Operator: The next question will come from Austin Wurschmidt with KeyBanc Capital Markets.
Austin Wurschmidt: I was just wondering, I know you guys don’t offer concessions across the stabilized portfolio but just wondering what kind of has changed just on concessions as far as what you’re seeing across those markets that are most exposed to some of the new supply?
Ric Campo: It’s very typical of what we’ve seen. The toughest markets like would be Austin, Texas and Nashville. And there — the concessions are significant, anywhere from 2 to 3 months free. Generally, merchant builders don’t go beyond 3 months free but you’re seeing that in the most supply constraint or supply markets. When you get to more markets that aren’t as pressured, then compared to those 2, you’re anywhere from 1 month to 6 weeks to 2 months max. And that’s kind of what we’re seeing in some of the other markets.
Operator: The next question will come from Rich Anderson with Wedbush.
Rich Anderson: So I wonder if we could talk a little bit about the longer-term view. Your Avalon and EQR said, well, peak supply in ’24 means peak revenue declines in 2025 or in theory, no one knows for sure. Do you feel like that is at least in the wheelhouse of a possibility in that what we’re seeing today in terms of your outlook which I think most people think looks better than expectations going in, could actually sort of see a downdraft next year as the full lot of the supply is absorbed into your portfolio?
Ric Campo: Based on some of the providers we use, they show an uptick in ’25 and our market is not a downtick. And if you think about the supply discussion that I had a minute ago, the supply project or the supply we know about the demand is the real issue, right? So when you look at the demand projections for this year, it’s — they’re nationwide, over 400,000 units. And then the projection for the following year, even with a slow — very low job growth mark, is something like 380,000 units of demand. So the demand drivers, interestingly enough, are just not usual demand drivers in multifamily. It’s always been about job growth, right? And today, it’s about taking market share from single families, single-family market because it’s so upside down on a cost to rent perspective and lack of inventory in the resale market.
And what’s happened — what’s really interesting is that is that if you want to buy a new house in America today, you pretty much have to buy or if you want to buy a house, you pretty much have to buy a new house. And when you look at the usually, when interest rates go up this high, the single-family homebuilders all crash and lay people off of. They had about a 5- or 6-month hiatus and then went back to hard core building houses because there was no inventory to be for single-family buyers to buy and that’s continuing. So I think that these demand drivers that are actually — that are driving this really positive outlook for demand in 2024 are going to be in place in 2025 as well. And especially if you have a backdrop of job growth that looks like it’s — it’s — I’m not sure you can say January is going to be a print every month in this year.
But clearly, the job market is a lot stronger than people thought it might be and that could help with the absorption and in 2025 as well. So I haven’t seen very many projections that show 2025 where rents are going down. They bought them. Most of the numbers that we see from folks are bottoming in 2024 and then they start an uptick in 2025 because you’ve absorbed a lot — so many units in 2024.
Operator: Next question will come from Eric Wolfe with Citi.
Eric Wolfe: So correct me if this is wrong but I assume that you had to gain the lease today. So I was just wondering based on your history, if there’s a certain gain to lease level where you’re no longer able to pass through like 3.5% to 4% type renewal increases. And then for that 4.1% renewals you sent out for February and March. I was wondering what the rate sort of achieve rate to think about would be on that?
Alex Jessett: So first of all, we’re actually not at a gain to lease. We have — we’re basically a flat — no loss lease or gain to lease. When you think about renewals, we’re anticipating the fourth — excuse me, the first quarter that we’re going to get at right around 3.9%. So fairly close to what we’re sending out and then the other question which I think is sort of really around the differential between new leases and renewals. When we look at our math, the differential for the full year actual percentage-wise between somebody with a signed a new lease for a renewal is really only about 1.5% differential. So it’s not that significant and not something that we think is problematic.
Operator: The next question will come from Haendel St. Juste with Mizuho.
Haendel St. Juste: Good morning. Just hoping you could talk about development for a moment here. I see you have up to $300 million of new starts, including the guide. So curious when we could see those start, how they’re penciling today from a yield or IRR perspective in which markets we can see those in?
Ric Campo: The developments that we have in that model or in the model are in Charlotte and their suburban 3-story walk-up type product. And we would start those depending on how the year unfolds in the back half of the year, so that we could deliver into ’26 and ’27. And the yields are anywhere from in the mid-5s to low 6s in terms of stabilized yields. And when you look at IRRs, it’s really kind of complicated to figure an IRR today given what are you going to expect cap rates to be. But ultimately, we think there’s going to be a pretty constructive market in ’26 and ’27 when these properties deliver. We have another — a number of them in the pipeline as well in other markets. But these 2 because they’re pretty simple and they come in at a price point that’s very affordable relative to urban high-rise in the same market is pretty attractive.
Haendel St. Juste: Okay. And then maybe on the real estate tax guide. You also, I think you mentioned, Alex, 3.5%, I think it was embedded in your same-store expense guide there. A little bit lower than I think a lot of us were thinking and certainly given what we’ve seen recently I’m curious if we’re kind of past the peak headwinds there for real estate taxes and selling into a new norm here or maybe you’re perhaps benefiting from something else that’s less obvious to us.
Alex Jessett: Yes, absolutely. So the property tax number that we have in our guidance is 3%. And if you think about it, it’s really the same number that we experienced in 2023. And so it seems that we are reverting back to the long-term mean which is in that sort of 3% to 3.5% range. Really, the big driver that you have is Texas. And as we discussed in prior earnings calls, Texas is very favorable when it comes to property taxes, especially with a new bill that was passed last year. And so we’re receiving the benefit of that for a second year in a row. And we actually think that our total property taxes in Texas are going to be up about 2.2% which is really a pretty low number and that makes up about 40% of all of our property taxes. So that’s the primary driver there.
