AvalonBay Communities, Inc. (NYSE:AVB) Q3 2023 Earnings Call Transcript

Matt Birenbaum: Yes, Josh it’s Matt. So the way we underwrite is we don’t trend anything. So the reason why the current lease-ups are exceeding pro forma by so much, by 90 basis points is — I mean basically, it’s got to be one or two things. It’s either rent growth between the time we started construction and the time, we leased it up which — that is what it is in the current situation. Or in some cases, we were just too conservative in our initial underwriting. And even without market rent growth the offering that we put out there, got a bigger premium to the comps than what we had underwritten because we’re pretty conservative in general. So when you think about the deals we’re starting now and you ask where are they going to stabilize two to three years from now, when they lease up, the reason why they might outperform we might get a little bit of hard cost savings, that’s certainly possible based on what I was saying although, we tend to buy it out pretty quickly.

Or it could be rent less between now and then, or it could be just kind of a more favorable response from the market. So on average, over the long run, we tend to outperform by more like 20 to 30 basis points. So that’s pretty consistent, but it will vary based on where we are in the cycle.

Joshua Dennerlein: Okay. Interesting. And then I’m not sure if I missed it, but did you guys disclose October occupancy? I know you put out the right growth.

Sean Breslin: I don’t believe we did, but we’re trending in the same general range in terms of economic occupancy kind of in that 95.7% range or so.

Joshua Dennerlein: Okay. Thanks, guys. Appreciate the time.

Sean Breslin: Take care.

Operator: We have reached the end of the question-and-answer session. I would now like to turn the call back over to Ben Schall for closing comments.

Ben Schall: Thank you and thank you, everyone for joining us today. We look forward to connecting further with you in November. Talk soon.

Operator: This concludes today’s conference. You may disconnect your lines at this time and we thank you for your participation.