Operator: Our next question is from Brad Heffern with RBC Capital Markets. Please proceed with your question.
Brad Heffern: Yeah. Thanks. So you guys reported a negative 80-basis-point newly spread in October. I’m curious how that compares to normal for this time of year and just generally how things are progressing versus the normal pre-COVID seasonality?
Sean Breslin: Yeah, Brad, good question. I don’t know if there’s a normal per se for October. But I mean generally what I would describe for rent growth throughout the year is that a typical seasonal bell curve. We typically see rents went up from January to July or August a 7% range or an average year and then they decelerate down by 4% or 5%. For this year, if you look at it sort of on average point-to-point from January through year-end you might see effective market rent growth in the 2.5% range somewhere in that ballpark. And what I would say in general about what we’ve seen in the back half of this year is slightly less seasonality across most markets with one exception being Northern California that has been more seasonal than normal relative to its history.
Brad Heffern: Okay. Got it. And then I think in the prepared remarks you talked about hard costs and said that you’re not really seeing cost savings in bids, but you expect to see them when they actually start going? Can you give us some color of where you think real hard costs in real life have actually gone?
Matt Birenbaum: Sure Brad it’s Matt. I guess I’ll speak to that a little bit. It is very regional. So, where we’ve seen hard costs come down say compared to this time last year, we’ve seen it a little bit here in the Mid-Atlantic maybe 5%. We’ve seen it in Boston maybe to a little bit more significant degree 5% to 10%. And I think we are starting to see it in Northern California, where it’s just been very, very soft for a while now. We have not yet seen it in Seattle. We haven’t yet seen it — maybe a little bit in Austin but costs went up so much there that it’s not I would say super meaningful yet. So, we haven’t necessarily seen it as much in the Sunbelt markets yet Denver, Southeast Florida, but we think that it’s coming there.
And I would caveat that by saying for us and others that’s what I was saying before. The best data is where you have a deal that’s ready to go and you really can hard bid it. And we don’t have deals that were hard bidding in every region at this very moment. So, it’s hard to tell until you’re at that place. So, we’re getting kind of discrete data points. And where we have them it’s very helpful because we do think again kind of like with the rents that gives us a little bit of an informational advantage to have a real sense for what’s going on in real time. But it really does vary based on the regional dynamics within each region.
Brad Heffern: Okay. Thank you.
Operator: Our next question comes from Rich Anderson with Wedbush. Please proceed with your question.
Rich Anderson: Thanks. Good afternoon. Just a question on expansion market and the process to getting in there. The word was used staying flexible about an hour ago. And I’m wondering does the methodical way by what you’re growing there offer you — is that what’s the word keeping you informed I guess and allowing you to pivot one direction or another. Or if you had a chance to do it perfectly in one fell swoop and everyone would stand up and applaud the transaction if you could get there all at once tomorrow would you do that? So, how committed are you? And a related part of that question is how is the Sunbelt performing not so much relative to the urban coastal areas where everyone knows that. But how is it performing relative to your expectations? And is it getting is it even more interesting to you even though it’s underperforming relative to other areas of the country at the present time?
Ben Schall: Hey Rich it’s Ben. Let me make a couple of comments. First in terms of our long-term framework of moving 25% of our portfolio to our expansion markets that remains. Primary drivers of that; one the recognition that our core customer our knowledge-based worker is in a more dispersed set of markets. And second we can take what we do well bring it to those markets in order to generate incremental value for shareholders. In terms of pacing and timing, we are seeing softness. We’re starting to see some dislocation in our expansion regions and we see it as a potential opportunity. It’s an opportunity to potentially be buying assets below replacement cost which we have started to do and in a development market that maybe has less players in it or players that don’t have the same access to capital or the same cost of capital that we do to be able to selectively step into some attractive development opportunities there.
There could be — you fast forward I don’t think it’s today where we’d be looking to accelerate our movement given where our cost of capital is, but there could be an environment at some point over the next couple of years where something more substantial does present itself and that could make — that could at that point be the right risk-adjusted return decision. So it’s on our radar. We’re continuing to grow through our own development through acquisitions and funding of third-party developers and we’ll keep our eyes out for larger opportunities as well.
Rich Anderson: A follow-up question is to Kevin perhaps. The 4.1 times leverage the target of 5% to 6% I mean, how do you ever get to that target anytime soon given the rate environment? And maybe one way is debt assumption, which was a part of a transaction you mentioned earlier. Is there any realistic lift to 4.1 in this environment, or could there be transactions here or there where you add debt at reasonable costs through your transaction activities? Thanks.
Kevin O’Shea: Sure. Rich, again, it’s Kevin. So I appreciate the comment. It’s an interesting question. We discuss and debate internally here. As you point out we are 4.1 times net debt-to-EBITDA levered relative to a five times to six times target range which is sort of a — it’s been a long-term target range that we’ve had for more than a decade, which speaks to sort of a normalized environment. If you look at 4.1 times, it’s benefited from cash. If the cash weren’t there we’d be kind of in mid-4s just as a further contextual comment. But more broadly, if you look back at the last four years or so, I don’t think anyone would agree we’ve been in a normalized environment from the pandemic and its effects as it’s moved through.
And as you think about how things have played out this year we are at that low four times leverage level in part because of our capital decisions over the last few years. And this year’s capital plan where we’ve essentially will have paid off about $750 million of debt this year and brought in about $750 million of new and recycled equity from the equity forward and the net disposition activity that’s deleveraging and not necessarily reflective of a normal year but — so this wouldn’t have been our capital plan normally but it has proven to be the right capital plan for this year. And what that does is it gives us financial flexibility to deal with an uncertain and volatile capital markets environment liquidity and strength to deal with an environment where we may wish to be patient in terms of additional capital formation given the recent rise in debt rates.
