AvalonBay Communities (AVB) 4 Nov 222022 Q3 Earnings call transcript

Company Profile

Participants

Jason Reilley	VP, IR
Ben Schall	President and CEO
Kevin O’Shea	CFO
Matt Birenbaum	Chief Investment Officer
Sean Breslin	COO
Nick Joseph	Citi
Steve Sakwa	Evercore
Austin Wurschmidt	KeyBanc
Jeff Spector	Bank of America
Adam Kramer	Morgan Stanley
Alan Peterson	Green Street
John Kim	BMO Capital Markets
Alexander Goldfarb	Piper Sandler
Jamie Feldman	Wells Fargo
Tayo Okusanya	Credit Suisse

Call transcript

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Operator

Good morning, ladies and gentlemen, and welcome to the AvalonBay Communities Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode.

Following remarks by the Company, we will conduct a question-and-answer session. [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 Third to Earnings you, Conference Doug, 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?

Ben Schall

our In the here year-over-year ways, and year increases open Jason, today, and joining metrics. the us earnings we and operating Kevin, for significant opening Matt, everyone first Sean, lineup half questions. for of you, thank after continued will from you QX our Thank strong with with momentum comments, many the in our

of almost as sequentially QX slide quarterly presentation, for XX% investor X X.X% year, on our a Same-store last and our to compared compared XX% As year strong revenue quarter from referenced increased figure. core FFO to ago. the increased

number future of presentation, I the of to AvalonBay growth. drivers specific further a emphasize earnings progressing into Before wanted

rent in earn-in drivers of enhanced generate loss-to-lease. underway, refer several costs expect $XXX just creates of estimate fully, rents. positive projects earnings significant which existing momentum, have further describe development million then will to the of of the three There other can with into the growth, Sean incremental projects roll these which range by earnings In short, a NOI is we as and our today’s levels. we should traditional be and are as most XXXX more our to through with yesterday’s then we drivers roll next The above head simple which up we First an over of underlying years.

yielding Our current outperform, million deliver lease-ups $XXX activity stabilization, and further. expect incremental upon continue cover development NOI to our X%, currently current we nearly Matt of will which to

expect environment, million further and which business improvement year-end The uplift return NOI generated of million. investment other and earnings a for of model delivered bottom our $XXX recessionary two we about this our ballast XX% $XX program future to operating or these as of from drivers on our the our up significant to from for a targeted build by structured margin incremental potentially uplift book to are $XXX $XXX line In have collectively of $XX initiatives, million activities million we’ve to NOI that as earnings. the million serve

X. slide to Turning

share per it core year While of of core we growth our year guidance. estimate guidance, reduced our XX.X%. updating FFO figure was $X.XX, share to full was full FFO per core $X.XX was QX short strong, by performance below our QX and FFO

than trend revenue of the seasonal full side, been norms. For the seasonality, has contemplated line the historical year, on return greater we the rent while slightly

based line during than X by date XXXX. higher. on of ever. the to slightly been credit sheet Capital our Markets the Difficulty] increased and maintenance forecasted, $XXX and projected balance to capital utility On environment. and than repairs higher Kevin the [Technical actively has adjusting highlights apartments, balance leading to be markets and higher costs stronger Slide we costs to team, to been our maturity our the we’ve how turnover $X.XX the sheet expense our Lockridge billion extended side, are Based and changing by steps and is out on strategy taken year Recently, million Joanne we turn

have swap million $XXX end we for the an in place funding and our through of proactively debt of borrowings forward next our equity interest Additionally, development bulk rate $XXX XXXX. of addressed the million

expansion On selectively posture the given in capital markets, the front, assets to rate deploying movements has cap we in shifted earlier worked a capital that our selling and benefit. this to into transaction of before locking our year strategy cost acquisitions of first our which

buyer being to As or part approximately expecting of net this $XXX to a nearly $XXX of the net of from year million seller be a we shift, million million an during also pivoted come development new down In with and we’ve incremental likely development starts. where also total new to margins capital associated costs on has are environment reduced the increased, swing. $XXX that profit

our manage to For we billion projected while regarding starts, previously $X.XX we XXXX, our from reduced we to the expected our our we we than starts. lower is figure rights In anticipated have the land contracts guidance and potential start development a starts of trending new flexibility $XXX haven’t provided as pipeline use million. XXXX, with timing

appropriate more I’ll rates of continue with that, cost based on with of XXX making on trends a basis potential the to with XXX a our decisions. approach. to it discuss focus We adjustments in between spread and make rent fully environment yields the underlying turn value-creation development operating And Sean costs, and the capital to incremental to continued market and will long-term and laser construction spread our cap to target

Sean Breslin

All right. Thank Ben. you,

apartment out like to efforts with associates to all customers Before service I AvalonBay shout with who a your to and experience. deliver I’d for performance customers shareholders. I’d like home thank you provide the start, big hard give and high-quality our for a are our our you to there working out the

X. Moving slide to

more revenue bad points Our trends. contributions growth primarily rates, year-over-year, underlying XXX higher modest other of strong QX other contributed was increased XX.X% and X.X% rental impact revenue the by which debt lease which driven of from reduced concessions, basis and

rent quarter XXX for the the was from the versus headwind basis-point noted we chart, relief As $X.X recognized as QX million $XX.X million on XXXX.

historical quarter X, more well the turnover rent through we Same-store below pre-pandemic quite pushed norms. healthy still X. levels. slide increases, than little to chart we relative remained strong during was but anticipated a increased as with to trends Starting Turning

of quarter. result turnover, the ticked XX%, a physical our occupancy XX As increased roughly experience above down the to points basis during remained but typical

us few while availability double-digit unit a realized Additionally, the as the inventory noted rent we the very and our we a during sets at well quarter, for XXXX. outcome favorable increase quarters, of on in the occupied relative leased bottom X charts the increased last to slide, up the that

thought XXX given some this of portfolio history, year, level key experienced Beginning than the likely and X. we’ve highest drivers very more XXXX. second than I point rent in change start points to we’ll provide entering ahead I’d our chart X, XXXX X%, revenue roughly as with Moving think in our overview X.X% of an with strong the starting the XXXX. slide we to of our stronger revenue built-in growth basis of roughly for

chart increases high baked-in opportunity to X% at Shifting In XXXX. the roughly addition running to X, depicted in as plenty to chart is the chart has roughly from beginning trending growth points renewal our benefit currently of year, in of progressed. our to debt loss-to-lease by is the range years collection as the rent and from X, XXX expire declined providing was X% At X, in leases the slide, revenue bad throughout outlined continues the rate residence bottom but of basis improve. the

XXXX, cases, processing moratoria courts continue continuing new expired we expect a progress providing revenue to make are and move for As downward into trend growth. to we tailwind the has the overall eviction as

Of in to $XX ‘XX XXXX, chart X, in presenting revenue course, we’ve as recognized likely indicated of experience relief immaterial a headwind in rent as XXXX growth. million we’ll compared the amounts for

I’ll development. Matt it to Now, to turn over Matt? address

Matt Birenbaum

Great. Sean. Thanks,

rents which development to lease-up, XX. supply demand in years. seen of locations lower an currently nearly resulting benefiting communities basis cost, yesterday’s over have a past construction new X%. on as Turning that on of yield developments very Ben [Technical slide while based These today’s are limited higher strong suburban earlier, mentioned few costs, are having and in Difficulty] in exceptional from the all

and they strong both these will communities NAV FFO. reach stabilization, As contribute core to growth

still the million in majority development shown earlier underway come. still As is slide this only in vast mostly NOI NOI on The $XX in currently the to billion quarter. of generated $X.X is development annualized our and stages XX, past construction of

It’s only $XXX market, increase assets this up also evidenced starts earnings $XXX,XXX with deals quarter, As on those worth cap we’ve which sale assets on leasing, drive of another in years. ramping fund before per when sales a that were levels able these lift average weighted QX, proceed the on NOI $XXX our to attractively transaction four these using pricing been on four our and set are We slide in most by majority rate development do as lease-up. we typically these business development. the and the past X.X% of million stabilization, vast underwriting do that of projects expect lease XX% generating will we’ve a recent priced until noting should for roughly in which priced to is asset market with capital as of several also million interest further of per rents rents the market in next home. $XXX conservative prior untrended status. the currently they proceeds lift open source that the achieved level construction activity growth rates, were shown assets based And to the we from when growth this month in future benefit In disposition not underway over rents current close wholly-owned lease-up again, to that NOI, five on currently in at mark the to further of of are our in the at

basis with can our have investment of expansion out the our XX assets completed generating also points. the on of to of one final the we fund quarter, been established XXX our review to best of I’ll while funding pricing relative are our we XXX assets less are and a what selling tell, rate. vehicles We turn cap sheet. cap balance with what future we’ve to additional of the trading rates. order established and has regions, to might year, And NOI to cap XX% home offset as these this in in of regions coastal and last XX% to rates well roughly values start balance, this regions expansion XX% in in and be think have more our in down rise some $XXX,XXX private roughly on XXX portfolio XX% growth the position cap buying. basis value in we risen has Kevin where in we rates points than activity risen that, Since But X.X% been the for Strong diminished capital as over trading as it per sale of of markets, maybe the bodes our

Kevin O’Shea

Matt. Thanks, Great.

steps Turning to year, as bolster to from slide his mentioned beginning about XX% underway These XX, end number our as a long-term include our the remarks, match-funding approximately in strong third position. with the the year. steps having Ben development of at shift with we’ve to capital already the financial the taken XX% markets up of and of this the of increased opening capital in quarter,

help these have of lower and billion completed will underway, nearly in on all growth stabilized. cost development they locked of the of and As we yesterday’s in are that a provide of capital to earnings cost when NAV capital, will with $X.X turn projects which essentially ensure the result,

which In is our by slide of of $XXX line up expansion XX, $X.XX million is renewal our on credit line another recent the we’ve taken addition, credit. previous and you can billion, as see billion of $X.XX from step

to possess As excess a we at million. in we of unfunded enjoyed end, and $XXX strength In relative investment $X.X flexibility. commitments our tremendous result, quarter billion particular, financial liquidity

declined remain target leverage to times of debt X.X to of our times. in X EBITDA we comfortably range last Our end and X.X to quarter the times at net below quarter year, versus X fourth

strength need equity recently, we a and a $XXX debt price well and forward of as NOI laddered our maturity maturities Our in at share management and size and the approach of over the are million capital just average not tremendous our years a taken of to to remained level Thus, sheet the both for modest conservative to unencumbered weighted XX%, at we’ve that fund relatively to we actions of consequence our with possess financial $XXX, April balance business of in eight record percentage other the years. at tap completed do an period extended flexibility time. including markets

Finally, Difficulty] received continuous earned year and on of goal our slide spirit culture our associates values our responsibility. to long It’s to [Technical to XX, the with sustainability our that the is a residents, our slide carrying highest it and as core and the being you’re we yet leader corporate eighth report improvement, aware, a maintained consistent to a XX, investors. Estate commitment that This a integrity, AvalonBay has from of increasing of is are X-star Global or Real excited Sustainability we and Benchmark, in we our for year, On a to row. designation GRESB. score in

residential number the multifamily XX the spot among listed and also residential one spot the We XX number the among earned listed companies one companies.

possible people achievements our for in and and the it this their grateful communities in efforts important and which are we in a We ongoing I’ll positive to grateful area, making to own to commitment for in especially turn lives are difference for residents our these the And back of our their making operate. with for we acknowledging that, Ben. GRESB progress

Ben Schall

to on Thanks, this specific drivers to earnings summarize, Kevin. position And adjust long-term In and us have in continue us. focus we quickly front creation. momentum our our environment, pleased to strong we’re our value approaches earnings operating and will our of with continued and number a keep to with AvalonBay allow of to strengthen

creating I’ll economic wider range based that, for commitments that their by to step With ESG We’re dedication the to marketplace. well confident questions. better potentially AvalonBay thanks for mission base to are and leadership of we for their live. open the line our operator it of dislocations reiterating broader the opportunities to and our a a turn to in our positioned the way associate I’ll broad And potential to on into paths end to

Operator

the from Citi. Our [Operator Nick comes Joseph first question of with Instructions] line

Nick Joseph

Thank you.

provide impacted year, on a that surprised if then it? details really you this started I was it when versus bit returning So, understand any some as are I the your hoping but And drove markets as could there did. seasonality much that XQ specific it diverge to more expectations?

Sean Breslin

see. expectation that of address QX most did Yes. return, communicated for And seasonality the part, but Nick, to is half expectation and to to it’s [Technical late we are we of Happy of when the It that August as August the September correct into what August, at our to to in based thus for is we expected would in rate impact being you felt if on road fourth you kind the is that. then Sean. continues we our call on begin last Difficulty] have we see normal quarter. and late our the QX have map the more seen far we started that bleed about I impacted typically it us. look But into compared provided. sort that would that moving forecast, And shift be and

out. months as we spot played with decelerated the through here, mainly rents season. decelerated, the held in well. the rent on what at expected, last then, the of anticipated, has the we the the as Renewals what move-in on move on July balance much relatively change move-in that it expected. mean, was it have you corresponds asking side. side you But if up which adjustment how really But that’s pretty of move I through it’s from look we So, you couple

of three. degree, responsible really and for there’s Northern California, the how a most somewhat are that’s Those the Mid-Atlantic. are about for So, regions Pacific really is And Northwest in part, out. the to lesser of terms played that three markets, primary it most that the

Nick Joseph

and to you side. about being market sellers, been recognize investment I your have being yields structured seeing are what net the on approach the a a to changes tactical are thinking then, adjusting bit And time mezz slowing And program? there? the the bit now guys start How you grow product you right

Matt Birenbaum

into really a Matt. year ago. is of strategic kind a that decision this Nick, we entry Hey -- that our The made or two was space

investments. And think year more probably more is time book. so, actually entering is to capital that the be market This and getting a originated we’re it’s just we’ve because I first the building good scarce.

and our more is phone ringing for So, more. sure,

some construction just and of And established is relationships is getting harder with of that some that of some capital for some we’ve the the of put together is lenders, starts. to new

So, we doing. certainly to be business measured the on, which take that ability very and we we’re have selective about the

that going terms the the Our current will reflect be rates in are coupon charging those bit on of what’s in rising investments. a our on market. And we’ll underwriting

then there when will where between And Again, kind make that be current we an the generally case and assets on look of and eyes. spot completed sure basis to on when So, of that to two compare trended further. asset we want everything in those we’ve looking we today. our what of lender the at margin got is are values those erode values they’re at margin adequate safety kind

it’s business, that for every deals XX be certainly So, get that bad the harder to willing it’s to commit time to be a to developers not we we X deals work, to. at and to actually in think for may to look have we’re going but

Operator

Our Sakwa with of next Evercore. from line comes the Steve question

Steve Sakwa

what broadly? all charts bad debt X, slide you impacts X, slide to of for X trend X ‘XX in were and the combine on a expectation that guess X number is into And that if is I XXXX, what your of kind or of and for net number?

Sean Breslin

that Steve, Yes. take it’s Sean. to Happy one.

$XX to full calendar million recognize relief year bad expect we’ve the reported be $XX estimation will net includes or throughout which X.X% our year. we full in of the recognized benefit XXXX, debt million that roughly the for to of So our rent

bad the started relief, roughly essentially with expected is range debt out X.X%. year our associated base at the high-X% impact resident year end and you If of is strip in the underlying the to rent

way So, we at about rent this relief, if expect point, you to is, really the it look if forward to think amounts any, for of XXXX. XXXX, immaterial

need bad full X.X% As that the growth for neutral full would for year. I a revenue on mentioned the year trends XXXX essentially average have result, that underlying a debt to to impact

expiring improvement with so, still move of I’d bad But this in courts provide and into based today. play things likely an like L.A. as on to we And a markets more forecast. precise February the terms a in early debt underlying will It’s say at that what what know to out we as trends what’s not continued in will point, expect and bad headwind in than in happening be XXXX. growth it’s certainly how modest in know, based example, XXXX we on revenue L.A. probably eviction moratorium debt net we

Steve Sakwa

that it of then rents that for maybe pegging are difficult. more a secondly, year, work, sort are where the you or next see start look a to really need costs is And do of But to it penciling maybe I out return to near you going on deck kind come zone? need that is construction make term And Matt. the just those into is were most to realize get up to down those on projects you at them cost to little basis? keep think if

Matt Birenbaum

-- It region. really Yes. Steve, Difficulty] it’s depends. the based does vary on the it [Technical and probably

moving yields up. been -- the our So, target have

they start high-Xs mark-to-market those actually is development the will as as exhibit lot and those I deals shown leasing of when current above yield, in deals, X, aren’t be because on yet. our lot a mentioned, So, the of a underway

yet are average somewhere started, kind the based thin on that that’s the On towards trending on cap we that haven’t where the today. rates in and of pipeline underwriting to was mid-Xs, pipeline deals

potentially have at And and, on only form then value comfortably of yet cap help of above some prevailing we not in today’s second be in come some pipeline, some. and good look level X those targets our bought some land we Most the some need development will bought those we that -- land. And rates of even So down rights starting the some deals deals the creation, to therefore, and of that then on terms hard those costs based generate land may We’ve or hard deals the rents. costs off will have. on. require of a XX-some of have

that land those need So, to have ability another time we at if do appropriate with sellers, have be. conversation the if and

So, it’s of a to those things. be all going combination

start that bid cost regions. basis, on trades total to hopefully, north well of not are that We hard pretty may better a some chance hard see overall, Obviously, but lumber, down, costs, definitely if a where down. the starting And of some off, everywhere, year-over-year costs on come of in basis. commodities coverage, lot think level hard to come they not sequential are were a but much good there’s copper, a I still

Ben Schall

underlying add Steve, This that well we have of this I’d by gets rights -- put is a that development add Matt. really Ben. couple elements. flexibility the I’d our was pipeline. into in

So land it today’s to retrading is part values. of potential

allows maybe timing, pipeline, part rents potentially other if trend So The our right? construction the that to and us were getting respect about question significant the with you the the some allows of in it lines which on of is your normalization not at timing costs. more part manage to

Steve Sakwa

Great.

for one last Sean. one Just

demand roommates, moving that any markets into folks any concern Just behavioral a just doubling of up, sort going ‘XX trends, creates in are from out of you seeing sort perspective? any

Sean Breslin

household. at as that about looked remains this per nothing I we sort mean, a that the of trend point, at we fewer Steve, We the was carefully quarter through move adults Yes. that in tax. number no. third talked the COVID, of

for income values not residents up quarter, up last XX%, move-ins was we’re third relate quarter elements pinched in the describe compared XX% talked if third mean, in, around as our the way. that I to that to XX%. in feeling So, new were people the to about seeing it move-in you want moved you behavioral year lease

is away. That more markets into of only see quarter other center of then, mentioned matches, sort job what XX% terms in past, call in of the thing we which in it as So continue we moves movement And I’d Same our to I solid is are kind trend suburban the environments. in these good areas. things the up XXX of greater big in to equal. than of from as people the of not moving norms, say environment, compared outlined the suburban some but pre-COVID kind terms urban roughly strong miles trend, trend solid third in the was in volume running in

So, certainly, more probably different that trend to is number continues, people that. of but to think something basis, I function things, a called do which back being a of with a the office consistent on has

Operator

Our KeyBanc. of Wurschmidt next from question Austin comes the line with

Austin Wurschmidt

So, you intra-quarter at I position if guidance lease about detail update operationally loss but any a considered point back July. of given for through portfolio? a an was gave guys appreciate the seasonality, all in to I’m you your the surprise And curious on you in the time just real bit happening was -- were providing more reduction what

Sean Breslin

overall. not practice our That’s Yes.

breakout the do there to it. to like the necessarily map $X.XX, if you where at was third relative the for of that. quarter, our expectations need feel things revenue came in the And didn’t we road look was So, and that’s the

So, through. like that was enough we preempt to material normal process feel the we didn’t go it

Austin Wurschmidt

just going a to then, little And Understand. bit. development

for various in time, gets in below targeted been dinged also of of various without benefit the you’ve guess, getting XX% of I the guys recent the enterprise for a over You years. of kind business? that risks that think But have cycle historically what’s throughout associated development the right in manages running impact XX% value, value level reasons really the and with earnings that being creation development you to

Ben Schall

it. perspective. we talked addition So, and development to about what more it expansion type of we’ve strategic and and of couple our us our field. and customer the worker other knowledge-based headed do well, more make markets allows wider in is I’ll platform expansion opportunities of thought from our to a on One, a we’re we’ve there, a to good have including question, playing markets a as and in take -- our about one comments It reasons,

So, that the there. effort is part of

where we build range. In our right, are we’d X% terms the development percentage in where you’re advantage last the pipeline to of And were the a up sort it actively get looking of for to to, of towards rights been of year, very has opportunities. we to today X% to lot take of like

cost the change return thresholds Now, change of in our level reality, going our right, pulling. capital going and that to we’re right, we’re changes, we’re when to

So, continue longer to today, grow but of from to given book to recognize a like is the we’d development broader environment. term, we’re the be where it our term our going as economic right, in restrained more percentage that business near we

Austin Wurschmidt

part. last just then, And

outlined deals So, when you to specifically remarks? kind those the portion. of owned what look spread in land would price the versus today, variables there prepared percentage at are in based of you on moving your development pipeline I But know option the XXX XXX basis-point

Matt Birenbaum

a of an deals it lot years put are necessarily. those couple can deals a that on process entitlement are are through don’t of I that A percentage know going out. I still

of today’s there’s just certainly continue or dynamic number cost of work And significant whether land some number to going to it’s very will significant that say kind but outcomes hard through those. will that And kind environment. say is really -- out comes on that then that those good variety kind to process, we’re of hard probably so what -- I’ll a And kind value. speculative what combination is of some environment. in -- of of knowing of It’s is work some wide at -- a there’s that, we’re of change, require there’s

Operator

Our the next Jeff question Spector line from comes with of Bank of America.

Jeff Spector

versus your suburban First urban assets? portfolio question, seeing you’re can talk differences you any between about

Sean Breslin

or…? specific, of just in Anything trends Jeff, terms performance overall

Jeff Spector

trends. -- performance exactly yes, Yes, just

versus little seeing anything differences a rent they -- talk urban there suburban, between could similar? trends? turnover, acting about are you you If bit and more are Are or any move-ins

Sean Breslin

Yes. Okay.

that’s So, helpful.

provided would say change like rent prepared we in highlighted for And the I the change, what mean on was quarter. I is essentially yes, So, I my release. earnings which rent XX% in remarks,

more to the expect out urban to, in would that, about on point suburban, New which XX.X%. and little urban the only you And as moments things a is what in XX.X% just move-ins, And couple environment, Seattle mentioned terms me, maybe across urban up a might XXX me. job example. say, areas. sort. away center -- that suburban you then mind little in income for or top as would miles given the compared of a the than that environments we then, I the things that in three new recovery of and opposed ago some are Other moving an move-ins outlined of more longer from moving income York the suburban of both are rent I job mean, up earlier that side, probably our Northern the was mentioned, is thing I urban are markets, As more urban as lease are or Boston seeing of into is as to compared California expect Those with that excuse around the is environment I center weakness about City

Ben Schall

that the [Technical in been even year, Supply a business to in range new topic versus gets our of more. And probably we is us see next what right? portfolio bit positioning suburban as the stock the Difficulty] markets. and supply, area urban Two-thirds look other X.X%. of of the general we of in our down is out coastal of supplies as is of Jeff, little suburban -- strength has number the terms coming on

environment durable are with prove going be more is and a softening to recessionary resilient. or markets So, in our environment, supply out to lower potentially a belief more

Jeff Spector

that’s saying versus lower you are in or clarify, To you’re suburban saying all, percentage… as you. a urban Thank

Ben Schall

of in markets. urban stock. supply So, markets. our higher That’s suburban that’s And is X.X% our our in

obviously positioning, in the in we’re is strong portfolio third So, look portfolio Sunbelt of that a perspective. markets, as higher we out we other from overall on place think our also relatively right? The

Jeff Spector

And do -- I you. to do surveys then I that all? on turnover Thank on I think had at you follow-up you surveys? out. turnover. guess, I the a you you discuss those like reasons I Can mean, do move think

Sean Breslin

of Yes, stuff. kind -- we [Technical all good we and that that do. We track Difficulty]

couple a on So, things of turnover.

to compared year materially third the first wasn’t year. was where the last turnover this is First as quarter lower quarter

look previous year-over-year basis down So, versus we you year-over-year. quarter, data it it a XXX basically quarter significantly turnover points earnings in the attachments, XXX at was if third from the basis, pretty release on anywhere the on was back flat to provided

than out rents. a little I anticipated. So, function bad variables. a improving, and then, debt other increase increases, underlying bit reasons, the And there in the of we terms a a it pushing really little of in that an of trend people talked which we rent moving of turnover were given is surprising much how is terms was about of is not out And to more number due piece

to more is because getting court court One of they’re we who or evictions as date. those just they know are move their out skipping the process through people

So, any in two only a little really there. are terms that bit kind of reasons the had out. a of pickup for move pickup Those of

sort, The others came it as came to down might of condo things as all down. down relates and home in came terms obviously that expect, purchase you of relocation,

Jeff Spector

you. Thank

rate, a going of back they to parents because lower-priced live move-outs they’re the do going Are to on do elsewhere? doing? or comment what curious on if they with unit they’re comment they Just on

Sean Breslin

We and We of anecdotal. have what ZIP usually that opposed in we it data the that don’t code, tend they’re behavioral as of terms That’s to it’s things But can have information. actually be anecdotal the behind always that kind well. we that real reasons to doing so kind count it, track you like and Yes. that data track of things on. various that,

Operator

Morgan Kramer of Adam the Our line next question comes Stanley. from with

Adam Kramer

wanted have to kind year to you the ago, of about that ask I how just metric compares the pre-COVID? ago of kind and years two ratios a or that maybe portfolio, in latest maybe rent-to-income

Sean Breslin

question, No. Adam. Good Yes.

move-ins, think you right to about to value made it I I last is it look at with up associated that up around the the household is year you comment XX%. move-ins was in earlier when income that associated XX%. third about in move-in the those this move-ins quarter, look way compared with those for if think the new at year, And the

think kind income So of these, from if are trading you basically, a rent -- to a at it from consistent people perspective. of level

rent are have to that sort we some in much that Certainly, makes and rents just we due people out, have I of up higher sense income moving So, people much. about are overall. increase. moving mentioned, as that with It our

what that’s expecting source Given comfortable the numbers it. pushing paying demand continue we their is we’ve that support to been through, are not to we But incomes and surprising. appear

Adam Kramer

in it. night. you Got of last And X% guys know kind That’s it think then, was of just the really lease, I terms helpful. loss to disclosed I last XX% quarter.

I going couple the of mean, to you a lease year, you or X%? having in of next the so kind enter last run, view sign anticipate as that that of year kind do here. going months, of going loss of last months Just of of terms to to next rents is how still of you kind in the heat up the you’re kind into probably couple you’re to the

Sean Breslin

Yes, get the the think if of into We lease have a maybe Those we our will think about loss volume good fourth that everything, quarter, impact to it won’t certainly is rent way it’s leases expiration will folks eat lease. that typically the renewal I to mean increases in but XX% you about question. and simple expire. around

is The kind of of seasonal in. the leases quarter -- expire, and XX%, our closer rents is that third kick seasonality to when XX%, of XX%

you’re that because Does the sense? most moving is volume of the kick moderate but impact only more as lease through make quarter loss quarter not the the compared then on to quarter much of impactful terms of rent typically, third is lease typically have in heightened as So fourth The you the to seasonality in. expirations, third quarter.

Adam Kramer

Yes, that really does. helpful. That’s

XXXX really around Just a revenue all building this helpful. final is of kind one the I here, of blocks kind disclosure think

I increases side, kind I on look, expense kind apologies are the talking But the tax think property some and Just it. mentioned you cost wondering given guys across resi about of dynamics if missed peers space various and of impacts, around or growth again, there? maybe not to headwinds but of guide kind of blocks there, of maybe inflationary building you potential put bit certainly here, a asking was expense XXXX kind right? color just I little wondering,

Sean Breslin

Sure. think a maybe top the bit. to Why just don’t four about categories I give you how them little or a of three sense

-- and the certainly attachment X%. also offering, We will be triple should handle so, in we’re XXXX expect as looks then, Repairs internet contractors pressure the there’ll increase there expect year, the on substantial in There the of smart there’ll see some than potential we in and due that access kind in ‘XX middle or procurement in and be innovation putting property don’t XXXX. others. growth just as and move for just we obviously pressure level release have into the may X% place here year, on couple then from turnover. our sort first is we of inflation in similar utilities greatest be that of the the others. more pressure like numbers wage be in are of taxes, next efforts, from upward what like, of we probably XXXX, in certainly, into ‘XX. constrained given of to some heard and some a bulk Payroll, terms but some ‘XX, as to a ‘XX, the ‘XX our under that remain we’re be to that -- of And maybe can utilities, be ‘XX. be profit will pressure our signed from earnings a rates very maintenance, And structure. half which contract for experiencing in And to This rates expense move to take terms that what assessments expense and looks our you due to you percentage of of

nice activity. So, while there’ll the be contribution be pressure there the given side, from revenue a to NOI some on that OpEx boost

to are maybe how those four the to top kind color in think of So, of as terms some about them.

Operator

with of from Peterson comes line question Our Alan Street. Green next the

Alan Peterson

pipeline, pricing renegotiating development other having sense on to earlier the participants, your point the capitulate sellers brokers to And degree? conversations starting rights you’re from pricing? getting what are with you so, land Matt, are the land and that to on regarding market if

Matt Birenbaum

would I early. say Alan, Yes. it’s

land basis the XX% land a only first and the thing XX% represents So, areas to of percentage. XX% higher project, maybe in is in are where typically the rents represents higher total

long-lived and deals. So, doesn’t costs, nearly are needle it land transactions the much move as as hard

now region X, So, might land closing deals in X, that or deals maybe that ago, you X, years land you’re if are depending depending on be X California the X, cut indicator but in going you’re a months could there. so it to But those lagging sometimes ago. it’s have similar, and X -- brokers if they take are Texas, been are time

we are the its way time, market. will it in first work then so and it to through see seeing You’ll transaction speak. system, And the over backwards first, it

Alan Peterson

the to the helpful. within new And high regards in is change That’s to that. October, imply rent appreciate effective that starting California, in trends I growth X% lease Sean, negative Northern that region? operating in

Sean Breslin

It’s No, still positive. it’s not.

Alan Peterson

to It’s bit or to rest still the getting that you’re Northwest, rents a on need California or across of little was even occupancy than positive. Are you softer concessions you the turn Pacific mentioned potentially which the portfolio? Northern to going sense maintain reduce the

Sean Breslin

rest there, sure. see of mean, for extent that some the the environments for don’t to I Yes. the to exactly what weak look that’s like I we going year. it’s possibility know But a certainly,

Operator

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

John Kim

on compressed Ben, mentioned assuming you today? of that question development the rates I’m you’re reduced. in remarks difference profit what your case, cap are the prepared market starts margins. a yields you And that’s on the underwriting starting had between the -- likelihood that and for yield I you’ve rates. means that developments If cap

Ben Schall

come John, the profits have down.

of If ago, developing to cap the out development rates was underlying running to to you that points. arena. at the a year we the basis are XX% where look back because XXX profits tune between spread That’s were were type of we

like guide mentioned are. But deals underlying There the rates developing that. And compressed. maintaining would a what XXX certain XXX that’s you below be approach. points and on has where would spread where I to, basis cap as before, I and that are be of we’re is group, that focus our as So, can between slightly to

John Kim

there number? a just specific is at to On the those and the the projects stabilized wondering because or yield, projects in lease-up of X.X%? calculate difference was is those X% way I to and currently that are leased is up almost going if as that at these you your yield levels, development So, overall part pipeline rent it that was

Matt Birenbaum

John, Yes. it’s Hey Matt.

is development XX So of lease-up. -- clear, that to are the I right Difficulty] is on communities X -- [Technical answer to development in be the guess deals, X that currently

So, they are [Technical and we’ve in Difficulty] those X at coming are the marked-to-market, that only today.

at originally were if they look Now, think, I -- that sorry, you X.X%. underwritten, underwriting slide X,

location. rest that the deals we to of that’s mark when when started rest that were the another on to points was today Northeast they -- that some to market was the uplift deals. rents those on obviously, come leasing. going XX to market, when see higher-yielding on when we But depend between would timing, in push deals up they in same book lot well. lease, when what them development started today the So, some it if of and And based in the book rents the book the basis of we we are as A on those then deals between start -- suburban among the the of of happens

we that may on those bps saw get deals, more, we XX get So, uplift. we may but less,

John Kim

X.X% pipeline, the original your market on is that the based overall on yield current that’s So rents? or on your underwriting, development just to clarify,

Matt Birenbaum

-- or So, it’s the XX are rents those the Difficulty] four and on market deals, XX what current underwriting are based was. [Technical other on initial which at the the

amount X.X% X.X% deals X.X%, XX it. deals that the other So Difficulty] are probably the with That X that rise said, we’ll to a to or that think overall have of is like represents not. I deals way are [Technical X.X% same a about

Operator

the from Piper Sandler. Goldfarb Our comes line Instructions] next [Operator Alexander of question with

Alexander Goldfarb

two items. So,

out guys levels. is still below the that turnover page pointed on pre-pandemic X you presentation on turnover, the First, in

you as thought of the fell quarter, historically. -- you would numbers sort guys just turnover is you in it what curious, still as third like achieve below the seems So low

And to do were to expecting holding that the you hit, even new the not is were pre-pandemic that case, rents ones if the just in lower? turnover think about whereas there. returning that renewals I be were were you especially So, turnover guys because said its we think being how level,

Sean Breslin

it’s Sean. Alex, Yes.

expect you the be that back to clear, last to belief it look try norms. to year the the in turnover is if historical and go QX experienced to QX we we And of independent had relative Just example. an and at reason we a be as lower,

was QX was quarter last XX%. was QX QX XX%. year. Last it XX%. of turnover on basically this this ended was year, of being XX.X%. up year, year, The first year Last top

quarters two a earlier year, pushing year-over-year were spread pretty we rents there this where we on So, that basis. had pretty wide was a aggressively

that year. that push continue last trend of not on So what were QX of essentially even though we to rents. expect to the was continuing year, top And experienced being below case. we we last was It

that hopefully, and that So turnover our question answers relates it to expectations. as

Alexander Goldfarb

question Cal, That does. I Seattle think Mid-Atlantic. and were highlighted And Northern the is weak, second the there initially, as markets being three guys you that

is Northern if Mid-Atlantic if perennially the past one that question. been is I sort Cal weak for to Mid-Atlantic, addressed ones. that decade has the of of anemic. correctly, a heard market Jeff just Spector’s and That’s You Seattle Mine

with sort was the placed case the rebound goes supply. than you that weaker it Obviously, thought market and it’s this market on? So, just would or that a didn’t normal of gets stuff where

Sean Breslin

probably thing miss expectations. is for revenue weaker clear on we a be one when about was we million $X.XX talked to about, try just weaker, And little than The the bit weaker, Yes. our should was Alex, it $XXX quarter.

it’s you not when -- run a significant here. a it’s not amount dollar So, math, the

those pushing began we’re take growth quickly X%, was so, little you than XX%, a as at a an Seattle But decelerate almost good California we experienced in example, it XX%. if QX more look the rent things was still to markets. in anticipated. was we And change, what In Mid-Atlantic, seeing

deceleration across about -- careful But when to above the the pretty think the These it’s quickly in change. these rent healthy about as saying I markets be going are So, we than of south things opposed -- of I’d historical little norms numbers pretty more in rent a absolute terms, terms strong. those anticipated was long-term are weak growth are our footprint. well like approach numbers, type you wouldn’t just still are of rate

Northern about But district Difficulty] [Technical the it. So, there’s or way San would that’s X Mid-Atlantic, and remains, the struggled I’d regions, think the office say, Virginia, second lot pockets D.C. Virginia country probably the maybe to have three X is services the Northern behind major jobs, a point think, most, then I I district. utilization particularly professional the in specific at this in jobs. the Francisco, lowest of where government the

to had necessarily the so, the office. need And in people the be haven’t

not and be the to really but we it’s We to overall, could see see through in where where be results still push in a needs to positive Mid-Atlantic continue position of that sort including trend, it from stronger D.C. movement

just our if it’s here all and this job regions, been of -- So at look of growth the weakest year. you absolute

job even trends pick you weaker not for office, jobs data So, has we more. that the growth. do you the have and have, better of then in to be And a everybody the in that see just need combination to to see market up

Alexander Goldfarb

I office, only as people mean, It’s and people the there government down away. that all are us when we’re some political in folks home. government blew that which the who know, back the we’re just you are to from working surprised speaking still

definitely So, message your resonates.

So, you. thank

Sean Breslin

Yes.

Operator

Wells Jamie Our line Fargo. with next of from comes Feldman question the

Jamie Feldman

Just you risk, into especially do to market the I to this how the XXX And at of delivered? little your rates. developments cap bake higher you. Thank that? theoretical. about be are bit might thoughts are your and And more comment XXX by basis-point think how what cap But a on developments going underwriting do spread that you mean, around underwriting? your rates kind time

Matt Birenbaum

Matt. things. Jamie, I’d Hey say of it’s a couple

most match-funding. is first The and important

match-funding an basis finished, honestly, were and funded which in asset based either few the debt rates rates were it way. we works deal we’re we years, deal environment spread. a that if is the it then like locked that we other over they still has than the cap are lower typically last permanent that’s equity in It them. points deals And finished or in lot XXX selling if when start with that or because we’re prevailing rates, those So, cap when on cap higher, we capital sourcing

and that stock capital in is the that that our kind a what of in I think time. locking example terms equity -- on of So was forward based the of cap was yield at good the on rate or

that’s So, first the thing.

most NOIs the that Beyond and as and mentioned, time, I rents obviously, also, that, NOIs trend rents don’t are of growing. we

the So there most conservatism time, is bit and lift provides more well. some that as there, of little a

Steve Sakwa

in underwriting about are cushion revenue think you side? the you today, for that As baking on what

Matt Birenbaum

cap Well, look today’s today. of we and with at -- stabilize, we because at rents, like NOI, a have so you higher today’s And or we the sold growth what what the stabilizing there. spot don’t the I if we’ll compare we come today’s then rate history we asset being said, a -- expenses, don’t they look than yields -- at today’s deals don’t because underwrite long we of if that have generally, we find, when in a that with yield. spot value was cost, spot asset up And we

of kind we model a the a IRR We in quote. forward return, XX-year growth but not yields that have in in long-term the

Jamie Feldman

Okay.

And too? you spot so, expenses, using what Is that you’re said?

Matt Birenbaum

Yes.

Jamie Feldman

about Yes. that? And think of do you how the risk

Matt Birenbaum

stabilizes, as so some I what property that’s have the the mean rents a see really OpEx have The piece of will moved, when is value. we taxes, typically and again, on is asset based moved will deal OpEx -- biggest the well. would

biggest out value But business, generally, probably operating rate, OpEx going grow you’re underwrote, if and -- means more get the mover because operating to margin everything significantly up were Difficulty] with significantly relative we rents than percentage NOI. grows the same where got high. together, where we’re the much creation we going that’s which be there. assets if it was that usually we And [Technical that settles more It’s more at means in a to very to OpEx at high wind so margin leverage. So,

Operator

Suisse. Okusanya from comes question next Tayo the Our of line Credit with

Tayo Okusanya

around is industrials the initiatives space. with co-working around you strategic started question guys My

bottom wondering and line? the little of business, the Just potentially it opportunity your you could if bit what economics size to that about could a contribute the talk of

Ben Schall

activating would was But our which potential self-started tap context The of value, overall in think users, of further the I by floor. a just a out with pilot that, our can of in self we into couple initiatives project buildings. industrious the which it’s California, help program of to is multiple our co-working A of at but at bottom space frame retail activated of their it own as we call some components creating Second different Space. we’re think own at space ground clients, talking started of area about one and which small our somewhere Sure. residents create Space an where above particularly incremental we network you we Second our to product. referenced, we the it’s relationship, actively

Tayo Okusanya

And you’re no of space just kind to revenue that? industrious, or renting there’s the model anything shared so like

Ben Schall

nature, want traditional retail a it that much a of it’s would It’s opposed I into to a a model. don’t shared -- give to model get it’s -- but too more the as share details pilot

Operator

to questions are call There management further in for the remarks. to queue. back the hand no closing like I’d

Ben Schall

you forward of joining appreciate today. the Thank all many soon. I and us seeing dialogue look for at you to NAREIT

Operator

this your you teleconference. Ladies does participation. and Thank gentlemen, for conclude today’s

have your a time, lines may You day. at wonderful disconnect this and

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