Mike Daley: Thanks for the question. This is Mike. I think we are continuing to see that A properties are being hit harder than B. I think those are the ones where we see the developers getting more aggressive with concessions. Obviously, that directly impacts the A market more so than the B market. And I think that our properties have definitely shown more occupancy and rent growth strength on our B assets. As far as markets being impacted, I think 2024, we expect that to be better from an impression – from a concession perspective, I think Atlanta, less pressure with the new supply, which is good for us. Obviously, that’s a big market. Dallas, Nashville, the other ones that were mentioned earlier, either very slightly up in terms of new supplier or even with this year.
Anthony Powell: Thanks. More generally, I mean, are you seeing any signs of stress in the consumer base outside of things like fraud? Are you seeing tenants coming to you saying they can’t pay rent? Just any kind of signs that consumers are being more stressed on a broader level than just more specific situations?
Mike Daley: Specific to our business? No. Our rent to income ratio has remained very consistent at 22%. We’ve not seen any upward trend and any inability to pay than we have in the prior periods. We do actually have better credit in our applicants than we did, say, a year-ago. So we’re seeing an upward trend in terms of creditworthiness of our applicants. And I don’t think it’s any surprise that any pressure on consumers generally impacts the residents in all multifamily, but nothing specific to our business beyond that normal consumer pressure.
Anthony Powell: Okay. Thank you.
Operator: Next, we’ll move to Eric Wolfe at Citigroup.
Eric Wolfe: Hey, thanks. Can you talk about where you expect new and renewal rate growth to go through the rest of the year? And if you think we’ll sort of see peak pressure from supply on your rate growth in the first half of next year, if there’s going to be a bit of a lag there just given the time it takes to lease up all the new supply.
Mike Daley: Yes. I mean I think – again, I think we’ll continue to see a little bit of that. The rent growth that we’ve seen so far that we’ve reported in the fourth quarter, we think that will continue for November, December. I think the blend in our guidance that we have for the entire fourth quarter is about 90 basis points of blended rent growth.
Scott Schaeffer: As far as the new supply, I think, we are looking at our submarket new supply. I think that the – as I mentioned earlier, Dallas, Nashville, Atlanta, we see that moderating, especially in Atlanta. And I think that in terms of the delivery, we do see that in the first half of next year, obviously, there will be some absorption tail on that delivery, but definitely, to your point, first half.
Jim Sebra: And I’d like to add that for the fourth quarter, as we sit here today, if you use a 50% renewal rate for lease expirations, 85% of that 50% has already renewed, and they renewed at an average 5% rent increase. So that gives you a good idea of how we see the fourth quarter finishing out.
Anthony Powell: Got it. And I think you mentioned that one of your data providers is predicting I mean like 2.4% market rent growth next year. I mean do you think that’s, I guess, reasonable given everything that’s going on? I mean, I would say that the market would probably be pretty excited about that growth just given views around what Sunbelt Supply is going to do as sort of the compounding effect of it keeps increasing. So I mean, just from your perspective, I mean do you think that 2.4% is reasonable. And when you’re looking to set your guidance early next year, I mean, are you mainly looking at some of the third-party data providers? Or is it more of a sort of ground up, look, each of your properties put out a forecast and you build that into your guidance?
Jim Sebra: So a long question. So let’s break that into pieces. So in terms of our budgeting and forecasting process, it’s very much a ground-up process with each one of our communities kind of having input into kind of what they think rents could grow by in terms of renewal and new leases. As we can always say that our data providers certainly provide data, and we use multiple ones. The one I quoted was CoStar is kind of at 2.4%. I think it’s probably certainly reasonable given what the data and how their economists have predicted. But obviously, 2024 is still very much unknown and we’re all evaluating kind of what the effects of new supply will continue to have across – certainly us as well as our markets.
Anthony Powell: Okay. Thank you.
Operator: We’ll go next to Wes Golladay at Baird.
Wes Golladay: Hey. Good morning, guys. As you look to next year for the value add program, I think you mentioned you’re still going to get those high teens returns. Do you expect the same amount of projects next year?
Scott Schaeffer: Yes. Our target next year will be for 2,500 to 3,000 units for next year.
Wes Golladay: Okay. Fantastic. And then you mentioned operational efficiencies rolling out next year. How should we think about expense growth compared to this year? Is there any one-time items that will be hard to comp next year or easy comps? And how will these efficiencies benefit you next year?
Scott Schaeffer: Yes. Good question. We’re obviously not giving any color yet on 2024 expenses. We’re still through the budgeting process. I would think that one of the big areas that we’ll – we expect to see some further progress on is bad debt. I realize that’s not necessarily an expense is a negative to the revenue line. But that’s a key area that Mike and Janice and team expect to see some progress on as we roll out these new technology tools. So I think we’re very much still open on 2024, and we’ll be prepared to kind of talk about it more in February when we give our guidance for 2024.
Wes Golladay: Got it. And if I could squeeze one more in. Let me just – commentary on other calls where the concessions were so low or so high that some people are moving from B to A assets. Are you seeing that in any of your markets where maybe a year from now when they can’t afford A rent, they come back, just trying to get a feel for the dynamic in some of these markets.
Janice Richards: I think in this – this is Janice. I think in the three markets that we mentioned, where we’ve seen that increased supply during a low seasonality, which is Atlanta and Dallas and Nashville. We’ve seen a sum of that, but we still see that our B assets are outperforming our A assets holistically.
