Tyler Batory: Good morning. Thank you. So just on the operating cost side of things, I really just want to tie the loop on this topic. I mean, ex property taxes, when we look at same-store OpEx, I just want to be clear on the drivers of that, quite a bit of growth there. How much of that is due to higher turnover? How much of that is due to just general cost inflation? And really, what I’m trying to get at, has there been a structural change in terms of the cost structure? I think there was always a concern with your business model that it would be difficult to scale. So I’m not sure if perhaps this outlook here indication that maybe some just economies of scale creeping in your business model, just given your size and the age of some of your homes?
Ernie Freedman: Tyler, it’s Ernie. I appreciate you asking because if you have that concern, other people might have that concern as well. And the answer is no, we’re not seeing any concerns with having dissynergies from the size of the organization. I think that’s helping us. I can certainly walk through some of the details, but you’re right to point out that we’re guiding real estate taxes to be up about 7% at the midpoint, but we’re guiding overall, which is a little bit more than half of our overall expenses. Overall, we’re guiding to a number that’s about 8.5% at the midpoint. So that means everything else is going up a little bit more. So I think most of that, and I’ll walk you through the details, we believe are more transitory items based on the circumstances where we’re at right now in the marketplace.
I’ll just go through some of the material items in there. One was insurance costs. I don’t think anyone is surprised in the environment hearing, but others, but property insurance rates are certainly going to go up. We’ll finish our renewal here in about three weeks. So we don’t have the final numbers on that. But in the last two years, our property insurance only went up combined about 3% or 4%. It was 0% one year, about 7% or 8% the next year. So we did much better than the broader residential. But with the cost of reinsurance treaties going way up this year, and certainly, of course, the events that happened in 2022, insurance costs are going to go up. We don’t think that’s a permanent issue. We think that’s a onetime issue. I wouldn’t be surprised if property insurance rates go up as much as 20% to 25%, which would bring our overall insurance costs up somewhere into the low double-digits, because the good news on other insurance lines, we’re not seeing those kind of increases.
The ones that are more material for us, Tyler, are really around turnover. And a couple of things with turnover. One, there are inflationary pressures. We do think those will subside as you get later into 2023 and 2024, but we’re still in an inflationary environment there. The other items that really point out with turnover are two important things. One, we do think turnover is going to go up. And we think that’s a good thing. Turnover is going to — because we think we’re going to have a better opportunity in 2023 than we had in 2022 for residents who have been delinquent in making rental payments, not paying the rent, we expect to see more activity there in people moving out homes. And so we do think turnover is going to go up for that reason.
