduction provide lower X.X%, same-store interest one continue to earnings of also resulting normalized of we FFO full-year share The timing per In expect the contributes higher Michael expected end updated high Quickly $X.XX remain per by turnover prior we in employees G&A. to driven The guidance best-in-class have additional highly it FFO. NOI and strong in $X.XX discussed. produce With which by from end wage occupancy, full-year, at rates, X.X%, as the define expect normalized driven net the expenses with the to which line of our and previous previous $X.XX to normalized per low guidance like we job FFO growth We employment. employers, with now release, growth in at expense our rate many moving than range and and our near around to line share. to the higher to and order continue This expect continue gave top all retain approximately is FFO $X.XX in in share market residential debt range. it full overhead expectations revenue on of remains service. the has expectations, for same-store normalized improvement of experience midpoint, normalized to same-store overhead, is corporate our $X.XX guidance expected corporate earlier $X.XX our of interest to full-year a in normalized pressure increase management of we come markets expenses a at now of modestly guidance anticipate later our revenue our midpoint due result estimates. expense, we improved, property increased. capital normalized to compensation our All-in-all, to

pool of debt XXXX secured a we due in line saw that our million credit. You the release prepaid $XXX with

to expensive is debt so do contemplated and without Our guidance penalty. we’re able relatively pre-paying

debt of months. in out upcoming turn all to expect our the We this portion

very prepaid. would turn offering a the hedge Jonathan, session. to the issue level I'll the you. over debt a that, at the majority treasury Thank it of rate, With expect favorable we anticipated of well to rate With we that Q&A the below

Operator

[Operator of question Instructions] Bank take We Juan America. will from our Sanabria with first

Juan Sanabria

guys color a like seeing bit of into hoping on It variable. and I new a could was just next York give you you're lease that’s little us year. seems trending New rates City, big how

going or New could a of the particular XXXX to expected just given of of for accelerate a to it off that quickly meaningful in City what's supplies, range you more talk If is the York story? drop is that market

Michael Manelis

Yes.

this is Michael. So

think, said is I the I’m of strong stay to this supply base kind October. away where specifics into market point, basis in I going from marked today, rent like basis in on XX the that level. reduction at ranges growth that you just York, I year-over-year So though, do a holding the New see while we a of the tell we will

going come the You’re of up all deliveries to that year. occurred against wave of for this the renewals

you year year and that but have not are it’s momentum it you of be momentum embedded into what out better New definitely York, we that in completely is because or than So today where be wood, have should of better forward next will just rent the growth. forward next the

Juan Sanabria

that generally some like going are great. provide action. to a Seattle the percent feel at we of then for seems outside again increase deliveries Is Coast latest whole. it supply that look things But you 'XX. But are correct? you still could seeing gave the you But kind change and Okay, have, improve. an you the some expect West expectations parameters about And do if of markets confident as

Michael Manelis

coming I in more see Yes. consecrated East in Francisco of market, kind Bay. said San like think, Oakland But the about that units we X,XXX I even

us. process is start we go our we database, to of obviously look what kind we and with think this competitive at I So that through actual

said mean, in biggest through slight remarks and I New Seattle and was market right. So everything those else the the I in I relatively of I increase as San each think going up decline would in is area. Francisco then like put buckets similar City these we York prepared just market, And

Juan Sanabria

[Indiscernible]

Michael Manelis

that? sorry. I’m What was

Juan Sanabria

exposure? as Jose San for increase you be Oakland area this relative Anything mentioned would your concern in portfolio year a that the

Michael Manelis

there say No, is is even market there I demand at that, a levels. wouldn’t those now concern right really listen, strong that in that submarket means and

that. out business I positive be market. on there the impacts think drivers fundamentals paying Oakland there what of to drawn? too Francisco. the have we're there now our San deliveries those that understand early -- I But there it's right for think Will all in are is is what other

that what increase be 'XX. I L.A. we significant absorbed in shifts to compared think are And said see because the the do in we So thing units in will for coming market. I that these the do want deliveries in to clarify L.A., a remarks prepared to I as of one 'XX that

Operator

from We'll Nick take Yulico from you. our Scotiabank. Thank question next

Nick Yulico

of Is expense the look there you year? on growth? on that XXXX into some Is give Any can drivers commentary Appreciate all the expense at there. on revenues growth next revenue can early aid improving?

Bob Garechana

really and -- in on we've component. rate full on the would Yes. economy. sure employment going be Hi, Michael of expense about going taxes, in of aggregate to healthier kind commentary you growth avoid run different the we Bob. the expect you as I'm which to Nick. the and do terms that It's doing categories, seen any continue payroll forward kind a anything specific an side, then, as And was real-estate of not that I numbers. mean, But same thing have big thinking

levels to see to And retain so we and pressure we our of wage of engage employments would as or kind expect look similar employees.

Nick Yulico

getting is growth portfolio? of expense I worse of terms tax year York City, is whether had of come? then or this this I in resets today still tax X% on New that is guess, in of terms for Can the some happened? your just you've York have York And us or to New where better portfolio And burning-off. sort City guess remind to, expense abatements in growth What issue the XX due you City New that

Bob Garechana

$X.X million run real-estate to our levels the basis. We million $X.X of and for are don’t full-year call on again. million for currently to basis even rate until it it are abatements the basis, XXX-a the in $X.X Those It's start Bob means that years all on of that program. further tax abatement, a what of XX properties an subject specifically kind have $X.X related is it X on different X them of next, the York years. to to projects million call in next, call some And out annual New

Nick Yulico

Okay. And last then, I just, question.

sold the that It rate. low You buyers. It West was End like, sounds mean, a to heard asset. I we went cap evaluate

that's rate. So a I guess lower cap supported

think have are are to I right marketing now. abatement rate you two mean, assets you there other any deals? for And sale there burn-off on Thanks. is I low also New cap similar York tax consider? those

Mark Parrell

Hey, is Nick, doing role. assets comment wouldn’t be market. York marketing the by is in the going our to system. would disproportionately through always sale expect But then as recycling the effectiveness We're what I putting of out we've and fairly Congratulations done What new market New activities -- well it's Mark. there I'm activities. to say assets on I specific your on

got sold. we've IRR pretty good asset see just can You the we a in

overall, look abatement are built, at on have this So built bought as you Nothing to relatively assets, wanted was them assets this the York tax it. New I New that with you buy didn’t think, really we abatement if abatement. York and

portfolio in have XXX-a reflection So the significant have that of of a is that a assets fact portfolio we we Manhattan. fact significant a

sell, in I New we a And we And assets pretty performance. some market optimism again, think, So the whatever minds has picture these sell that in about okay side. our think we'll York in sell assets. price, well. in mentioned that's Michal there's we've as anything don’t some if and good I well because get we supply improvements done

Operator

take Instructions] Nick our next from Citi. question from [Operator Joseph We'll

Nick Joseph

focus. I of growth lower you can’t well. But to it's new important? frictional drive You turnover continue do level a then large it know turnover consider becomes go more which what at been and lease

Bob Garechana

Yes. I interesting an it's mean question.

were I But we're close. that yet. don't I say would think, know I So if getting there

being turnover trend now recorded record would couple expect I continue. for of with to think the I last quarters, that

as land, our service going on focus don't guessing but the has relentless percent. a kind focus job we’re I that where with normalizing on to turnover getting think we're fantastic outstanding I'm a said know done of delivering team exactly renewals. on close that I to and I

Nick Joseph

Thanks. the nearby And into considering you did now? then right this Are markets quarter. in expansion deals you Denver

Mark Parrell

that you Mark. do it's refer we've The materials. can in to to our chart -- our process you that to I is Nick, guide There very been thing a strategic is and Hey, a bit a best on investor open to that success think evolution on to market Page did shows on term. what of contribute Denver heat XX is rated now. there attributes that like the on market you map And we that we highest our was long

we So as our thinking sorts of us we that we're that work relatively wage classic growth high those about about our markets, these which things But are where and are think high places driving possible think are single family the markets, wants live, of markets. certainly will good characteristics to other that decision. markets, costs, win our in target we play, it demographic framework

Unidentified Analyst

executed for curious how on transition things of your staying congratulations the on the filling leaving? seen and staying bench about you CEO how We've where through leadership It's all you. to team companies and demonstrating decision promotions versus came Board. are board and me that talk Can versus completely the do the on David, on different the that and stay to Board. of Michael do our question you just the then you retires, exits the in I’m was with shown. terms that internal for retirement, And congratulations in just this speaking. and rest you

David Neithercut

impossible about probably And in been the would Sure. they We've decided practices. had that not really Michael. lots time have if that the fact for Mark are all, outside. directly discussions not me And probably that, of from years withstand one fit size actually XX does best He of to Board in But period. someone nearly state most years was ago. me to on I've the reported hired coming

And think that is the okay general the be to belief so, with would me on I for that remain Board. it -- scenario that

play role should forward. lot we my of I've wide-open the him I as work I well understand and well. with think what had go sort about with as Mark. very will discussions of for belief this And boundaries, into a think, play can I that And role eyes sort of going our I I going forward what both it

Unidentified Analyst

balance Now Board out sort an little to because to independent technically arguably another insider? would bit you're you a add of things the

David Neithercut

Well, had expect that Board insider. Board refreshment I a bit past an am technically continue. several Look, I have years. I'm over an insider. of more quite we -- to the than some And

Operator

from question next our Steve with take We'll you. Thank Sakwa Investments. Evercore

Steve Sakwa

And the talk are XX. I general, about is of to market not markets year you the know, in obviously, your your forward? Seattle very, deceleration further down I year. going appreciate rental concerned guys very showing are wondered, next supply a rates slowdown some Seattle comments moving from gone next look guess, But, the specifically how numbers, in on ago I XX you same-store large year. maybe about suburban But, to I as to about you a

David Neithercut

revenue occupancy up mean, work. rents I of months than three here in year. a sitting kind Seattle better that It lower ago now But were today, occupancy about tell We point. tell place our lower you, prepared did today and I I what's will almost well, the we XX.X%. Yes, Seattle would next at is at with tool remarks here the taking market. expect modeling feel about talking when I price right from sitting stabilized can albeit your produce embedded and I growth the think, us clearly, we is the you

some this conservative going over to this in play. run kind through the some us build-up occupancy And with little let play I So of of of get we're have this bit period. kind portfolio a prior we of growth and occupancy a and think

I -- their that growth. job open positions it market like see in diverse record We to XXXX side; a think Seattle. the Amazon's the remains for growth got job number backup like at of

seeing So I the happening. had supply. through things We feel some We're of like CBD. good of work a there are some fundamental release in that this some

of we of through know the said to there And think something kind that will year Now let our got think, Microsoft. into how to kind some navigate with will for Redmond, we play the that I next be I But, able be of we like our a kind strength just of expansion to and Bellevue, work out way is through this. I little this shift way bit.

Steve Sakwa

Okay.

But natural it from the sort like doesn’t obviously, just sound things like we of So sounds the it your it's getting worse had in of are numbers. perspective, maturation stabilizing, here.

David Neithercut

No. erosion how way like we've this. the and power our we're feels we we place than that in just of stabilize, Other it, the like alluded think through of that know to to I pricing a navigate kind

Steve Sakwa

your what everyone expectations but what sort in this. cost. and But of the sort I'm to gears Okay. of just curious of about market And XX we and I'm costs pace in are sort new other guys curious in seeing general, in to new in see terms the projects to weight start experience are pipeline. in maybe over continue land then, the given if new the certainly just But projects evaluating of you terms market, new clearly rising just, push your a next of out on development, feel sure maybe months purchases is thinking developers, you construction just cycle. stabilizing not switching of potential construction of this again, I'm current the to of starts, terms

Mark Parrell

Steve, may it's my answer a amplify Mark. David little. Hey, And

that But low. that at think is too Board, We New except would of abating. under is we to think these in X% the in developers A perspective, and some Southern Coast, We it building good not San with number question costs, New York, we've to do see What pressure. X% they're do you, X% cycle. on. buying California. to. slower X I speak and escalation we the and tariffs, high We was in hard product, you do to the under up. are, the seen But I events -- on Francisco in think the East would to costs of of to our across higher Seattle, be some to lot Just accepting with continue point the course, being alluded of markets, the keeping in as, product is material material late, costs answer across interested X from generally in in terms escalation, sense do land they're that IRRs look financing can't as cost the Michael as construction this are to here the I product industry maybe developer of cost tell see more juncture, significant range and pressures significant this the terms at well of both costs. events. more rents X% in built go some the we are growth numbers decline under being are City. But not We our again go And seeing York up we those

Operator

Green We'll Pawlowski from take Advisors. our with next John Street question

John Pawlowski

Curious.

in Curious three inflection market. Some office where seeing employers have your to And demand. inflection points tiers on found I high. the D.C. fiscal supply if defense multifamily been is starting know any are enter from spending in table the big stimulus still point the of you're

Michael Manelis

Yes.

All traffic I So get through I’m count. trying the that if foot this Michael. can is to see

right overall demand, increase if I see percent. is I now I think, market showing write can the in and

the month foot over September September, for up traffic was 'XX. So our X.X% of of

take the So call need. demand is the What come it a to not power to time -- still would us. say we in take willing increasing. It's tour to pricing I that demonstrating stable and with people

the giving So improving a of power. us abating but I really the for nothing pricing think do in supply, the is that's stable there component absorption demand new that's position

John Pawlowski

D.C. irrationally as are cap Curious, perhaps. Okay. a York rates low prospects. rates prospects about kind potentially pretty kind East seeing capital, of to of is how return operate cap the as thinking expansion And rank at versus you of funds, source rather D.C. a markets? low, for Coast for The near growth magnet in? least you're term D.C. of some New other the and how markets And

Mark Parrell

Hey, it's John, Mark.

all including including markets, low and the at performing D.C. assets. looking constantly the We’re

apartment want of it us. do has great over we’re terrific the the that on was had recession, high very You impact And point to and performing in can time D.C. numbers coming a -- market. to to acutely well us that’s do for the continue of our did I expect certainly out years. aware it And supply been D.C. in out the few last

have long over perform benefits, does it does well countercyclical it have factors some time. So periods the of

would a that. with things D.C. an fact, great about we we in appealing think be started XXXK if bit, that's is the just asset we completed certainly And do but this are lease supply at abated So that up find of D.C. like just there this it juncture,

so very know this speak is in Washington. going of far So area to my sort of well

we we market terms as difficulties the So acknowledge that like in in in regards of many do supply. late

Operator

Stanley. We our from next will Hill take question from Rich Morgan

Rich Hill

various sorry a earlier, I'm you've Good less Costa-Hawkins? hearing you this on away, discussion have having but any haven't from guys. We're this wondering updates you things. if was [Indiscernible] But I it. at morning, mentioned on away Do updates of I a if point? have than month couple different any

David Neithercut

and that here. David closing coming We want of It seeing. the of would we probably results through onto more just same see you're on newspaper the thing probably, you really more editorials the Neithercut have. prop reduced, -- no update would XX, totaling just out be hear we

the that really a got what West those serious away problem. at about getting tell Essex in state. well if generally, this one our this a not ably into Day. understanding housing way you is leader doing problem the would team, most a very XX a And housing so So job message very addressing about have polling can terrific days is really I very by in be address a just the initially But the goes as a no to we've good suggesting now real And senior or least Coast mistake this senior guys -- led can there. we've that going out been serious as Election give you, from updates I leader assembled to the

going So we it to got message feel this tape through year. on run and good this, the and we've like are we elected will a be

Rich Hill

curious, to potentially growth a just back you do that I asset the down. York really attractive? aligned medium that's Got question it. maybe of markets, expect really it multifamily City really owner New medium balance New as circle the York you inflect? York other case City second. I'm long-term you about some still for I class And properties up table? asking York Is do long-term. depreciation coming New not but recognizing worst of as and to a you in attractive growth an IRR near-term, is Or as New if think But want the scenario to coming supply to how City guess City the and that I'm attracting Complete is

Mark Parrell

position that numbers with go up short wasn’t of X% this hear that that long asking some give in right? were the question revenue all, a a broke and John, just our market Is again, at repeat you quite exact on it's can't at Mark. because that we're I you to going a XXXX, was I this not ago. market in want that to because New for view juncture. medium-term you there, little Yes, York. to But I'm

as at some its jobs that to of year. are But go So a now reason into again market we X% and unit with run market, revenues jobs media future. cycling think abating, and on continued near there rate new good in the a supply technology the suggesting this back point next

the like long-term, across would all market we short-term, board. So medium-term, the

Operator

Capital. Kim Thank you. We'll John BMO our take next question with from

John Kim

this The of two below if this? expectations. have stabilize indicate that drove And so, development I'm in came stabilized X.X% what if wondering you your quarter deals.

Mark Parrell

I'm the was Helios? relating question So to sorry, again,

John Kim

Yes, Helios and [Multiple Speakers]

Mark Parrell

see positions on still All that occupying, Again, we on, assets goes Yes, yield. assets. those burning-off. mid-X% a those they're stabilizing at still are

kind bring a happy of yield mid-X% expectation. those in is So our to we're

John Kim

indication you give could your partnership can in returns of or how on your D.C., your Okay. WhyHotel add to development yield with project? some And the to then much that on kind development

Mark Parrell

It's be -- hotel FFO. of does you mean, we $XXX,XXX to the they could none occupancy WhyHotel units really to development and or be just that as if temporarily we’re like numbers execution. the that show normalized it's step to Mark. the occupancy with do page that it going in anything of think I net So properties something clear,

from strictly But XXXK should from next number really of but a permanent the run, think see it the the you yield, residential think residential, FFO in as just you I year. us affecting will about effecting So not just perspective. development long

John Kim

That next Great. question. Okay. was my

is the do need at reduce and like are Upper somewhat you New pricing XXX a in strategy, Turning Side to York End? given still encouraged your to three consternation the feel West you West or

Mark Parrell

Well, on we good End further exposure don't pricing was our lower thought West feel certainly necessarily perspective. We the there. compelled from our

and market came the in I the in take markets reinvest think, in feel at overexposed points anymore but come. each I Denver we time. have in we they we But in assets all like to in again, again, And will might will varying think, our we we’re we West don’t don't here, team, look opportunity as Upper we they to Side. elsewhere. like a But as it

Operator

question from from take will Michael our Lewis SunTrust. We next

Michael Lewis

supply. You of more talked what I it a for about earlier wanted rising costs little ask that maybe to you. specific construction to

locked lock in a process rising little You environment? cost about when haven’t you How your in active costs on given the if a in? you talk had to And budgeted we're all raise much in that process you’ve the Could you around developments. your changed cost?

Mark Parrell

internally may both for construction that David a But, cost End XX% our certain unless of the contingency. the an of matter deal, forward Garden so-called on not that we’re amplify and board great we the committee this. example, we’re investment very some West bought deal, deal. Garage was about I’m tower had the going interest It to appropriate out to start, to go and and

out. that which contingency making sure risks possible that we focused Street, are Xrd So things. some End each as I asking starts, level And XXX on try and have our both at very tower of as these West for and think deals. on much bought appropriate one if of in we've as But these things we are focused you're Not the we're most got two been detail approach very an there recent them.

now our feel So much very we right with comfortable budget.

Michael Lewis

helpful, biggest bigger That’s picture is longest West My question. of has and line the End is since a second question a lead more time.

things become together, drag in the following it getting moves snake? ones. been wave the divorce there any their formation late finally XXs, but about has of there age I you demographic lot way a know to right, and kind millennials get that if household about girl through impactful, You could the and that’s rate, oldest a up think wondering if talked as marriage until on was these

David Neithercut

and about and our think residents I then in mean, only all is are people question. about are attract areas XX older. our We think the suburban good don’t kind assets I We with urban our very -- We the attracting product think we ages. millennials. amenities mean of don’t XX% of of we in have

I that, certainly answer guess, I say through would the are and So millennials aging.

XX, now Our of average XX%. biggest is aging the And our millennials. cohort right units is

we've demand. are single So plus units XX occupant still people coming of got feeding percent our units.

we that's slightly than urban again, like any siblings. So would are they sure coming up. not they across see Group I'm product GenZ less our that continued why demand older lifestyle an age for groups all

So I pretty mean, the demographic we numbers. about all feel good

Michael Lewis

fallen you attention it? the think Or mostly paying you was do rate … immaterial and Do to it's diverse think

David Neithercut

and Yes, sure up happens that's down down trend and I it hard of don’t that's make of went rates I little something I for said, down if number if year's years. don’t went and when or now don’t, or that's mean. kind I a to I just The birth sort say. mean, I to guess, this I'm not a know bit. it

Operator

you. Thank

Zelman from and question next Dennis Associates. our We will take from McGill

Dennis McGill

think the growth and you And some employment with XXXX, general, as One it's of of into plan rising would the what little in you for bit cycle in higher wage uncertainty, the deeper and that plan? the about question maybe think How uncertainty you put maybe like ranges the etcetera? with growth, type that, build things whether drivers around as outlook, do key to the economy. about and you general about guys employment relation

David Neithercut

great question. Yes,

number. XXX,XXX and what So with they by an per markets market and teams think It's across more just and that talking month, or pardon quarter revenue supplemented to per the the new don’t onsite in here our up seeing hearing come put Chicago. about have a about, end be as are teams hiring teams jobs we fair our investment process, jobs me, algorithm we about where can our

get And national, it's don’t is a a national there that's our want I this computer again, sense, fitting places. not So number growth the again is and some to for us. of job certain are on in numbers but portfolio lot

a So question our focus is implies. maybe micro more than bit your

Dennis McGill

place and laid is that I'm then, you that looked employment And holds but the backdrop way. just, as Okay. look, XXXX that that preliminary that the in largely you've as the about out micro XXXX? it as was you in think sure, Is that directionally markets, in far numbers impact, assuming at

David Neithercut

tech Yes, a all other have remarks did relating company media on And it's We we Angeles. feel is. in Michael's -- our new a we occurring roughly Boston give or see some to in whether that. in like color remark hiring in markets hiring Los it little you

So we across platform. the 'XX. residents base minds, yes, we it see have are combined assuming equivalent wages 'XX we in the But that's roughly employment with to our are now our basically, things in we rising across

Dennis McGill

assets team separately, in you maybe discuss in your side general? or around just as Okay. the the interest availability and lending capital there in you're capital the conversations what can own And market then hearing well it's as just whether from out seeing

David Neithercut

in retrenched the our U.S. for of for But assets, We we a space across be and There apartment as I'm the still well board it lending Chinese this, market. in are the do bid buyers asset general. like are assets, and strong Well, in to participatory ask money Bob lot class. take to part Canadian, think going side. foreign the continues as still buyers, and significant little Europeans, of and speak that other on to have chasing the our think less

side, of Bob the think I’m to we You And on strong to to in kind be side. people going investment as mean question. see talk continued debt very turn to your right. flow the continue equity see availability space. about our it you to get part the trying development exposure again, just that development I flows to of

Bob Garechana

Yes.

healthy comments, with of or supply GSTs to on very continue of piece, we that So kind up kind the stabilized see breaking lending following multifamily arrangements. Mark's and the on

up, rates have but been meaningful costs have overall, interest up gone that healthy gone because very history. So prior and has of versus changes no kind

echoing really as kind well. comments side, development of the On Mark's

the a We of terms conservative slightly lending see is lending with but come But lending. continue going so has of alternative spread, what to funds you’re LIBOR a private bit kind bit down banks are cost and up we all-in kind to maybe ago to in are sources and up, so -- continuing to the the be those relatively rates are are they that rates. little of see actually than little aggressive, willing in What to capital banks have that lend, of Construction in probably form push gone advance higher. providing sources space costs a to pricing etcetera decade rates, capital seeing space. of we is loan debt of equity is different thought more that maybe all

Dennis McGill

last that in imply that into side, going otherwise supply, would developments does As from this cycle? deeper to the it you some look prolong the what be or on longer of decline competition -- a development the

David Neithercut

money more. to, expensive. below forma and or And remains to make at cost that that’s to of That's the mean, capital alluded that it's costs it's be guess that is higher, above this I very equity I in but coming going harder the as the Bob the now double say in capital. the the that banks, same I is even pencil. middle. be just bank will the tends very This seen, to price But pro to considerably

it again, to basis. a the think, money extend mind, necessarily going on in expensive particularly because much, that too with relative just I is So isn’t things

Operator

next from Drew our We take Baird. will question from Berman

Unknown Analyst

long-term give This to recent Drew. us for sold. West on is on color you End some you Hope guys growth check XXXX to the the Boston acquisition's Alex NOI could relative asset expectations

David Neithercut

color on you Sure, little that. I give can

the There is So fully there. fair is amount competition of occupied. asset

for these quarters color X%. So a don't us, We would growth XX-year and then around in us this, then X.XX terms growth I X. our there we year That there. Xs averaging first does deals rent some potential saw on I of underwrite I for have here going renovations we revenue So like. near-term but they're looks growth, things forma know uses mind relatively the was pro buyers growth to do? can to saw other perspective, and the in know they often low our they in relatively as more what us have? estate muted What what hold. that it generally units from with juncture, rent to underwrote high expense the real certainly near-term. the you gives And And a few sure number West some don't those is over We I'm increases value say reset comment But in relatively in End, the again, market. deal. at burns-off, when tax buyer can certainly there this

Unknown Analyst

really That's helpful.

notably NOI for compared argument Additionally, Denver Denver's on third just the long-term our your relative long-term to were your trend curious holds how most coastal the unlevered insight value residual give quarter you markets? you up IRR could to us growth We assets. some expectations anticipate acquisitions, the whether

David Neithercut

did forma. pro though XX our forma some measure pro end the cap They is with be were I deal expansion over there sum good exit, on that the have looking -- construction mid just mid-rise high-rise of these to Yes, rates the we IRRs increase Denver but the we question. did high in to would that. the at X are have even that the with cap we way thought years generally mean, on rates and unlevered

Operator

you. Thank

Alexander our and with O’Neill question take will Sandler next from We Goldfarb Partners.

Alexander Goldfarb

and Two you, guys. Mark there. as you out questions Thank first, good And congratulations and for morning well. David,

retaining It guys if and retention. you like more is holding raising renewals yet, are seem X%, on you are The more doesn’t the just But you earlier was are tenants on first again, queue. if at renewals it a that is question the retention improving. and still in back

the a like you things have Or are overall on X% were they allowed what declined? to decade our and that's suddenly people to outs going keep home lose? of Or do X% willing just have think a way is move than you less at other of there move So apartments work ago? market, think on more tenants push still you sort X% do to your

Michael Manelis

would to Michael. that little actually XX.X kind is seeing of move for compared reason our in say would year. say this in that portfolio. it's you people So, little fewer of year-to-date very this mean what all to Put that that bit a change a just last that probably buy out too. We've down basis, sighting home. that was with I we're a year I I alluded from everything those of actually little date a move reason. moving to to bit XXX is reason XX.X% out out

the third think, we I quarter, renewed. in

residents to think I we everything. with XXX the little it's roughly of quarter last exploration. I did year think I eluded bit a than same of in more amount of it the third And

I deferring changes. life think its

the customer high and our seeing I is think, we retention. And improvement service. we marked and honestly we the see pay service relationship something saw efforts off. customer This in between have we're done

occurring, part to is, going are renewals, of pricing so the the to remember of contributing these too three you these So elude to put the at those where I this this retention. things in be And pricing of those think and we are all X%, transactions blender lot that point. is we're to have a and rents renewals our months while, renewals issuing before, when

process. of where this you were And think many to these up markets renewals relationship is in reporting and rents rents fact market a as negotiating with well. I through has to do lot year-over-year, prior residence this So that are our demonstrating are these and are in the that X%

Alexander Goldfarb

will in demand the development? there increase ramp-up is your Northern just developers and number development waiting view are that fear go years. speculation you certainly if because any And an jobs Is side. that. other for of will it's is on Or more therefore Virginia. be question just paradise is in apartment by a happens to developer's past benefit offset that is to already the D.C. on of will going suddenly then that the And been the will pick-up landlords that this be Popular second than Amazon sort and

Mark Parrell

is. it's Mark, anything instantaneously. happens going that Again is the to I this. that build capability XX,XXX to is our the to have have But office Yes, to into if I be obviously developers doubt. assets mean, that do this immediately more going think already, it there gradual. we Depending is not to Amazon employees, and There no Alex. where whatever then certainly to half sure don’t X,XXX of is open this. of I'm some number and it’s can near an certainly and get located well are new it's there

Operator

Anderson our Securities. with We will from take next Rich question Mizuho

Rich Anderson

sensitivity stand let’s at you and that such done control vacancy Costa the every Hawkins, of you rent when you be on profile? have a a I Would What guys Have points growth case know that say get’s But look on where you would municipality chooses it. think basis your entirety your it control. scenario. done repealed worst and of Just exercise? XXX kind of portfolio? impact the to be single

David Neithercut

Hopkins was We properties in It's Neithercut don’t rent the for a before currently what to on they'll going they've of put rent municipalities since that. There scenario. XXXX. because, had know and what might municipalities before that worst We limitations they don't course, -- what in have was control XXXX control properties XXXX. math, that’s control XXXX, put all done know demand. have not We’ve here, fact rent that built case David don't act and and know even are you first built don't right place between And go be Costa Rich.

we if of might little not time. know We productive bit impacted So went it's to quite how our XXXX or market how current just markets use that I’m the control. have NOI some of that currently in be of certain the got theory from do or much revenue a as know rent sure much that game whatever. We XXXX

XX, place. if [indiscernible] could Top we feel have for are worst we the of California. at exposure -- changes to just We know we we so might what team be thing do do. of income It’s in what risk put possibly good it's thing very in And suggest. the I feeding with But place as a the respect certain not productive a we best use got time certainly do said a state where good earlier, it's not again, they like place. to But

running We’re hard.

after good until and right chances end to feel going We’re we there. about the bitter our

Rich Anderson

second then And Okay. last and question. last,

it? lot forgive Do but, feel of one talking the your time. how or divorce, recreational that that legalized. to And what who thing, your write me, for a community are some XX% of use probably and communities marijuana their because has you own they thing, changes, against and perhaps portfolio happier, that. of be your within You're going about and it ability they're let people your and within now everybody's your people there XX% a about could of but thoughts social you I'm perhaps curious of over roll about mismatches lot to Or is XXX% laws have do about What maybe that? because happy are

David Neithercut

Rich. No there client incentive

Michael Manelis

lease not almost I would have we I Michael. that today. in would our portfolio say we say it’s laws. our agreements write entire is is smoke-free I This mean place.

have some that properties not outlier we think have we I with. deployed that

those So markets. to community. we’re smoking smoke-free it Marijuana than marijuana be in no legalized today. legal cigarette. me could recreational In our still Cigarettes use is of different communities, our the

Rich Anderson

around their community Right. they right? the can run in smoke and But inside apartment out

Michael Manelis

would That lease of violation. No. kind be a

somebody neighbors like their just smell inside lease is a violation. if cigarette, So and that's it apartment, smoking

Operator

next We Okusanya will from Jefferies. take our Tycho question from

Tycho Okusanya

kind dynamic been maintain Mike, have a you I'm guys dual of CEO there you can are strategy to role, Again, up that are and reports But you the Mark now long changes any a very seat? in to the with EQR's with the for time. that CEO sign again curious just [indiscernible]

David Neithercut

those not of before. We've thank comments. almost for Well, I'm Look, the company very the terms urban embrace the say I've seat; to suburban you I of quite long-term for most dual CFO The I've the in XX. years. that, I conversations the close it I'm Well, been been with one the it. got was role strategy, in seat. and owning never in dynamic in then XX advantageous products think,

we all certainly into Denver. have We of back kinds evolve And all here. the

the our So mean, in will process. I thought and strategy conditions, I changes to change overtime think response naturally and

don’t it be So static. on I changes, strategies. But core to investment wouldn’t especially expect dramatic the expect I

Operator

floor remarks. have we to the Thank David further questions. back Neithercut turn you. At I to like this time, would no over for closing

David Neithercut

everyone. Thanks,

As think I great my the we with confidence most over community close, work been REIT call, I earnings thank tell I final want is it's important and the pleasure the can years. friendship a you. and are support, in last you I for your to your everybody and XX probably all now XXXth what of

you you, For forward I'll to those person. a look weeks. of thanking few you We in in San see Francisco in

of will year would future the with of I end at Mark not team and note gratitude step Equity please the in the see, in of those at great you, Residential. extra I leadership confidence For down that the Equity ordinary here with

So thank everybody. you very much and best regards to

Equity Residential (EQR) 24 Oct 182018 Q3 Earnings call transcript