EQR - Earnings call transcript Q1 2019

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Operator

Good day, and welcome to the Equity Residential 1Q 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Marty McKenna. Please go ahead.

Marty McKenna

Stephanie. you, Thank thanks first and us discuss to Good XXXX for results. Residential's quarter Equity morning joining

Our today Company statements Officer; risks and us certain Michael statements Chief featured matters the and Officer update for Manelis, these President federal speakers These subsequent The Financial forward-looking of this be our and are the to Mark discussed Q&A. within Chief advised economic here securities events. certain during Operating meaning are no is the Bob forward-looking to or Please our constitute statements our Garechana, with Parrell, may that untrue CEO; call subject obligation that assumes uncertainties. because laws. supplement become conference of

Parrell. Now turn I'll Mark the call to over

Mark Parrell

Good today. morning joining for Marty. thanks us and you, Thank

pleased strong deep product exceeded for our income of in revenues, our We delivered across well is with expectations a our our supply start growth demand that markets. all same-store remaining off and FFO are and net to new to being normalized absorbed XXXX the quarter. operating for

the push end but to competitive hold We new a near us we is strong high across normalized of primary deliver and markets rate. benefiting would our ranges. same-store in both leasing just top the and if from We're growth FFO expect markets. sizable demand our dropping beginning New to This is guidance season, which are allowing occupancy creating Boston in these also York trends revenue supply growth

After give I'll Chief Michael call our activity on the our our we'll And to Operating As full-year July to after call operating performance. revise at color discuss is quarter that Manelis, Officer open the investment second guidance. of until quarter, to over turn our to our the up call questions. we'll end you your our in the wait custom, I

we early in after quarter, the acquired assets I on XXXX. of apartment the call, the acquired We The investments in cap gave the built $XXX.X D.C. acquired end acquisition property the first on no price to but apartment and three fully first the million stabilized. switching This properties, was Maryland quarter a the unit you of and of approximately details on quarter rate was that's we So, a Washington property is was purchase side in other suburb XXX XXXX fourth quarter in Rockville, X.X%. acquisition

of strategy have while suburban for den investment markets, been acquire a our properties develop develop Our over acquired has urban we decade to late. in urban assets and and more and

located positive with demand to product We employment of in suburbs assets the wage and like certain that drivers to also seek well characteristics apartment proximate share continue our other urban high being to ratio having that, income that market. high incomes mean ratio is in similar the low. income I and household assets By other relatively is the where our to rent the to rent

think walkable owned boxes, to assets checked convenient rental very single the and car Assets this less housing. asset amenities by that we are are all to compared property in this housing portfolio. we're is apartment Rockville complements existing these other affordable owned submarket The and family

to rate subject rate to will growth quarter first expense approximately our property its program of look Manhattan in anything to over for Asset quarter, reduce the of these Avenue $XXX.X improve XXXX, us This subsequent our not did and expect end the for sold XXXA should We You New sell like we continue markets. our in the XXX sale York time. our to million. but NFFO in Sixth opportunities property is and growth tax the

parameters. meet the New Manhattan in area York look to acquisition our continue and We properties in that to acquire elsewhere

first quarter assets Our million and of relatively The of in our in dispositions parameters meet $XXX that number acquisitions million of that XXXX. the acquisition guidance call to continues low. we're for were $XXX marketing

We expect There And in are growing our on. to rates high quality steady the as grow all apartment Overall the considerable be markets now, year Officer. our in Manelis, assets goes our to continues number call to Michael own assets cap with sale increasing I'll over holding NOI. modestly the demand for and Operating suitable of turn values Chief are markets.

Michael Manelis

Thank you, Mark.

line during So release, having we were on renewals and period. shows of on than we have momentum Occupancy with was strong continue better were XX, change the earnings Gains units on Page In a high new expected. which turnover mostly the turnover demand, the for lease levels expected front. slightly and deliver schedule satisfaction that better included result better pricing pricing record fewer and revenue strong we a power, pricing lower the customer but quarter. power stronger to in trends of both new what

current performance June full-year of the our high-end be and would we revenue included X%. year X.X% for of range. couple in and to approximately we momentum months continues I've the stronger the This any complete relationship our trends is the market comp and Sitting the towards be revenue next the and our in assumptions expect was in lease not to is online. challenging tell It but same occupied will As income to achieved today, that than momentum assist stated to of important quarter portfolio guidance pricing Investor previous compared our a posted the the will at XX.X% note previous last looking March understanding gain increase quarters renewal expect market. week May occupancy. Presentation the are We for the April's these quarter. XX.X% by mostly potential be calls periods our period our for also given full-year they due more here to slight story, year. first comp If remaining and new to

quarter with our by power, provide me expectations line which let income market. a steam first quarter. Boston pricing was So the you in strong with throughout some rental stronger color gaining had

the quarter, last and more our is portfolio were XXXX the later this from expected they results online the are While April our year. demonstrating for in Today units renewal coming pricing same expected pause greater a Boston achieved with in increases this XXXX with and X% X.X%. than increases base parking competitive retail is and being to week the portfolio year. supply occupied revenue in benefiting contributed was portfolio power The XX.X% than rents new Boston

So while we expect XXXX for in the supply competitive strong market fundamentals to positive. outlook very demand is the overall are increase absorption this and

was the of revenue driven Moving will This and allow was us improved was year-over-year remain in continue pricing X.X% to which reported New had level. our a increase strong also X% occupancy power. better by for the traffic highest at to the expected targeted disciplined a Market consistent than quarter foot York, which markets. and concessions to at amongst use pricing XX.X% growth market gain all very

expected we than approximately the footprint with During operations an and XX% negatively Island XX% XX,XXX fewer XX% deliveries and quarter been have just The supply supply. Long units, concession than dollars this not impacted City is in use our in are the to-date lower XXXX. under our competitive and deliveries Brooklyn new concentrated from

results occupied The portfolio increases the delivered at In renewal market. April some fact, XX.X% and our Brooklyn of the X.X%. are in achieved is New York best submarket revenue

quarter definitely strong really the expected. quarter D.C. had what we during than Washington greater pricing a strength occupancy was So power and and

strong XX,XXX was remains Although, the below or year, of a and last the of posting growth year. X.X% services a spot national job declined business the average. over bright gain increase rate has from unemployment same jobs Professional period last

the We technology Our which well employment. and and our defense quantity on Northern as Virginia strong for dollars in new to as submarkets by are submarkets procurement of in growth limited absorption. being power very supply potential fueled were slowdowns likely is pricing being due concentration spent XXXX in forecasting

XX% our with market. April improvement renewals We at in is continue about to occupied portfolio cautious be further this Today, X.X%.

Amazon commitment street rate of recent Union one now several location our levels the Seattle as quarter also what power Coast, the articles supply to market. opportunity stronger for jobs delivered any tech the started Strong across West show an have and deliveries in over XXX several Eastside. from in from absorbed market. new and capture posted appears Overall, moving shifting apartment during stated pricing the fueled CBD this the the and Seattle continue XX,XXX with region grow supply another the high is Recently, this Moving market. next posted new into directly this to strength months the keeping also are strengthen demand of to filling expected. suburban that is in country. Facebook is and be than than to we Large the occupancy employers area Bellevue. in also which faster acquisitions. to by to present the over demand pace both has Seattle the employment Lake a to South Seattle being up new

We renewals are XX.X% occupied with X.X%. at April

surprise demand over mark, markets. year out amongst foot San hire it rates is job said had year the product of Next below remains gain quarter second workers of slowing. jobless increase not growth step the running in Francisco, highest X% for very a our being in pace That a are that to traffic We of with X.X% was strong. and which for companies the all our the is

foot represents our delivered a submarkets revenue which the Area. the our This had and lowest the traffic this during East in quarter. revenue in in portfolio also contrast the income growth which in Bay market, year-over-year, XX% of and occupancy to of Our amongst is Downtown all portfolio reduction Bay produced strongest the growth

demand confident Oakland Bay the that than insatiable rest Bay from are placed in Area. pressure on offset of be our whatever and will We in more portfolio the deliveries short-term the the by housing for may

renewal East XX.X% XX X% in gains portfolio submarkets see with was than about continue year, is which Our retention April the points offset results. Francisco to it we are declines strong most Bay. being by San last less occupied and is in increases basis

down during as LA Moving Los Angeles. the to performed quarter. expected

area. that of the a us With from continue new revenue X,XXX to supply weeks Downtown market, the units Mid-Wilshire are in shortages weeks and delays business almost and to see deliveries trend side last and X about large the stretching through of X,XXX additional over the currently construction this of XXXX. we area X labor in lease on year our to for delivered in core the expect up currently front, The continue. the On for over in to Metro. we to projects Downtown Metro Hollywood Concessions we units for the be saw is Downtown Koreatown due appear submarket to norm XX% supply tracking area

well, growth at new but a highly Metro are performing our price boutique monetized like Downtown despite the of Many quarter and the typically feel a Downtown from and supply. is assets. have X% the revenue Metro below Our assets XX.X% portfolio occupancy the point pressure for

online with West about Downtown market throughout was In compared being given of the April The of LA we addition higher XX.X% submarket between in to job about renewal the from LA our year major occupied two San difference pressure Valley overall the XX% XX.X% West supply continue increase the with strong same will last revenue. believe the growth our Fernando companies. and The in content year market week LA both revenue XX% be our as portfolio absorption is and will to X.X%. that

seen better April quarter expected to the in expected is remains from last quarter. are XX.X% Diego. since slightly on Moving were this earlier revenue as and achieved and in have growth Military March decelerating leases, Base due Today Orange pickup occupied lower January overall and market rents have than occupancy. pressure increases with April in outlook But we San new by X%. X.X% spending Diego but occupied remains resulted strong, on had not April X% expected the supply pricing slowing expectations. a driven Irvine is today achieved momentum higher County results of in been limited supply. experience we for to for gains new but least the that pressure as some in XX.X% increase we Job power than plus And the and and positive renewals. downtown are San late

prospects on residents overall front, On our employees. initiatives experience right we are and the digital focused the creating for

launching on homes create functionality the to resident our demand introducing number business, the enhance initiatives including XXXX, mobility and smart a and tours, not prospects sales new our a further of self-guided but teams, self-service is portal, During testing for of limited are service and to exciting LA, which we standpoint to new maintenance the a system. in technology gained to will side industry leveraging in efficiencies leasing from intelligence and are times and redefining and artificial operating new be years from will These our come. we are the for digital likely XXXX in industry our operating efficiencies experience Impact technology confident for XXXX. our that a

huge of Equity Let me close with employees the Residential. to a out shout

on strong are and Thank and momentum to question-and-answer operator their experiences you. ready continue is season to delivering now residents the enter the And to leasing go have to appreciated. focus prospects remarkable we our as greatly We we session.

Operator

Instructions] [Operator first Our Citi. question with comes you. from Thank Nick Joseph

Nicholas Joseph

York the Thanks. New sold City asset Mark, April. you in

did As rent what the transaction interest you marketed current you York control? asset, market pool in of given the surrounding New buyer uncertainty or learn the about terms potential

Mark Parrell

advantage with for is Nick. certainly different, Thanks with pools generally a they have like now increases they But, few that very good we mean an sold. think little what but difficulty, and ago, no two assets what underwriting this folks sufficient little those deals IRR buyer question XXXa I have asset of are relatively the were numbers on. between the smaller have knows you that us asset are. Listen a companies aren't XXXa and cleared think I because bit those been that than the years reporting everyone public process a I bit are

$XXX the of that's asset those IRR this a did sale together, assets got last proceeds. so End together asset well. XX% about XXX million we on So unlevered, West the annual which very year and XXX which We've deal

of assets a they generally I very the kind the with So think very escalations comfortable returns, deal those the happy not great private those for at understand are with of and the these of because difficulty. the value mark-to-market buyers accumulating end, assets with are again asset, saleable that and sorts

Nicholas Joseph

urban that you about talked assets strategy, pricing EQR's and differential And located are seeing suburban right now? more between a or you investment assets one IRR well Thanks. make attractive

Mark Parrell

other. forces cap by before. general in markets Yes. across I in trading know is the each have between didn't markets, of trade markets between start that saying I'll on lot a and both your questions mean about the collapsed really secondary IRR, but coastal forces rates I stuff and in

it cap of So it's associated well, I but add less great But maybe a IRRs the think are a just because do trades real IRR value it's little product a cap less lower there's when not do you're and lower has our deal that at buyer the generally because with trading trades again buying in got trade on. But an an it. some of bit speaking, compression city the with rates difference between competitive continue rate again IRR going risk urban a there. lower asset suburban on But between there's right demands. urban generally a so I side urban think demand now center that still location. to

Nicholas Joseph

Thanks.

Mark Parrell

you. Thank

Operator

Thank you.

Our Wu Merrill with of Bank Lynch. America question from comes Shirley next

Shirley Wu

Good for morning, questions. Thanks the taking guys.

Mark Parrell

Good morning.

Shirley Wu

morning. Good

York rent the back affordability, other it political New I'd So think regarding, housing I given in stabilization to climate to you're what like the around California. carry let's say, want across markets and hearing housing even country,

those on your prospects? latest thoughts just So

Mark Parrell

Sure. for Thanks question the Shirley.

new markets to we and point belong many with through solving things is we're about We're active. old affordable in sort housing housing workforce supply York encouraging programs affordable reform, affordable reform XXXa of of – our the markets supply crisis whether housing, the not like going our of able very generally, just discuss is trade makers that mean policy deal. these in it's various the to various rent regulatory So zoning but just discussions through New get and control I there across that on associations limiting

in to feel that press conversation So some and we've we real it. like continue got traction we'll

we need a we're relates that's New things by going regime there of very and trade that on. the those specific But housing associations. again rent try a in get It lot to across have to will of mid-June the York new just point problem. it and so this be and which the create reauthorized part the As through incentive to various your for continuing the to does conversations limit to complex solve was control private are of middle side question, not

sort of that has continue message we that's industry the the to So advocate.

Shirley Wu

it. Got

And I'm switch so going other side, on supply. to to the

calls, little that challenging your a there's some how probably this downtown previous mentioned markets L.A., potentially submarket been Oakland like say balance hearing your more been that's it’s are XQ? bit and do you production. to stronger How on you've the that as weakness think that's you York a we're projections, there's in could And well and safe that West outperforming. well. do impact again, your to into that impact is as let's markets So as in New going revenue overseas say, And going projection

Mark Parrell

your in understand it Bay catch of as performance of the specifically I well sure, East area Did East bay in and make them to to some garbled, production markets. I the comparing as you're supply does get want County in but about in a talking question Orange I that sort correctly? the little Coast

Shirley Wu

year let's of going the Yes. out? And to play you how the rest say, think, is

Mark Parrell

Sure.

Michael Manelis

Okay.

this So Michael, I think that. I is address can

I think slowness see projected So versus were about tracking. of on XXXX in County and lower XXXX. actually revenue of we the kind talked for We call, we're the had full-year that last projection we that our Orange seeing supply kind

I were think of thought we a just units what reduced Orange than a for what year, QX. competitive going consistent XXXX knowing standpoint facing actually a very we in off But run County the to better and kind X,XXX experienced little was rate of last that again, be in we did under we competition. that of

would the online to into point Area, guess on say, I seeing yet. the Oakland we're necessarily in Bay. East deliveries don't Bay that coming I pressure over Moving I

anticipated and to going poll are to be when coming market. still deliveries whether kind going we these full-year, built downtown when of But look Francisco. that's TBD at think I San that's as we that what attract to from to we is our

momentum in kind I And San see you we about Bay have going of expecting is the in York, We were the as any We thought. that East power. pricing may see stronger move the QX supply. New reduction in right mitigate Francisco thought better I were we're momentum we in tell have East the will over what the of York. change to really any to New going that Coast impact outside So you to think and from we supply now. than don't you

in the the for writing continue put I that to range. think these the end we of going high income to leases months as opening as markets out start these as for more more and we're alluded in we balance trends if remarks, of the I seeing the is So play year next us of our couple that to

Shirley Wu

Got it. Michael. Thanks for color the

Operator

Thank you.

next Our Nick question comes with from Scotiabank. Yulico

Nicholas Yulico

but Thanks. happen guidance, you tell Good would mean reasonably just be until then waiting and morning, that quarter guidance. can markets between everyone. the us would are raising same-store prevent from second negatives adjust perhaps I that now risk to you could here? understand what which the the I

Mark Parrell

this. few season, few supplement may the our months. leasing Michael the then span months in leases approaching with over over mean we of and turning a I as know Mark It's have you Sure. of next half

you certainly that So very relevant. are you've variables rate, got in occupancy in variables got

and X.X talking differences talking the midpoint is about here. are of it's level of your fine just we're very precision we're whether pretty about those So X.X, there's talking the – you being rate numbers. guidance about growth small our When start in

very, we're like miss down. something, That miss maybe simple the top So or very supply range happened things in that – blip you're has that is could as but occupancy factor. by some to going mean push market, to down in temporary don't what things by of what numbers push anything of Nick the our I'd that some say that submarkets to going undisciplined end those systemic as that change there's one you can you a up

consider say that's that of to us I effectively at would leasing what season. and you've point So got you all that impossible in for early the predict to is need this

Michael Manelis

southern to where that's the from Nick, really right risk there's guess just if now. Because to only that would see any perspective, a thing just me California watching sits I to add I the additional softening. downside it's risk is

sharp that our of occupancy other eyes it need markets, we of now keep pause will these I all The dilutes California we remote Southern a think right the sudden But that see to then so on kind of be it. a trajectory it's our in very other where quickly.

Nicholas Yulico

know about later Can said Southern year. leading And mean labor worried construction about that impact I you you're that just supply some year I I the talk you I shortages all mean LA.? just are kind next pushed scenario falling on into is up were California, because of supply to that LA this in of think gets in some a maybe this delays.

Mark Parrell

will what see, right. I think is that we

into I in So a occur what shift from XXXX number think we the got in a it a saw units pushed of were we the we for deliveries moved the XXXX shift XXXX, up – projecting lot market. and XX,XXX saw through XXXX expected

is trend to that expect continue. We going

I get saw of the XX% quarter first think the expected out. deferred and completed we in about shift

guess I every keep is, occur. So of shift quarter going that we seeing to are some

Nicholas Yulico

just on new renewal Thanks. And helpful. lease the last question on new It's data are Okay. rates. you and giving

numbers, lease much different numbers new I’m that guess, those wondering concessions. including the be On would I

Mark Parrell

I be don’t right we the quarter in of of in York doing would as we versus that No. guess a in XX% fewer concessions are do now mean XXXX XXXX. first lot really about portfolio. I the New concessions better

this of so outside bit performing be and than York, look on the what's a page. at New And little better York I New would

Michael Manelis

Yes.

revenue. I number new are in for something. mean, lease $X.X a I just think it's on concession million billion like or $X.XX material us not

Nicholas Yulico

you. Okay, Thank great.

Operator

you. Thank

Steve question Our next comes with Evercore. from Sakwa

Stephen Sakwa

Hi.

could that sort of the and of timeframe to much big Just How a think we do I could quick you're doing over just sort tech to a that. that? that do some you self-guided tours margins some expect what other benefit think see how the, of the guess like things wanted be or talk and of couple you of about to questions. opportunity I and initiatives margin

Mark Parrell

these probably initiatives all it's too put I think to from together. So know of impact early the exact

previous centralization onsite in You years. a we've need done of to lot eliminated that roles and remember

us create out of we'll to our exciting new that amazing locations. figuring leverage an got to concentrated most we is see very So are and technology this how for efficiencies. What's that probably highly for desirable bigger operating in assets us the is probably return opportunity portfolio

this proximity of start self-guided onsite our we where we of folks. when about thinking close potting tours, So kind start about kind thinking

allow have staff in to reduce sales going reliance will to it's time, are tasks for greater of windshield on have the going efficiencies us service. both to We less to completed contractors and which getting our us is And today. many also allow that

more I this think XXXX all of compounded of really the and impact So coming technology benefit like comes and XXXX, start them as deploying together. we start see the to

Stephen Sakwa

how much I have testing and of done sort come have and pluses what the sort on guess, you out that? beta of self-guided tours minuses of

Mark Parrell

the have lot we a in ready done you you the buildings technology in our now where need have staff there. just to so don't lot right, a place. technology have we've We're have place the we of place. So remember deploy And locks in so where concierge we concierges, getting

tours of self-guided hours personnel. say properties after been about months. don't I probably nine testing do kind can We've You you onsite have would at where for,

We’ve probably the a bit a home X,XXX technology, it down. and about we've running. over On units have smart little year. up done We'll narrowed

it. But a tours, kind of XX self-guided takes done really potential see this properties. because right the handful it of upside tour the of market We we've to minutes better need of time. it's big, a at really On to

huge staff. a in So efficiency your you start tours equals those that eliminating

Stephen Sakwa

give on in you to idea sort smart cost expect the sort a put Can And you of the and home the of just of rough last returns on technology. things that? us all home the the might that the just of

Mark Parrell

Yes.

throw kind of one. swing guess, $XXX, just what it you're does lock about door per an So I of on I tough I'll mean that's average a in. out depending putting but

a standard you've lock, got costly just lock. have you more it's mortise If if than a

as that. the yield on that's far I hard getting to you're that industry the a in month it's goes, say return that return we've management, a getting charged. really the been kind $XX think of sustainable premium out As On

expect more to concentration answer need really So I of the think be what get you these to from in able we to that tell it. we portfolio question to

Michael Manelis

to Yes. where stuff going in people I’d just is of of this markets add stakes Steve, demand table these be some to stuff. sort this of get some

So tell is really vary bit. it and little to it's hard it'll a what

thing positive. And and will install an for opportunity some markets it's one will certainly some us another. the install But to

Stephen Sakwa

maybe mean portfolio as And markets you moving control think strategy any and initiatives. last some Okay. back you've to like about question I and places do for these of forward? you about I in footprint the markets, hear the of coastal these sort then of Denver Mark, kind on the just rent know other differently tried move

Mark Parrell

We've Rent control is various a account. we like operate take risk, to just that managed that we in, our just financial strength municipalities risk climate very of change like into have the Steve well.

New entire York’s had rent market. control the time that we've in been

continue have housing a with a and and we're hope really kind problem. we up to these dialogue policymakers ending to to workforce less just regulating have that general in involves with really hope more something again less conversation not worse good have certainly housing, it's of But and aware prices So of. workforce and housing,

account? into not take of type of It’s offsets isn't move to those in demand to those maybe lot to disadvantages compelling you markets. we not other markets. customer The those I'm a in see. the rent the in threat fact have that and build other markets Absolutely. do with ability reasons markets, the do we we're in and a and us it So the the quality other control and sure

Stephen Sakwa

for it me. That's Thanks. Okay.

Mark Parrell

you. Thank

Operator

you. Thank

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

John Pawlowski

Thanks.

York for on change ground in your year. New what with control, sticking political curious the come does there Albany, middle Just contacts case of scenario rent what's base your this

Mark Parrell

guess that. hard about The have proposals that right really things. now. a of us to number number are talked of things, for That's many John. talked Thanks, active Yes. other legislators are There about governor's a so

that honest close with firm that's you enacted. to you, When a then have handle on to me we'll review. exact be we the does have tell a good Just seem be for something impossible proposal likely to

John Pawlowski

know I mean can close week My there legislation pushback But I and crystallized. getting are is being there's details it's and hearings this change.

So just any playing these there NOI five curious is you but years portfolio today? your not three out to next risk base see things to case, maybe as

Mark Parrell

the only Well, give on portion heard being that there category us, rent some me I the it. Those a depends this you the with capital all, you many changes how that and things if for rate City you there of benefited it's maybe aren't units variants relevant at particularly different depend hard because market it but of And are like change controlled it of good really change discussed York all does react scheme, our which you New don't improvement controls. you to so units. not portfolio change broad in disagree additional I've broad to are – a from rent it's I'll tell isn't view. preferential

I number the have desire certainty, more underwriting hard to answer. for now, of that until you kind to us So appreciate right it's some get to just but give we

John Pawlowski

relief portfolio? and hit XXXX That's and few meaningfully unfold to of pockets years, supply D.C. your the won't and which is in fair. coming submarkets, the another starting up And then I Michael pockets across XXXX permitting but for are are on oversupply where just come as various dynamic of pick for the where

Michael Manelis

us X,XXX a to think anticipate of looking and this of in in supply we continue. kind units is really at top concentration that on I really in market submarkets And district quarter. delivered So And we're of these this kind Virginia. almost the

us would in still the concentration it from the So on Northern us still on sits a district, Virginia. in it sits say, standpoint, I

to performing continue. that than supply We despite the sitting what We're there. thought we better expect

Mark Parrell

it question apologize. your than don’t was I I was only know or that, John broader D.C.

John Pawlowski

wondering, necessary project. because this beyond Sorry, And Not permitting a big revitalization of supply across bunch year the there's D.C. just where the big is XXXX, supply hitting. where shocks but I metro? are shocks waterfront accelerating, hitting know the

Mark Parrell

Well, D.C. as the a new is get talk Market Union going area I market areas. supply to deliver has the rapidly you a that ability waterfront certainly this is lot well. mean in to again about in of

live there for more areas draw lot reasons much new the these livable, so than district that areas. So are to they're much these but terrific of the more sense these areas new reasons before, dynamic there even do in making more a place, are people

on of also deliver could stuff and if Amazon. Arlington not more it in amount So think the two you and in because about see bit a wouldn't at I a years and may up talking around of going there. can all of Market, easily I you, in surprised little be around I'll of supply HQX concentration tell lot you in pretty spring the the places Union in delivered we're

I everywhere. So, I exist honestly. mean

John Pawlowski

Thanks Yes. so much.

Mark Parrell

you. Thank

Operator

you. Thank

with next from Richard Hill Morgan Our comes question Stanley.

Richard Hill

supply in like is three recognize how context, get here, guidance. next out Maybe Hey. the a maybe nicely have It over versus plays two just bit little morning more I sounds on bullish you near-term, you City any a of pretty focused you're action take technical? but New to either broader to of most up years, do until on demand Good see want that York because question look on that you what as and you markets in that what the caution so-called markets maybe and guys. following out do rebounding

Mark Parrell

Mark. Rich. Hey, It's

I'll it I in on supply as about more amounts markets prior other market would that little So structural discouraging Washington, short bit think think makes limitations D.C. other large supply you order, about of ability brand limitations in little it's talked some of When the the and supply relative many say I – the land deliver of Most inputs difficult than sort more supply. in a submarkets side. submarkets, our markets demand on other. terms question of a have probably call new or and and in the we supply more just in slightly of three picture, and in the

feel like demand, New the services all over of sort In good. very feels we picture across we York bullish employment of good financial markets New We the is mean I very York headache very long-term. think. terms about the on

We're the that amount think tower there. costs we demand that like emphasis deal. like new the building great it We with of city a lot. And an has New big technology base a media and reborn and I our York we a on resident Boston, see

thinking which define So rent the the place board governments D.C. D.C. do know be, a are would Coast have but is better frankly they our supply Metro renovation West knew other lot got demand jurisdictions we package funding the have then fund we whether because there A investing numbers then it feel because assured are across very system, three discussed both of we've I the reforms about control terrific. just well. funding to including terrific. of the from badly picture call to as that the new they like demand And that. point, of in concerns, commended our just and to the the in the We the was The and now markets and And needed in infrastructure. done on is which their D.C. be just you is

So and good challenging is bit would the see a markets other supplying any lot of our we in little things D.C. And say the just across a picture in again than I more markets. board. that

Richard Hill

too that Got side. been We've aging millennial There's even talk that’s about population that's it. these And bigger. you behind they're rent early talking or on Z you own that population. to about the demand lot on is one have the expect rent it and follow-up thoughts obviously propensity coming of at millennial more a the been the Gen and own this versus to than to disease do Do tell point? going to

Mark Parrell

a Well, something couple I've I me got to so living Gen with speak Z that.

this be I again dense like. transit don't changes. urban suburban these invest that continue these in creation don't provided want dynamic and would in inflection infrastructure can't operate don't why and continue like and cities why dense in cities of parks and we we point see to I know that jobs to the there that attractive what think in. I live of I know people settings

I'd point out So, at I optimistic. resident very we're mean XX. bit that average little a is our older

even height millennials through the the yet of our system. haven't seen we So,

their now, a tailwinds they very be expressed they're continue coming we But to XX and millennials, preferences to I similarly. guess when wouldn't in from so Z young core. I out college and seen good housing this just years just yet. act entering think reason well might going really biggest the group be It to of no the so Gen yet we're haven't feel fair, older, to believe are the that is

Richard Hill

Got it.

helpful Thank guys. good Congrats quarter. on very Okay. you. a That's

Mark Parrell

you. Thank

Operator

you. Thank

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

John Kim

gave you data this driving Thank specific X% York, found And based pretty broad you Is submarkets? some increase, the then I'm you. a what wondering lease rates indicator specifically on interesting is good New of if be some to it new Michael of think? or it foot do traffic to historically. to growth by market. is your

Mark Parrell

No.

being say I So, would pretty consistent was just strong. it submarkets across the the

how do those only itself things by in traffic the would not influence could that because foot think look we're to on thing to dollars how available sell have putting units we there's is I demand, see based you that we much there can numbers. many advertising

can I get us right, prior we a consistent in that of leading year our you areas these a marketing us can the growth think position strongest start we allowed in strategy year-over-year see a grow versus and on for where pushing and kind basis were kind fairly the had indicator. then to occupancy of

John Kim

change for or be revenue up will maybe your of being same-store any year couple from as quarter as Okay, to questions least moved this far revenue accounting this Was Bob. benefit revenue. there the a unelectable

Robert Garechana

Yes.

We've avenue. no debt for always accounted our expense there's So change. bad contrary as a

in didn't the any income So, impact the implementation statement accounting lease regard.

John Kim

respecting at is the versus the extinguishment FFO looking Is any quarter? more second second first in or but quarter. down quarter narrowed one-time your Okay. FFO items quarter is not the And second there like coming the debt area cost like guidance, the then this normalized,

Robert Garechana

on debt stones some the to is of part XXX. sale tax of one so that We of actually was sizable. costs, fairly that that There's the acquired as extinguishment Its payoff property which our it mark-to-market. Yes. non-cash, relate exempt bonds

there conjunction fairly sizable to in debt written a So had when off be is sale. off we paid the that that discount with

John Kim

your then year? first the year, it end of Do of finally, range that going the at the high-end like for expenses come know I And in come in you quarter. to at to your out of guidance remainder is high continue sounds have for the the also revenue guidance expect

Robert Garechana

Yes.

always the the with comfortable at midpoint our in expenses. that original range call forecast. be assumed the of would end loaded So guidance we're front of growth on our kind expense We

comfortable we're kind where midpoint of around of the that's the So right. kind range

John Kim

Thank you.

Operator

Thank you.

Stevenson with Janney. question comes from next Our Rob

Robert Stevenson

is NOI particular points basis or XXX much Anything on and having an morning Turnover year-over-year. the continued that XXX was driving Good down guys. or XXX decline pretty in overall impact again meaningfully an versus how higher? of

Robert Garechana

just QX I quarter, in of yes, was of So fewer over it for units QX roughly over X.X% XXX it was mean XXXX, the over turned XXXX.

the I to So unit from actual make ready the perspective, is cost – cost mean an NOI a not significant. physical

for coming think you renewing units. don't us The a those I reduce to X.X%. vacancy that's big at and have right So we our loss NOI. in people renewals were is now a also driver the And benefit we more right on

to that, to So NOI are which delivering service what I of strong residents. kind the is we seeing that. customer Of a that said our in we've into lift consistent from past, drivers the that me think we're contribution to the is is to very

later fueled marrying changing at company are out and high. time later scores there satisfaction having decisions for deferring the people being Our later. all with life And years that's children

those we're How lower think I coming of benefiting all from things goes. So, it I much know. together. don't

Robert Stevenson

one up. this the that point. sticks at just market was Anything out that County is exception about it Orange was Okay. or noise

Mark Parrell

XX it's it just it forecasted Yes, that it we the down last pressure up guidance and market. versus that need first We some something that to our into year. was knew was and that were quarter but right. during we first quarter equated walk. in facing something outs watching move we're of It's to more We

Robert Stevenson

L.A. new positive have that your What all I assume those lease a San markets, growth then basis? new schedule. and growth And be entire to What year. per Okay. and in full-year. likely quarter are the the the positive Francisco had done first rent markets flip and positive lease besides When when for you on is new other those markets said for two as could

Mark Parrell

Yes.

for full-year. the put March we've guidance Investor the So the Presentation for out there in

Francisco, San of probably the understand right have will you now. perspective you just change March New and a get three I the here would So a at lease that impact D.C. really York think kind quarter sitting that the could tell from and sense. look outperformed I you first of as kind and those guidance are new stuff. what it better not the when basis basis you to that leases XX we're points, in numbers, full-year And the expected the getting stretch full-year just Its new that meaningful. ready you the all in it's of write, XX over quantity quarter. we points put than of rest this and call out of

Robert Stevenson

Okay. Thanks guys.

Operator

you. Thank

from Guinee Stifel. Our with John comes next question

John Guinee

Great. CapEx smart digital unit experience A $XXX your in unit per new and X,XXX spend few quick guidance. the tech questions, are included you. digital is Thank first

Mark Parrell

Yes.

John Guinee

then any…? second, And

Mark Parrell

Yes.

John Guinee

change in asking Okay, contiguous taking or to assets headquarter great. your second Then location HQ any Amazon rents yet? in to

Mark Parrell

No.

see lift they announced they're June me I that. what up power It's from the they go to some in that pricing and office progresses see right. as submarket we're space. demand actually more for start fundamentals psychological just you're good think seeing long-term you're employees those there the think and going you'll jobs – for to strengthened it's year To going temporary a number and to and in see what think I going and more some I that and putting probably HQX

John Guinee

expected needed to And per on under Okay. yield unit yields. square last then foot memory to as Boston basis tower then per hit a those development XXX,XXX rents our and refresh

Mark Parrell

with we of that the and that over give Right. second over asset stabilize yield here. underwriting yield. construction be and Yes, sense tower here where not current take have through we a to for rents just X%. on The X% the expect little actual at a There talk current I for certainly current that points. to sure here so with would bit I with But could a rent a costs later me have me you I'm you don't the about that. is a a

John Guinee

Thank job. you. Nice Great.

Operator

Thank you.

Goel Our next with comes question from Zelman. Hardik

Hardik Goel

Hello? Do me? you hear guys

Mark Parrell

Yes, we can.

Hardik Goel

taking and L.A. Mark. thanks, of on I just my D.C. for call. on some made comments a you question the supply. Thanks Hey had

kind How just and time deliver that have supply could hasn't construction on the that some revise healthy and the people started with same you supply color really to is know they're that of ones at So delays difficult comes typically capital on really? D.C. if at stack clip where going markets driving having even looking pretty issue just labor and insight add what's we on? we and and an that California time costs much to and what's versus into difference is in of

Mark Parrell

these little opposition very new Sure. see One DC, but couple I and easy. different mean the lot not entrenched it there's effective are Virginia. destination much to a construction is by of less things a and relatively new of there's more Well like a the of are in you is significant Downtown going to Maryland It’s build lot difficult, to entrenched opposition. easy neighborhood, neighborhoods a Northern there on. new you There as L.A. area similar. is When sorts again is of ballpark go so see amounts a you construction. relatively

is through. is the that say in Coast, So on have D.C. on you rules I more that of of availability to governmental base speaking government terms West and than all in a I work regulations limitations would it generally good need in say of in of you D.C. restrictions we to execute to sized would easier. land terms maybe subcontractor local

maybe on view have significant land We units. additional more limitations, a effective more NIMBYs

all of those combination So I it's a think things.

Hardik Goel

started. quick takes that Does affect in well you the the just What a on it get it long What the about about how complete difference and regulatory just follow to environment to as wants approved there time? Is use unit think? and up. done already to

Mark Parrell

be that you're you're a garden heard it's you're not case, I've wrap building product, more what don't. you building mid a rise rise the are I building what or constructing. to high

to you're going it's high if a So building rise take longer.

York a rise where of time. when lot of our pretty and lot when everything's New supply of like a there's they're And so it takes accurate think markets garden, rise we D.C. markets mid have we high lot a like where less numbers,

of construction of in L.A. probably is of things, a there related mid difference. the heard material rise I've D.C. I starts, rise not the but that in a the whether it's those once not difference If area So, a completion in great there's heard have and say of completion sorts the or mid deal

Hardik Goel

Got helpful thanks. it. That's very

Operator

Thank you.

Our O'Neill. Alexander Sandler with question comes from Goldfarb next

Alexander Goldfarb

for into but that you rent Good XXXX that morning. New your to Mark, know XX bucket? stabilized either portfolio a pre assets majority mentioned What market going fall a just on for New York minute, your York your units. basis, you maybe New could that's Brent of not percent would York a you York either were percentage most New just the rate of portfolio rent or control

Mark Parrell

for and this we some technical, example, and that give properties Sure subject move rate. bit admit they're Alex, little they'll shifting some the period are here a stabilization completing I their market to I'll in numbers these as is very rent it's of correction general all

X,XXX even we metro in aren't York, units So, have in York call or City New so it New X,XXX proper.

units or So, moving it some they're out of going right deals XX,XXX maybe rent not in that conversation part having of down this one number the call or another. fashion our units we're rent have stabilized so, so because is XX,XXX shortly now, stabilization and we category,

is those units. a are remaining there's restrictions very so and You what York whether call New less odd means variations a lot the XX.XXX or that effectively significant as on but or X,XXX of know and

Robert Garechana

go through to and cycle. keep and of to going as units, number XX is its XXXA rate burn some now at these stabilization the through increasing of market from rate market Our their units we call rent assets periods

Alexander Goldfarb

Okay.

to just stabilized as the as rent to that caps are So well legal includes rate the the units units clarify preferential subject rents, X,XXX correct?

Mark Parrell

Yes.

Alexander Goldfarb

that second you guys the and but I are council then XXXX then up I just towards on maybe but with the the measuring energy is against how market then that way XXXX. buildings looks city not. reading – rate if And rate market in is Okay. just the both don't exempt, buildings the passed in regulated mayor they're assigned mandate it view the York, units are could initiatives units the portfolio were new recent you I've know think but question And heard New is just about talk your talk about you

XXXX maybe against your portfolio threshold? just lays for of the in talk about So up could how again XXXX sort you

Mark Parrell

Sure.

let just get little of So, me bit a context.

really in really XXXX out a then another measure gas decline bill calculation They've a for of beginning So greenhouse intensity. and the is that XXXX those come with trying has kind to I believe. mandate

just rent So, to that XXXA Brooklyn at XX% I about kind our and stuff be we looking Manhattan about the rolling XXXX stabilization. about of won't kind and we off as to the unit. to portfolio we're they where some of units In take thinking will or still think measures anticipating only form X,XXX this need subject of will properties be of subject have prescriptive

being on that I say and been consumption So company would focused always the we've energy efficiency. said,

about achieve, it's we're take baseline work just a consultant but to to some going up is this how XXXX hit – their benchmark that with not understand concerned yet much reduction for able we're But we're like we're sure work to that we're calc to about our a but have to do to we're to challenge we're say would where So not still not this I is reduction XXXX. for looks in And benchmark. going requirement. working as but to the really it XX% as through be

Alexander Goldfarb

for basically But part effectively XX% is Okay. the because... shielded portfolio initial your of

Mark Parrell

I take need but to measures mean, there. still Yes. in you prescriptive

actual but we've most the from our confidence calculation the we are of lot to need there these just shielded years to still have already given yes, So focus or done a things you're But going it that do. over penalties from you're of those.

Robert Garechana

that of of that New a for we've with assets these cogent the York you lot us. do in already initiatives a gone efficiency and – well lot a got got we've done is lot of know sustainability Yes, work we on we've

of do You'll see would I that A some lot Alex, done us anyway. have we work. bet you

Alexander Goldfarb

Mark. you, Thank Okay.

Mark Parrell

Thank you.

Operator

Thank you.

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

John Pawlowski

follow-up rate the quick X.X on like New could share burn the from The you yield, offs disposition what cap XXXA sellers a basis? be York of impact on the cap would disposition. One the City rate Thanks.

Mark Parrell

me what us the ours there John. cap that willing try We Again, all based tell sellers know know it's is is. rate we or what thought on same might same Understand what you process. think about to We to initially renovation thought the process as the is. buyer about the pardon be Yes. their

later. that up me asset? any know that that have with don't the schedule for specific specific I step asset. could We I on have – Bob, with So don't you conversation right you now got certainly detail

Robert Garechana

estate from was can it Yes. the but thing relates our is tax own XXXX The up the the growth that's of the say only rate about of step color to was $XXX,XXX have I kind real all it I piece, as at from to moment. XXXX,

John Pawlowski

Okay. That helps. Thanks.

Mark Parrell

Thank you.

Operator

Thank to back you. I'd to our for this turn remarks. At presenters like closing it time,

Mark Parrell

right. All

our We Before we friend, has end the Analysis retirement. a very to Company Bob XX want years after our Senior in and John give CFO's. as so his the VP teacher to us and wish special is colleague to our Planning Lennox, you a who call, very I been retiring many Garechana me thank today to and with best mentor Financial of in both of valued and a Company. John him

So for and your thank good today all have time day. a you

Operator

presentation. gentlemen, today's and Ladies you. concludes this Thank

disconnect. now may You

Equity Residential (EQR) 1 May 192019 Q1 Earnings call transcript