Eric Wolfe

Eric Wolfe asked why the annual RV rental income growth is projected to step up from 4.5% in Q1 to 5.4% for the remainder of 2026, and about the company's visibility into normal attrition rates for RV annuals. He also followed up on the year-over-year drop in non-core income, seeking clarification on the cause, and inquired if the $100 million of discretionary capital after dividends and CapEx is earmarked for specific investments.

Answer

Paul Seavey (EVP and CFO) attributed the Q1 RV annual rent growth moderation to a higher occupancy comparison in Q1 2025 and carryover impact from northern resort attrition in Q2 2025. Patrick Waite (EVP and COO) confirmed normal attrition is expected, with good visibility from rent increase notices and renewal processes, and that elevated attrition from the prior year is behind them. Seavey explained the non-core income drop is due to the timing of insurance proceeds recognition. Regarding discretionary capital, Seavey stated it funds working capital investments like purchasing homes for sale/rental and discretionary CapEx, including expansions, which are financed by line of credit borrowings exceeding free cash flow.

Eric Wolfe asked about the projected $3.6 million year-over-year drop in non-core income for 2026, given the same pool of properties, and sought confirmation that free cash flow use is not included in core FFO estimates. He also asked about the earmark for the $100 million of discretionary capital.

Answer

Paul Seavey (EVP and CFO) attributed the non-core income difference to the timing of insurance proceeds and storm recovery, noting recognition occurs upon receipt. He confirmed that interest expense assumptions are based on existing debt and line of credit usage, and that funding for working capital investments (like home purchases and discretionary CapEx including expansions) comes from borrowings exceeding free cash flow.

Eric Wolfe asked about the acceptance rate and potential turnover for the 5.1% annual RV price increase, particularly for Sunbelt locations and the Phoenix market, and when the company gains full visibility into these figures.

Answer

Paul Seavey, EVP and CFO, explained that visibility into winter season annual renewals is current, while summer season renewals gain visibility in Q2. Marguerite Nader, CEO, noted no decrease in appetite from Canadian annual customers and no increase in home sale activity among them. Patrick Waite, President and COO, added that early reads suggest a normal rate of acceptance, similar to a run-rate year. Marguerite Nader highlighted the strong performance of filling 475 annual RV sites in the quarter.

Eric Wolfe asked about the timeline for understanding acceptance of the 5.1% annual RV price increase, especially for Sunbelt locations, and any early insights into the Phoenix market. He also sought clarification on when the 5.1% annual RV rate increase is 'locked in' and the potential for turnover changes in the coming months.

Answer

Paul Seavey, EVP and CFO, explained that winter season annual RV renewals are currently visible, while summer season renewals (effective Q2) will provide better insight later. Marguerite Nader, CEO, noted no decrease in appetite or increase in home sales among Canadian annual customers. Patrick Waite, President and COO, added that early reads for the Sunbelt suggest a normal rate of acceptance, and Marguerite Nader highlighted the filling of 475 annual RV sites in the quarter as a positive indicator.

Eric Wolfe asked for a breakdown of the expense guidance reduction, specifically how much was from flexing variable costs due to lower transient business. He also sought to quantify the higher turnover in the annual RV segment.

Answer

EVP & CFO Paul Seavey explained that the remaining one-third of expenses (taxes, insurance, marketing) is now projected to be down 1% year-over-year, driving the savings. President & COO Patrick Waite addressed turnover, stating that while historically around 5%, it was elevated at about 20 properties in the Northeast as the portfolio normalizes from a period of peak demand. CEO Marguerite Nader added that this turnover typically occurs in June.

Eric Wolfe asked for a breakdown of the expense guidance reduction, specifically how much was due to flexing variable costs with lower transient business. He also sought to quantify the higher-than-normal turnover in the annual RV segment.

Answer

EVP & CFO Paul Seavey explained that the expense guidance reduction reflects variable savings at transient properties, a favorable insurance renewal, and savings in membership marketing. President & COO Patrick Waite clarified that annual RV turnover, historically around 5%, was elevated at about 20 properties in the Northeast as the portfolio normalizes from a period of peak demand.

Eric Wolfe asked for a breakdown of the expense guidance reduction between variable cost flexing and other savings, and also sought to quantify the higher turnover seen in the annual RV segment.

Answer

EVP & CFO Paul Seavey detailed that the expense savings came from both variable cost control at transient properties and reductions in areas like insurance and membership marketing. President & COO Patrick Waite explained that RV annual turnover, historically around 5%, was elevated at about 20 properties in the Northeast as the company cycles through a period of peak demand growth.

Eric Wolfe requested a breakdown of the reduced expense guidance, asking how much was due to flexing variable costs with lower transient business versus other savings. He also asked for more detail on the elevated annual RV turnover.

Answer

EVP & CFO Paul Seavey detailed that savings were realized across both variable expenses (tied to transient occupancy) and fixed costs, including benefits from the recent insurance renewal and membership marketing. President & COO Patrick Waite explained that annual RV turnover, historically 5%, was elevated at about 20 properties in the Northeast as the portfolio cycles through a period of peak demand from prior years.

Eric Wolfe asked for a breakdown of the expense guidance reduction, specifically how much was from flexing variable costs with lower transient business versus other savings. He also requested quantification of the higher turnover in the annual RV segment.

Answer

EVP & CFO Paul Seavey detailed that the guidance reflects variable savings at transient properties, with two-thirds of core expenses (utilities, payroll, R&M) expected to grow 2.4%, while the remaining third (taxes, insurance, marketing) is projected to decline 1%. President & COO Patrick Waite stated that RV annual turnover, historically around 5%, was elevated at about 20 properties, primarily in the Northeast, as the portfolio moves through a post-peak demand attrition cycle. CEO Marguerite Nader added this turnover typically occurs in June.

Eric Wolfe asked for clarification on the timing of the MH guidance change related to hurricane damage, questioning what changed between the initial guidance and the update. He also inquired about the company's exposure to Canadian customers and if their behavior was factored into guidance.

Answer

Patrick Waite, an executive, detailed that the full impact of hurricane damage becomes clear over several months as residents make final decisions. Marguerite Nader, an executive, added that the key trigger for the change was when impacted residents stopped paying rent. Paul Seavey, an executive, noted Canadian customers are about 10% of RV revenue and that no guidance change was made based on their behavior, as the primary impact is in Q1.

Eric Wolfe inquired about the key drivers for ELS's 2025 expense guidance, which he noted was low, and asked for clarification on a projected $4 million increase in other income, questioning if a 2024 JV distribution would repeat.

Answer

Paul Seavey, an executive, explained that the expense guidance is expected to align with CPI, with savings anticipated in administrative expenses and membership commissions. He confirmed the ~$4 million increase in other income is primarily driven by expectations for sales and ancillary activity, and that a JV distribution similar to the one in 2024 is anticipated in Q1 2025.

Eric Wolfe followed up on the equity issuance, questioning the timing and motivation for raising a significant amount to pay down debt that was recently swapped, and asked if this signals a potential increase in acquisition activity.

Answer

Paul Seavey, EVP and CFO, acknowledged a ~$5 million cost to unwind the associated swaps but emphasized the transaction was attractive to remove 6.05% debt and create future flexibility. Marguerite Nader, President and CEO, added that the move improves their position to act on acquisition opportunities, though she noted the current transaction market for institutional-quality assets remains slow with limited inventory.

Eric Wolfe from Citi inquired why the contribution from Existing Customer Rate Increases (ECRIs) would not decrease as move-in rents recover. He also asked what specifically was causing move-in rents not to flow through to the rent roll as quickly as expected, if not related to ECRIs.

Answer

CFO Jeff Norman explained that the flow-through of rates is a gradual process, and the ECRI approach has been similar year-over-year, with minor caps from state of emergency restrictions. CEO Joseph Margolis added that customers continue to accept ECRIs at the same rate. Jeff Norman identified slower churn, specifically lower rentals and vacates, as the primary reason for the slower-than-expected flow-through of move-in rents to the rent roll.

Eric Wolfe from Wolfe Capital questioned why the contribution from ECRIs (Existing Customer Rate Increases) wouldn't decrease as move-in rents recover, given past trends, and what factors were causing move-in rents to flow through to the rent roll slower than anticipated.

Answer

CFO Jeff Norman explained that the process of rates flowing in and out of the portfolio is gradual, and ECRI approach has been similar year-over-year, with modest headwinds from state of emergency restrictions. CEO Joseph Margolis added that customers are accepting ECRIs at the same rate. Jeff Norman identified slower churn (lower rentals and vacates) as the primary driver for move-in rents not flowing through as quickly in Q3.

Eric Wolfe asked about the company's stance on share buybacks amid stock volatility and inquired about the impact of AI on customer search behavior and price sensitivity.

Answer

CEO Joseph Margolis affirmed that the board has a price band for buybacks and they are prepared to act when appropriate. On AI, he acknowledged its rapid evolution makes demand harder to measure, while EVP & CFO Jeff Norman added that it leads to more qualified, higher-converting web traffic.

Eric Wolfe from Citigroup Inc. sought to reconcile strong Google search demand with weaker housing and moving trends. He asked about other demand drivers, such as the 'lack of space' customer, and whether this trend was more pronounced in specific markets.

Answer

CEO Joseph Margolis acknowledged that moving-related demand has declined from a peak of 63% of customers to 54% in Q1. However, he highlighted that the 'lack of space' customer has grown to 35% of tenants and has a length of stay twice as long as a moving customer. He confirmed this trend is more pronounced in dense urban markets like New York, which has contributed to that market's outperformance.

Eric Wolfe requested clarification on the Los Angeles 10% rent cap, specifically which rate it applies to. He also asked how revenue growth guidance could be nearly flat if move-in rents are improving and occupancy is a positive contributor.

Answer

CEO Joseph Margolis clarified the L.A. rent cap applies to the existing rates customers are paying. Executive P. Stubbs explained the full-year revenue guidance appears modest because the year starts from a lower base (Q4 revenue was down 0.4%), and the positive effects of improving rates are expected to have a greater impact in the second half of the year.

Eric Wolfe questioned if the LSI portfolio is still expected to outperform the legacy EXR portfolio in 2025 and asked what demand indicators are needed to become more aggressive on move-in rates.

Answer

CEO Joseph Margolis affirmed his expectation that the LSI portfolio will outperform the EXR portfolio next year. He explained that pricing is not a macro decision but is driven by algorithms that optimize for long-term revenue, not just occupancy. The company constantly runs A/B tests on algorithm-produced prices to ensure it is maximizing customer value.

Eric Wolfe asked about the implied deceleration in same-store revenue growth, which was 4.2% year-to-date, seeking to understand the drivers, including potential impacts from fee income or higher bad debt.

Answer

Chris Lau, Chief Financial Officer, attributed the deceleration to the timing of last year's leasing spreads, which moderated into Q4 2024, and the timing of fees, which were strategically accelerated into earlier parts of the year due to the Lease Expiration Management Initiative, likely leading to negative year-over-year Q4 fees. He also noted a prudent approach to guidance in a choppy residential environment, emphasizing the full-year top-line outlook in the high threes and expected NOI margin expansion.

Eric Wolfe from Citi asked for the same-home occupancy rate in July and sought clarification on how the flatter seasonal curve would affect occupancy trends in the second half of the year compared to the significant drop in 2024.

Answer

CEO Bryan Smith explained the stable outlook is due to the lease expiration management program reducing H2 move-outs. CFO Christopher Lau confirmed July occupancy was a strong 96.1% and that the full-year guide in the low 96% range implies much less seasonal moderation than the 100 basis point decline seen from June to year-end in 2024.

Eric Wolfe requested the same-home occupancy figure for July and asked how the expected flatter seasonal curve would impact occupancy trends in the second half of the year compared to the prior year's decline.

Answer

CEO & Trustee Bryan Smith and SEVP & CFO Christopher Lau confirmed that less occupancy deceleration is expected in H2 2025 due to the lease expiration management program reducing move-outs. Lau noted that occupancy dropped about 100 basis points from June to year-end 2024, and a much flatter trend is expected this year. He stated that July 2025 same-home occupancy was 96.1%.

Eric Wolfe asked for the specific same-home occupancy figure for July and sought more detail on how the expected flatter seasonal curve would impact occupancy trends in the second half of the year compared to the prior year's decline.

Answer

CEO Bryan Smith explained that the lease expiration management program is expected to preserve occupancy by reducing move-outs in the latter half of the year. CFO Christopher Lau confirmed that July same-home occupancy was 96.1% and that the company expects significantly less seasonal moderation in occupancy compared to the 100-basis-point decline seen from June to year-end 2024.

Eric Wolfe from Citibank inquired about the drivers behind the 2025 occupancy guidance, asking for forward indicators supporting the expected increase and whether it would mute blended rate growth. He also requested a breakdown of the high-3% blended rent growth forecast.

Answer

CEO Bryan Smith confirmed that strong leasing demand from late 2024 has continued into Q1, with January new lease rates accelerating and February expected to see an occupancy pickup. He stated that new lease rate growth is on a positive trajectory and the company is well-positioned for the spring leasing season. For the full year 2025, Smith broke down the blended rent growth expectation into new leases in the 3% area and renewals in the 4% area, supported by a low single-digit loss-to-lease and market rent growth around 3%.

Nicholas Joseph, on behalf of Eric Wolfe, asked about the outlook for occupancy over the next few months. Eric Wolfe then followed up with a request for early thoughts on the 2025 revenue growth potential, including the expected earn-in from 2024 leasing activity.

Answer

COO Bryan Smith expressed confidence that leasing activity picked up in October, expecting to gain some occupancy by year-end and build momentum for 2025. CFO Chris Lau provided preliminary building blocks for 2025 revenue, estimating a low 2% earn-in from 2024 activity, noting third-party market rent growth forecasts of 3-4%, and a low single-digit loss-to-lease.

Eric Wolfe with Citibank asked how the company determined the high end of its disposition guidance at $650 million and which assets are being considered for the remaining $100 million. He also inquired about the framework for the $100 million stock repurchase program, specifically whether there's a target price or if it's contingent on achieving a certain leverage level.

Answer

Mahbod Nia, Chief Executive Officer, explained that the increased disposition target reflects current market conditions, the board's focus on shareholder value, and continuous evaluation of alternatives. Regarding stock repurchases, Mr. Nia affirmed strong conviction in their value but stated that the company is prioritizing deleveraging with its limited capital, believing that reducing leverage will have a more significant impact on shareholder value than immediate buybacks, given the current discount to NAV.

Eric Wolfe asked how Veris Residential determined the high end of its disposition guidance at $650 million and what specific assets are being considered for sale to reach the remaining $100 million. He also inquired about the framework for utilizing the $100 million stock repurchase program, specifically if there's a target price or a certain leverage level that needs to be achieved first.

Answer

Mahbod Nia (CEO, Veris Residential) explained that the increased disposition target reflects market conditions and the management team's focus on crystallizing shareholder value. He noted that the extension is a result of ongoing dialogue, market proximity, and what best serves shareholders given the current transaction market parameters. Regarding stock repurchases, Mahbod Nia affirmed that while share buybacks are seen as a valuable capital allocation decision given the company's intrinsic value, the priority at this time is deleveraging, as he believes leverage contributes to the current discount to NAV. He concluded that using proceeds for deleveraging is considered more impactful than buybacks currently.

Eric Wolfe of Citigroup Inc. asked if the smaller average size of recent asset sales indicates a stalling market for larger properties, which assets are considered harder to sell, and how sale prices compared to replacement costs.

Answer

CEO Mahbod Nia confirmed a 'discount for size' exists in the current market, making assets over a couple hundred million dollars more challenging to sell. He identified properties like House 25 and Liberty Towers as examples of larger assets. He stated the recent sales were executed at a slight discount to replacement cost but represented strong pricing for the current market, evidenced by a low 5% average cap rate.

Eric Wolfe inquired about the decision-making process that led to acquiring the partner's stake in the Urby (now Sable) property instead of selling it. He also sought clarification on the 6.1% cap rate calculation, the drivers of the implied NOI growth, and the sustainability of the asset's Q1 performance.

Answer

Chief Executive Officer Mahbod Nia explained that acquiring the partner's illiquid minority stake was the most accretive path, given the limited buyer pool for large assets and the significant, immediately realizable synergies. Nia clarified the 6.1% cap rate is based on Q1 annualized NOI plus over $1.4 million in synergies from management internalization and payroll savings. Chief Financial Officer Amanda Lombard added that the asset's Q4 2024 NOI was artificially low due to a straight-line rent adjustment, making the year-over-year growth appear exaggerated.

Eric Wolfe of Citigroup asked for clarification on the large sequential increase in multifamily NOI for NAV purposes, questioning if it contained one-time items and how to determine a recurring run rate. He also inquired if the favorable insurance renewal involved changes to coverage or was purely due to better pricing.

Answer

CFO Amanda Lombard confirmed the NOI figure included one-time benefits, specifying that approximately $1.3 million of the NOI improvement was from prior-period adjustments for insurance and taxes. She and CEO Mahbod Nia clarified that the insurance savings were driven by improved market pricing, not changes in coverage, though Nia noted their geographic concentration still results in a margin penalty compared to peers.

Eric Wolfe from Citi inquired about the composition of move-in rent data and its predictive value for overall revenue, and also sought confirmation on the improving monthly trend in Revenue Per Available Square Foot (RevPAS).

Answer

EVP & CFO Brandon Togashi clarified that move-in rates exclude discounts and are not a direct predictor of in-place rates due to the ECRI program's impact. President & CEO David Cramer confirmed the positive monthly RevPAS trend into July, attributing it to strategic rent management, though Togashi noted concessions would still weigh on the final revenue growth figure.

Eric Wolfe from Citigroup inquired about the context of the 5% sequential contract rate increase in April and the year-over-year rate growth. He also asked for an update on the progress of achieving revenue synergies from the transitioned PRO properties, particularly regarding the occupancy gap.

Answer

CEO Dave Cramer explained that rate improvements have been sequential all year, with move-in rates turning positive in March and continuing to improve. He noted that while occupancy is softer, rate growth is exceeding expectations. Regarding the PRO transition, Cramer stated they are making good progress on closing the 250-300 basis point occupancy gap and expect to see more traction by the mid-summer months as marketing and pricing tools are fully implemented.

Eric Wolfe inquired about the context of the 5% contract rate increase in April and the progress on achieving revenue synergies from the integrated PRO properties, specifically the occupancy gap.

Answer

CEO Dave Cramer explained that sequential rate growth has been strong all year, with move-in rates turning positive in March and improving further. Regarding the PRO transition, he stated they are making good progress on closing the 250-300 basis point occupancy gap and expect to see more traction by mid-summer as marketing and pricing tools are fully leveraged.

Eric Wolfe asked whether the fundamental improvements seen since the October 2024 bottom were driven more by housing market activity or easier comps. He also questioned the expected trajectory for street rates throughout 2025.

Answer

CEO Dave Cramer attributed the improvement primarily to increased confidence in raising street rates post-PRO transition, as the company felt occupancy had stabilized. He noted that a more stable competitive environment and a slight pickup in housing activity were also factors. For 2025, Cramer expects strength to come from more stable asking rents and enhanced execution of their ECRI program, rather than from significant occupancy gains.

Eric Wolfe of Citi questioned whether stronger renewal performance versus new leases could create an unusually large gain-to-lease at year-end, impacting 2026. He also sought clarification on the view that Sunbelt markets won't recover significantly next year, despite strong absorption and falling supply.

Answer

EVP & COO Michael Manelis responded that the current loss-to-lease is 2.6%, slightly lower than normal, and he expects to end the year with a moderate gain-to-lease, not an abnormal one. EVP & CIO Alexander Brackenridge clarified that the Sunbelt recovery is submarket-specific; while EQR's assets in low-supply pockets are on track, broader markets like Austin face a large unit overhang that could delay recovery into 2027.

Eric Wolfe from Citi questioned whether stronger renewal rates compared to new lease rates could create an unusually large gain-to-lease by year-end. He also sought clarification on the view that the Sunbelt market recovery will be muted in 2026, given strong absorption and declining supply.

Answer

EVP & COO Michael Manelis responded that the portfolio currently has a 2.6% loss-to-lease, slightly below normal, and he expects it to end the year with a moderate gain-to-lease, which is not unusual. EVP & CIO Alexander Brackenridge clarified that the Sunbelt recovery is submarket-specific; while some EQR-owned properties are poised for recovery, broader markets like Austin and Phoenix face a significant supply overhang that will take longer to absorb, with challenges potentially extending into 2027.

Eric Wolfe of Citi inquired about acquisition opportunities in the Sunbelt amid macro uncertainty and how Equity Residential formulates its blended spread guidance for the upcoming quarter.

Answer

Chief Investment Officer Alec Brackenridge noted a recent pickup in Sunbelt transaction activity, with pricing around a 5% cap rate, as buyers anticipate that decreasing supply will offset job growth uncertainty. Chief Operating Officer Michael Manelis explained that the Q2 blended spread guidance of 2.8% to 3.4% is based on normal seasonal trends and consistent renewal performance, with less than a third of new leases for the quarter signed so far.

Eric Wolfe inquired about the drivers behind the expected acceleration in same-store revenue growth throughout 2025, asking for a breakdown between other income and fundamentals, and the anticipated magnitude of improvement in the second half of the year.

Answer

CFO Bob Garechana explained that the revenue growth acceleration is back-half weighted due to two main factors: lower starting embedded growth, which means more of the year's growth will come from the prime spring/summer leasing season, and the rollout of other income initiatives like connectivity, which also ramps up later in the year. COO Michael Manelis added that while the seasonal shape is normal, the overall blended rate growth will be elevated compared to 2024, with the third quarter likely being the strongest.

Eric Wolfe inquired about the potential revenue growth contribution from bad debt normalization and other income initiatives, such as the bulk WiFi program, in the upcoming year. He also asked if recent volatility in the 10-year Treasury yield impacts the company's pricing for acquisitions in the Sunbelt.

Answer

CFO Bob Garechana explained that the opportunity in bad debt lies in closing the gap from the current ~1% of revenue to the pre-pandemic norm of 50 basis points. He confirmed the WiFi program's contribution will be more meaningful in Q4 and 2025. CIO Alex Brackenridge added that despite rate volatility, a 5% cap rate for Sunbelt acquisitions still feels appropriate, though the market is in a 'feeling out process'.

Eric Wolfe of Citi asked for clarification on the expected acceleration in blended lease rates in the second half of 2025, questioning the drivers and Q3 expectations given that peers have been reducing their outlooks.

Answer

President & CFO Alex Jessett explained that while blended rates are now forecast to be just under 1% for the second half, the full-year 1% revenue growth target will be met through better-than-expected occupancy, lower bad debt, and higher other income. He credited the new Vero screening process for reducing bad debt to pre-COVID levels. EVP & COO Lori Baker added that a record-high customer sentiment score is driving strong resident retention.

Eric Wolfe inquired about the decision to maintain same-store guidance despite a strong quarter, asking if guidance would have been raised without the current macroeconomic uncertainty.

Answer

Chairman and CEO Ric Campo confirmed that the prevailing economic uncertainty is the primary reason for their cautious stance. He stated that while the business is performing well with no "cracks in the ice," the market volatility necessitates a "wait-and-see" approach, and they might have been more constructive on guidance in a more certain environment.

Eric Wolfe inquired about the strategy of front-loading acquisitions in 2025 and sought clarification on the guided 0 to 100 basis points of FFO dilution, asking if this level of dilution should be modeled for the next several years.

Answer

President and CFO Alexander Jessett explained that acquisitions are planned before dispositions for tax efficiency using reverse 1031 exchanges. He clarified that the FFO dilution in 2025 will be wider, near 100 bps, because the company is selling older, more capital-intensive assets. However, he advised against extrapolating this dilution, as transactions in 2026-2027 will involve more comparable assets, resulting in tighter FFO yield spreads.

Eric Wolfe inquired about the four predevelopment projects that Camden paused, asking what level of rent growth would be required to make them economically viable again.

Answer

Chairman and CEO Richard Campo explained that the decision was about disciplined capital allocation, not just rent levels. He noted that construction costs have not decreased while rents have, making new developments challenging. The paused projects were in markets where Camden is reducing exposure (California, urban Houston) or has concentration issues (Atlanta's Buckhead). Campo stated that to make these projects work now, rent growth would need to be about 100 basis points above the long-term average, but the company prefers to allocate capital to acquisitions below replacement cost in the current environment.

Eric Wolfe (with Nick Joseph asking) inquired about any signs of construction starts picking up and how much in-place rents would need to rise for new supply development to become financially viable again.

Answer

President & CEO Christopher Marr stated that construction starts are decreasing due to high costs for materials, land, labor, and financing, which he views as a constructive long-term trend for supply. He noted that it's difficult to specify a rent threshold for new development to resume, as it's highly market-specific, but believes there is still 'a bit of a ways to go.'

Eric Wolfe from Citigroup Inc. inquired about current trends in new construction starts and asked for an estimate of how much in-place rents would need to rise before new development projects become financially viable again.

Answer

CEO Christopher Marr stated that new construction starts are trending down due to a combination of high material and labor costs, elevated land values, and tight financing for speculative development. He believes this will create a favorable supply backdrop for 2026 and 2027. He noted that the rent level needed to justify new supply is highly market-specific and that current rates still have a ways to go before new projects pencil out.

Eric Wolfe asked about the significant drop in advertising spend in Q4 after a large increase in Q3, questioning the strategy and its potential impact on recent weakness. He also asked what is factored into guidance for other property-related income for 2025.

Answer

President and CEO Christopher Marr explained that advertising spend is lumpy quarter-to-quarter based on system-driven opportunities and that the Q4 level had no negative impact on performance. CFO Tim Martin clarified that other property income will see outsized growth in Q1 2025 before stabilizing, as the company will lap fee structure changes made in May 2024. He stressed these revenue changes are permanent and sticky.

Eric Wolfe from Citi questioned the economics of the UK ground lease purchases, asking for the yield and the meaning of 'strategic flexibility'. He also sought to understand the significant sequential improvement in transient RV revenue, asking if it was driven by operations, market conditions, or other factors, and how sustainable it is.

Answer

EVP & CFO Fernando Castro-Caratini stated the UK ground lease repurchases were done at a blended 4.25% yield, which is accretive, and provide flexibility by converting leaseholds to freeholds, eliminating future rent escalations. He clarified the transient RV revenue improvement from Q1 to Q2 was expected due to seasonality, as most transient-focused assets open in the summer, and reiterated the full-year guidance for a transient revenue decline of about 9%.

Eric Wolfe from Citigroup asked for confirmation on the assumed average cash balance in guidance, details on the acquisition pipeline including assets under contract and valuations, the mechanics of the 1031 exchange window, expected recurring CapEx, and clarification on the prior U.K. business write-down.

Answer

Executive Fernando Castro-Caratini confirmed the guidance assumes a cash balance of around $1.7 billion with no prospective acquisitions baked in. Executive Gary Shiffman stated they are actively engaged on high-quality MH single-asset and small portfolio opportunities but will remain disciplined, noting the 45-day window is for identification only. Castro-Caratini specified recurring CapEx is expected to be just over $70 million for 2025 and that the prior write-down related to remaining goodwill in the U.K.

Eric Wolfe from Citi questioned the certainty of the projected second-half revenue decline in Los Angeles and asked about the potential speed of revenue recovery once rent restrictions are lifted.

Answer

SVP & CFO Thomas Boyle explained that the impact from rental rate caps on existing customers is well-defined and the primary driver of the decline. The main variable is the underlying strength of customer demand, which has been encouraging. He estimated that upon the restrictions' expiration, revenue could be recaptured over approximately one year.

Eric Wolfe followed up on the L.A. rent restrictions, questioning if the math implied a 20% revenue reduction for impacted stores. He also asked why operating expenses, which were low in Q1, were expected to increase based on the full-year guidance.

Answer

H. Boyle clarified the L.A. impact will be a gradual ramp-up totaling 100 basis points for the year, not a sudden spike. He explained that Q1 expenses benefited from some non-recurring items, like easier comps on health plan costs, and that advertising spend, while down in Q1, will be managed dynamically throughout the year.

Eric Wolfe asked if markets with higher occupancy are showing better pricing power, questioning if occupancy is a leading indicator for move-in rents. He also inquired about customer price elasticity based on the company's ongoing pricing tests.

Answer

Executive H. Boyle clarified that improving overall demand trends, not just occupancy, drive pricing. He cited Seattle as an example where occupancy was up only modestly but move-in rent growth was positive. Boyle explained their revenue management system optimizes for total revenue by balancing inventory, local demand, and price sensitivity, noting that new customers remain price-sensitive but become less so after moving in.

Eric Wolfe of Citi questioned Invitation Homes' occupancy guidance, which implies a significant deceleration in the second half of the year despite a strong July reading of 96.6%.

Answer

President Charles Young explained that the trend aligns with expectations, as seasonal turnover typically increases in Q3. He noted that supply in markets like Central Florida and Texas is slightly increasing the 'days to re-resident' metric, contributing to the anticipated dip into the mid-96% range, which he described as a 'reset year' for occupancy.

Eric Wolfe of Citi inquired about the implied deceleration in occupancy guidance for the second half of the year, asking if the projection was conservative or if it reflected anticipated trends in future lease expirations.

Answer

President Charles Young explained that the year is unfolding as expected, with seasonal turnover increasing in Q3, which is reflected in the July occupancy figures. He noted that this is a typical seasonal pattern and that some supply in markets like Central Florida and Texas is slightly increasing the time to re-resident a home, aligning with their initial forecast for an occupancy reset to the mid-96% range.

Eric Wolfe from Citigroup Inc. asked about the engagement with homebuilders amid weaker retail buyer demand, the potential to scale up partnerships, and concerns about shadow supply impacts.

Answer

Chief Investment Officer Scott Eisen confirmed that dialogue with homebuilders remains strong and they continue to selectively pursue forward purchase opportunities. He mentioned a recent increase in discussions around 'end of month tapes,' which is creating opportunistic chances to acquire small batches of homes, but the overall partnership dialogue continues to be robust.

Eric Wolfe asked why Invitation Homes is not projecting blended rent spread acceleration beyond the mid-3% range for 2025, given that February's performance already reached that level, and questioned if this reflected the company's stated 'cautious approach'.

Answer

Chief Financial Officer Jonathan Olsen confirmed the mid-3% blended rent growth forecast for 2025 is a measured approach. He explained that while new lease rates accelerate early in the year, they typically moderate during summer's higher turnover season. Olsen noted that ongoing market supply pressures are expected to be absorbed, which will likely impact occupancy by slightly increasing days on market as the company prioritizes achieving optimal rental rates.

Eric Wolfe from Citi asked for insights into the growth potential for the upcoming year, specifically requesting commentary on the expected earnings earn-in and the projected loss-to-lease at year-end.

Answer

Chief Financial Officer Jon Olsen stated that the company would provide detailed 2025 guidance in about 90 days. However, he did indicate that the current earn-in is around 2% and mentioned they would be in a better position to discuss loss-to-lease later in the year when it becomes a more relevant starting point for the next year.

Eric Wolfe of Citi inquired about the allocation of the Taylor Morrison deal between Millrose and its manager, the underwriting differences for build-to-rent versus for-sale communities, the potential for an equity issuance to fund growth, and the specific credit enhancements on recent non-Lennar deals.

Answer

COO Robert Nitkin detailed that while the underwriting for build-to-rent is similar, it has a nuanced focus on operating income. He stated that over the long term, most of the Taylor Morrison opportunity is expected to be allocated to Millrose. CEO Darren Richman added that the deal is derisked as it includes financing for vertical construction. Regarding capital, Richman confirmed the priority is optimizing the balance sheet with debt and there are no plans for dilutive equity issuance. He declined to give contract-level details on credit enhancements but emphasized strong protections are in place and no single MSA represents more than 6% of the portfolio.

Eric Wolfe of Citi requested a breakdown of the key assumptions embedded in the year-end EPS run rate guidance, including funding volumes, yields, and capital mix. He also asked about risk mitigation strategies for non-Lennar deals, underwriting adjustments, details of the new term loan, the rationale for the 100% dividend payout policy, and assumptions regarding the runoff of Lennar-funded deposits.

Answer

COO Robert Nitkin explained the EPS guidance assumes the $1.5B non-Lennar target with conservative yield and debt cost assumptions. He noted risk mitigation includes higher deposits and cross-collateralization. CEO Darren Richman clarified the new term loan's rate is consistent with the revolver and is a corporate loan against all assets. He also explained the 100% dividend payout is core to the REIT's strategy of maximizing cash repatriation to shareholders, as retaining the extra 10% offers minimal capital advantage.

Eric Wolfe of Citi sought clarification on several financial and operational points, including the key assumptions behind the updated EPS guidance, risk mitigation in new deals, the relationship between lot costs and home prices, the specifics of the new term loan, and the rationale for the 100% dividend payout policy.

Answer

COO Robert Nitkin detailed that the EPS guidance assumes the $1.5 billion non-Lennar funding target with conservative yield and debt cost assumptions. CEO and President Darren Richman explained that the new term loan is a corporate facility with terms similar to the existing revolver and justified the 100% dividend payout by stating the REIT's purpose is to maximize cash returns to shareholders.

Eric Wolfe from Citi asked for a detailed breakdown of the assumptions embedded in the updated year-end EPS run rate guidance, including funding volumes, yields, and debt costs. He also inquired about risk mitigation tactics for non-Lennar deals, underwriting adjustments, the terms of the new delayed draw term loan, the rationale for the 100% dividend payout policy, and the impact of Lennar's deposit-funded option fees on guidance.

Answer

COO Robert Nitkin detailed that the EPS guidance assumes the $1.5 billion non-Lennar funding target with yields and debt costs that are more conservative than current levels. He confirmed that risk mitigation includes higher deposits and varied cross-collateralization, with underwriting remaining rigorous. CEO and President Darren Richman clarified the new term loan is a corporate facility with terms consistent with the existing revolver. He explained the 100% dividend payout maximizes shareholder returns, as retaining the small amount of extra cash offers little reinvestment benefit but significantly impacts effective yield. Robert Nitkin added that the impact from Lennar's deposit-funded fees on the run rate is not meaningful.

Eric Wolfe from Citi inquired why new lease growth isn't improving more significantly despite high retention and strong renewal rates, and sought the basis for the company's confidence in its forecast for higher occupancy in the second half.

Answer

President & CFO Jim Sebra attributed the negative new lease trade-outs to the high rent levels of leases signed 2 to 2.5 years ago that are now expiring. Regarding occupancy, he stated that July trends showed a rise toward the 95.6% level, supporting their confidence in maintaining and slightly increasing it for the remainder of the year.

Eric Wolfe asked about the strategy behind raising capital via the ATM program and the rationale for moving away from short-term leases, which impacted blended rent spreads.

Answer

President and CFO Jim Sebra explained that ATM issuance is accretive, as acquisition cap rates in the high 5% range exceed their ~5.4% cost of capital. He also clarified that the strategic shift away from short-term leases began in mid-2024 to optimize the lease expiration schedule and is expected to be completed by mid-2025.

Eric Wolfe asked about the rationale for increasing value-add spending in 2025 while also forecasting occupancy growth, and questioned the drivers behind the Q4 bad debt increase and the confidence in its guided improvement.

Answer

Executive Scott Schaeffer explained that value-add was curtailed in 2024 due to supply pressures, which are now waning. CFO James Sebra added that dispersing renovations across 15 new communities will mitigate occupancy impact. Regarding bad debt, Executive Janice Richards cited seasonality for the Q4 rise, while James Sebra expressed confidence in the 2025 forecast due to the success of fraud identification measures implemented over the past 1.5 years.

Eric Wolfe of Citi questioned the drivers behind the sequential same-store revenue increase beyond rate and occupancy, and sought an early outlook on those items for the upcoming year.

Answer

CFO James Sebra attributed the sequential revenue improvement to lower bad debt expense and growth in other income. Looking ahead, Sebra mentioned ongoing efforts to reduce bad debt and add amenity offerings, and pointed to external forecasts for market rent growth in the 3% to 3.5% range as a key building block for next year's revenue.

Eric Wolfe from Citi asked for the reasoning behind lowering the blended rent growth guidance for the second half of the year and requested recent leasing trends.

Answer

President & CEO Angela Kleiman clarified that the expected deceleration in blended rent growth is a function of normal seasonality following a peak in July. EVP & CFO Barb Pak added that the more anemic-than-expected performance in Los Angeles, which has a different seasonal pattern, also contributed to the revised second-half forecast.

Eric Wolfe inquired about Essex's occupancy strategy for the second quarter, asking if the company would prioritize pushing rates over occupancy, and whether any forward-looking demand indicators showed signs of weakening.

Answer

Executive Angela Kleiman explained that the occupancy strategy is nuanced by region for the peak leasing season. The company is pushing rents in Northern California, managing a transition in Seattle due to supply, and focusing on occupancy in Southern California, which peaks later. She stated there are no signs of weakening demand or cracks in fundamentals, and recent tariff announcements have not had an observable impact on their markets.

Eric Wolfe from Citibank questioned why the 2025 renewal rate growth forecast of 3.5% is lower than the 4% achieved in 2024 despite weaker market conditions last year. He also asked for the drivers behind the conviction for stronger blended growth in the second half of the year.

Answer

Executive Angela Kleiman stated that Essex's strategy is to keep renewal rates market-appropriate, which can cause year-over-year lumpiness, and the focus is on total revenue maximization. She attributed the expected second-half acceleration to supply cadence, with 60% of new supply delivering in the first half, and the lag time between rising tech job postings and actual hiring, which is expected to boost demand later in the year.

Eric Wolfe asked about the drivers behind the lower like-term effective rent growth compared to the previous year and inquired about the economic or policy factors that might alter the company's strategy to expand its portfolio in new markets to 25%.

Answer

Chief Operating Officer Sean Breslin explained that rent change is tracking to plan, with the year-over-year difference attributed to an earlier acceleration in occupancy and rate growth in the prior year. CEO Benjamin Schall added that the expansion strategy is primarily funded by asset trades, making it less sensitive to capital markets, and a slowdown would likely only occur if transaction markets became illiquid.

Eric Wolfe inquired about the expected earnings accretion from development in 2025 versus 2024, considering various puts and takes like capitalized costs. He also asked about the operational challenges of Build-to-Rent (BTR) products and AvalonBay's interest in acquiring BTR portfolios.

Answer

CFO Kevin O'Shea detailed the factors affecting development accretion, noting that higher capitalized interest is offset by lower occupancies, lower cash levels, and a higher share count, resulting in about $0.15 of growth from investment platforms. CIO Matthew Birenbaum and COO Sean Breslin added that while they would consider acquiring strategically aligned BTR portfolios, much of the existing product is in tertiary markets. They see growth coming more from their Development Funding Program (DFP) and their own construction, which aligns well with their increasingly mobile operating model.

Eric Wolfe inquired about the long-term supply outlook for AvalonBay's markets, particularly as the company increases its Sunbelt exposure. He also asked for details on the underwritten yields and value creation strategy for the four new Sunbelt development projects, with a specific focus on the Austin start.

Answer

COO Sean Breslin projected that new supply in coastal regions would likely trend down over the next few years due to a challenging development climate. CIO Matthew Birenbaum explained that the new Sunbelt starts underwrite to a ~6% yield and that the Austin project's timing is advantageous, capitalizing on lower hard costs and a projected lease-up in 2026 with less competition. CEO Benjamin Schall added that AvalonBay's cost of capital advantage and operating model initiatives can add 30-40 basis points of incremental yield to new developments.

Eric Wolfe asked about MAA's visibility into new lease spreads for May and June, and what recent data provides confidence in the expected inflection in rent growth.

Answer

Tim Argo, Executive Vice President and Chief Operating Officer, stated that MAA has good visibility into leasing, with a handle on about half of May's new leases and a quarter of June's. He expressed confidence based on the steady acceleration in new lease rates, which improved from nearly -9% in December to -4.6% in April, a trend he expects to continue into the summer leasing season.

Eric Wolfe inquired if the 2025 guidance implies a significant back-half weighted improvement in blended lease spreads and asked about the dynamics of tenant renewals, specifically the frequency of multi-year renewals and any caps on renewal increases relative to market rates.

Answer

Tim Argo, EVP and Chief Strategy Officer, explained that the expected improvement is driven more by normal seasonality and the concentration of lease expirations in Q2 and Q3, rather than a specific back-half prediction. Brad Hill, President and CEO, added that diminishing supply pressure will also support this trend. Regarding renewals, Tim Argo noted the average resident stay is around 21-22 months, making consecutive multi-year renewals uncommon, which naturally limits how wide the gap between renewal and market rates can become.

Eric Wolfe from Citigroup asked what key metrics MAA will monitor to formulate its 2025 guidance and inquired about other potential revenue growth drivers, such as the WiFi program.

Answer

Tim Argo, EVP and COO, identified new lease pricing as the key metric for 2025 guidance, noting that Q4 performance has a limited impact on earn-in. He highlighted the property-wide WiFi program as a future revenue driver, with plans to expand from 4 test properties to 20-25 properties in 2025, which could have a significant financial impact. H. Bolton, CEO, added that the low percentage of leases expiring in Q4 minimizes the near-term impact on earn-in.

Eric Wolfe asked for an update on current concession levels and their expected trend for the year, and also inquired about the rationale for appointing Joe Fisher as CIO and how capital allocation might change.

Answer

COO Mike Lacy stated that high occupancy (above 97%) is allowing UDR to reduce concessions, which were around one week in January and trending lower. Chairman and CEO Tom Toomey explained that the executive changes, including Joe Fisher's move to CIO, are part of a strategic effort to deepen the talent bench, bring fresh perspectives to key areas like investments, and drive long-term shareholder value.

Eric Wolfe from Citi questioned the implications of achieving supply-demand 'equilibrium' in certain Sunbelt markets by mid-2025 and sought details on the bad debt outlook.

Answer

SVP of Operations Mike Lacy projected that while the first half of 2025 will see similar trends, a return to 2-3% rent growth could occur in the back half of the year. CEO Tom Toomey added that job growth remains the key variable. CFO Joe Fisher clarified that the bad debt improvement was a 2024 event, with the year expected to finish with bad debt just over 1%. He anticipates further benefits from enhanced screening but does not expect a return to pre-pandemic historical averages.