AvalonBay Communities (AVB) 28 Jul 222022 Q2 Earnings call transcript

Company Profile

Participants

Jason Reilley	VP, IR
Benjamin Schall	President, CEO & Director
Sean Breslin	COO
Kevin O'Shea	CFO
Matthew Birenbaum	CIO
Nicholas Joseph	Citigroup
Austin Wurschmidt	KeyBanc Capital Markets
Stephen Sakwa	Evercore ISI
Chandni Luthra	Goldman Sachs Group
Connor Mitchell	Piper Sandler & Co.
Bradley Heffern	RBC Capital Markets
Alan Peterson	Green Street Advisors
Richard Anderson	SMBC
Joshua Dennerlein	Bank of America Merrill Lynch
Adam Kramer	Morgan Stanley

Call transcript

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Operator

Good morning, ladies and gentlemen, and welcome to AvalonBay Communities Second Quarter 2022 Earnings Conference Call. [Operator Instructions].

Your host for today's conference call is Mr. Jason Reilley, Vice President of Investor Relations. Mr. your begin may you conference. Reilley,

Jason Reilley

and Thank Quarter AvalonBay Second to Earnings you, Conference Kyle, XXXX Call. Communities welcome

XX-Q Before XX-K we of release of in begin, made please There afternoon's and note that forward-looking press differ may and and discussion. associated forward-looking SEC. company's filed materially. are the uncertainties actual uncertainties yesterday results during a with statements as There a risks the and as variety discussion Form well risks is with Form statements, these this may be in

to usual, press definitions on available may The operating information financial of AvalonBay other President As with this an this discussion. release attachment review Communities, also which over and the measures our And does performance. and with his refer website results terms, financial I be Ben remarks. the include our today's is non-GAAP will that, turn of for used to call at in reconciliations www.avalonbay.com/earnings, during you of attachment encourage CEO we and and and Schall, to Ben?

Benjamin Schall

occupancy was share net $X.XX or FFO driven and increased rent core financial I'll atypical, This as Sean allocation. by and approaches On bad us Jason, of Kevin, the a guidance us we share, strong as end $X.XX today. is had per is X% some favorable very above-average more of I asking continued for than capital and will for second of QX well debt. share exceeding well guidance above per as Q&A. joining our you, since with growth, thanks, particularly prepared our with performance everyone, quarter outperformance prior by discussing remarks, and Thank and to and magnitude operating Matt our start latest operations, by April at we expectations.

core we're our will on increase over core XX%. more of per $X.XX guidance. quarter, at $X.XX prior an fully, as share X, XX% year the growth Kevin And the guidance increased describe core for per up FFO FFO roughly to FFO As raising bringing share during year-to-date midpoint, shown Slide to our the second

our As over impacts that we growth erode number fundamentals, support and allocation. the operating should next to back support year, later the capital half are which will guidance a that our way the highlight of serve of macro remarks, or going environment earnings meaningful continued ballast. there our during Switching year as in for strong into tailwinds a a if were to

uncertain strong the environment shareholder cycles. sheet time it maintain macro balance our has to ever strength markets as focus $XXX us $X.XX is in at ways. future of through and fund on million allowing to we also in -- We responded and our Our as forward been, creating can in We've across an end which draw changing certain the down $XXX to providing equity over XXXX value April growth. issued share, a capital a

our in to in As to established shifted continue portfolio we regions from rotate and net buyer we communicated QX, as neutral from our net we the being assets trader of optimize a markets. capital into expansion also XXXX, a

our acquisitions Consistent active markets. selectively of in points dispositions assets are with basis in prior rates, which our widened match regions, generally at approximately established XXXX $X.X based higher with our which XX seen We with continue to we've dispositions many our billion with we development projected profiles CapEx market development activity, in by expansion cap assets on older we're we front, billion delays. And a newer reduced of acquisitions fund remain rights have under starts $X.X construction and the some markets. project-specific on pipeline, while to utilizing

conditions so ramp evolve. XXXX development on overall we on start depending maintaining are up that or focused macro flexibility volume, projects, our we For down how can new potential

additional lease from QX same-store color Net year in the some majority in Before XX.X% coming additional offsetting revenue rates provides concessions quickly debt as vast growth, well breakout Slide revenue turning X relative bad as year. growth. QX the it to bad underlying on growth QX a our with reduced Sean, our payments provide last me with of to improved rent also relief to impact the as of compared change debt. last let

and Turning emergency our relief compared rent federal June to to rental these remains our prior to backdrop component expectations to the into was Slide in earlier that and resident of in revenue the assistance QX. with net bad underlying government XXXX mid-X% detail. to the range, QX compared a in points to guidance, relative see And more we funds bad to while debt X. XX review improving programs Net meaningful to with are in I'll from low X% government's of currently behavior basis operating run via XX with And payment bad debt payments outperformance that, continuing historically. it QX May would Sean dry as turn elevated, pleased debt down

Sean Breslin

Thanks, All Ben. right.

Turning the remained in business supported the it Turnover to in ticked quarter. of absolute in seasonal terms below Slide June, revenue patterns, growth XX% above each month throughout quarter. healthy the The norms, was Ben historical X. was trends up but very occupancy noted given strong though normal by even

regions. quarter by of our change averaged Additionally, healthy the roughly trended and supported up during demand rent across like-term all XX%, effective

revenue, Lastly, rent some out in in noncollectible see more moving from and communities, during started like residents challenged chronically excluding some were quarter we delinquent lease of our L.A. started improvement particularly the New as York. to markets who relief, second

month. the half decline in modest While we back the from of month of number expect likely continue delinquent improvement to to be accounts XXXX, will rate of to the

Slide the positive. X. The remains for quite outlook Moving business to

ahead we up resident we're the move the of as of trend look XX% of capture And historically than the levels to second to throughout with and to into second and the range, at since XXXX. Xst growing more roughly further the end. loss rent incomes continued increase continued low availability rents half quarter positioned percentage are in quarter Asking supporting of double-digit lease of X% and XXXX the well higher year,

Slide to Turning X.

exceeded Leasing leases about during that or post velocity projections. portfolio quarter strong lease-up $XXX average month very initial rents XX Our on XX% at were above continues results. per to the

result, producing almost a million are yields be value the creation relative on significant business, projected in to underlying $XXX rates. range in stabilized mid-X% As to cap

balance I'll address to XXXX updated the our Now it Kevin turn and Kevin? to outlook for sheet.

Kevin O'Shea

core lease divided third the higher-than-expected in on by by increase partially $X.XX $X.XX as a This the represents with to our expectations in increase turn our over represent X April, of revenue already growth a relative this rates $X.XX year is second driven also been over Thanks, and outlook growth the $X.XX XX, XX.X% company's share in Sean. further, recognized debt, strongest evenly now reflecting the last would earnings decrease $X.XX provide lower-than-expected and X XXXX. bad If residential an full for other business. in X of financial residential growth On we represents year strong categories, XX $X.XX described offset per achieved, this remaining the a fourth earnings same-store in full primarily and in or expect by our roughly increase quarters. in Slide revenue, of of a earnings. We revenue release. quarter year's This FFO having in down Page higher continued bit $X.XX Drilling over increase same-store decades. across revised increase in

second relates the rent expect about debt rent to it to impact As in first half. bad year decline underlying debt before the bad to of in X.X% X.X% and we of the relief the from relief, half

the We year also expected in expect the the rent million in relief second $X to half to in million recognized we the quarter. all half, which nearly first decline from of third of $XX the is

about basis points in portfolio, NOI year is midpoint bad residential residential in for revised the to at in XX points, to change we revenue first growth XXXX growth now on growth in the growth we from of mind of that same-store year-over-year increase our for basis basis Keep XX.XX%. net XXX debt a points. XXX the full result, second bad was revenue debt points XXX the XXX the contribute year half X% As operating will XX.XX%, expense of in rate of projected same-store full bad a basis Thus, a residential year half roughly same-store basis debt so for points expect project net and of overall XXXX. basis guidance, to same-store of

planned we $XXX initial developments from early Finally, in few about slightly shifted have million starts XXXX, to expect start in developments down into expected new XXXX. the a outlook for as billion in their $X.XX

are completed will Turning XX. Nearly equity this that to stabilized. these funded of match underway NAV with provide Locking long-term cost is and already current the investment ensure projects of they and XX% debt when earnings growth capital helps capital. development and Slide

to Slide XX. Turning

continue positioned range strength of As also below us investment look with this across attractive exceptionally regard, and stability, sheet platforms. we debt-to-EBITDA leverage flexibility our balance financial net remains to our our which low well to target of growth In is provide funding while Xx opportunities enjoy ahead, we giving Xx. to X.Xx, the

it of NOI coverage average with quarter to our XX, record I'll liquidity unfunded in Ben. debt end. about XX%, $XXX is a about well-laddered remaining maturities billion at Xx to $X.X as excellent, are position commitments of to liquidity interest back weighted that, are Slide Our maturity of unencumbered on ratio shown as relative years. percentage of and years respectively. in our levels X.X turn our And with And excess million With

Benjamin Schall

Kevin. Thanks,

earnings at consistent yields in strong so today's ratchet platform. to spread described over points, start our generating earnings yesterday's to meaningful value or industry-leading XXX shareholders points value a our XX cap an exceptionally able we and additional and we're strong sheet development, approach, of core number do generate in focusing of incremental ratchet are down but value emphasize as of between far our balance strong so development activity way basis a support highlights in on provides and cap outlook. completion particular creation and current creation earnings funding stabilized As rents, and XX, at and growth. how stabilized time, the Slide on we our we cost our measure significant rates forward, realizing growth. that this tailwinds, look On start With year, through historical value To and projects for spread creation a between continued yields and rates, match that wanted development Slide we up

our our incremental X we're spread based basis underwriting, provide to current appropriate next term, to earnings For In X come range Slide are expected development with to from pipeline, continues to from believe underway we points NOI most rights which on incremental our the seeing this returns. over $XXX XXX million years. roughly XX, the developments to as of provide projects shown meaningful these XXX projects near on in risk-adjusted

these the from XX. the number we to digitization basis to margin outlined, million as progress home in associated revenue improvement midst operating platform managed year-by-year technology technology transforming of $XX renewals or additional $XX including and an of including customer we WiFi million that provides of smart bulk Moving in on of disclosure projected expense points of self-touring, and And with $XX savings others. maintenance, a of incremental we significant in of Slide generate additional our Internet, initiatives, experiences, and previously $XX with million the of come expect with rollout the and to Slide certain million NOI. XX investments are XXX innovation to

last We program to investment also off quarter, is solid introduced a which structured start. our

million providing and we've XX, a returns on projects. we preferred over book new construction achieve attractive investments, risk-adjusted closed our on will of can we X we incremental As equity $XXX build intimate development, Slide knowledge to of leveraging on growth. million construction believe third-party our operations, and earnings that shown By capital, time $XXX developers business of to providing first up

our Before highlight, the of continued Corporate on XXth want our to Annual shown leadership given closing, Responsibility as Report. recent publication XX, I Slide also ESG

and numeric, these achieved On XX% the Scope far. X through and initiatives, emissions and we've reductions to E, targets first actual science-based X Scope proud the we of so emissions, in Scope for reductions X one we're XX% REITs that are in reductions reductions, set emission

come. our investments culture, our to our progress remain and in diversity and being with people advancing S, more inclusion made initiatives, a the priority, On including and

also looking key the caring. to around that date, to of evergreen facilitate have continued I'll ahead. set associates how believe very local year our of summary through operating We spirit time our And questions. expectations to table our turn that our connect for XX, AvalonBay to of operator We're including lifted meaningfully results are there and invest a on Slide tailwinds with specific donations, a it pleased with strong closing, part communities volunteer and continue our earnings key our growth for of number the to a In AvalonBay the in that, culture, with direct takeaways.

Operator

from [Operator Citi. Instructions]. Joseph question with Nicholas We take our first

Nicholas Joseph

the on -- looking the are and development here. starting on market looks annual yields Maybe initial I'm pretty transaction widespread there's but in Obviously, between XX I come numbers, transaction market, and cap these rates recognize XXXX. Slide the and down the

the you've terms So over movement months seen last markets. cap just curious rates in values what of in asset or X and across your X

Matthew Birenbaum

the Nick, it's the a in in the rates. been Matt. of market there's certainly, rise Yes, couple with last in months, shift transaction

are And so and in changing active we pretty good it's we've market, so -- some quickly. the had

buyers. type. cap portfolio most Ben as data remarks, are are more in in mentioned a say just to others that transacting NOIs we it, points, be were little I'd can little institutional-grade highly are -- deals thing that we've more are more seen call a move, up, points his first kind definitely our asset the So in XX It's assets. levered some of nobody basis to recently range. but But targeted than been less regions, sure, of prepared There not rates if continue assets real maybe depending grow. suggest, the where probably that gotten the and on probably is may they that more type had would the a which in particularly more would significant they have be

some getting the in denominator. that increase numerator to of overall terms some the offsets XX% you're of in values, the down because lift maybe X% So in asset

Nicholas Joseph

into then of color about? least competition And the some come Just any these did on at you of helpful. you to kind just What on as are start investment entrance market. deals, program few execute That's of how seeing? the structured deals sort this first

Matthew Birenbaum

that I one it's to well. I guess as Yes. Nick, Matt. can speak

the we first on in their we the working San the Francisco have, Denver. Coast. others is So and X Bay actually the is pipeline in then actually through in And area East a one deals the East one other way have the

we're So flow, given typically the do sponsors. we there a a it's mean our local of builder, in is geographic nice mix. deep think our markets. developer there And seeing deal merchant, lot I presence leverage

So land. some that are at knew kind them as we of from these sites of looking

acquisitions and to deal talking them, the of brokerage they flow or certainly good dispositions. asset -- Some from we're there's community folks about asset

really strong other we're an alignment in they that in given capital the expertise relationship construction further first deals fact we're heart with thing first All in construction The with is these pretty up provider and stack our in obviously are, lenders. seeing capital such them have take and lenders. than And there and operations. development the they experienced

find. capital think So of we're to is looking repeat to harder pool from get I flow a And increasing lenders. the probably as business a deal little gets

like position we even So should that our competitive. forward more be going we

Operator

Markets. with question next Austin our KeyBanc capital Wurschmidt take We from

Austin Wurschmidt

using was and given revenue still risk this data recessions sizable you I'm earn-in your I materially if mean, materially, that I some at point. probability where soften historically what if, starting And to from today. -- again, could give a idea trying that soften recognize little that maybe of you of just place I what's be. presumably wondering as you'd see if at things conditions expect kind just to but here, got negative are turn earn-in of to shape a high 'XX actually guess if in growth historical downside bit different, do the all provide loss curious, understand, up lease I to So I'm year, entering guys you we're the could

Sean Breslin

Sean. that is Yes. take one. this Austin, I'll

As of year still is a X.X%. was into lot The at the a in you we there's of earn-in, guidance transactions that year-end. do, to about and obviously it to relates execute of the leasing now that beginning lot to the place earn-in XXXX, between coming had the give I

second And that based we XXXX, could leases sort where guidance year so far executed thus going year, above this well on we XXXX expect we've of started for would forward what given as the to into look half the the be the provided earn-in you the that of you XXXX.

from bit that, including, So will could in There in be debt a tailwinds, rent headwinds keep other obviously, some one variable terms normalization factors the that be bad a collection mind whole this it's a obviously, The in a of of underlying are be and/or puzzle. should of the relief of bit headwind. of year rates loss tailwind.

need leases are a where expire particularly It -- I you'd today end to, throughout be negative go kind So you've kind where when growth. to then would the other to in next rents total how growth to think position terms to of that to have how And even question translates revenue room in of really up to of any have a we to a it your to if probably would of year might whipsaw and as the growth what our given in see you got to happen, fair macro a that those environment really keep quickly with of kind loss that and year. sour, the it a economic revenue between pretty the things embedded about still relates cushion would kind continues in of lot of I us yes, I revenue of kind to and severe leases terms mind get to negative as of all make happen growth. rents point characterize shock our where have think there's lot between

that's So describe I'd that. how

Austin Wurschmidt

of billion $X.X got to pushed Obviously, year. then XXXX helpful. on had $X.X in about next guys billion talked secondly, That's into Great. you environment. deals just sort range the the starts depending And some NAREIT a

an then below how could And of $X.X the there? billion, you the So also given low debt end today is additional provide that to just about you your that range? upside is update have you're thinking So billion? $X.X the leverage curious capacity

Matthew Birenbaum

Sure, part I and of be less going had just year. thought the I'll is can maybe based to Austin. -- debt speak the are development question. this the talk what on And development wants mean, year to going Kevin Matt. deal-specific than into to volume, really then Yes, our starts speak this that's to the the I some so to factors. we

roll else equal, 'XX. that into all So activity would

quarter rights development been. ever this our obviously, to as billion, think and -- as so which I pipeline it's large picked up And is $X.X

is would we the I look continue, attractive, continue say final $X the but those if deals in. $X get have what if and So equity we anywhere on could on to deals deals how the there, from possibility. preserving do those billion course, costs economics to that we of really year start come depending next have billion focused on certainly see when we And based changes We're on forward. together flexibility we certainly

So amount speak so Kevin, we of have But a to that do already raised, to you speak. fair that? capital to want

Kevin O'Shea

a usually is of and Xx. million, I is Sure. now and million. is on combination to make and point And Yes. good expecting typically on million a out, one. a the $XXX of below as is around flow, EBITDA is EBITDA top we're of target think million selling capital, Thanks, our we're Leverage, In levels I million growth the sheet of between free of Austin, from which to a We you position I'd point cash range we leveraged environment $XXX around I kind environment, -- is pointed enter $XXX from $XXX normal mean retaining that. your growth, first another million mean then point strength of Matt. and XXXX assets in year $XXX which normal balance to of a enter for market X terrific view. the adds $XXX

XX-year by end you amount give typical growth billion debt can development, EBITDA $X.XX of up investment, out flexing the you of That that, ago. given most a tremendous in have so to or the NOI it we would range, leverage-neutral take, debt, you right compared issuance. rates So be But to back $X.XX low funding it's -- a years, say, with call over reasonably if XX in year. look look is back -- Obviously, if over uses. attractive were that it, X% right of look last capacity But billion would point relative you for years, today of kind XX capacity attractive the if in relatively correct current Currently, it but more years. we unsecured funding with in the, year beyond now. of in over you would you're development be treasuries were the look for you last terms or do are to capacity X.XX% that and where where reasonably or now, the and having up around experiencing don't attractive XXXX the sort a as of over we're debt high. even is last they cost if more, And leverage-neutral back primarily us XX development to just

time, be a relative So and the as of yields other up. choices our that just look together got function how to plan, much that at put how of between cash other to will, well the capital ability a pointed choices our on as I as forward take into I lots what markets. cost to both equity are the is free But we capital ability out terms a assets, to bit little debt we've we think of Matt flow, sense debt and development sell costs attractive and leverage in of XXXX think

Benjamin Schall

definitely in terms the Austin, positioning markets. question, orientation durability right? X/X then our of going also and around relatively there. this speaks our of comments forward to be what our supply the expectation of next seen Demand emphasize averages is strength relative add in And also a And is to portfolio development to With markets, both continue is drivers, couple not that the of is to suburban Sean, starts. believe to that I'd we of X.X% projected strong I'll be we're and level national be other of our suburbs, fundamentals may in your to our Ben. on how to range low. looking in particularly that's It's operating year provide going then stock. a portfolio

durability we So into over us to on the be think from the operating you've that the last development next some us then of going a -- and perspective, And side, couple our year. bulk markets. years, development will the continue activity with new provides resiliency seen additional over really from of as in the suburban

Operator

Steve We move question next to the from Evercore ISI. Sakwa with

Stephen Sakwa

I September, you provide thoughts you're wondering maybe if the August, what notices could just the of out and in balance Sean, your what for, a you kind little renewal guess, for year? are of on July sending and where was color I got

Sean Breslin

it that range. remain we in relates XX normal mean in as that. the we kind California, that terms next to in double-digit as some offers over the renewals, constant basically overlay went an Sure, COVID given of of in July, address And out. low we to happy to were the XX example. of are than as place double-digit forward low days Steve, mind where that regulations range the look in keep remains that constrained in like I markets more And relatively slightly

you, Steve. year going get in the So is before renewals, there's that but to more to the be come it all we're to of to next probably way able I'd probably it's on describe

Stephen Sakwa

the or development you couple -- I'm you today lumber circling on the Page there? rents as development. are the gotten costs, on major I front you the questions just a guess realize the or steel guys certain costs of to, higher curious, is beneficiaries just of X XX. input back year and guess, sort I different. start to of areas but I in the with We've from it's 'XX whether concrete, in -- maybe just And current that inflation look Okay. to a little I X seeing And what through ago, at environment

I future guess in you costs are yields pipeline the about kind of how much next into how thinking So and year? have on moving come

Matthew Birenbaum

Sure, Steve. Matt. This is

significant. there. it top it's It to As be may relates inflation, the to starting still and we're like out at cost it still then It's downshift. feels

sure, down. prices lumber are For obviously,

seem off starts, coming sales like For quickly they're pretty now.

guess is to days in think more I maybe that not say increase I'm means little in some to behind favorable. us, markets, that of costs start a I I'd all don't necessarily going become X% maybe optimistic are but So per the buyout will drop. definitely guardedly hard month markets. But

ago, we starting probably this the or well, it X you to relates of year. X X yield. X As they years running the And the expect book, around so year, was at and developments rights that's high development how that on start Xs. mid-X% where are X to of our or probably that started is as we've far we're today's economics in today half second affects to Compared pipeline into and typical a cost the rents kind our today's look hard the development that if

probably that late last representative pretty that cap completed were a the basis I conservative still Frankly, those it the we are cap do down provides how sub-X%, quote we a these where rates we're XX probably things. they in XX, today. So strong development think spread. is but but And are that points, little probably year, rates always of

So I'd deals in would stabilized where say a the X% good our for as were to probably cap's guess they market. today if best trade representation those

Benjamin Schall

if increases XX% And need cost, keeping Steve, we increases, pace roughly, rent quarter, hard increases, overall with NOI from X% you think our you're but to as you hard approximately just cost NOI it standpoint, last a reiterate costs cost of project this increases and again, construction about and uplift. emphasized sensitivity XX% being

those levels, both range yields at type you of those in that of And maintain get Matt so X.X% if able you're referenced. that to

Operator

take next with our Chandni Luthra Goldman question from Sachs. We

Chandni Luthra

tech-oriented if are that? guys of signs business? more about seeing you Any that we markets, there talk you're of your Could reflect reads have broader malaise any the around been the sort early what everywhere in seeing in

Sean Breslin

you start-ups things the renter the we of no. the this in is answer particularly out, But the Chandni, impacting some coming experiencing is slowing the the of the pace At same of population companies larger of that this in on in point, of offer. based things are We're we're apartments Yes. in to terms lean is types not reading front hiring. the desire door, some the demand the for trying their terms it of kind that Sean. of media

Chandni Luthra

the tougher a And we versus a acquisitions into view you Understood. event economic how would relative recession, positioning the question, backdrop? in if of my follow-up of development go

Benjamin Schall

This is Ben. start. Chandni, I'll

selling Our adjust acquisition going dislocated. right, and got of our then based portfolio been reallocating could activity, into our of focused well But into on as if optimization really as initiatives it from trading capital very further at this initiatives. is expectation least much the established movement an to And the diversification we've regions our it assets, on assets in that regions. the date, forward, ties and that the market it's and established approach

So primary that's the element.

talked about we what's we thinking right? maintain. the of where high allocation side, need set, think the On capital spreads a as development it's Matt there, a to that about about at opportunity sort really we're the triangulation level,

the is development the risk. -- that the about relative think range XXX at spread other attractiveness the relative So and other the do basis in how thinking we're do sources we -- return And it about and appropriately that of -- point of there that that on of bottom to then think the provide end in about type the what's there. XXX you a to is component how sufficient probably

our to those So think of our going forward. triangulating will allocation that we about and will approach capital -- dynamics to source And choices that's capital. along continue X with approach, that been our really our continue as be we're

Chandni Luthra

the last financial those allocation? to take areas relative think crisis of capital any as about the Are lessons from positioning X we of there

Kevin O'Shea

versus of acquisitions In terms development?

Chandni Luthra

Yes.

Kevin O'Shea

probably the Well, we I mean I think have balance respond have of first probably taken a to emerge the lessons be is, always the prepared you're opportunities so to in positioned that sheet market. able all, to

environment, developing, best So circumstances. in shareholder enjoy and a can in But dislocated of we opportunities that's and certain market typically obviously, environment, creation. operating emerge source in normal a value you acquisition see highest our

opportunities are our are from that engage pretty in, saw a stock. us attractive of As there XXXX, standpoint you buying in back

at of bit why excess of available below with to Because you'll a Chandni, quite need us. we our operating part -- liquidity target the that's see, and reason So to leverage front level we're more large in can there's able macroeconomic of to that respond a you, when in you be of of prepared positively them. to the environments be unfold greater want to of dispersion majority

to And over to and opportunities next capital in a hunker But use act if we down really may to. or the order emerge in more likely, position our strength invest the position in so a that so. year we're to in we're whatever need

Sean Breslin

but Chandni, downturns. one the following to GFC, is the thing in of prior to reflection on add book. Keep that. not mind our experience a development just this And just

time good As typically a is relates as land pointed new we new it jobs. importantly, to if renegotiating reset very out, in development, for a sourcing Matt costs, very have, there to times those it deals, as buy us either that relates some is are to land. good out that construction deals And

time build buy once, only then deliver, would you yields every to of very, be And you to good that it and very on nice mature started. us when tend only source at release and be to so for book year, that they You they a opportunities very get business. tends it them once, it

equation. that So to that of the is side one the relevant thing is development

Operator

We Markets. from Capital Heffern RBC next take with Brad question our

Bradley Heffern

we'll starts, anything guess of that further delays On that individually? next in quarter the there common cetera? projects specific likelihood them see to et something are what's with delayed those? there And each Is I is further that's out, the from

Matthew Birenbaum

wouldn't I No, the on. backed which is really, up up. bit getting even just Honestly, professionals in a across is just permit everywhere, that's -- we're common Matt. I of little backed our in the it's and seeing design say jurisdictions thing what in so -- mean drawings final Brad, terms

think general across space. likely So to it continue. we're seeing is I trend And the that's a probably

predevelopment in have I schedules we as a longer think about are things started activity through. think that kind and of taking we factor start get little to that that as to we think about

half starts, delays tracking and are don't any So those create this in of that anything those. up would further the the for the all are deals that at second teed point solidly, see year I

Operator

Street. from next Alan our Green with Peterson take question We

Alan Peterson

payroll next of over any only us the reduction the costs X% year-over-year helping you reductions overall the Sean, year-to-date? growing can on-site keep headcount year? remind in that's guys magnitude additional you anticipating at Are

Sean Breslin

Yes. Alan, Sean.

office of that X%. on parse numbers about on it the second side the and So between office is But quoted -- quarter, in the was I maintenance. we and the house, down the headcount

you touched of result it the initiatives expect will benefit and activity remarks his at efficiencies level, we particular, the And yes, site digital in the as in couple and we the that on on next the maintenance referenced the terms both over forward, that On for prepared have that years. X%. you maintenance bucket the ongoing side, the various about then in it's that side, office additional of in Ben of look initiatives,

Alan Peterson

to points there just pencil that points. one XXX range the end than question. spread a a And project? development development low philosophy Ben, XXX new the continue Perfect. you on basis is touched roughly basis XXX more start on construction where for to being you economics where Is would of still to tighter scenario

Benjamin Schall

a is It you that's a we markets. would very it that relative be and mean, you when proposition. the sure value specific those on have come around position questions down make a yourself coming creating general from the So value our to Yes, of range would -- creation approach level It possible. view I asking that long-term on right? is start the conviction to are dependent our risk, be get going of you're around appropriate to higher range, tougher so

Operator

Kramer next Morgan with our from Stanley. take Adam question We

Adam Kramer

maybe a picture to a of about Kind bigger rent of question want kind bit of growth. ask

long term, think numbers, we're a elevated and to level we're me proxy inflationary of going still is high decent of and wrong, even of you which obviously, the X% think typically with here, historical. on relative pre-COVID to be kind I of and I'm of an I of X% kind right, in year off think And environment, if If kind this but -- kind kind should kind historically, per correct to cool year-over-year use. of on rent growth basis inflation kind

of will might Is X% still be good to that about guys be should land where a So proxy right use? higher? kind And kind growth wondering the think kind of do we of that think when of you kind think kind what growth? number? of you rent Or longer-term rent

Sean Breslin

start, a really I'm to the inflation. inflation underlying function at in if else our period of economy. Adam, Yes. is with But customer I it Sean. rents segments this it, in. in chime is than time, grown you though, and quoting, the of number just faster happy think long markets Over a that you're anybody can look have our

of recommend minus I times -- or kind think points when XX around is are number I frame, XXX recall or those years long, time inflation. XX widen. so, a spreads over Again, times where the compress are to above basis there plus they or kind there headline and of

of So basis on I a you serving think to our of nominal how therefore, across markets, and rate rental in think rate the really function terms growth it what segment. might underlying again, want is inflation a you our about expect

terms. absolute you need that's, in number it about to So think think, as I opposed how to

Adam Kramer

based it's a of just for or half think That's maybe quick really assumes and color I second a the new half kind in where just growth Maybe there. follow-up you also -- on But somewhat I growth. guide rate second of lease then appreciate it blended what to know tough lease helpful. kind far year. or you right? second growth of kind have maybe a we may where number, but So number that kind you different kind blended the that lease the end out, number think lower at, of the year of is new may end the but half growth on, do where rate predict

kind year, earlier growth and earn-in to of questions. kind about those thinking of next back right, of kind Just

Sean Breslin

built question. into deceleration year second from XXXX. what's Adam, like of Yes. comps for the primarily second our result effective term in the as half some of change reforecast a rent the good the Essentially, is of half

up if still in second then so in had negative I as it earlier, I change rent almost third at through quarter. you flipped think quarter, And comps look the happened X% the to what quickly tougher. the referenced get we XXXX,

through year. expectation a is move from where second so into second the high about half our deceleration the going the the effective a As that the trend to how change of on see half. level XXX you'll first think at half, basis sort balance That's look it's the we to points rent I of of average you roughly second half, of as

Operator

Anderson question Rich with is SMBC. from The next

Richard Anderson

above you cadence like don't of up tough last have we sort Or term than decelerating, is absolute that they are are market following today? have. Just that are normally the about pace second are lower rent rents where but November -- comp for meaningfully on the optics? today are half forecast? Meaning, the In year, your in rents is of actual this growth just they this What rents in still your question. scenario dollars,

Sean Breslin

Rich, good question. Yes.

a mentioned in X% I've the asking seen year. run since rents So beginning of than up to date, nice more the we've

of back the terms in So the of the do what's seasonality asking half around seasonality in you're is to some really maybe question likely expect year. happen. We

of about half of level we But absolute in we it periods. is that would the have assumed normal second rents pre-COVID see be seasonal to in in sort that the should We seen half what terms compared the as yet. XXXX haven't of reforecast, in decline

So if or that, remember they last we and of just X you sort see year. rose rents of flatlined last then months year, the really X didn't the

they made For but That's if assumption. this year, we've the far at pre-COVID a assumed so just for pace will would see modest year. we have case, We'll decline, typically an more the that's assumption than this that periods actually that's dictate.

Richard Anderson

don't that's, latter a better guess, affects of better Is nice come in for live the the some slowdowns, of the market the during a Or leverage Nebraska What's know with portion it the to week. hiring of or Okay. how can you to hiring to want -- scenario kind now you? at employers some you but I headlines. okay, scenario overall? just So better to And job, second to. back accelerating to essentially if your no is to the they hiring you anywhere tech pure terms commitment layoffs giving back office? office wanted tech Or tech since well, least but the at multifamily a if multifamily I the business, got for least in hiring keep say, question, for the near feeling, to pandemic they being

Sean Breslin

through the And I'm multivariable go not a pandemic, cycles layoff question, that. following give -- Rich. That's in have and the given were you past, typically you tech tech such as rec certainty we Certainly, know. a I been can which Yes. that's on XXX% we through don't painful, sure

of... In terms

Richard Anderson

Sean, the more back employer, and and office the question. of sort office more leverage of having the in the essence the multifamily people sorry, the employer more I layoffs people people then be negotiating and so question to to near is I'm guess moves so using is

Sean Breslin

agree Yes. that. with No, you I on

employment in almost demand you highly within we the some And to So Obviously, just meaningful that of for activity. markets, is concentrated I XXX to to if if out the away is look job-centered to amount, it. whatever the think the second historically, is all as from to around or even migration. than -- the greater head even And to bucket, our -- was second is modest extent just an our example, relevant reversion you declines going move-ins is, our to move-ins there the was It the move-in miles in are where suburban some our employment markets the sorry, number submarkets of I give quarter, XX% the by still XX% urban second for have that base any XX% at portfolio. seen quarter quarter. same-store in there

it certainly, normal relevant, of a come X/X And still is favorable and very was lot but only as there's urban, to less it's -- out it's from opposed to pandemic for favorable trend is back us, which other portfolio, we're XXX% levels. migration of where during up markets. seeing suburban, So which that the various job-centered the as

trend that people those meaningfully in quarters continue been pulling start benefit employers more quarter accelerated to that trend of very into a third in second and hopefully, in the back quarter. couple certainly in the markets a as that's So And has us. place will for office do the

Operator

Dennerlein Joshua Instructions]. of Bank next [Operator our America. We question take with from

Joshua Dennerlein

had Curious, you the details and trying is that level April, dynamic about from loss kind that just to that growing May Slide lease is how on of like time and was about to your days? June. see year? normal thinking into extraordinary just of saw it think how I you then about I'm that at the of these X -- XX%

Sean Breslin

way pace. extraordinary, absolute Yes. during of The Josh, second at the word, up trend is, kind normally In average. normally to terms, above XX% use Sean. around, this is quarter? that To answer is does first your the yes, question it not just

that's hopefully, So helpful.

Joshua Dennerlein

normally even pace a lot higher growth you see So the of the is as a would than like seasonality? normal

Sean Breslin

January than Normally, beginning from an same That It see since you slope is up correct. call year. average it And range just that weaker year. in when at to, is than mentioned, what the you being mid-July still wouldn't up, more I change. rents I'd it, look point of that trends as X% type the to, you that

Joshua Dennerlein

Okay.

have in Or the -- to restrictions was that function because really it And rents sorry, rate? because just one earlier there loss moved? follow-up. in on a of Is fast some is how just also push like lease just to is able growth year being the the

Sean Breslin

of the the X. It's combination really

push can't we're we able it. So all to capture rents on hard. renewals, And of

rents rent to to more of are XX% a at cap lease, they that, spread than up course. if -- will are that people accrue for So increase that loss and

Operator

Connor from with comes question Piper Mitchell next Sandler. The

Connor Mitchell

have questions. two I

for extended First, to And Has additional developers? this you some merchant the guys also about buyers pullback of the given has acquisition just levered opportunity thinking acquisitions? general market.

Matthew Birenbaum

it's since the assets brand-new I Matt. merchant class say, highly typically, buyer usually builders, their would those the levered buyer. not Conor, is assets of a

folks but been the there complete. some So early in want particularly, been of there there than maybe that there fully a And before the there's pullback less there. sell pullback is some lease-up space, to probably has value-add been has are

price execution feel competition. offer. better seller, this less something going do an certainty highest getting opportunity as it's it as and about absolute we So there's a less a about environment, that think we create forward, does for positioned the buyer us. in is we of for like And I are that's And it where

it's So more to a think favorable us. opportunities I buying do going lead that to for

Connor Mitchell

Great. also development again, same the developments to of a ramp guys level on program? investment question And Okay. is that capital it once you're if about or my development about acquisitions investments I hitting was you you the couple allocation would you of might think times. have how structured speed you within of structured wanted wondering if of you And carry kind if then developments guys just talked program. and second the your up, if up

Benjamin Schall

of certain $XXX this of Ben. separate we'll a we that $XXX million is a over approach about years. couple book business. the may million up It's the a to We business and a build the capital, To But Connor, little of degree, would that I bit fill as think harder, consistent environment. business. based on expect pretty of next there little bit pull less to a out finite that

Operator

no It or I'd appears to to additional time. the back there closing comments. like are call turn for Mr. Schall this at further questions any Ben

Benjamin Schall

We support Thank and appreciate summer. rest again a thank today. joining and and of wonderful you us have engagement, your the for you,

Operator

your Thank participation. And for today's concludes call. you this

disconnect. now may You

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