Unidentified Analyst: Okay. Great. And then second question maybe to Tim or others, but on the October spread between new and renewal, pendulum on these sort of growth numbers always swings too wide. I don’t think anyone expected 20%-plus type of rent growth a year ago and maybe this is surprising to the downside. When you think about the first half of 2024, should we be conditioning all of us investors and analysts for negative blended number at least for the first half of the year when you think about that pendulum factor or is zero your kind of number from this point forward you’re not giving guidance but is there a range of sort of surprise factor that could bring that into negative territory at least for a period of time next year?
Tim Argo: Zero is what we have dialed in for Q4 in terms of our forecast which as we said is kind of where we sit right now for October and Q1 typically compared to Q4 if I’m thinking about sort of normal environment or historical environment is usually pretty similar. I do think — I think you could see those numbers move a little bit on the margins up or down in terms of blended that’s going slightly negative or slightly positive. I do say as we get — as I mentioned earlier as we get into the spring I think you start to see some normal seasonality in terms of new lease rates. We’re not going to jump up to positive three or four all of a sudden I do think you’ll see some acceleration. So there’ll be some bands, but I don’t think it’s widely different than what you talked about because we do think renewals remain pretty consistent and with where we see turnover going that will blend in as a little bit bigger factor in terms of the overall blended rate as compared to new leases.
Unidentified Analyst: Great, good enough. And congrats to Al, good luck to you.
Al Campbell: Thanks Rich. I appreciate it man.
Operator: Thank you. We will take our next question from Anthony Powell with Barclays. Your line is open.
Anthony Powell: Hi, good morning. Quick question on the transaction environment, I think you mentioned that you saw cap rates increase by 15 basis points in the third quarter. Given where interest rates have not given where public market, stocks, I would expect that to maybe expand a bit more. So where do you think cap rates go the next few quarters that you seek to deploy more capital here?
Brad Hill: Hi, Anthony, this is Brad. I mean, I think a couple of things. One, keep in mind that what we saw in the third quarter was very limited in terms of transactions. Certainly we — as I mentioned in my comments we saw activity — marketing activity pick up a bit early in the third quarter, but a lot of that has not closed at this point really just a handful of projects closed and we saw those cap rates come up a little bit. But to Eric’s point earlier about the availability of capital for well-located properties in good markets, we continue to see strong bedsheets for those. And so and we’re still seeing cap rates in the low 5% range for those well-located assets. I would expect to see pressure on cap rates. But really it’s going to depend on how that liquidity shows up for those assets to bid on them.
But certainly given the severe movement that we’ve seen in the 10-year. And agency debt today is in the 6.5%, 6.75% range, we would expect some upward movement in cap rates but to what degree is going to depend on the liquidity picture, the fundamentals of the properties locations things of that nature. So it’s really hard to say where that goes from here.
Anthony Powell: Got it. Thanks. And maybe on turnover and renewal rent growth. How aware are tenants typically of a highly growth environment like this? And are you seeing tenants come to you and ask for rent declines, seeing tenants move out to newer buildings? And is that a risk next year as more of these apartments are delivered in your market?
Tim Argo: Well, I think certainly they’re aware. I mean the transparency now with what’s on websites and social media and everything else and all the different marketing avenues and advertising platforms that certainly they’re aware and you can see down to a unit level a lot of times on websites. But probably tell a new phenomenon. It’s been that way now at least for the last couple of years. So I think there’s a component of the renewal side of just you’ve hopefully provide them with good resident service. They’re happy where they’re living. They’re happy with the manager and their owner. And there are some friction costs involved as well. It’s pain to move, it’s expensive to move. So there are some things from a customer service and a friction cost standpoint that are meaningful. But overall as we talked about I’ll see turnover changing much from where it is now. So I don’t think that becomes any more of an outsized pressure than it has been.
Anthony Powell: Good. Thank you.
Operator: Thank you. We will take our next question from Wes Golladay with Baird. Your line is open.
Wes Golladay: Hey, good morning everyone. I have a question on the capital allocation front. I mean, is there a point where you buyback to maybe become a top priority when you consider were development yield are penciling-in and acquisition yields. And then they seem pretty thin where the 10-year trading and typically acquisition cap rates have been north of 100, 200 basis points over the 10-year. So it seems that gives them the upward pressure in the private market.
Brad Hill: Well, again as we touched on a little earlier I mean, we think that the opportunity to put capital work as we did with the Phoenix acquisition is the appropriate and best value creation from a long-term perspective, particularly given where the initial yield is and the opportunity we have we think over the next couple of years to really improve that yield meaningfully. So we continue to believe that remaining patient with the balance sheet capacity we have and looking for what we are expecting to be even more compelling opportunities as we move forward with some of the distress in the market from some of these merchant builders that the longer-term value creation associated with some of these acquisitions is going to make a lot more sense.
As Brad mentioned, we do have — of opportunity teeing up on the development front but we control the timing on that. And we do think that we’re going to see some moderation begin to take place with the construction cost and we think the yields there are going to get better. So we — and as I say we’ve got the luxury of making controlling the timing of when we elect to pull the trigger on those projects. And of course, these projects if we were to start anything next year, I mean, it’s going to deliver in ’26 and ’27 and it’s going to be we think healthier leasing environment at that point. So we’re going to be patient but we think that some of the external growth opportunities that we have in front of us over the coming couple of years is the best sort of value creation opportunity that we have in terms of how to put this balance sheet capacity to work.
Wes Golladay: And a follow-up to that are you seeing any portfolios or maybe somewhat aggregated assets and maybe debt was underwritten at a very low cap rate environment or maybe a lot of floating rate debt. Is there anything kind of penciled in to fit your quality criteria? .
Eric Bolton: Well we pay attention to those opportunities when they come out. More often than not what we have found is the asset quality is not really what we want to do and not of interest to us. And a lot of the aggressive buying and high leverage buying that took place over the last few years. A lot of it was associated with sort of a lower price point product to our current portfolio and just — we haven’t found it to be particularly compelling to add to our balance sheet.
Wes Golladay: Great. Thanks for taking the questions and congrats.
Eric Bolton: Thank you, Wes. Appreciate it.
Operator: Thank you. We’ll take our next question from Linda Tsai with Jefferies. Your line is open.
Linda Tsai: Just one really quick one. Can you remind us of what’s causing higher fraud in certain markets? Is it demographic shift technology? And then what are mitigation strategies.
Tim Argo: I mean, it’s difficult to say. I think what we have seen is certainly since COVID and post-COVID that the actions taken by the courts and the judges and that sort of thing has become a little bit more lax so that frankly creates a little bit more opportunity for bad actors. What we’ve done in turn is — we’ve familiarized ourselves and have some experts so to speak within our team that are good at identifying that sort of thing. And frankly, what happens is if you get — you start to get a reputation, if you will that these guys are good at catching it and the people trying to the front door that way tend to stay away. So it starts to solve itself from some standpoint, if you can be good at detecting it and good at defending it preventing it.
