That’s an important other ingredient. There wasn’t a lot of opportunity cost here, there wasn’t a lot else available to buy at prices that made sense and all those capital structure considerations have to be thought about too. We’ve talked about on these calls. Things like, does it create a lot of tax gain that’s hard for a REIT to manage. That worked out okay for us. Bob has done a great job and his team on the balance sheet, so I don’t have to worry about debt maturities that we need to kind of husband our capital. And another I want to introduce is you got to be careful about platform scaling. If you sell too many assets, you can really increase your overhead as a percentage of revenue. But all that said, the Board and the management team remain open to buybacks.
And for us, it’s hard for me to give you a formula. We’re just going to kind of see what market conditions are, where the stock goes, what’s out there to buy, and, keep our mind open to doing more, stock buybacks.
Robin Lu: Right. Thanks for the color.
Operator: And our next question is going to come from Michael Goldsmith from UBS. Please go ahead.
Michael Goldsmith: Good morning. Thanks a lot for taking my question. My first question kind of dovetails off of Jeff’s one. If you kind of slice your portfolio between kind of core coastal, San Francisco and Seattle and then expansion markets, you talked quite a bit about just when you’re expected to see the second derivative and basically how long it’s going to take for the expansion markets to recover. Can you put some more context around San Francisco and Seattle, how that timeline compares? And if you’re starting to see some of that second derivative recovery, now or expect to see it in the near future? Thanks.
Mark J. Parrell: Hi, Michael, it’s Mark, and I think, Michael Manelis may have something to add here. So, we talked a lot about San Francisco on the call, the last one and why we like the market long-term, feel the same way. The management team thinks there’s going to be elongated recovery in that market. Conditions on the ground are a lot better. The mayor put out some information about crime reductions. They have the biggest class of police cadets, at the police academy in San Francisco, they’ve had since before the pandemic. So, there’s some good things going on. But until, as Michael said, we get a little more tech job growth, which talking to the team and talking to others in the Bay area and in the city of San Francisco is probably a more later ‘24, ‘25 thing.
That’s probably where you get rent to take off. The thing I want you to think about is, you’ve had spectacular growth in incomes in the Bay area since 2019, over 30% nominal and 12% or 13% on a real basis, yet our rents are down in the city of San Francisco 20% since 2019 and kind of flattish to up marginally in the Bay area. So, this is a market that, like New York, can really take off once you get some job growth, because there isn’t a lot of new supply. Housing costs are pretty high. So, the management team’s optimistic about the recovery. The timing is kind of tough. I don’t know, Michael, if you’ve got anything you want to add.
Michael L. Manelis: Yes. I mean, I think we expect these markets to be volatile this year. And just starting off the year right now, I got both markets at 96%. Yes, we issued a lot of concessions in fourth quarter to get there, but the fact that we got there shows us there is demand in the marketplace. And as we think about even, like, the new lease change. So, both of those markets reported in December about a negative 8% new lease change. When you look at the January results, they’re now both at about a negative 3.5%. So, it’s a pretty material shift. So, the setup heading into the spring leasing season is really good, but we’ve been there before, and we’ve seen those markets kind of hit a pause and then kind of retrench a little bit.
So, that’s why we’re just being a little cautious. We’re going to wait till we see probably a couple consecutive quarters of improving fundamentals before we kind of change some of our long-term modeling on those markets. The other thing I would just add besides the value proposition of San Francisco is Seattle benefits from having, like, the lowest rent to income ratios out of all of our coastal markets. So, we just see this opportunity and the fundamentals for those markets to recover. It’s just like Mark said, it’s hard to pinpoint when.
Mark J. Parrell: Yes. I forgot to mention something on Seattle I just want to throw out there. Seattle’s nominal wage growth since 2019 is 40%, right. Yet our rents in that market are up 7%, and downtown, they’re flat. So, again, these markets have the ability to pay more for great quality housing. And, again, Seattle is a supply, push this year, but after that, it gets a lot lighter. So, that’s about a third of our portfolio, Seattle and San Francisco. And I hope, Michael, we’re talking about that second derivative towards the end of this year for you, but we haven’t embedded that into our guidance.
Michael Goldsmith: Got it. Very helpful guys. And then my second question is just related to bad debt as a percentage of revenue, it was flat sequentially. I think there’s an expectation that it could be choppy, but continue to trend down. So, what’s assumed in guidance for 2024? And do you expect a continued slow and steady pace of improvement? Or should we expect that to kind of to get better in a specific quarter or just any sort of visibility around the pacing of improvement? Thank you.
Robert A. Garechana: Yes. I’ll grab that, Michael. It’s Bob. So, to start with what’s assumed in guidance, we do assume that we will get, we will improve. So, we ended the year at, call it, 1.4% of bad debt as a percentage of same store revenue. I think I said in my remarks, we expect to get to 1% a little over 1% for the full year. That means that by the fourth quarter, we’re assuming that we’re sub, 1%. You’re correct in the kind of 3Q to 4Q in 2023 it being flattish, and what I would caution and is that it is, this is a thing that is very hard predict because of the court systems. It has puts and takes. There’s more of a step function than a linear kind of improvement function associated with it. So, our expectations and guidance is that, Q1, which we’re in right now is more flattish, and that you started see seeing improvement later in Q2, Q3, and Q4, because of that kind of case of the court system and because there is there’s always been a little bit of seasonality in this number as you think about, like, post holidays, bad debt in the first quarter is always or typically a little bit higher anyways.
So, expect it a little bit of a choppy step function, but expect improvement overall.
Michael Goldsmith: Thank you very much.
Operator: [Operator Instructions] Our next question is going to come from Jamie Feldman from Wells Fargo. Please go ahead.
Jamie Feldman: Great. Thank you, and, thanks for taking the question. So, I guess just thinking about your comments on Sunbelt versus coastal, you think about the assets you bought, last quarter, one year old, selling assets that are 40 years old. How much of your view on those markets is, tied to just the types of assets you own? At least if they’re newer assets, are they in lease up where you meet, it means you have more concessions, more challenging to get, to get leased up. Is there some of that bias in the numbers you’re putting out, or would you say, your view of what you’re seeing in coastal is truly, a view across the markets?
Mark J. Parrell: Yes. Thanks for that question, Jamie. I guess I attack it another way by certainly lease ups are different. But remember, the numbers we’re telling you are same store numbers, so they won’t include lease up conversations. But I would say we have relatively small portfolios in those markets. So, if one property is being hit hard, it could be one out of eight of our same store assets in, Denver. So, I think that is it. I think different people, obviously, different parts of the market feel it differently. So, that would be my comment. We have relatively small portfolios. I mean, Austin, we have three same store assets.
