Sean Breslin: Yeah Michael, it’s Sean. I’ll take those. So in terms of customer behavior, I’d say the trends we’ve seen this year have remained relatively consistent. As I mentioned earlier in response to a question in my prepared remarks move-outs to purchase a home is well, well-below long-term averages sub-10% and has been below there for some time now. So not surprising given everything you’re experiencing in the single-family for sale market in terms of run up in values and REITs and now the slowing market, et cetera people not terribly inclined to purchase a home and renting is not only more affordable but if you’re a risk-off mode you may not want to consider it anyways. Nothing else notable I would say in terms of customer behavior at this point in time.
As you noted, the year-over-year comp does get easier as we proceed further into Q4. So a little bit of that as I mentioned in October as it relates to the uptick in rent change in the Mid-Atlantic, Denver and Seattle regions. And we do expect rent change to somewhat stabilize as we look at November and December. And while it won’t be anything that’s super terrific in terms of a significant rebound as an example, it should be more stable than what we experienced last year based on what we know today.
Michael Goldsmith: Thanks for that. And my follow-up question is related to taxes. The New York City tax burn off was a significant factor in the real estate tax. What’s the expected impact going forward? And how should we think about real estate tax for the expansion markets versus the coastal markets?
Sean Breslin: Yeah. Good question. As it relates to property taxes, which are about 35% of our expense structure we do expect another elevated year of tax pressure in 2024, most of it related to the expiration of those tax abatement programs that we experienced this year. And the level of impact next year will be relatively similar to 2023. As it relates to tax rate, or just tax growth in the Sunbelt or our expansion regions versus the saves regions independent of the exploration of the tax abatement programs. Certainly I would expect more pressure in the expansion regions and the Sunbelt in general given the significant run-up in values that they have experienced over the last three years relative to the established regions.
I think that’s pretty clear. There’s always a lag effect. So the question is just, which market, which submarket tax jurisdiction et cetera, but certainly expect more pressure in those regions as compared to our established regions, which is still the majority of our portfolio.
Michael Goldsmith: Thanks for that, and good luck in the fourth quarter.
Sean Breslin: Thank you.
Operator: Our next question comes from Joshua Dennerlein with Bank of America. Please proceed with your question.
Joshua Dennerlein: Yes. Hey, guys. I appreciate the disclosure on the two new product starts 6s. And then also how you’re kind of doing that with the projects in lease-up right now to 90 basis point higher spread. Just trying to…
Ben Schall: Hey, Josh we’re getting a lot of feedback on the call.
Joshua Dennerlein: [Technical Difficulty] I am sorry.
Ben Schall: Why don’t you dial and we will get you back in the line.
Joshua Dennerlein: That’s okay. I am sorry. [Technical Difficulty]
Ben Schall: Joshua, if you could call back in – there is still static – line to the next participants, Okay.
Operator: The next question comes from Steve Sakwa with Evercore. Please proceed with your question.
Steve Sakwa: Thanks. I just want to circle back on the development. So are you guys planning development starts in the fourth quarter, or is it up in the air? It sounded like Matt you had some things that would pencil on that high six maybe seven range. But I’m just not sure if you actually were starting anything in the fourth quarter. And if we think about 2024 starts would those most likely be back half weighted to give yourself some time to kind of see how the economy plays out here?
Matt Birenbaum: Yes Steve yes we may well start a deal in the fourth quarter that would be on similar economics to the Q3 starts. Again we’re 95% match funded on development underway today. So if we have deals that we think make sense we think we do have some room there. So I wouldn’t be surprised if we have a similar level of start activity in Q4 to Q3 maybe whether it’s one or two deals I don’t know. When we think about 2024 I think you’re probably right. It probably is more back half weighted based on kind of how the capital markets evolve and kind of our access to and pricing of new capital that would fund that business. But we’ve been in a again for us if we track to roughly $800 million in starts this year or maybe a little bit under that that would be a pretty light year for us and certainly lighter than what we expected going into the year which was the same last year.
So we’re at a pretty modest level of starts volume relative to our kind of long-run capacity and averages and that’s a response to what we’re seeing in the markets but I don’t think we would view that as a significant level.
Steve Sakwa: Got it. And then just secondly on expenses they’ve come in a little bit better than what you originally guided, but still kind of elevated in the six-plus range. Just as you think about the puts and takes into next year how do you maybe see expenses trending? What might be a little bit better and what overall might be still headwinds into next year?
Sean Breslin: Yes, Steve, it’s Sean. I can take that one. I mean we do expect 2024 to be another somewhat elevated year primarily due to a few factors I can touch on. One I mentioned earlier property taxes which is about 35% of our expense structure. We do expect it to grow at an elevated rate due to the expiration of those tax abatement programs that I mentioned previously. The pilot burden in 2024 the burn-off there is relatively similar to 2023 before we see it begin to step down in 2025. Utilities, which is about 12% of the expense structure the continued implementation of our AvalonConnect offering which is a profitable endeavor. We’re expecting kind of $25 million of incremental NOI from that program, but it is a burden on OpEx growth as it’s being implemented and we do expect that to be continuing through 2024 as well.
