Mark J. Parrell: Hi, Eric, it’s Mark. Just to start, the others can contribute. I mean, you look at the numbers in DC and Boston and New York last year were outstanding. So, we’re being thoughtful. We’re being a little cautious going into a volatile year, but your restatement of the setup is correct. I mean, those northeast markets have steady demand, by and large, minimal supply or in DC’s case, strong absorption characteristics. I mean, we’re optimistic those markets can continue to do well. In some cases, like New York, and Michael alluded to that, they’re coming off really big rent growth years. In some cases, there’s a little bit of a pause to catch your breath and let resident incomes grow to catch up to rental growth. But, I mean, if you didn’t get that message, we’re super optimistic about the northeast markets and think they will do very well. It’s just trying to handicap all the various crosscurrents in the economy that are challenging for us.
Eric Wolfe: Thank you.
Operator: Our next question is going to come from Jeff Spector from Bank of America. Please go ahead.
Jeff Spector: Great. Thank you. My first question is a follow-up. I heard a comment and I think it was on the Sunbelt quote it could be a couple tough years. I guess can you expand on that? And then, and maybe most important is talk about when you expect supply pressure to peak, let’s say, in Seattle. And I know, again, Sunbelt is, smaller markets for you. But if you have a view on the Sunbelt, it would be appreciated? Thank you.
Michael L. Manelis: Yes. Hey, Jeff. This is Michael. So I’ll start. And just specific to the Seattle and the supply that we see, it is back half loaded for us in the market with basically, a lot of concentration in Redmond as well as the city of Seattle. So for us, like, the peak is what we expect to experience is going to be somewhere in that back half of this year. And you could already see the starts coming way down. So, I think the level of competitive pressure that we face in ‘25 and Seattle will be less than what we’re facing in ‘24. Relative to the Sunbelts, I mean, this is a great question because it’s going to take a while to absorb the units that are coming to this market, and the supply that we look at is fairly constant across many of the Sunbelt markets all year long by quarter, which tells us that and what I said in the prepared remarks that we expect to feel this pressure at our assets all year long.
I think as you turn the corner and you get into ‘25, you’re going to start to see that supply number slow down, but you are still going to have a little bit of the overhang of the pressure from the units that were delivered to the market in ‘24.
Mark J. Parrell: Yes. I’m just going to add a little bit to that. If you look at ‘25 expected deliveries and some stuff from ‘24 will definitely slip, I mean, it’s about as big as ‘23’s delivery. So, it’s not like ‘25 is a, incredible decline. So, what we really see, Jeff, as we look at this is still good demand in those markets. That’s why we like Dallas, Fort Worth, Denver, Austin and Atlanta. But the supply picture in our experience, we’ll spend this whole year with declining new lease rates, occupancy pressure, all of those things, and you as an investor and an analyst may start to see improvement in that so called second derivative of rent growth late this year beginning of ‘25. But same store revenue growth in our experience will be worse in ‘25, not in ‘24 because all those leases that are being rewritten will go through the rent roll.
And so you may be more optimistic in ‘25, but your numbers actually likely will be worse. So, that’s what we’ve seen with supply in our history across our markets, and then we don’t really see why it’d be any different here. And I think the wild card is if you have incredible job growth in these markets, you may be able to absorb some of this supply more efficiently and get through it more quickly. But the idea that ‘24 is the only oversupplied year is kind of a tough one for us to accept.
Jeff Spector: Thank you. That’s very helpful. And is that why you’re assuming acquisitions in the second half or is that just conservative approach I guess to the guidance on acquisitions or to your point, are you really expecting these opportunities to arise more second half ‘25 in your expansion markets?
Mark J. Parrell: Well, the guidance is just to help you model. If Alec, can buy things in his team earlier at good prices, we’ll buy them earlier. The relationship I think you’re going to see here is that prices now seem okay, maybe not quite good enough, but the discount to basis, the replacement cost, pardon me, is very good. It’s the cap rate. And when you look at, like, two years of declining rental growth, you buy in Dallas, your year two number might be lower your cap rate than your year one. But on the other hand, later this year, you’ll be past some of that and your year two number will look a little better. So, likely paying a higher price. So, that’s what you’re going to see us navigate. We like these markets long-term.
We think owning the four markets that we’ve, tabbed as our expansion markets, say, 25% of the company will create more balance and drive growth better and reduce volatility over time, Jeff. But getting into them is a little bit of an art. There’s going to be a little bit that we probably do sooner, a little bit we do later, and you may feel better about the price in one and not as good about the revenue growth in the other and vice versa. But, we’re prepared to do that. And, again, the number you see there is just sort of the guidance assumption. We’d be happy to do more if we can find more.
Jeff Spector: Thank you.
Operator: And our next question is going to come from Robin Lu from Green Street. Please go ahead.
Robin Lu: Good morning. I just want to touch on taxes. From your conversations with cities, are you hearing any markets where lower values are starting to flow through to tax assessments?
Robert A. Garechana: Yes. Hi, Robin. It’s Bob. Thanks for the question. We are seeing lower values in some markets. In fact, we’ve gotten some assessed values, actually back already, as we look at 2024. And on the margin, you are seeing some decreases. So for instance, in Washington state, we saw about a 1% decrease, and we’ve got most of the values back there, and we’re seeing it in other places. Obviously the income, as assessors look at values, the income production in 2023 was really quite good. But the offset there was really the cap rate change just given risk free rates and other things. And so we are seeing some acknowledgment by assessors that values are in fact, lower than what they had initially assessed at. The open item as you think about real estate taxes for 2024 will be where rate comes. And we have rates in some places, and we’ll see where they, fall out in others.
Robin Lu: So, the magnitude of where values have fallen in, let’s call it, the last couple of years haven’t really fully been baked in yet. They’re still sort of trickling into tax assessment. Is that how — am I interpreting that correctly?
Robert A. Garechana: You are correct, and that makes for an excellent appeal activity for our real estate tax team as we challenge values.
Robin Lu: I’m glad it could help. Just on the second question.
Robert A. Garechana: Thanks.
Robin Lu: I did obviously notice that you, did some stock repurchases in the open market after a long period of a pause, with, I guess, little less system development and no near-term debt maturity, are you expecting or how does buybacks drive against other capital, uses this year, particularly on the way that you, the cadence between disposition and acquisitions for 2024?
Mark J. Parrell: Hi, Robin, it’s Mark. Thanks for that question. Our primary capital allocation goal is going to remain building out the portfolio in the way I just described in these expansion markets and lowering exposure in Washington DC, New York, and California. Again, we believe that portfolio will create the highest returns over time, the lowest volatility, that that’ll make the shareholders the most money in the long haul. All that said, we’re going to continue to consider these share buybacks, especially when you get this bigger value dislocation and when you can fund it with assets that are the least desirable, among the least desirable in the portfolio against the portfolio that we think is really top notch and where there isn’t a lot to buy.
