Joe Fisher: Yes, I think we talked a lot in the first half of the year about that elevated level of long-term delinquents, which put some pressure on the occupancy and the pricing, some of the fees and of course, the turn cost and legal costs in the first half. But team has done a really good job both with upfront screening but also working through the appropriate regulatory and legal processes here throughout the year to get that number down. And so we do have a slightly elevated number of long-term delinquent still in the portfolio, maybe 15% above the long-term average. The challenge is that you still have elongated fiction processes in place, which means that you end up with 2, 3x the amount of dollar exposure for those individuals.
And so we’ll probably stay at that level, maybe get a little bit better over the next year. Encouragingly, though, I’d say in the month collections continue to be strong, we kind of get 96.5% collected each month. Subsequent to that, we have additional collections that usually take us to about mid-98s collected over time. And so that kind of gives you a 1.5% bad debt number. That’s been pretty stable here over the last couple of quarters. We’d expect it to remain stable in the year-end. I think as we go into next year, could there be a little bit of upside. I don’t think we’re getting back to long-term averages of kind of 99.5% collected, given the regulatory environment, but maybe there’s a little bit of upside from that 98.5% type level. That said, it really kind of becomes a rounding error in the total picture.
So I think we’re kind of losing a little bit of the force through the trees when we kind of dive into it.
Austin Wurschmidt: Got it. And then just sneaking in one quick one, I’m curious how the level of concessions portfolio-wide compare versus that, I think it was 2016, 2017 period where coastal markets were negatively impacted supplies. Could you just compare those two periods? Thanks.
Mike Lacy: Austin, we’d have to probably go back and look at some of the numbers from 2016, 2017. But I think what I would tell you is what we mentioned in my prepared remarks, seeing 1.5 weeks today. That compares to a half a week just a few months ago. And what’s been interesting is places like Denver, L.A. and San Francisco, we’ve actually seen those increase a little bit more than average right around two to three weeks. And then the Sunbelt as well as our Philadelphia assets have moved about 1.5 weeks to two weeks over that time frame with everything else being pretty consistent. But I would say as you go back to 2016, 2017 levels, maybe slightly elevated today.
Operator: Our next question is from Jamie Feldman with Wells Fargo. Please proceed.
Jamie Feldman: Great. Thanks for taking my question. So the other income line continues to grow. I know it’s part of your growth plan. We’re just wondering about the quality of those earnings versus rental income and how resilient you think they’ll be in a downturn as you’re pulling back on your rent expectations.
Mike Lacy: Jamie, this is Mike. They’re pretty sticky in nature. A lot of this has to do with things like parking and different fees that we’ve applied, whether it’s package lockers, smart homes, things like that. So these things tend to be pretty sticky. In addition to that, it’s incremental in nature. So things like short-term furnished, we still have premiums there. We’re still doing things with our amenity rentals. And the newest thing was just rolling out our Internet program. We’re starting to achieve those $50 increases. And again, that’s – that’s looking pretty good. The earnings for next year on that alone is going to be pretty significant to continue to drive, call it, that 50 basis points of other income growth. So overall, everything feels pretty good today.
Jamie Feldman: Okay. Thanks for that. And then I mean, shifting gears to some of the other levers for investment. I mean, can you — what is this I guess what does the change in market conditions mean for your appetite to fund developer capital program, even new development starts? I mean do you think this has any kind of big picture impact and how much capital you think you could put to work in some of those in the coming year?
Joe Fisher: This is Joe. I’ll take it. I guess, number one, we feel really good about the liquidity and balance sheet position. So clearly, going into this period of time with position of strength, if you will. So we’ve got a good optionality. As you go down to kind of that pick list, I’d say we would start with the dry powder that we reserved for our joint venture and so we did that seed portfolio earlier this year, source some capital in the low 5s effectively. Today, cap rates are in kind of that mid- to high 5s range based off a limited transaction volume that is out there in the market. So we’d like to be able to transact with our partner. We’re showing them transactions. We think we can transact at that level. But just as importantly, we can go out there and layer on the platform and get the additional kind of 10-plus percent upside in NOI on top of that, plus that recurring fee stream both on asset and prop management to make the effective yield pretty compelling relative to where we source that capital.
And so we and our partner are very focused on that right now to drive the forward accretion and take advantage of the market the way it is right now. I’d say on the DCP side, the good thing is we’re really not seeing that many opportunities, which tells you that any development starts is going to be taking place. And so while we do think that market comes to us over time, and we would be interested in potentially adding to our portfolio there. At this point in time, looking at the capacity being utilized over on the JV and waiting for more opportunities to come our way. And then lastly, you mentioned just development. Development is pretty challenging right now. We’ve got some assets coming through lease-up that are doing well and will clearly drive some additional FFO accretion here in 2024 and 2025.
But in terms of new start thresholds, we’d want to see at least mid-6s on a current basis, most likely given current cost of debt, where cap rates are and where our cost of capital is, we’re not there at this point. But I would say we’re getting some benefit potentially over time from the cost side. We’re starting to see costs level out, if not come down. And so, I think if we’re patient there and just keep building up optionality and making sure that we got all our land ready to go, there’s going to come a point in time when we go pretty aggressively when all the market signals point us to go that way.
Operator: Our next question is from Michael Goldsmith with UBS. Please go ahead.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my question. You talked about that the demand has been holding in there pretty well. But I was wondering if there was any change in how the consumer is approaching the cancellation processes given that there’s a lot of options out there, we’ve talked quite a bit about the As and Bs. Are they walking in signing a lease and then regretting their decision and backing out? Just curious of the trends within that?
Mike Lacy: Hey Michael, that’s a great question, something we obviously have been watching very closely. And to your point, we are seeing people shop a little bit more. So when you think about that canceled denial rate, we typically run in that 36%, 37%. This time of the year, we’re currently running around 42%. So we are seeing people come through the door. They’re finding that there’s potentially a better option out there. So they are canceling their release at times, so that is a little bit more elevated on the front door. And then on the back door, what I would tell you is, negotiating has picked up to some degree. We typically negotiate on, call it, 20% to 25% of our leases. We are currently around 25% to 30% negotiations, and that equates to about 50 basis points off of what we sent out.
