Alexander Goldfarb : Thank you, Mark.
Operator: We’ll go next to Haendel St. Juste with Mizuho.
Haendel St. Juste : I’d like to get some clarification on a comment you made earlier in your remarks that it’s not uncommon to see new lease rate declines of minus 4% to minus 5% by December. And given the weakness in San Fran and Seattle that, you expect you’ll be slightly more negative than that. So, am I correct to read that you’re implying that your entire portfolio, new lease rates that you expect to be minus 4% to minus 5% or potentially weaker? And then what does that sort of imply for these rates you’re expecting for San Fran and Seattle by that point? Thanks.
Michael Manelis : Yes. Haendel, this is Michael. So yes, just to give you like some historical context. So, when we say historical norms, I’m really just looking at like 2017, 2018, 2019. And to give you — in new lease change would typically in the month of October, be like a negative 1.5% to 2%. November goes down to like a negative 3% to a negative 4% and December would be like a negative 4% or negative 5%. So right now, you’re seeing we’re putting up a number in October, that’s a negative 3.1% because of the inclusion of San Francisco and Seattle and really the pronounced concession use that we have going on in those markets. So, as you think about the fourth quarter for us, I think our new lease change for the full quarter is going to be somewhere around a negative 4% but if you go all the way to the month of December, given what we’re seeing, I don’t know why we won’t be a negative 5% or even slightly above that negative 5% in that spot month.
But for the quarter itself, I would put new lease change somewhere around that close to negative 4%. Renewals have been really stable for us and really have been doing better than what we thought. We will hold somewhere right around that 5% net effective change on achieved renewal increases. And when you put those two factors together, that’s going to give you a blended somewhere around 1.25% give or take, 10 basis points either way.
Haendel St. Juste : Got it. And any color or any views you want to share on new lease rates for San Fran and Seattle?
Michael Manelis : So, look, I mean we’re running high single digits right now. I think San Francisco stays kind of at that level. And I think a little bit has to do with if you back up and think about what were we doing in the fourth quarter this time last year, we did have concessions in play in Seattle. So, we were like a minus 6% new lease change in the fourth quarter of last year. So, I would tell you, maybe we kind of just hold the line in this high single digit for the balance of the year in those markets.
Haendel St. Juste : Great. That’s helpful. And if I may, one more. I’m trying to get a better understanding of the range of reasonable expectation that we should have for your same-store revenue next year. You outlined in your presentation the earnings of 1.3% to 1.5%, which is helpful. But the new and renewals getting softer, blended towards 2% for the fourth quarter, negative new leases. The bad debt is improving. But further than you expected and occupancy, I think based on a bit of a tough comp. So, I guess putting it all together, I can’t quite seem to get to the same store revenue projection for next year above the mid-2s? Is that maybe unfair or what maybe could I be missing or underappreciating.
Mark Parrell: Well, I appreciate the question, Haendel, it’s Mark, but we can’t answer that with any specificity. We — just sort of sharing what we know at this time, we’re in the middle of the budget process, which is both top-down and bottoms up. In places like Seattle and the expansion markets supply and close in proximate supply is going to matter. Other places we’re looking at job forecasts and how well occupied we are. So, I think that’s just news yet to be written.
Haendel St. Juste : Fair enough. But maybe can I ask you about Rite Aid and how you think about backfilling those stores and if we expect — should expect that to be a drag or maybe a tailwind to next year?
Alexander Brackenridge: Haendel, it’s Alex. We actually have a lease in place already. So, we’re very excited about it. It’s going to be a good user. It’s going to be a great amenity for our residents and for the neighborhood. So, it’s a matter of getting them into the space, and that’s going to take a little bit of time through next year, six months or so and then they’ll be in place.
Robert Garechana: Yes. And Haendel, from a P&L standpoint, as Alex mentioned, there’s two things that will go on to determine the P&L is just how fast those folks get in place, the new lease because that’s when we’ll start recognizing the revenue for them in 2024 and what that impact is relative to the write — we had the write-off which you’re not going to have again in our base year in 2023. So those two pieces in that rate of growth. But I would expect — in all likelihood, it will be relatively flat because you had the impact in ’23 of the $1.5 million write-off.
Haendel St. Juste : Appreciate. Thank you.
Operator: We’ll go next to Josh Dennerlein with Bank of America.
Josh Dennerlein : Just wanted to touch base on the same-store CapEx, you increased it again to $3,600 per apartment unit. I looked back like a year ago, I think it was like $2,600 per apartment. Just kind of curious what’s going on there? What are you guys seeing? And if there’s any shifting from like same-store expenses into CapEx buckets or just rising costs?
Alexander Brackenridge: Josh, it’s Alex. Yes, you’re right. It did go up, but it went up for a variety of reasons that I’ll go through, not related to shifting expenses into capital. It’s really related to starting the year thinking that spending capital on our portfolio was a more compelling use of capital than acquisitions or development. And we had a big budget. I always handicapped the budget a little bit because things generally take a little longer its construction, things go wrong, contractors, misstates and through the first half of the year, we are right on track for that. We actually had a very productive summer, and so we ended up doing more work than I thought we would do. So, it’s partially that. It’s also — we added in some ROI projects, specifically some solar panel installations that have a great return that weren’t available to us until the middle of the year.
