Joe Fisher: Yes. I think Camden and team are spot on that in terms of seeing more of a capture for the rentership side of the equation, be it multi or the single-family rental side. But when you have affordability pretty much as distressed as it has been at any point in the last 30 years, 40 years with single-family, typically, when you see that, you see the pendulum swing the other way. And so you have started to see signs of that with home ownership rate kind of peaking out to plus or minus 66% over the last year or 2 years, you start to see that tick down a little bit. So, I think on the macro side, definitely agree on that. We expect that to be the case in terms of the macro backdrop for our guidance. And then when you look at what we are actually seeing on the ground, you look at our move-outs to buy activity, it’s still significantly below what it used to be.
And so we are keeping more and more people in the renter pool, which obviously helps on the retention side and helps on the pricing side. So, we are in 100% agreement with Camden on that.
Rich Anderson: Yes. I mean I get the theory, just wondering if you are seeing it in your numbers and you are saying you are already, which is interesting, so I got it. Thanks guys.
Tom Toomey: Thanks Rich.
Operator: Thank you. Our next question comes from the line of Haendel St. Juste with Mizuho Securities. Please proceed with your question.
Haendel St. Juste: Hey there. Two quick ones for me. Good afternoon. Mike, I wanted to follow-up on your comments on San Fran and Seattle. I don’t think you mentioned it. So, perhaps can you share specifically what concessions you are seeing in those two markets today and what you are offering in your own portfolio and then maybe also outline where concessions usage is – concessions are being used more broadly and more prevalently in the portfolio? Thanks.
Mike Lacy: Yes. And thanks for the question. Specific to San Francisco, we were offering around three weeks during the quarter, during the fourth quarter. That’s actually come down to about half of that range over the last 30 days, and that’s where you see it translate into those blends that I mentioned, that 700 basis points, 750 basis point pickup from December. A lot of that is just concessions coming down in that market as well as market rents coming up. And it’s pretty consistent across the board. I mentioned earlier, we are 50% exposed Downtown SoMa area, 50% down along the Peninsula. It’s pretty consistent across the board. As it relates to Seattle, we haven’t really offered concessions there over the last year or so. That’s a market where we tend to adjust our market rents more than anything else. And today, we are not offering any concessions.
Haendel St. Juste: Okay. Thank you for that. And back to I think comments you guys have made on capital deployment here, it certainly sounds like there is a conservatism as you wait for perhaps to see better return versus not necessarily not having an interest. So, I am curious if you could talk a bit more about how hurdle rates – your hurdles rates have changed here and what you would need to see to get more active with on [Technical Difficulty] and perhaps more DCP deployment. Thank you.
Joe Fisher: Yes. Hi Haendel. So, I guess overarching, our capital deployment strategy is that we still sit in a capital-light mode. Obviously, the cost of debt has dramatically improved in the last 60 days to 90 days. Cost of equity has improved a little bit. Asset pricing has probably improved a little bit. So, the backdrop clearly getting better, and you continue to take off a little bit of risk at a time in terms of the supply and macro environment as we move throughout the year. So, maybe some increased degrees of conviction. But today, I would say the area that we are most focused on deploying is continue to deploy capital, joint venture partner, LaSalle, big props to Andrew and the LaSalle team on that One Upland deal that we got done in the mid to high-5s initially.
With the capital flows we have seen and compression in rates, that deal would clearly trade for a cap rate inside of where we just bought it a few months ago. So, we would like to continue to deploy with them, go out there and get more opportunities. We have put about $150 million at the high end at share within our guidance. So, that’s the priority today. To the extent that DCP opportunities come along and maybe get some paybacks and we can redeploy, we will take a look at that, obviously. Development, we have seen a little bit of reprieve in terms of hard cost. They are starting to come down a little bit. And so I would say on the shovel-ready deals that we have prepared, we are probably in the 5.5% to 6% type range on current NOI and inflated cost.
I think we will continue to take a hard look at that as we move throughout the year in terms of when is the appropriate time to start those given the fundamental picture, which as you go into ‘25 should be a little bit better than ‘26 clearly, when you are delivering well below historical levels of supply should be a good year to potentially deliver into. So, that’s the other piece that we will be taking a look at as we move through the year.
Operator: Thank you. Our next question comes from the line of John Kim with BMO Capital Markets. Please proceed with your question.
Robin Haneland: Hi. This is Robin Haneland on for John. I just wanted to touch on the DCP. How many of these are currently on a cash basis versus simply accruing the rate of return to the balance and it looks like a couple of the preferreds were extended, Junction Phase 1 at infield. Was there any particular reason for this?
Joe Fisher: Yes. So, in terms of cash pay versus accrual, majority of these, by definition, because they are developments are going to be accrual-based. So, just the same way that the senior loan is going to have an interest rate reserve to help fund their portion, we are going to have an accrual on ours. And so over time, as those assets migrate to cash flowing and operational, at that point, they will start to generally pay the senior with cash flow, but will typically accrue. So, we will probably follow-up offline and get you a little bit more specifics on which ones have some degree of cash flow, but for now, I would assume majority are accruing as you think about it. In terms of the years to maturity, do you want to delineate between our maturity and senior loan maturity.
Sometimes those are not coterminous. And so what we disclosed there in the supplemental on 10-B that is our maturity for our pref position and/or mezz position. And so typically, they are going to have extension rights built into those. So, that’s really all you are seeing there is exercise some of their extension rights that they have. That said, in terms of senior maturities, we talked a little bit about the asset in Philadelphia coming up with the maturity here in 2Q. Beyond that, our next maturity starting ‘25 and ‘26, so we really don’t have much in terms of senior maturities upcoming, which typically trigger some type of the capital event.
Robin Haneland: Got it. And on SoCal, given the current set of emergency, are your renewal rates impacted in any way? And can you maybe just touch on your flood risk insurance policy?
Mike Lacy: Yes. So, right now, they are in a state of emergency. So, there are price gouging efforts in place. So, there is a maximum of around 10% that we can charge at any given time. Right now, just in terms of how it’s impacted us, we have – happy to say it hasn’t been a huge impact. We do have probably 10 units or 12 units that are currently facing some leaks, but overall, it hasn’t been a big impact for us.
Joe Fisher: And just from the insurance perspective, every single year when we go through our renewal, we obviously renew, take a look at adequacy of limits across quick, name storm, water, whatever it may be. And so I feel we are appropriately covered at this point in time with the insurance program.
Robin Haneland: Thank you.
Operator: Thank you. Our next question comes from the line of Linda Tsai with Jefferies. Please proceed with your question.
Linda Tsai: Hi. Just one question, back to innovation and other income, you have highlighted the $5 million to $10 million contribution in ‘24. I think back at NAREIT in L.A., there was a slide showing $40 million from innovation over the next 24 months to 36 months. So, $13 million a year conservatively, the $5 million to $10 million you are guiding to this year is less. Did anything change in your outlook versus back at NAREIT?
Mike Lacy: No, nothing has changed in our outlook. I think for us, we are just looking at the initiatives that are out in front of us. We still have a list of about 60 others that we are assessing today. And so we are constantly trying to figure out which ones to move the dial on and where we should put our efforts. And again, we think that that’s a pretty good place to start the year, and it’s consistent with probably the last 5 years or 6 years of around 50 basis points of incremental NOI that we have been able to produce.
Joe Fisher: Yes. And I think as it relates to that $40 million, a big component of that, call it, $15 million to $20 million was related to WiFi and still is. But as Mike talked about, that’s kind of $5 million to $6 million incremental. So, a lot of that lift comes in the coming years as we continue those rollouts and then you mature through the leasing cycle at each asset once we get that installed. I would say, too, just a little bit of context to that 45 or so basis points that we talk about innovation. That number is explicit to what I would say is very concrete ideas where things like WiFi or parking or storage where you can charge an explicit fee. We know what the rollout schedule is. That’s really componentized within that 45 bps.
When you look at some of our biggest opportunities that Mike mentioned, when it goes to customer experience, when it goes to fraud efforts, those were not captured within that $40 million that we talked about, but those are also outside of other income. Those are pretty big implications as it relates to occupancy, pricing power, expenses, capital, etcetera. And so those are opportunities above and beyond that, but are very soft in nature because they are harder to quantify in terms of explicit timing by resident. And so those will come over time, but aren’t embedded in our guidance.
