Sean Breslin: Yeah, Michael, this is Sean. A little bit of a complex answer to that because it depends on a lot of assumptions. The things you would think about are how significantly different is it from our baseline forecast in terms of job and wage growth and where does it occur and when does it occur? So if we see acceleration, but it happens in August, it doesn’t do a lot for us because we will have signed leases, through July, offers are out for August, September, October in some markets. So I would say it probably helps you as a better setup for 2025 if you saw that happen in the second half of the year. If we saw a significant acceleration in the macro environment in the next 60 days, as an example, beyond what we forecasted, that should play out better for us as we get into peak leasing season.
I think you just have to remember that if silver market move in to market, kind of 30 days before they move in, as an example, but those renewal offers are in most markets from a regulatory standpoint, they’re out 60 days to 90 days in advance and once it’s out, you’re not going back and saying, oops, sorry, I’m going to change rent and move it up.
Michael Goldsmith: Got it. That’s helpful. And then just based on current conditions, how far along do you think that we are in post-COVID recovery in the Northern California and Seattle regions?
Ben Schall: Yeah, good question. When I talk about it in the context of maybe rent basis, I would say Northern California is still a long ways to go. We have rents that are essentially asking rents today that are down roughly 10% from pre-COVID peak levels. That’s primarily driven by San Francisco being 12%, 13% below peak, which is, that’s a pretty significant number and what I would say is that while I think we’re seeing some green shoots in San Francisco in terms of what’s happening with, say AI as an example, there’s a long ways to go in terms of getting the sort of quality of the built environment at a place where people are comfortable, office leaders, business leaders, kind of calling people back to the office and/or people wanting to migrate to the city and be able to feel comfortable with what they’re doing.
So I’d say there is a lag there. How long it takes to play out, I think these things take a fair bit of time when you’re talking about quality of life issues, crime issues, things of that sort. So I don’t think this is necessarily a couple quarter type of issue. I think there’s several quarters, depending on the political will of what happens to actually see it sort of trend the right direction for us in a more meaningful way. In terms of Seattle, I think a couple of things to think about as it relates to Seattle. Seattle rent levels for us are up about 8% from pre-COVID peak levels, but it is a very bifurcated market. The urban core of Seattle, whether it’s right downtown, stuff like Union, Capitol, etcetera are much more challenged because of not only the quality of life issues that I mentioned that you have in San Francisco also in play there, but there is a meaningful amount of supply being delivered more in ’24 than was delivered in 2023, which will compound the issue versus if you’re mainly suburban, north end, east side, you’re much more well-positioned.
That’s where the majority of our assets are in Seattle.
Operator: Our next question comes from the line of Richard Anderson with Wedbush. Please proceed with your question.
Rich Anderson: Thanks. Good afternoon. Sort of an open-ended question, but see if you can get a response out of you. New York Community Bank yesterday had its debacle. Former Signature Bank, both of them had multifamily as part of their problem in terms of own losses and whatnot. I think we have to distinguish between rent regulated and market rate, but still, and rent regulated is really what’s causing the problem. But I’m curious if you’re seeing anything new on the ground from your point of view. Perhaps this creates business, sort of growth opportunities for you, but are there operating disruptions that are happening in neighboring assets as a result of all this, just sort of bad operating behaviors and kind of a distress situation? Are you seeing anything along those lines that we should be concerned about from this banking perspective, lending perspective?
Ben Schall: Rich, we are not seeing significant distress in the system. You know, there obviously is the potential wave of maturities that’s being highlighted by folks. For the most part, at least in our markets and the assets that we’re spending time in and around, we’re seeing lenders agree to extend out loans. We’re seeing equity step in and put up more capital. Now, not all debt providers and equity providers are able to do that. So that does create the potential for some dislocation, but we’re not necessarily seeing it of size. I’d say we’re preparing to be ready to take advantage of it, but not seeing it at this point. Operationally, you know, the theme I would take you to is look back over, I don’t know, this last cycle, last decade, world of capital being homogeneous.
Capital is flowing to all types of players and generally is flowing at a similar cost to all types of players and so as we think about positioning going forward, there is an element of thinking about how we take advantage or step in opportunities for assets that are being operated by, less sophisticated players, players with less scale. And I’ll kind of end on the theme of as we’re thinking about the opportunity set out there, it is a combination of both places where we can bring our balance sheet to bear and bring our strategic capabilities to bear and we’ve spent a lot of time on our operating model transformation. It’s got two impacts. It’s one, it helps us drive internal growth, but we’re also bringing those operational capabilities to our external growth.
Rich Anderson: Great, great color. Thanks for that, Ben. Second question for me, you mentioned, and we all know 2X the amount of supply in the Sunbelt versus your established regions and yet you’re still predicting positive revenue growth in your expansion markets and I think it was said January new lease rent growth in the Sunbelt is flat, not even negative. Maybe I got that wrong, but nonetheless, it sounds resilient from a dollar’s perspective, despite the supply. Is that a good way to look at it? Relatively resilient, I should say. And/or are you thinking, well, 2025 could be materially worse in the Sunbelt as sort of the supply picture builds on itself and starts to impact revenue maybe to a greater degree next year versus this year? Is that the way you kind of think about the Sunbelt today?
