Alan Ratner: First line of quoting was hoping — good morning. First on a question, I think the commentary around the land strategy was really interesting. So I was hoping that to understand a few of those points. First, with the self-developed deal tailwind on the margin side looking at your 2024 guidance down a little bit year-on-year, how should we think about that tailwind flowing through? Is that going to be more prevalent in 2025 and beyond as these deals get to the finish line? Or should we think about that more as an offset to some of the other headwinds that you might have i.e. more land banking optioning higher land costs overall? Just trying to figure out the moving pieces on that part first.
Erik Heuser: Yeah. Hey, Alan, it’s Erik. Maybe a couple of things. Yeah, really the specific commentary in the prepared remarks was around the 2023 underwriting. And so kind of that tailwind as you suggest, it’s going to take some time to come through the system. Obviously, it takes time to bring those to market. So you’ll see that over not just through this year, but over time. And then with regard to just kind of room for land banking as somebody asked previously we do view that as an important option for us, especially as we think about maximizing return the kind of the prior tranches that we did average of averages at a deal level that kind of cost us about 175 basis points for a trade of about 600 basis points of return.
If you blend that across the overall company portfolio it’s obviously pretty — not de minimis, but it’s much smaller, right? You might be thinking 20 30 basis points to the overall portfolio. So hopefully, that helps with regard to timing and cost and use of tools.
Alan Ratner: That’s helpful, Erik. Thank you. And second on cash conversion. You guys have had really impressive cash conversion in these last two years roughly 100% of net income converting to free cash. And a lot of that I think has come as you maybe shrunk the land position a little bit right-sized it to some extent, inventory turnover has improved working capital has shrunk. As we think about this pivot towards more self-developed deal should we temper that trajectory a little bit? Like is there going to be a little bit of a blip in the opposite direction as these deals kind of work their way through the development process.
Curt VanHyfte: That’s a good question, Alan. I don’t know if it’s necessarily tempering because when we kind of look at everything we’re looking at we did have a good year of cash generation through — in 2023. Even with some of the land spend targets that we have in play for 2024 we still believe we’ll be in a real good cash position as we work our way over the course of the year from a cash flow generation standpoint. So without kind of getting into too futuristic kind of I guess a directional signs. We still feel really good about our I guess our cash generation even with land spend that we’ve I guess earmarked in our prepared comments.
Alan Ratner: Okay. Thank you for that, Curt. And if I could squeeze in one last one on related. Can you just give an update on Yardly and kind of the timing of single-family rental recognition of sale. I think, I vaguely remember you mentioned in 2024 you kind of had a bunch of deals in the pipeline to potentially close, but I know there’s been some volatility in the SFR market the VFR market. So any update you can give there would be helpful.
Erik Heuser: Yes, Alan I appreciate the question. And maybe just a kind of frame obviously a pretty volatile rate and cap rate environment last year maybe the last 18 months. So really have exhibit operated with a fair amount of prudence making sure we’re only bringing the cream of the crop to the business. The right way to think about the scale of that business today is we’ve got about two dozen projects working in about eight different markets four are actively leasing today. And we’ll have optionality to think about disposition of probably a couple of those this year depending on what the market tells us. And then of those kind of, those couple of dozen deals 13 are within the venture that we’ve previously talked about. So that really gives us a lot of capital efficiency.
And then we’ve got a number of others that are kind of working through horizontal and vertical development. So really constantly looking for deals but they’ve got to be the cream of the crop as we think about kind of that volatility in the rate environment that we’ve — that we’ve seen. So really from a timing standpoint again a couple this year perhaps options and then maybe double that the following year and then you’re really going to see prospective ramp-up.
Alan Ratner: Perfect. Thank you, so much guys. Appreciate it.
Operator: Thank you. Our final question today comes from Alex Barron from Housing Research Center. Please go ahead, Alex.
Alex Barron: Yes, thanks for squeezing me in. Great results in the quarter. And I’m sorry if I missed this. Did you guys discuss what the legal settlement charge was about?
Curt VanHyfte: Yes Alex, good question. I think we — in our 8-K we did disclose that back in December, but it was from an asset that we got through the AV acquisition. It was — it’s from a — it’s limited to the state of Florida. It’s a community called Solivita and it was settled and it’s kind of behind us for now. And that’s essentially what it was. If there’s a lot of detail in the 8-K that we filed for it back in December. So feel free to kind of take a look at that. And if you have additional questions let us know.
Alex Barron: Okay. I’ll take a look. Thanks. My other question was on the share buyback the $300 million number. Is that meant to be $75 million a quarter? Or is that meant to be whenever you guys feel it’s opportunistic? And is there any potential upside to that number if the stock were to persist at a lower value?
