Eric Bolton : Yes.
Haendel St. Juste : One more. I appreciate the color you guys gave on the building box of same-store revenue, but could you give us some color on what you’re assuming for bad debt, ancillary and for turnover?
Tim Argo: Haendel, on bad debt, I would — the way that we’re thinking about that is it will remain pretty consistent with where it’s run here recently. I mean we’d probably run around that 0.5 percentage point range turnover staying low, at least for our guidance, we’re staying low around that 45% range. And then what was the last one that you asked about?
Haendel St. Juste: Fee income.
Tim Argo: Yes, the ancillary income it is growing one. We’re assuming it will grow pretty much in line with our overall effective rent growth, so right around that 1% level.
Haendel St. Juste : And then one last one. I think it was last quarter, there’s a lot of chatter around A versus B rental pricing and the impact that the new supply was having on that dynamic. Curious if there’s any updated perspective, anything that you’ve seen in this past quarter or any updated views on the performance of A versus B in your portfolio is or has changed over the last quarter or so?
Tim Argo: Yes. I mean we’ve probably seen it gap a little bit. I mean RRBs, what you would call it these or even if you want to think about suburban versus urban, suburban is outperforming urban kind of the CBD and the interim loop. If you think about suburban, we’re probably about 80 basis points better in Q4 January on a blended lease-over-lease basis from what we’re seeing on the secondary. A versus B in the way we think about our portfolio, it’s about 55% A, 45% B, a little bit tighter there, probably about a 30 basis point gap with the B is doing a little bit better. Occupancy pretty consistent for both. But I would say the biggest notable thing there is certainly suburban assets are outperforming a little bit of less supply in those areas as well.
Operator: And we’ll take our next question from the line of Brad Heffern with RBC Capital Markets.
Bradley Heffern : First, I just want to say congratulations to Al. Hope you enjoy your retirement. On your lease-ups, can you talk about how those are going in terms of pace? Obviously, you’re outperforming on the [RIN] side, but I’m just curious if they’re taking longer than normal just given the supply backdrop?
Brad Hill : Yes, this is Brad. Those are pretty much in line with our expectations. Certainly, there’s been a slowdown in the velocity in line with our overall portfolio kind of over the holidays and the winter months. But there’s nothing material in terms of difference there versus what we expected. Our day break asset is leasing up a little bit slower and has been. But in general, all of our assets, and that’s the one in Salt Lake City. But in general, all of our assets are leasing up pretty much in line with our expectations in terms of velocity, given the slowdown here over the winter season.
Bradley Heffern : Okay. Got it. And maybe I missed it, but can you give your expectation for market rent growth that’s underlying the guide? Obviously, you gave the blended assumption, but just looking specifically for the market piece.
Tim Argo: Our blended as we talked about is about 1%. And we really — we expect market rent, if you will to be pretty consistent with where it is right now.
Bradley Heffern : Sorry, consistent as in flat or consistent as in similar to the 1% number?
Tim Argo: Yes, flat. 1% is what we’re expecting in terms of our blending growth.
Operator: And our next question comes from the line of Adam Kramer with Morgan Stanley.
Adam Kramer : Just wanted to — I think we talked a little bit about capital allocation and potential opportunities with acquisitions or developments very similar question, and again, recognizing where the balance sheet leverage is. So I was just wondering about the opportunity or maybe the appetite for share buybacks here? Or is that something you can consider? And maybe kind of what it would take for that to be under greater consideration.
Eric Bolton : Well, I mean, as you point out, I mean, we do think that attractive acquisition opportunities are going to start merging later this year into 2025 merchant builders continues to struggle with their lease-up more likely than not below what they underwrote. And so we believe for the moment that at current pricing, the longer-term yield performance that we can pick up on acquiring these lease-up properties provides a more attractive long-term investment return, especially on an after CapEx basis as compared to investing in our existing portfolio, our earnings stream. We also see it providing a better ability to continue investing in our new tech initiatives that we think offer the opportunity for meaningful margin expansion over the entire portfolio over the next few years, creating significant amounts of value.
And then as you know, I mean, there’s a REIT. We’ve long oriented our thinking around the idea that best way for us to reward shareholders over a long period of time is through the dividend and through earnings growth. And we think that continuing to find ways to put capital to work that supports those first 2 agenda items I just mentioned in supporting our ability to continue to push dividend growth through all phases of the cycle over time is the best way to reward REIT capital. Having said all that, I mean, we obviously continue to monitor the public pricing of our existing portfolio and the company and obviously interested in continuing to maintain a strong balance sheet. I mean if we continue to see dislocation or even more dislocation in terms of public versus private pricing of the real estate.
I mean we do have a buyback program in place, authorization in place. We’ve done it before and we wouldn’t hesitate to do it again if conditions warranted it. But for right now, given the outlook and the opportunity we think we have in front of us, we think better to sort of hold on to our powder, we think the long-term value proposition is likely better with the focus that we have.
Adam Kramer : Great. And you mentioned some of the tech investments and kind of the opportunity set there. Maybe just, I don’t know, I wonder 2 there that you’re very excited about and you’re kind of able to share with the public?
Brad Hill : Yes. I mean, this is Brad. You’ve definitely heard of these in the past, but I’d say number 1 is our continued investment in our CRM platform. And we rolled this out a couple of quarters back when we continue to update and refine that platform, which really allows better management of our prospects and our leasing process. And this is also really an enabler to a number of other things that we’re working on, our centralization, our specialization, our potting. All of those things have kind of our CRM platform at the centre of those. We continue to focus on our potting of properties. We’ve got — we’re up to 27 potted properties today and we’ll continue to look to expand that when opportunities present themselves. We’re also investing right now and updating our website.
We’re hopeful that we’ll be able to roll this out later this month. And really our goal there is to be able to drive more leasing traffic through our website, which is the most cost-effective way for us to do that. We get a large portion of our traffic now through our website, and we’re looking to continue to improve that. We’re also really working to optimize our mobile — our website for mobile use, which will support our online leasing and our self-touring. The last one that I’ll mention is we’re rolling out right now a property-wide WiFi on select properties this year. We’re also adding this on some of our new developments. And this is really an opportunity for our residents to have really seamless Wi-Fi across our property, whether it’s in the unit, common areas, amenities and really provides a better opportunity in service for our residents, and that has a really big revenue component as well that we are testing at the moment.
Operator: And we’ll take our last question from the line of James Feldman with Wells Fargo.
James Feldman : I’m sorry to extend an already long call. But you had mentioned an expectation you think rental decline. You’ve fix amount of exposure to floating rate debt. Can you talk about your — what’s in your guidance in terms of rates this year? And then as of the year-end, you had $500 million on the commercial paper facility. Do you expect to keep that in place all year? Do you think you pay that down? Or is that already paid down?
Andrew Schaeffer : Yes. Jamie, we paid that down in the first week of January with the bond issuance that we completed and that effective rate on that issuance was right up just north of 5%. The place we look to the next dollar is our commercial paper program. And right now, it’s at roughly 5.5%, and so we’ll keep an eye on that. And as rates are expected to decrease over the back half over the year, we expect that number to maybe come down a bit.
James Feldman : What’s your assumption in your guidance for where rates go?
Andrew Schaeffer : Yes, we’ve got a dropping down 25 basis points through halfway through the year and then another 25 basis points on the very back end of the year.
James Feldman : Okay. So you’re down 75 basis points by year-end?
Andrew Schaeffer : Just 50. 25 at the end this year.
James Feldman : Okay. And then you had mentioned a $0.05 drag from developments that are not stabilized yet. Is there any variability to that? Is any of that being capitalized? There couldn’t be so much of a hit to earnings?
Andrew Schaeffer : Yes, there is some capitalization there. And when you look at our capital — interest capitalized year-over-year, a slight increase, but pretty steady. But what really comes into play there is just the timing of the developments. In 2023, we delivered and leased up 2 developments in 2024. We’re going to be delivering and leasing up 4 developments. And so you got a bit of a play there that’s creating some headwind. And then in general, just the overall the rate at which we’re capping that interest comes into play. You’re looking at an effective rate, roughly 3.5% that we’re capping and then we’re borrowing at a higher rate today than what than what we’ve capped at previously.
