And I’d say the general consensus was cap rates plus or minus 5% at this point in time. There is still going to be a little bit of a meeting of the minds with some of the risks that are out there between buyers and sellers. But it still seems like we’re in that plus or minus 5% cap world. So that really doesn’t feel like distress, I’d say, as a buyer.
Jamie Feldman: Okay. If I could just ask a follow-up on that. I mean when you think about your debt lending business and your preferred lending business, and you look at the impairments you’ve taken or some of the projects you’re talking about, I mean, is part of the story, like you just don’t get great deals even in distressed moments. I mean, does it make you rethink at all some of the other ways you’re investing beyond just development and clearly very strong core operating skill set just because there is so much capital that does want to be in this space?
Joe Fisher: I don’t think it makes us rethink the suite of options that we have. I think that’s one of the powers of the platform, obviously, in terms of diversification of markets but also diversification of ways we’ve been deploying capital. We’re really not a one-trick pony. And so I don’t think it changes at all our thoughts on what we continue to deploy into DCP like investments. Those over time have provided solid returns for us. It’s a good way to pivot at certain points of time when other capital decisions may not make sense. So I really don’t see that being a pivot for us. We will continue to go into all forms of capital.
Tom Toomey: Jamie, this is Toomey. I might just add, what’s interesting, everybody can find one or two deals that have distress. And we highlighted the path that creates a lot of that distress. And you’ve gotten slightly a of repay in the last 90 days with rates coming down 100 bps. That certainly helped. But when you say the scale of distress, what my experience is, is there is a lot of people with a lot bigger capital capabilities than ours and even in the public arenas to write large checks for significant signature bank, for example. Lot of distress inside of that entity with real estate. And it was never offered up, no one ever got a hard look at it. So the range of distress one, two deals in a market, yes, and they will get picked off, but in mass, no, because of Fannie and Freddie capability as a backstop.
And then that leads to significant capital beyond ours that probably can reach and grab should it become entity level-type distress. So we will be smart and nimble about it program with respect to DCP, not going to be a lot of development activity coming online anytime soon. And the recap market is pretty competitive and a lot of capital. We will be cautious about any aspect of going back into that. But we’re going to keep, as Joe said, all our options open, and see what makes sense on a risk-adjusted against matched against our cost of capital.
Jamie Feldman: Okay, great. Thank you for your thoughts on that.
Operator: Thank you. Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.
Michael Goldsmith: Good afternoon. Thanks a lot for taking my questions. Can you talk a little bit about the pace of recovery trending from Northern California and Seattle? And when you look at your Slide 16, you have a top and bottom growth markets on the West Coast as a whole. So how wide is the gap between these cohorts? And then can you just talk a little bit about the trajectory of some of these markets and when we can start to see them improving? Thanks.
Mike Lacy: Sure, Michael, this is Mike. I’ll take a crack at it first. Specific to Seattle, San Francisco area, I’d say first starting with San Francisco. It’s good to be diversified. We are 50-50 urban suburban. We’ve got 50% of our exposure in the Soma downtown area and then the rest down along the Peninsula, and it covers about 8% of our NOI, team did a really good job last year. I can tell you we expect to be number one in terms of total revenue growth in that market. So we’ve been able to do a lot with what we have to work with there. Today, we’re sitting around 97%, 97.5% occupancy. We’ve seen concessions come down as of late, really over the last 30 days or so, and we’re starting to drive our rents. And I think specific to your question around trajectory and trends San Francisco is the one market out of all of ours that had the highest momentum.
And when I say that, I look at December, for example, our blends were around negative 7%. In January, we’re actually flat, so about a 700, 750 basis point increase month-over-month. Again, it’s a low lease expiration period of time. So try not to get too excited about it, but we have seen demand pick up there. A lot of that has to do with the city being cleaned up more. You don’t have as much supply. So today, San Francisco feels relatively well. Seattle is not too far behind for us, again, a very diversified market. We are all along the suburbs and a lot of exposure to the Bellevue area, where most recently, we’ve heard that there is about 200 plus thousand square feet of office space being taken out by a TikTok. So more recently, we’ve seen traffic pick up in that area.
I can tell you our blends, just going from December to January increased about 250 basis points, from about zero to, call it, 2.5%. So that part of the country feels a little bit better today than what we would have expected moving into the year.
Michael Goldsmith: Thanks for that. And then my follow-up is you’re including 45 basis points of benefit from innovation and other income in your same-store revenue guidance for the midpoint of – what are the current opportunities for further revenue generation and cost savings from the platform?
Mike Lacy: Yes, a few things. Let me step back and give you a little bit of color on some of the initiatives we’re working on, both on the revenue side and expense side. I mean, for us, you’ve heard us talk a lot about the customer experience project. And we put in my prepared remarks that we do expect about a 100 basis point improvement in turnover this year from that. That’s just the start of it. We just recently armed our teams with a lot of information. They are putting it to use today, and they are starting to question the power of knowing exactly what retention can be and what it will do for them. And I’ll give you an example, we went through, call it, 300,000 data points and recognize that you can have a 20% higher retention rate, if you can move people with a negative sentiment, we’re more on a bad trajectory to a good trajectory.
And again, we use a lot of our proprietary information to score this, whether it’s their sentiment scores, their survey scores, service scores, we are lumping all those together to get an understanding of how we can change those trajectories. Over the last 9 months, we’ve seen an improvement in turnover. Just by putting a flashlight on this, and specific to the fourth quarter, our turnover was actually 400 basis points better than the historical average. So again, we’re just now scratching the surface. We expect a benefit this year, but even more to come in ‘25 and ‘26 as it relates to that program. In addition, we talked a little bit about our Wi-Fi rollout. We’ve got about 20,000 units installed today. We’ve got another 12,000 coming throughout the year.
And so this is going to continue to pay dividends not only this year, but into the future. As of right now, we think that’s about a $6 million benefit in incremental revenue in 2024 and more to come in 2025. Aside from that, really excited about our fraud and bad debt detection, starting to utilize more AI around that, just to be able to understand who’s coming in, try to block people from getting in the front door. So we’re utilizing it in terms of our proof of income as well as our ID verification. And we’re starting to see that, that’s making a difference for us as well. And as it relates to expenses, we’re highly focused on driving that number down. You saw the midpoint of our guidance is around 5.25%. I’d remind the audience that aside from our anniversary-ing off of the CARES Act as well as the WiFi. Our organic growth is probably closer to around 4%.
Still after what we can control, trying to drive that number down, some of the things that I can think of off top of my mind are vendor and product consolidation, working with the teams to try to drive that into a more efficient state, more personnel efficiencies and more ROIs around expense savings, where an example is a re-pipe. We can limit some of the insurance costs that are hitting us, and we can also eliminate some of the service requests that we’re having to face. So those are just a few examples of things that we can control that we do expect will help us throughout the year.
Michael Goldsmith: Thank you very much.
Operator: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.
Adam Kramer: Hey, guys. Thanks for the question. Just wanted to ask a little bit about the sequential move in January versus December and blended rate growth and I guess, kind of the occupancy build as well. And looking at Slide 9, it looks like there was kind of decent drop-off in 4Q in terms of deliveries in your market. Wondering, did that kind of play a factor in maybe in kind of the January results with the December and January results? And then maybe how you are thinking about kind of, I think some of the further sequential improvements that you guys kind of talked about here in new lease in February versus January. And kind of in the months going forward relative to the fact that there is kind of that the pre-material step-up in deliveries, it looks like in 2Q, I guess in 3Q ‘24 in your markets?
Mike Lacy: Hi Adam, it’s Mike. I will start and if Joe wants to jump in, he can. Again, for us, we took the stance of trying to drive that occupancy up in the fourth quarter. And a lot of that has to do with you just have lower lease expiration. So, it’s a period of time where you can really get in there and make a difference. And I will tell you, probably more specific to how we did it. It’s not necessarily with the deliveries. I would say it’s more around our focus on retention. And so again, when you look at our turnover, and it’s 400 basis points better than what we would have historically experienced during that period of time, we were trying to drive our retention up, which obviously helps you with occupancy.
