Angela Kleiman : Hey, Adam. No, that’s a good question. We actually have — I know this is not a surprise, we get this question on a regular basis, and it’s fair to ask. We have historically a disciplined approach when it comes to evaluating markets, not just within our own markets. And so we do look at all the major metros across the U.S., and it’s part of our annual study to make sure that we have a good handle on what are driving the fundamentals of other markets as well. And so — and this is not to say that we wouldn’t venture into other markets or take whatever proceeds available. It’s really a function of how we view the relative value. And what I mean by that is, as I mentioned earlier, when we look at the fundamentals of our markets with recovery ahead of us, with potential demand catalysts from these large companies and low supply and affordability metrics.
That just speaks to the fact that our market has much more upside and lower risk from supply. And so it’s more compelling in the near term to focus our investments in our markets. We will, of course, continue to watch the other markets and make sure that relative value holds.
Adam Kramer: Great. Thanks for the time.
Operator: Our next question is from Joshua Dennerlein with Bank of America. Please proceed with your question.
Joshua Dennerlein : I just want to go back to your comment that you’re sending out renewals at 3%, 3.5% right now, what your guide assume is 1.75% for the full year. I think some of that might just have to do with the free rent burn off. But can you maybe walk us through the cadence of when we get past that for your rent burn-off and when things start to trend down to 1.7% because I assume the second half of the year is actually weaker than 1.75%?
Angela Kleiman: Hey Josh, it’s Angela here. We are seeing that — that the benefit of the concession burn-off to begin to abate as we head into the second quarter. And that’s why — as Barb mentioned, that you’ll see that renewal rates to start to converge to that 1.25% market rent. So, that’s — hopefully, that’s the cadence that answers your cadence question?
Joshua Dennerlein: Okay. Yes. No, that’s good. And then maybe just one more. For the same-store revenue range, could you walk us through the assumptions that get us to the high and low end of the same-store revenue range of 70 basis points to 2.7%, mostly focused on like blends and occupancy assumptions underlying that?
Barb Pak: Yes, Josh, this is Barb. There’s a lot of different assumptions that go into the high and the low end. I think the biggest factor will be delinquency and market rent growth that could drive us to either the high or the low end. And as we saw like in the third quarter when we — or the fourth quarter when we got back a lot of delinquent units, it can have an impact, a temporary to our occupancy and to market rent, if we get those units back in a low demand period. So, there’s a variety of assumptions related to that on the high and the low end.
Joshua Dennerlein: Okay, all right. Appreciate that. Thank you.
Operator: Our next question is from Wes Golladay with Baird. Please proceed with your question.
Wes Golladay: Hey everyone. Can you give us the balance on the two non-accrual investments? And then can you also comment on what the $20 million noncore G&A charges this year?
Barb Pak: Yes. So, the two that we put on non-accrual, the balance is $25 million for both and in terms of the $20 million that we have in our guidance, that’s mostly related to political contributions. As you know, we’re fighting a couple of ballot measures. So, that’s most of what that’s for.
Wes Golladay: Okay. Thanks for that. And then I guess, maybe bigger picture, supply is still relatively low at the portfolio level and rent growth is call it, low 1%. Is it just mainly the markets with heavy supply bringing that — the blend down for you? You also mentioned something in the comments earlier about the job growth is being driven by service-related jobs. So, I’m just wondering if the job mix is also playing a big part of the forecast this year?
Barb Pak: Hey Wes, on the rents for our guidance, it’s a couple of factors. So, first is what you mentioned the service sector jobs, which has been — which has dominated the job growth last year. And we’ve all seen the announcements recently. The lots of companies are still retooling and reevaluating. And so typically, if you look at the long-term average of our job growth and the composition, normally, you would want about 30% of those jobs to come from higher wage jobs. And so in this environment, which with the consensus — the macro consensus of a soft landing, we certainly wouldn’t be forecasting — we wouldn’t be getting ahead of them forecasting robust high wage job growth. And so that’s one key factor. As far as supply, you’re right, for our portfolio, it’s only 0.5% for California.
Seattle is elevated and close to 1% and higher than last year. Fortunately, for us, it’s mostly concentrated in the downtown area and our portfolio is mostly under Eastside. Having said that, there will be some properties that will have to — that will be impacted by supply, and we’ll see concessions elevated on a temporary basis for those assets.
Wes Golladay: Okay. Thank you for that.
Operator: Our next question is from John Pawlowski with Green Street. Please proceed with your question.
John Pawlowski: Thanks for the time. Barb, I wanted to follow-up on your comments on your quarterly process of remarking the values in your preferred equity book and making sure your dollar basis is safe. Are you able to share a rough average loan to value in your prep book right now? On real values, not lagged kind of third-party appraised values?
Barb Pak: Yeah. I don’t have that in front of me. And I think it varies by asset. So I don’t have that in front of me. But it does matter about the rent growth that we’ve seen in each asset for each property and how we underwrote it initially that all plays into fact where we are in the capital stack. But like I said, we do a thorough scrub and we feel comfortable with the book.
John Pawlowski: Okay. One more for you, Barb. How much success, if any, have you had collecting past written off rent from tenants that have moved out? I’m just not – I don’t have a good sense of how much teeth you guys have to go after credit scores and how much you’re able to actually collect from the huge cumulative written off rent balance?
Barb Pak: Yeah. It’s a small component of our monthly collections. We are collecting a little bit every month on that past due rent, because we have hit their credit and gone after them. and because of our conservative approach to how we account for bad debt, whereby, if you’re delinquent after 30 days, we reserve against it in the financials, when we go and hit their credit and they need their credit, they will start to pay. So we’ve — it is a recurring part of our income given how we account for it, but it’s hard to quantify, and it is lumpy. It moves around month-to-month. And we do expect it will be a reoccurring part for the foreseeable future given we have over $130 million in uncollected rent. But it will be a small part, but it will be drips and drabs.
John Pawlowski: Okay. All right. Thanks very much.
Operator: Our next question is from John Kim with BMO Capital Markets. Please proceed with your question.
John Kim: Thank you. I wanted to go back to your market rent forecast of 1.25% for the year, which is below what you had a year ago. Angela mentioned in the prepared remarks, layoff announcements have come down quite a bit year-over-year. So I was just wondering, are you actually seeing more move-outs due to job losses this year versus a year ago when it seemed like tech layoffs were a lot more prevalent?
Angela Kleiman: Hey, John, it’s Angela here. We have not seen more move-outs to job loss, and we do track that. When we look at move-out reasons, it’s relatively stable. And so our market outlook is really a function of where the economy is and how we believe we would perform relative to the overall economy.
John Kim: Okay. So just projecting unemployment rate moving up?
Barb Pak: Yeah. And I think, John, just to add to that. I think the mix of jobs has been — we’ve seen a change in mix over the last year as the high-quality jobs have not been added in mostly service sector, as Angela mentioned earlier. And I think that, that is — we just don’t see that changing in this environment given the slow economy. So — that could change. That would be upside to the forecast, but it’s not our base case at this point. And that’s what’s driving the below average.
John Kim: Can I clarify on the impairment that you had in your preferred? Do you still have a position in this asset? Or was it — was the loan fully written off due to the recapitalization or some other kind of event?
