Alex Kalmus

Alex Kalmus asked about Equity Residential's development strategy, specifically what conditions would prompt a restart of construction activity given no new starts in 2025, and if current development economics are improving.

Answer

Bob Garechana, Chief Investment Officer, confirmed no new starts in 2025 but expects some in 2026, including projects in Atlanta following recent land acquisitions. He explained that Equity Residential seeks development opportunities where acquisition options are limited, focusing on risk-adjusted returns. He noted that costs have been steady, yields have improved with rent growth, and the company's role as an LP with local partners is more in demand, allowing for favorable deal structuring while maintaining a thoughtful and modest approach aligned with cost of capital.

Alex Kalmus asked for more color on yield differentials between townhome (Build-to-Rent) product and traditional multifamily, and how operating metrics like rent growth, turnover, and occupancy compare between these product types.

Answer

Matthew Birenbaum, CIO, stated it's too early for long-term data, but existing rental townhomes have performed as well as or slightly better than attached communities. Yields are similar, but the expense profile differs. He believes BTR is a niche aligned with future demand, attracting older residents who stay longer, which should drive greater profitability over time.

Alex Kalmus asked for more color on the yield differentials between townhome (BTR) product and traditional multifamily, and how operating metrics like rent growth, turnover, and occupancy compare for these product types.

Answer

Matthew Birenbaum, CIO, stated it's too early to tell long-term yield differentials for BTR, but existing rental townhomes have performed similarly or slightly better than attached communities. He emphasized BTR's role in accessing future demand, attracting older residents who tend to stay longer, potentially driving greater profitability.

Alex Kalmus asked if lower turnover was driving lower repair and maintenance (R&M) expenses and if expectations for that expense line had changed. He also questioned why insurance costs were up year-over-year in Q1 despite a favorable renewal.

Answer

Executive Barb Pak clarified that R&M costs are lumpy and not directly tied to turnover; the full-year growth expectation of 2.5-3% is unchanged. Regarding insurance, she confirmed the full-year forecast for a 2% decline remains intact. The Q1 year-over-year increase in the line item was driven by lumpy tenant litigation costs, not higher insurance premiums.

Alex Kalmus of Zelman & Associates inquired about the expected timeline for the convergence of renewal and market rents and asked if there was a risk of the spread widening again in late 2025 or 2026 as supply eases.

Answer

Executive Angela Kleiman stated that the timing for the spread to tighten is difficult to predict as it depends on market conditions. She noted that if demand is stronger than expected, market rents could accelerate, which would actually cause the spread between new and renewal rates to widen. However, she expressed confidence in achieving the base case forecast given the favorable supply landscape.

Alex Kalmus inquired about the acquisition strategy amid market optimism and asked for more details on the new partnership with Funnel and its expected impact.

Answer

CFO & CIO Joe Fisher noted that while buyer interest is high, a lack of willing sellers is keeping transaction volume low. UDR's focus is on its JV with LaSalle for value-add deals and selectively enhancing its on-balance-sheet portfolio. COO Mike Lacy explained that Funnel will enhance the customer experience and free up internal resources from back-office tasks to focus on leveraging data for new, value-creating innovations.

Alex Kalmus of Zelman & Associates asked when the currently wide spread between renewal and new lease rent growth might return to pre-COVID levels.

Answer

SVP of Operations Mike Lacy acknowledged the spread typically widens in Q4 and Q1. However, he expressed confidence in maintaining strong renewal growth of 4-4.5% because key metrics show resident stability. Turnover is at historic lows and move-outs due to rent increases are not rising, which he attributes to the success of the customer experience project.

Alex Kalmus asked about the drivers behind the 4% year-over-year decline in resident turnover during the third quarter and the expectations for this trend moving forward.

Answer

Executive Vice Chairman D. Keith Oden identified the primary driver as the significant drop in move-outs to home purchases. He noted this metric is currently around 9%, which is historically low compared to the typical 15-20% range. This 5-8% differential of residents staying put is a 'difference maker' for retention. Oden expects this trend to continue into 2025, as there is no short-term change anticipated in the housing market that would alter this dynamic.

Alex Kalmus of Zelman & Associates asked about the formation of the joint venture with Blackstone, the associated fee economics for AIR, and which specific markets were experiencing the greatest loss-to-lease.

Answer

CEO Terry Considine and EVP, Co-CIO John McGrath stated the JV originated from a long-standing relationship and allows AIR to retain management on assets where its platform creates value. They confirmed AIR will earn standard GP and property management fees but did not provide a forecast. President of Property Operations Keith Kimmel identified Miami, Denver, and Boston as having the highest loss-to-lease, noting that resident income growth is keeping affordability strong.

Alex Kalmus asked about the potential timeline for New York City dispositions and the market conditions required to proceed, and also inquired if unsolicited offers for the company had subsided since the separation.

Answer

Executive Conor Wagner stated that for New York dispositions, the company would be judicious and wait for the right price, which would be helped by market optimism from vaccine rollouts and return-to-office trends. CEO Terry Considine confirmed that there had been no 'noise' from unsolicited offers since the new company was formed.

Alexander Kalmus from Zelman & Associates inquired about how Aimco demarcates its urban versus suburban properties and asked for an opinion on how the potential elimination of 1031 exchanges would affect the multifamily transaction market.

Answer

EVP of Property Operations Keith Kimmel clarified that the urban/suburban distinction is based on physical geography, citing specific property examples. Chairman and CEO Terry Considine addressed the 1031 exchange question, stating that increased taxes would simply reduce overall transaction activity.