Operator: [Operator instructions] And our next question comes from the line of Linda Sye [ph] with Jefferies. Please proceed with your question.
UnidentifiedAnalyst: Hi, thank you. With new rent growth in January at negative 1.9%, how much more negative with that trend and at what point might it turn positive if you’re ending ’24 flat?
Ben Schall: Yeah, good question. What I would say is seasonally, rents start to pick up in January. Rent growth typically accelerates asking rent growth, this is as you move through the spring and into the summer. So typically what you would see is this would be sort of the low point of the year, kind of December, January, and then things would improve from here. So certainly, I mentioned, we’re talking about basically getting flat for the year. So, we’ve got several months here where it will continue to improve, flatten out and then probably as we get to Q4, you would see it come back down and go slightly negative again, which is not uncommon in this kind of an environment. So you start to see sort of positive numbers as you get into Q2 and Q3.
UnidentifiedAnalyst: Thanks for that. And then on Avalon Connect with associated costs going away and revenues coming online, if you want to isolate the impact of that for NOI [ph], like how much would that benefit ’25 NOI growth?
Ben Schall: Yeah, we’re not providing any guidance as it relates to 2025 at this point. I did indicate what it was for 2024 as it relates to revenue and the impact on OpEx in my comments, my prepared remarks.
Operator: And our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question.
Haendel St. Juste: Hey there, good afternoon. Two questions for me. First is a follow up on your comments earlier in San Fran, Seattle. Can you outline what your blended rent expectations for the two markets are this year? It seems like your client Seattle is creeping over into the east side and Bellevue, where you have more relative exposure while demand and pricing power still seems pretty evasive in San Fran and maybe some color on the level of concession you’re offering as well as what you’re seeing competitors offer in those markets. Thanks.
Sean Breslin: Yeah, Haendel, this is Sean. We haven’t provided the market level detail for 2024, but thank you for some recent trend data. That’s helpful. So for Q4 of 2023, Northern California overall blended rent change was down 2.8%, which is essentially down seven on new move ins and positive roughly 2.5% on renewals. In terms of Seattle, new move ins were down about 200 basis points and actually renewals were up about 200 basis points. I’m sorry, I misquoted that. The blended was 200 basis points. It was down one nine on new move ins and plus five nine on renewals and so we started to see a pickup in Seattle more recently, again, in that suburban kind of northeast east side sub markets, not downtown, which has been positive.
People coming back to work from Microsoft and Amazon in particular having an impact on that and what I would say is we are more optimistic as it relates to what we expect in Seattle, given our portfolio in the Seattle market in 2024 as compared to Northern California for the reasons I mentioned earlier.
Haendel St. Juste: Any color on the impact of supply in Bellevue and any color on the concessions?
Sean Breslin: Yeah, in terms of the supply, Bellevue has actually been holding up quite well. Most of our portfolio, if you think of it, we have North End, we have a pretty core portfolio in downtown Bellevue and then also in Redmond. Redmond has actually been a little bit softer with the supply as compared to Bellevue, but I think it’s related to concessions overall across the portfolio is most of the concessions that we experienced in Q4. More than 50% came from the combination of Seattle and Northern California, more skewed to Northern California for us relative to Seattle and it really is a sub market by sub market discussion. I’d say the most competitive sub markets in Seattle are two to three months free and that’s urban core assets in lease-up today and are really close competitors.
In the Bay Area, maybe two months would be the high end in Q4 is what we’ve seen and that’s tapered a little bit in January, but pretty similar. So it really is kind of sub market by sub market assessment as to what you see.
Haendel St. Juste: I got it. Thank you for that. And last one, just speaking overall on the transaction market, I’m curious, how do you characterize your conversation of late with potential sellers and their cap rate IRR expectations with some hopeful distinction between coastal and the Sunbelt? I was at National Multihousing this week as well, and it seemed to be still a fairly wide bid ask spread with buyers sticking to their guns and some waiting to sell in the back of this year and hoping that lower interest rates would drive lower cap rates. So curious kind of how those conversations are going. Cap rate IRR expectations in any color on coastal versus Sunbelt. Thanks.
Matt Birenbaum: Sure. Hey, Haendel, it’s Matt. Yeah, there’s still, I would agree, there’s still pretty significant bid ask spread for many assets. We tend to describe it as a market of haves and have-nots and there are lots of assets that would fall into the have not category because those are only going to transact if the cap rate is significantly north of the debt rate and the buyer can get positive arbitrage and so that would be tertiary markets, that would be some out of favor sub markets and, I don’t know if it’s so much coastal versus Sunbelt as it is kind of primary markets versus secondary tertiary markets in terms of that distinction. There’s still plenty of interest in certain Sunbelt markets for sure. The assets that are trading, there is money that seems anxious to get going and, what we’re hearing anyway is the cap rate now has to at least be in the fives, and there’s some debate about what the year one underwriting is, because in some markets, obviously, NOI is starting to decline.
So that makes it a little tricky as well. But, I would expect you’re going to start to see some transactions get signed up here in the next two months to three months at cap rates, maybe somewhere between five and five and a half. That’s a pretty big range, but again, only for assets that are considered highly desirable.
Operator: And we have reached the end of our question-and-answer session. I’ll now turn the call back over to Ben Schall for closing remarks.
Ben Schall: Great. Well, thank you, everyone, for joining us today and we look forward to connecting with you over the coming months.
Operator: Thank you for your participation. This does conclude today’s conference. You may disconnect your lines at this time.
