Cooper Clark: Great, Thank you.
Operator: Our next question comes from Eric Wolfe with Citi. Please state your question.
Eric Wolfe: Hi, thanks, and congrats, Dave and team. If I look back at 2023, you ended up beating your guidance by about $0.05 with around $0.02 of that coming from higher, same-store underline. So I was just curious what ended up surprising you to the upside to drive that $0.03 extra and how you’re thinking about some of those line items in 2024?
ChrisLau: Yes, sure. I think it sounds like Nick. Good morning, Nick. It’s Chris here. Yes. As we look back on 2023, I think we are really pleased with how the year ended up playing out and also in particular the momentum we’re carrying out of ’23 into ’24. I would say notable areas as we think about the outperformance from a Same-Home perspective, I think we did a great job on the rate side, leaning into and pushing rate over the course of the year. I think we saw that especially through the spring leasing season and some of our updates at the end of the second quarter. I would say that was kind of the theme of the first half of the year. And then the other piece, we talked about this a lot in the second half of last year is what a great job the team did around controlling controllables, controlling controllable expenses in large part as Resident 360 started to be rolled out across the portfolio.
We saw nice expense controls around R&M and turn in the third and the fourth quarter. And so I think it was really rate growth through the spring, nice topline trajectory balanced with tight expense controls, notably in the back half of the year and through turn season, that really translated into the outperformance last year. And as we think about this year, just taking a step back, I would remind us all that, look, it’s early, right? It’s early in the year. It’s not lost on us that there’s still some economic uncertainty out there in the environment that we’re thinking about this year. There’s still some question marks out there across the environment, and we’re going to make sure that we come out of the gate prudently at the start of this year.
But I think it’s very important. Again, we really like the position that we’re in. We exited ’23 nicely. We had a great fourth quarter, and we’re seeing really nice trend lines into January and February like Bryan was talking about.
Eric Wolfe: That’s helpful. And then just second question on your disposition guidance for the $400 million to $500 million, what’s assumed in terms of cap rate on those? And I’m just guessing that they’re probably below the implied cap rate on your stock. So I was just curious how ATM issuance fit into your capital plan as well.
ChrisLau: Sure, yes. Let me tie those together. Best guess on dispositions is that we’ll probably see an environment fairly similar to this past year 2023, $400 million to $500 million of sales with dispo cap rates probably somewhere in the threes again. But look, tying into the broader capital plan. Look, I would zoom us out for a minute. As you know, we have a large $1.9 billion capital need for this year when you take into consideration both our growth programs and securitization refinancings. And although the planned primary funding blocks for this year consist of retained cash flow, importantly recycled capital from dispositions and debt, we’re always evaluating all options. And when the stock was trading at a small discount to consensus NAV, as an example, all things considered, including our relative cost of borrowing in the mid 5s and the totality of this year’s capital needs a little bit of equity made sense.
But again, I would remind you we’re only talking about $130 million. It’s not needle moving in terms of capitalization of the company, but we think it’s a very nice complement to help round out this year’s larger total capital need.
Operator: Thank you. Our next question comes from Haendel St. Juste with Mizuho Securities. Please state your question.
Haendel St. Juste: Hi, good morning and congratulations to both Bryan and Dave. Dave, I wanted to go back to your comments on development for a moment. I wanted to understand perhaps the opportunity to maybe flex up the development deliveries this year from the current guide of $750 million. I think last year you started off with an initial guide of $650 million and then you ended up with $850 million for full year ’23. So I’m curious kind of the opportunity and what perhaps you might want to see. And could we see potentially you flex up to a level similar to what you did last year? Thanks.
David Singelyn: Yes. So let’s talk about the opportunity set. First of all, we are in a really, really good place not only to be able to flex up, but also to maintain a very consistent growth program into the future. We’re sitting with 12,000, maybe 13,000 lots right now in our inventory, and those are all in different stages of development. Some are in land and some are ready to go vertical. But that is really going to give us a very, very predictable long term growth program for many years. We do have a couple of holes in that program, but it’s very, very little. It’s just a market here and a market there were maybe in the ’26 or ’27 unit delivery outlook we need to plug a hole. So those are the fine-tuning and we’ll take care of that.
The ability to flex up is there, Haendel it’s all about looking at the capital that you have. The capital that is going out from year to year, you have to look at exactly where it’s going. In ’23, some of that capital was going into not deliveries, but it was going into some land development preparing for deliveries either this year or next year. And so you got to look at both the numbers of homes as well as the dollars. It’s not a perfect science that they correlate perfectly because sometimes there’s a little bit of a timing difference between how much land development is going on versus deliveries. We do have the ability to flex up and we have the ability to flex up more than just in development. We talked about today we’re on the sidelines with National Builder and MLS.
We’re on the sidelines not because we won’t grow through the National Builder MLS because the opportunity set is not there. It’s all a function of what the capital markets look like as well as what the acquisition opportunities look like. But it’s also about maintaining consistency and predictability in your growth program. So we can flex up. We got to be careful how much we flex up. If we flex up, it can be borrowing from next year because you have to have the land developed. So I know that’s a long-winded answer that’s a little bit roundabout, but hopefully that addresses your concern.
Haendel St. Juste: It does, and I appreciate that. Maybe some comments on the backfilling of the land itself. Curious kind of what you’re seeing out there in the market. Any notable changes of any sort? and then potentially any regions or markets you may want to get into or increased exposure to. Thanks.
David Singelyn: Yes. It’s — I don’t know — let’s talk about markets first. I don’t know that there’s any additional markets that we want to get into today. One of the things about where our development program is, is that when the opportunity was there two years ago, 2.5 years ago to buy land at very attractive prices in the COVID period, we took advantage of that. I think in one year we bought nearly 7,000 lots or 8,000 lots. We are very, very well positioned going forward. Today land is available, but the pricing of that land, no different than the pricing of MLS right now, is a little bit on the richer side. So we’re in a very, very — we’re in an enviable position that we do have a land pipeline. I believe in 2023 we bought land, but it was a very limited amount of land.
It was plugging some of those holes I was talking about in future years, delivery program ’26, ’27, and ’28. But land will become available. We are very choosy about where we are buying our land. We’re buying the land contiguous to national home builders where they’re buying retail product, not build-to-rent product. And in the long term that will pay dividends. But we can be patient. We can definitely be patient that is the benefit of having the pipeline that we do have. So I’m really happy that our development program is in very good shape for many years, and there will be times that we will be able to ramp up acquisitions of land at a greater pace than we are doing, but we are plugging the holes and it will be a very consistent program for many years, regardless.
Operator: Our next question comes from Adam Kramer with Morgan Stanley. Please go ahead.
Adam Kramer: Hi, guys, thanks for the time and congrats to Dave and Bryan. Just wanted to ask maybe a two-parter here to start just where does the loss to lease sit today? And then maybe you talked about a little bit earlier, Bryan, but just roughly where are you sending out renewals, I guess for March and April at this point?
Bryan Smith: Sure. Yes. Thanks, Adam. Our loss to lease is sitting in the low 3% range today. In terms of renewals, we’re sending out renewals — well, February and March, we’ve gotten many of those results back already, and those are trending slightly better than January. We’re sending out renewals in the 5% to 6% range into April. And again, as we talked about, our expectation for the years is renewals would be in the 5% area for the 12 months.
Adam Kramer: Great. Thanks. Maybe just switching gears and a little bit more of a conceptual question. Just wondering on acquisitions, it seems like it’s kind of not being incorporated into guidance. I think you kind of bought a little bit here and there over the course of 2023. And I guess that the conceptual question is, look, if the acquisition market, whether it’s MLS or builder partners, were to come back and be more attractive, would you consider that or is kind of the full focus on development, kind of, given all the advantages that program has, and you’d probably stick to development even if the acquisition market came back. And then I guess if you were to kind of go back into acquisitions more because that market did improve, do you kind of have the G&A, scale, and kind of ability to flex that acquisition kind of spigot back on?
David Singelyn: Yes. So, Adam, this is Dave. Absolutely, we’re not opposed to National Builder and MLS. We look at them as a wonderful supplement to our development program. Our development program, what we said over and over is it allows us to grow in every economic cycle, and that’s what is today. But it doesn’t mean that we’re opposed to the National Builder and MLS. Today, we still have a acquisition team, they continue to underwrite homes every single day, whether it’s from National Builders or MLS. The MLS, as we know, has a lot less inventory available on it, but we do underwrite it, and we’re underwriting thousands of homes every month and every quarter. We’re just not finding them attractive today. As time goes on and cycles, if you go back and you look at where we are today, it’s probably very akin to history.
Have to go back a long ways though, probably to the 1980s when you saw the very, very rapid increases in interest rates, et cetera. But those cycles always repeat, and there will be a time when it is going to be very, very attractive to buy any type of product against your cost of capital. And yes, we have the entire infrastructure in place. It’s not only in place in the acquisition side, it’s also in place in Bryan’s management side of the business. So any opportunities that are out there big or small, we have the ability to execute on them.
Operator: Our next question comes from Michael Goldsmith with UBS. Please state your question.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. As you think about the equation to maximize revenue, right, lease spreads have remained quite strong, while occupancy has kind of come down a little bit from a sequential on a year-over-year basis. Can you just provide a little more detail around the strategy around occupancy versus pushing rate? And did that allow you to push rate a little bit harder than maybe you have in prior years?
Bryan Smith: Yes. Thank you, Michael. I want to just start with a reminder that we’re trying to optimize the entire revenue line and rate, and obviously as a component, it does affect occupancy. Our plan this year was to enter from a position of strength, 96% occupancy is strong, both under any historical lens that you look at. And our expectation as we go into the spring leasing season is that we will have some pricing power. We looked forward to absorbing some homes and maybe a slightly better rate environment, but we had really good rate growth on new and renewals in Q4 continued into January. And keep in mind that’s before the demand is really going to kick back in. So we’re in an excellent position coming in there, but we’re not looking at any individual component in isolation. We’re looking at maintaining a very balanced and consistent pricing strategy for the residents that maximizes revenue in the long term.
Michael Goldsmith: Thanks for that. And then similarly, turnover is kind of turning up just a tad. I suspect that kind of goes hand in hand with rate. Are you seeing any pushback from residents on renewal rents?
