Mid-America Apartment Communities, Inc. (NYSE:MAA) Q1 2024 Earnings Call Transcript

Mid-America Apartment Communities, Inc. (NYSE:MAA) Q1 2024 Earnings Call Transcript May 2, 2024

Mid-America Apartment Communities, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to Mid-America Apartment Communities or MAA’s First Quarter 2024 Earnings Conference Call. During management prepare comments all participants will be in a listen-only mode. Afterwards, the company will conduct a question-and-answer session. [Operator Instructions]. This conference call is being recorded today Thursday, May 2, 2024. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets of MAA for opening comments.

Andrew Schaeffer : Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning with prepared comments are Eric Bolton, Brad Hill, Tim Argo and Clay Holder. DelPriore and Joe Fracchia are also participating and available for questions as well. Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday’s earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results.

During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial debt. Our earnings release and supplement are currently available on the for Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric.

Eric Bolton: Thanks, Andrew, and performance trends in the first quarter were in line with our expectations, and we enter the summer leasing season well-positioned. Pricing trends for new resident move-ins continue to reflect the impact from new supply delivering in several of our markets. Our renewal pricing remained strong. Encouragingly, blended lease-over-lease pricing in the first quarter captured 100 basis points improvement as compared to the prior quarter, followed by April pricing that was ahead of the first quarter performance. While the bulk of the leasing year is still in front of us, we do like our early positioning as we head into the summer leasing season. We continue to believe that our high-growth markets are producing solid demand sufficient to absorb the new supply in a steady manner that will enable continued stable occupancy, strong renewal pricing, strong collections and overall revenue results that are aligned with the outlook that we provided in our prior guidance.

Our leasing traffic remains strong and record low resident turnover, favorable net migration trends and stable employment conditions across our diversified portfolio and markets continue to drive solid demand. While we expect leasing conditions will remain pressured by new supply deliveries through the year, our on-site teams actively supported by our asset management group are doing a terrific job. Superior Resident Services as reflected by our sector-leading Google ratings and record-high resident retention rates, along with several new technology capabilities introduced over the past couple of years are making a meaningful difference in this competitive environment. With new supply deliveries poised to begin tapering later this year, demand trends remaining stable and occupancy remaining strong, we remain optimistic that leasing conditions should recover quickly and begin improving in early 2025.

While the transaction market remains slow, we are seeing more acquisition opportunities for new lease-up projects, which Brad will touch on in his comments, and we remain comfortable with our transaction expectation for the year. I continue to be optimistic about our ability to work through the current supply cycle with in our high-growth markets ability to absorb new supply. With a 30-year performance record focused on these high-growth markets, we’ve operated through prior supply cycles. Today, we believe our diversified and higher-quality portfolio, our stronger operating platform our stronger balance sheet have us positioned to compete at an even higher level. We’re excited about the outlook over the next few years. Our high-growth markets continue to offer attractive long-term appeal for employers, households and real estate investors.

We have a meaningful future growth on the horizon as new supply deliveries decline and leasing conditions strengthen. Several new technology initiatives will drive further efficiencies and higher operating margins from our existing portfolio and a pipeline of redevelopment opportunities will also drive higher rent growth from our existing properties. And finally, our external growth pipeline continues to expand, setting the stage for a meaningful additional NOI growth. I’d like to send my appreciation to our MAA team for a solid start to 2024. And with that, I’ll turn the call over to Brad.

Brad Hill : Thank you, Eric, and good morning, everyone. In preparation for what we believe will be a stronger leasing environment in 2025 through at least 2028, we continue to make progress in putting our balance sheet capacity to work to deliver future earnings growth. Subsequent to quarter end, we started construction on a 302-unit prepurchase development in Charlotte, North Carolina, and we expect to start construction this quarter on a 345-unit project under our prepurchase development platform in the Phoenix, Arizona MSA. Both projects are expected to deliver first units by mid-2026, and deliver stabilized NOI yields in the mid-6% range. consistent with what we are achieving on our current developments that are leasing.

With the addition of these two projects, our active development pipeline represents 2,617 units at a total cost of approximately $866 million. With continued interest rate volatility and tight credit conditions, transaction volume remains low. But we have seen cap rates firm up a bit from fourth quarter with market cap rates on deals we track that closed in the first quarter, averaging approximately 5.1%, 30 basis points lower than the previous quarter. Despite the low transaction volume, our team continues to find compelling select acquisition opportunities. We currently have an off-market 306-unit suburban property in Raleigh [ph] under contract to acquire for approximately $81 million that we expect to close this month. This newly constructed property is currently in its initial lease-up at 49% occupancy and is expected to stabilize in mid- to late 2025.

At this point, we believe our forecasted acquisition volume of $400 million is achievable. Despite the increased pressure from new supply, our four developments that are actively leasing three of which are under construction and one that has completed and is in lease-up continue to deliver good performance. While new lease rates are facing slightly more pressure at the moment with concessions on select units, up from four weeks to six weeks, we continue to achieve rents on average approximately 18% above our original expectations, driving higher than originally projected NOI and earnings and creating additional long-term shareholder value. For these four projects, we expect to achieve an average stabilized NOI yield of 6.5%, exceeding our original expectations by 70 basis points.

We continue to make progress on the predevelopment work for a number of projects. In addition to the two 2nd quarter development starts I mentioned a moment ago, we expect to start construction on one to two more projects later this year. While we have not seen a broad reduction in construction costs, encouragingly, we have achieved some level of reduction on our recent pricing supporting our ability to start construction on these projects. We have seen better subcontractor bid participation, which we expect to lead to better execution with stronger subs throughout the construction process for our new starts. We are hopeful that the significant drop in construction starts that we’ve seen in our region will lead to more substantial construction cost declines.

As we progress through the year, allowing us to start construction on additional opportunities in our development pipeline, which today consists of 10 well-located sites that we either own or control, representing additional growth of nearly 2,800 units. We maintain optionality on when we start these projects, allowing us to remain patient and disciplined in our execution timing. Any project we start this year will deliver first units in 2026 and 2027 and aligning with what is likely to be a strong leasing environment, supported by significantly lower supply. Our development team continues to evaluate land sites as well as additional prepurchase development opportunities. In this liquidity-constrained environment, it’s possible we could add additional in-house and prepurchase development opportunities to our current and future pipeline.

While we continue to pursue numerous external growth opportunities, our existing portfolio remains in a good position heading into the busier leasing season. Our broad diversification provides support during times of higher supply with a number of our mid-tier markets currently outperforming. As Tim will outline further, despite the high level of new supply, we continue to see solid demand and absorption, leading to improved current occupancy with future exposure better than this time last year. Our collections are strong and near pre-covid levels at 99.6% of billed rents. Our resident base is stable with more residents choosing to live with us longer, supported by our focus on customer service, coupled with high single-family housing costs.

Before I turn the call over to Tim to all of our associates at the properties in our corporate and regional offices. I want to say thank you for all you do to improve our business and serve our residents and those around you while exceeding expectations of those that depend on us. With that, I’ll turn the call over to Tim.

Tim Argo : Thanks, Brad, and good morning, everyone. As Eric mentioned, new lease pricing in the first quarter continued to be impacted by elevated new supply deliveries in several of our markets. This, combined with typically slower traffic patterns that are evident this time of the year attributed to new lease pricing on a lease-over-lease basis of negative 6.2%. Renewal rates for the quarter stayed strong, growing 5%. Because traffic tends to be relatively low as compared to the second and third quarters, we intentionally repriced less than 20% of our leases in the first quarter. The new lease-to-renewal pricing resulted in blended lease-over-lease pricing of negative 0.6% for the quarter, an improvement of 100 basis points from the fourth quarter.

Average physical occupancy was 95.3%, and collections outperformed expectations with net delinquency representing less than 0.4% of build rents. All these factors drove the resulting revenue growth of 1.4%. From a market perspective, in the first quarter, larger markets such as the Washington, D.C. metro area and Houston continue to hold up well and Nashville showed improvement. Many of our mid-tier metros also continue to be steady with Savannah, Richmond, Charleston and Greenville, all outperforming the broader portfolio from a blended lease-over-lease pricing standpoint. Our diversification between larger and mid-tier markets helps balance performance through the cycle. The improving performance of a market like Nashville, which is getting a lot of new supply, demonstrates the benefit of submarket diversification along with the market diversification.

Austin and Jacksonville are two markets that continue to be more negatively impacted by the absolute level of supply being delivered into those markets. Touching on some other highlights during the quarter. We continued our various product upgrade and redevelopment initiatives. For the first quarter of 2024, we completed nearly 1,100 interior unit upgrades. Given the number of units and lease-up across our portfolio currently, we expect to renovate fewer units in 2024 than we would in a typical year, but would expect to reaccelerate the program in 2025. We have now completed over 94,000 smart home upgrades since the inception of the program, and we expect to complete the remaining few properties this year. For our repositioning program, we have four active projects that are in the repricing phase, and we have targeted an additional six projects to begin later in 2024 with a plan to complete construction and begin repricing in 2025.

Regarding April metrics, we are encouraged by the accelerating trends from both the first quarter and March in both pricing and occupancy. April blended pricing is negative 0.4%, a 20-basis point improvement from the first quarter and a 70-basis point improvement from March. This is comprised of new lease pricing of negative 6.1%, a 10-basis point improvement from the first quarter and notably a 70-basis point improvement from March. And renewal pricing of 5.1%, slightly ahead of the first quarter and an improvement of 50 basis points from March. Average physical occupancy for April was 95.5%, also up from both the first quarter and March. And as Brad noted, 60-day exposure also remained lower than this time last year at 8.5% versus the prior year of 8.8%.

As we’ve discussed, new supply being delivered continues to be a headwind in many of our markets, but we still believe the outlook is similar to what we discussed last quarter. While we do expect this new supply will continue to pressure pricing for much of 2024, with demand and leasing traffic expected to increase in the spring and summer, we believe we have likely already seen the maximum impact to new lease pricing and that the outlook is better for late 2024 and into 2025. It varies by market, but on average, new construction starts in our portfolio footprint peaked in early to mid-2022. And we’ve seen historically that the maximum pressure on leasing is typically about two years after construction store. While supply remains elevated, the strength of demand is evident as well.

Absorption in the first quarter in our markets was the highest for any first quarter in the last 2 decades and the highest of any quarter since the third quarter of 2021. Job growth is still expected to moderate some in 2024 as compared to 2023, but has recently been revised upwards and growth still expected to be strongest in the Sunbelt region in the country. Job growth combined with continued in-migration accelerate the key demand factor of household formation. Additionally, we saw a resident turnover continued to decline in the first quarter, and we expect it to remain low with fewer residents moving out to buy a home. In fact, the 12.9% of move-outs in the first quarter that were due to a resident buying a home with the lowest ever for MAA.

That’s all I have in the way of prepared comments. I’ll turn the call over to Clay.

Clay Holder: Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.22 per share, which was $0.02 per share above the midpoint of our first quarter guidance. About half of the favorability was related to the timing of real estate taxes, while the remaining outperformance is related to the collective timing of overhead cost, interest expense and nonoperating income. Our same-store operating performance for the quarter was essentially in line with expectations. Same-store revenues were slightly ahead of our expectations for the quarter, driven by strong rent collections. Excluding the favorable timing of real estate tax expenses, Same-store operating expenses were slightly higher than our first quarter guidance, primarily due to onetime property costs.

During the quarter, we funded approximately $44 million of development cost of the current expected $647 million pipeline, leaving nearly $202 million to be funded on this pipeline over the next two years. Although we expect to complete three projects in the second half of 2024 with the additional starts that Brad mentioned earlier, we expect to continue to grow our development pipeline over the remainder of the year, which our balance sheet is well positioned to support. During the quarter, we invested a total of $9.4 million of capital through our redevelopment, repositioning and smart rent installation programs, which we expect to produce solid returns and continue to enhance the quality of our portfolio. Our balance sheet remains in great shape.

We ended the quarter with nearly $1.1 billion in combined cash and borrowing capacity under our revolving credit facility, providing significant opportunity to fund future investments. Our leverage remains low with net debt-to-EBITDA at 3.6 times. And at quarter end, our outstanding debt was approximately 95% fixed with an average maturity of 7.2 years at an effective rate of 3.6%. During January, we issued $350 million of 10-year public bonds at an effective rate of 5.1%, using the proceeds to pay down our outstanding commercial paper. We have an upcoming $400 million maturity in June that has an effective rate of 4%. Following this maturity, the next scheduled bond maturity is in the fourth quarter of 2025. Finally, with the bulk of leasing season ahead of us, we are reaffirming the midpoint of our core FFO guidance for the year while slightly tightening the full-year range to $8.70 to $9.06 per share.

We are also maintaining our same store as well as other key guidance ranges for the year. That is all that we have in the way of prepared comments. So, Regina, we will now turn the call back to you for questions.

See also American Politicians are Buying These 10 AI Stocks and 30 Cities with the Highest Number of Veterans in the US.

Q&A Session

Operator: We will now open the call up for questions. [Operator Instructions]. Our first question will come from the line of Austin Wurschmidt with KeyBanc. Please go ahead.

Austin Wurschmidt: Thanks, and good morning, guys. Just want to hit a little bit on the operating side of the business. And I was hoping you could provide some detail on sort of the operating playbook in the next couple of months and how you’re thinking about pushing on lease rate growth and occupancy. And has the breakdown between new and renewal lease rate growth that you embedded in guidance changed at all at this point?

Tim Argo : Austin this is Tim. Yes, I’ll give you a little bit of an overview. I mean I think we’re — as I mentioned in my comments, with where we are in exposure, where we are with occupancy we feel like we’re in a good place there. So, we’ll continue as we get into that, certainly, busier part of the season now, the push on new lease rent growth where we can and balance a little bit depending on property by property. It’s not necessarily a portfolio-wide decision. We look at everything based on occupancy and exposure by property, but we’re comfortable with where occupancy is. We’ll continue to push on pricing where we can. As far as the mix between new lease renewal, first quarter was about where we expected it to be with renewals, probably 51% to 49% in terms of the total leases that we did in Q1.

I would expect it to blend a little more towards renewals over the next couple of quarters. So that’s a key thing to keep in mind as you think about pricing trajectory for the rest of the year is that we do expect turnover to remain low, and that the renewals have a little bit heavier weight than the new leases.

Austin Wurschmidt: That’s helpful. And then the March data implies there was a pocket of softness, which I think you alluded to a little bit in your prepared remarks, comparing the March versus April. I mean anything from a comp issue or a 60-day exposure perspective that caused you to pull back in March to just position the portfolio better heading into April and May? Just looking for some additional detail there.

Tim Argo : Yes. I mean there was a little bit more of a push towards occupancy, I would say, in late February and early March is based again looking at it on a targeted basis where exposure was. And that’s late February or early March time frame is always the time of the year where you start to see lease expirations pick up and you’re kind of waiting on that demand to pick up as it as it has and it starts to do in March. So, there was a little bit of a lean towards occupancy during that period. And as you saw, as we got into April, we saw acceleration both in pricing and in occupancy from where we’re in March.

Operator: Your next question will come from the line of Brad Heffern with RBC Capital Markets. Please go ahead.

Brad Heffern : Just sticking with the leasing spreads. Typically, you see a decent sized uptick in April. Obviously, I know March was weak and so there was an uptick, but it seems like it’s not tremendously different than what you saw in January and February. So, I guess has traffic picked up a lot in April? And are you surprised that the leasing spreads didn’t increase more sequentially?

Tim Argo : To the first question, yes, we have seen traffic pick up leads, lead volume, and we look at it kind of going back to the exposure factor. We look at leads for exposed unit, and that’s as good as what it was. We’ve kind of talked about we haven’t seen a normal year since probably 2018, 2019. So, we’re sort of exceeding those levels when you think about traffic volume and leads for exposed and all the things that we look at internally for demand. I mean, with the March new lease pricing, I mean, it’s — when you get into individual months, it can be volatility, and there’s not a ton of leases getting done in the first quarter. So, it’s going to ebb and flow from month-to-month. What we’re looking to see is kind of quarter-to-quarter, see that general trajectory moving up, and we’re seeing that and it will play out over the next three months or four months.

I mean we will reprice about 50% of our leases for the year between May, June, July and August. Obviously, that will be the biggest part of the impact of what it has on the year, and that’s also when we start to see the traffic really pick up. So that’s where it will really play out as over these next three months or four months.

Brad Heffern: Okay. Got it. And then in the prepared remarks, you said a stronger leasing environment through at least 2028 when the supply drops off, I think a lot of people would agree on 2026. But I’m curious why you would project strength that far out is the expectation that a low level of starts is just maintained indefinitely and that’s what’s driving it? Or if you could give your thinking there?

Brad Hill : Brad, this is Brad. Yes, I think relative to that comment, it’s a realization that the high level of supply that we are seeing today is partly a result of cheap financing that’s been available over the last couple of years and just realizing that in general, those times are behind us. And so, getting back to a more normal supply environment going forward into the future. I do think over the next couple of years, the supply environment will be below long-term averages, but perhaps we get back closer to long-term averages as we get out a few years. But then when you layer on top of that, just the demand strength that we are seeing in our region of the country leads us to believe that the fundamentals could be very, very good for a number of years.

Operator: Your next question will come from the line of Josh Dennerlein with Bank of America. Please go ahead.

Unidentified Analyst: This is Stephen Sun [ph] on for Josh. Just a quick question on the concession usage. Wondering whether you can kind of comment on that, like across your markets. where you see the biggest concession and where you see maybe the improvements? Thanks.

Tim Argo : Yes. This is Tim. I mean at a high level; concession usage is pretty similar to what we saw in Q4. We haven’t seen it get materially worse or better. For us as a portfolio was about 0.5% of rents last quarter. It’s about 0.4% of rents this quarter. At a market level, it obviously varies a little bit. I would say, again, not a lot of movement from last quarter. One market where we’ve seen it probably get a little bit heavier concession usage in Charlotte, where we’re seeing 1.5 months to 2 months there. Austin continues to be, obviously, a heavy concession market, but no worse than really than what we were seeing before, where you’ve got one months to five months and most of the submarkets in Austin with probably closer to two, if you think about Central Austin.

And then the other one we’re keeping an eye on, I would say, is Atlanta, we’re certainly in the Midtown area, we’ve seen concession uses pick up a little bit. But broadly, as I said, kind of stable and not seeing quite the usage from developers that we saw late last year.

Unidentified Analyst: Okay. Great. Thanks. And then on a different subject on the development yield, sorry if I missed that, but can you comment on like what’s the yield you’re underwriting for the new starts? And maybe also some comments on the construction costs you’re seeing right now? Thanks.

Brad Hill : This is Brad. Yes, I would comment that the yields that we’re expecting on our new starts for this year are in the mid-6% range, which is consistent with what we’re delivering today on our existing development portfolio. So that is a pretty good spread from where current cap rates are, call it, low 5s as I mentioned in my comments. So, we’re still in that call it, 150 basis points spread or so range with current cap rates, which feels really good to us. And in terms of construction costs, I mentioned in my comments, we haven’t seen a broad reduction in construction costs. It’s really markets specific. There are some markets where the supply pipeline is really dropped faster and quicker and earlier than other markets, we’re seeing some cost reduction in those markets.

There are others, for example, the two projects that we are starting, we have seen our partners have been able to get construction cost reductions without scope reductions in those projects, which I think is a positive for both of those, but we’re not seeing across the board construction cost reduction in our markets in general.

Operator: Your next question comes from the line of Michael Goldsmith with UBS. Please go ahead.

Michael Goldsmith : Good morning. Thanks for taking my question. It seems like the quarter was generally in line with expectations just above the midpoint, yet demand was unseasonably strong. So, does that mean that demand needs to stay at unseasonably strong levels to kind of hit the high point of the guidance going forward?

Tim Argo : I mean I don’t think it needs to necessarily stay at higher levels than what we expected. I think it needs to be at levels that we’ve seen pretty consistently now for a while. I mean the demand has been there in our markets for a while. Job growth in migration continues. The number of move-outs that we’re seeing outside of our to outside of our footprint has declined. So that net in migration is pretty consistent with where it’s been. So, it’s really just continuing to see the demand at a steady level. And then now as we get into a heavier traffic period, we would expect that to obviously benefit, which is what you didn’t see in Q4, Q1 is obviously the lower traffic patterns. But demand is there, and now we’re getting into the heavier traffic season and heavier lease expirations, which will have a greater benefit.

So, I think mainly just seeing that demand at a high level, it would take some sort of economic shock, I think, to move it to where it’s something that is not attainable in terms of thinking about our guidance.

Michael Goldsmith : And my follow-up is, what is your expectations of leasing spreads during the peak leasing season? And how much momentum can be picked up on the new lease side? And along with that, can you hold renewals at 5% when new leases are down 6%? Does that lead to increased negotiation on renewals? Thanks.

Tim Argo : Yes. I mean we’re — this time of the year, there’s always a fairly wide spread when you’re looking at new leases first renewals. It’s gapped out a little bit from where it typically is, but not hugely different, and I expect those spreads to narrow a little bit as we get into the spring and summer. Our expectation for renewals, and I think we’ve talked about a little bit last quarter, it’s kind of in that 4.5% to 5% range. We’ve been closer to 5% right now. We think somewhere in that 4.5%, 4.75% range is reasonable for the rest of the year. And keeping in mind, too, when you think about the lower turnover, those renewals are going to have an outsized impact on the blended leasing spreads more so the new lease pricing.

And our expectation for new lease pricing, while it is for it to accelerate from here over the next few months and then moderate back down as we get into Q4, still, but it’s going to be negative for the full year. We don’t expect to see new lease pricing get to zero or get positive. I think it’s probably well into the spring season, spring and summer 2025 before we see that. But that’s a high level how we’re thinking about it.

Eric Bolton : And Michael, this is Eric. Just to add on to what Tim is saying. I think another thing to keep in mind is when you look at that negative 6% on new lease pricing versus 5% of renewal in terms of a lease-over-lease comparison, that implies, I think, in some people’s mind a bigger dollar difference than what’s at play really. If you look at the actual rent amount that we’re achieving on new leases and the actual rent amount that we’re achieving on renewals is only — the spread is only about $150, and that, of course, as Tim mentioned, is kind of the biggest spread we see from a seasonal perspective. And then it tends to narrow a bit over the course of the spring and the summer. So, the friction cost of moving and some of the other issues you run into moving suggest to us that spread is — and again, recognizing it’s going — we think, narrow a bit over the spring and summer.

We think yields an opportunity for us to continue to achieve the renewal pricing performance along the lines of what we’ve outlined, and we don’t see any particular concerns about the spread in terms of what you’re referring to.

Operator: Your next question will come from the line of Eric Wolf with Citigroup. Please go ahead.

Eric Wolfe: Maybe just a follow-up on Michael’s question there a second ago. Based on your guidance, it looks like you need around 1.7%, 1.8% sort of blended growth that to hit your blended spread guidance for the year. I mean, is that the right way to think about it? And I guess when do you think we’ll hit that level?

Tim Argo : When you say, are you talking about blended spreads or new lease thinking? About blended.

Eric Wolfe : Blended spread. I mean blended spread, I mean, I think your guidance before is 1%. So, if you’re based on what you’ve done thus far, we were calculating like 1.7%, 1.8% for the rest of the year? And then I guess, on the new lease side, right, if you assume percent renewal for the rest of the year, you probably need like negative 2% on new lease. But I was just trying to understand sort of what’s embedded for the rest of the year and when you think we’ll see those levels.

Tim Argo : Yes. I mean I don’t think it’s quite to the level you said on new leases. I mean, a couple of things to keep in mind that we sort of alluded to is one, the Q2 and Q3 will represent about 60%, 65% of all the leases. So — which is also the strongest period. So that will weigh heavier into the full-year blended. And then along with that, we tend to see the renewal portion of that mix tick up even more in Q2 and Q3 as well. So, you have to — when you’re thinking about a dial-in a heavier weighting on the renewals and [indiscernible] heavier weighting on the lease spread throughout the year. So yes, I mean, I think we talked about kind of 4.5% to 5% in the renewal range. and new leases staying negative, but certainly accelerating from where they are now.

And then as you get into kind of September and beyond, would expect it to drop back down, not quite to the level we saw in Q4 of last year, but certainly a little bit further negative. But I think the main thing to keep in mind is just the weighting both in terms of leases per quarter and then the weighting between new leases renewals.

Eric Wolfe: Got it. That’s helpful. And then there was a comment in the release and you alluded to it in your remarks about a quick turnaround in rental performance later this year, next year. sort of what markets do you think we’ll see that turnaround the fastest. So, based on your supply projections, where do you think we’ll see that quicker turnaround?

Tim Argo : Yes. I would say that at a high level, the markets that have been strong, continue to be strong, and I would expect to remain strong. And then I’m thinking about D.C. and Houston and then some of the mid-tier markets like Charleston and Richmond and Savannah and Greenville to some extent. The ones I would keep an eye on that I think can start really helping some of the Florida markets, both Orlando and Tampa are starting to show some improvement, and we’re, I think, a little bit further along in that supply absorption, if you will, than some other markets. So those are a couple. And then I remarked about Nashville in the prepared comments as well. That’s another one that I think continue to see some benefit from. It’s getting a lot of supply and working through it, but where we are in that market is pretty well positioned. So, I would say those three beyond the ones that have been pretty steady for us right now.