John Kim: Okay. Great. My second question is on — is for Terry. On your opening remarks, you mentioned that you’re confident this year AIR will be performing favorably versus your peers. And I just wanted to clarify how you perform — how you define that?
Terry Considine: Well, thank you very much. That is a very good question, John. It’s what I would have addressed in my prepared remarks, which is to look at the big picture, that the most important things that are happening at AIR are the increased quality of the portfolio, higher average rents, faster growth rates, higher margins, higher credit customers, greater retention, bigger margins, so forth. And off balance sheet asset, of course, is a stable and productive workforce. So those are things that when we look back at the end of 2024, will show up in free cash flow growth, and it’ll show up in 2025 FFO and AFFO at a greater degree. In 2022, we had considerable nonrecurring income because of the acceleration of the divorce from Aimco.
But we called it out. So the market would see it and focus on the recurring number, which continues to grow comfortably. I think everything we see is that growth continues. I want to emphasize one thing that, again gets to be lost. In 2023, the real estate markets were largely paralyzed by — with low volume and transactions because of the standoff in pricing between providers of capital and users of capital. We were very successful in using the kindness of our joint venture partners to participate to buy properties at considerable discounts that are going to reward us in the future. And we were able to do that also in a way that increased our scale or assets under management. So our net effective G&A, which is already low, gets lower still.
So I just think when we focus on the use of proceeds and not just the cost of proceeds, we’re going to be satisfied with the outcome.
John Kim: I think you mentioned FFO as part of that. Just wanted to clarify?
Terry Considine: I think FFO and I, of course, would direct people also to AFFO. I think it’s important to consider both and net asset values, which discount growth rates. I think that triumvirate will measure the value of the enterprise, which I predict will be significantly higher than it is today, and will have a rate of growth in ’24 that will compare very favorably to our peers who are wonderful companies, but face different challenges and have different exposures to new supply, have different exposures to foreclosures in their mezzanine loan portfolios, different exposures to development and other such activities. And I think net-net, we’re going to do fine.
John Kim: Great. Thank you.
Operator: And your next question comes from the line of Rob Stevenson from Janney. Your line is open.
Rob Stevenson: Good afternoon, guys. I guess just piggybacking off of your comments there, Terry, in terms of difference between you and peers. Keith, can you talk about what your systems are telling you in terms of new lease rent growth goes from here. You were negative for a very short period of time and by a much smaller magnitude than almost all of your peers. And now it’s positive on signed leases in January. Are you going to be able to stay positive on new lease rates in first quarter? And does it turn back negative at any point in ’24 given what you’re seeing today?
Keith Kimmel: Rob, thanks. Look, we’re feeling very optimistic as we go into the year, as you point out here. And it’s not just optimism, the facts are our occupancy today at 97.7% is setting us up for a strong acceleration into spring season, the (ph) one. Look, implied in our 3.5% blend that would get us to our 3.8% revenue guidance puts a 2% new lease and a 5% renewal. So that’s essentially what we have in. We have a 1% market growth from today until, call it, July-ish when we get into peak season. And we’re already starting to realize that today. So what will happen next, I will say will be more importantly known probably in April when — but we are already seeing volumes that are increasing coming out of the holidays and the winter months.
And what we’re seeing is more of a pre-pandemic kind of acceleration. When we look back, let’s call it between 2014 and 2019, prior to the pandemic, this is the type of acceleration we would have seen and so more work to be done, but we’re feeling good about where we’re at.
Rob Stevenson: Okay. That’s helpful. And then, Paul, has your Southern California portfolio had any material damage from the recent extreme weather? And are your California assets specifically insured for flood or is that something that, if it incurred, would be self-insured?
Paul Beldin: Rob, I’ll handle the first part of the question and turn it over to Patti Shwayder, who runs our insurance program, to dive into some of the particular details. As far as any material damage, no, nothing material. We have seen what you would expect, leaky roofs and spots some water intrusion, but the costs of which are less than $0.5 million based upon what we know to date.
Patti Shwayder: And yes, we’re insured for flood at all other perils in these properties in and around the country.
Rob Stevenson: Okay. That’s great. Thank you. Appreciate the time. Have a great weekend.
Operator: Thank you. And your next question comes from the line of Haendel St. Juste from Mizhuo. Your line is open.
