Rich Anderson: Okay, fair enough. Thanks very much.
Operator: And our next caller is going to be John Kim from BMO Capital Markets. Please go ahead.
John Kim: Thank you. On your blended lease growth, improvement in January, can you comment on how you think this trends for the remainder of the quarter? I realize I expect it to improve in the second quarter. And if there’s any discrepancies in the market performance versus what you had in the fourth quarter, as shown in Page 17 of your supplement?
Michael L. Manelis: Yes. Hi, John. This is Michael. I could start with that. So, I mean, I think as you look at this and I cited before just the improvement that we saw in San Francisco and Seattle coming off of December and into January with the new lease trends going from, like, a minus 8% in December down to, like, the minus 3.5%? The portfolio itself was at minus 5.7% for new lease change in December and is now in January that we put in the release at a minus 3.7%, the expectations clearly is that you could see with sequential rents improving each week, that number is going to continue to drop, as you work your way through the quarter. So, on the renewal side, it’s a little bit of the opposite story. You saw renewals were a 5.2% in the month of December, and in the release, we have January at the 4.9%.
The quotes are out there, but we do expect this renewal number to keep trending down as we work our way through. Somewhere in that 4% to 4.5% range is what we expect to achieve off the quotes that are in the marketplace. So, I think you’re going to see the interplay between these to shift a little bit where you’re going to have strength because you’re going to have new lease change starting to recover and hopefully turning positive as we start off the spring leasing season, and we’ll see if we keep this kind of momentum in place to do that, and you’ll see the moderation of renewals, but still at a really strong number if we come in anywhere between that 4% and 4.5% growth.
John Kim: Okay. And my second question is on, your development yields. Like you said, we’re trending closer to 6%, given higher concessions. Can you comment on the level of concessions that you’re providing today? And if, is this really driven by your Texas and Denver developments, or is this broad based?
Alexander Brackenridge: Hi, John. It’s Alec. Well, we are literally just starting up our lease ups right now, so we don’t have a lot of data yet. We are assuming a month right now, but that could be flexible over time. And, those lease ups are three in Texas, one in suburban New York, which will probably see very little, of that kind of concessions, and then, two in Denver.
John Kim: Great. Thank you.
Operator: And our next question is going to come from Adam Kramer from Morgan Stanley. Please go ahead.
Adam Kramer: Hi. Yes, maybe a little bit more of conceptual question and I guess also kind of in-line with Alex Goldfarb’s question earlier. But just looking at kind of the new lease change by market, comparing that to the renewal change by market, it’s kind of interesting that new lease can vary pretty by some of these markets, but renewals are in a pretty tight band, call it 200 basis point band give or take. And so I guess the question is kind of twofold, right? Is there an ability to maybe push renewals even more And say a market like DC where new lease is holding in a lot better versus kind of expansion markets, right or San Francisco where I guess I’m kind of surprised by that historically widespread between the new and the renewal rate.
And should I be maybe a little bit worried about renewals kind of falling a little bit, getting closer to that kind of deeply negative or somewhat negative new lease change? Again, a little bit more of a conceptual question, so apologies, but hopefully that makes sense.
Michael L. Manelis: Yes. Hi, Adam. It’s Michael. So, I mean, I think there’s just more stickiness into the renewal stats that you look at this. And you’re also coming off of a period of time, which is low transactions. So, there is a little bit of that in these numbers. I think as we think about this I mean, like I said, we have this data going all the way back in time. It’s just not uncommon in the fourth quarter to see new lease change goes negative even in a pretty good year with rate growth happening in the marketplace. That new lease change goes negative and renewals stay positive. So, it is a really uncommon situation for our renewal growth to go flat or even think that it’s going to be negative. And like I said, we’ve just put so much into our processes.
We have so much good information and insights to it. We got a high degree of confidence. That being said, if there’s a big dislocation in the market, right, even the deceleration I mentioned before could be more robust than what we’ve modeled.
Adam Kramer: Great. Thanks. That’s really helpful and I appreciate that color, and all of kind of the building blocks earlier on the call too. So, maybe on concession usage, I know you’ve talked about it a little bit on the call thus far, maybe just if you don’t mind just some of your expansion markets, kind of the level of concessions in terms of number of weeks that are being offered?
Mark J. Parrell: Yes. So, I think I would just start by just saying that the concession use right now remains concentrated in the Seattle and San Francisco portfolio for us with about 70% of all the concessions being issued. When you drill into the expansion markets, I mean, it’s such a small percent of the absolute portfolio. But right now, when you go across them, it’s running between, like, 30% and 45% of applications receiving about a month. I’d say Dallas right now is the one market where we’re up closer to about six weeks, worth of concessions being issued. And like I said, we would expect that to kind of continue at that level in those expansion markets, and we’re watching what’s going to be happening with the new lease ups and how competitive are they so that we know where we need to play.
The fact that these markets are now, like, 96% or even some of them over 96% with that concession use that we did in the fourth quarter is really a good sign, because the last thing you want to do is turn on concessions, do leasing, and still land at an occupancy like where you started with. That would not be a good situation. So, we feel like the setup right now is defensive. These occupancies are 2% to 3% above. We expect to issue 30% to 40% of our applications receiving concessions of a month to a month and a half in those markets.
