Cole Bardawill

Cole Bardawill asked about the potential positive impact of a 3.75% rebate on engine margins in Q1 or throughout 2026, assuming the net tariff impact peaked in Q3 2025. Bardawill also inquired how the Section 232 tariffs and evolving competitive dynamics are expected to influence Cummins' share position across the engine business moving forward.

Answer

Mark Smith, Chief Financial Officer, clarified that tariffs are viewed as a margin diluter, not an opportunity for margin improvement, and the company's focus is on mitigating costs and achieving stability. Smith stated that Cummins is in a strong position to support all customers with its U.S. manufacturing base and has seen rising demand for its products in heavy and medium-duty trucks over recent years, despite the complexity introduced by tariffs.

Cole Bardawill asked about the potential positive impact of a 3.75% rebate on engine margins in Q1 or throughout 2026, assuming the net tariff impact peaked in Q3, and how competitive dynamics from Section 232 tariffs might affect Cummins' share position in the engine business.

Answer

CFO Mark Smith stated that tariffs are not framed as a margin opportunity but rather a cost headwind, and he would not speculate on the impact of potential rebates due to lack of detailed information. CEO Jennifer Rumsey reiterated that tariff stability and increased customer ordering would improve margins through better plant utilization, not direct tariff-related margin improvement. Mark Smith added that Cummins is well-positioned to support all customers with its U.S. base and strong penetration across multiple OEM brands, despite the complexity of the tariff environment.

Cole Bardawill asked for clarification on the 2025 occupancy outlook for the D.C. portfolio, questioning if any erosion was expected. He also inquired about the specific drivers for the high property operating expenses observed in D.C. and Maryland during the fourth quarter.

Answer

COO Tiffany Butcher clarified that they expect D.C. occupancy to remain strong and stable in the 96% range, similar to the prior year, with gradual improvement expected in Atlanta. CFO Steven Freishtat explained that the high Q4 operating expenses in the D.C. metro were primarily due to utility cost true-ups that hit at a couple of properties during the quarter.

Cole Bardawill inquired about the historical impact of presidential elections on demand trends in the D.C. Metro market. He also asked about the occupancy trend in Atlanta and whether the company is currently prioritizing occupancy over rental rate growth.

Answer

CEO Paul T. McDermott explained that political 'alignment'—one party controlling the White House and Congress—historically drives job growth and demand in D.C., while a lack of alignment results in only temporary effects. COO Tiffany Butcher confirmed that Elme is prioritizing occupancy over rate in Atlanta to drive NOI. She expects occupancy to remain in the low 90s through year-end before trending up in 2025, particularly during the spring and summer leasing season.