John Pawlowski

John Pawlowski inquired about the specific Denver regulation impacting utility rebilling and other income, and whether similar concerning draft legislation exists in other markets that could pressure Camden Property Trust's ancillary income streams.

Answer

President and CFO Alex Jessett identified House Bill 25-1090 in Colorado, effective January 1, which prohibits billing for common area utilities, representing a $1.8 million impact or 19 basis points of same-store NOI. COO Lori Baker added that the bill requires full transparency and disclosures, prohibiting unclear utility pass-through charges, but noted that most other markets are pro-business, reducing similar concerns.

John Pawlowski followed up on development economics, asking for an estimate of current yields for the four properties in the pipeline, specifically if they align with the 5-5.5% range quoted for the shadow pipeline, given recent market rent growth malaise.

Answer

Alex Jessett, President and CFO, clarified that the current pipeline consists of two deals (Baker in Denver and Gulch in Nashville) and a couple of controlled land sites. He stated that the controlled sites pencil to mid-5% on an untrended basis, while Baker and Gulch are more challenging, leading to potential delays in their starts. He noted that construction cost reductions could improve economics, but the company is waiting for more clarity in the Denver and Nashville markets.

John Pawlowski inquired about Equity Residential's pace of capital deployment into Sunbelt markets for 2026, asking if the company plans to accelerate or throttle back, considering private market pricing and the near-term growth outlook.

Answer

Bob Garechana, Chief Investment Officer, explained that capital allocation is primarily dictated by the cost of capital. He noted that the current opportunity set favors share buybacks due to the challenging cost of capital for REITs, and therefore, there will be no acceleration or deceleration in Sunbelt deployment until the cost of capital changes. He added that private markets show strong demand for Sunbelt assets, priced tighter than public markets.

John Pawlowski from Green Street asked about Equity Residential's capital deployment strategy in the Sunbelt, specifically whether the company plans to accelerate or throttle back its pace of investment in Southeast and Southwest markets, considering private market pricing and the near-term growth outlook. He also inquired if the 2026 revenue guidance assumes modest acceleration or flat job growth.

Answer

Bob Garechana, Chief Investment Officer, explained that capital allocation is dictated by the relative cost of capital, with share buybacks currently being the most attractive opportunity due to REITs' challenging cost of capital compared to private market valuations. He noted that private markets show strong demand for Sunbelt products at tighter cap rates, but Equity Residential prioritizes long-term IRR and vertical integration. Michael Manelis, Chief Operating Officer, clarified that the 2026 revenue guidance assumes steady demand similar to the last six months, not an acceleration in job growth, with pricing power primarily driven by significantly reduced competitive supply. Mark Parrell added that the high occupancy also contributes.

John Pawlowski asked about other markets besides Washington, DC Metro showing a real cooling of demand in the last month or two. He also inquired about changes in the underwriting process now that Bob Garechana is CIO, specifically philosophical differences, data usage, and processes for the next 5-10 years.

Answer

Michael Manelis (COO) identified Boston as another market with more softening than expected, attributing it to a weaker biotech sector, pullback in university/research funding, and immigration challenges. Bob Garechana (CIO) stated there isn't a wholesale change in strategy but emphasized accelerating a data-driven mindset, leveraging larger data sets, better analysis, and Equity Residential's long history of internal data to make better decisions.

John Pawlowski asked which markets, besides Washington, DC, are experiencing a cooling of demand in recent months. He also asked Bob Garechana, Chief Investment Officer, to outline changes in the underwriting process under his leadership, including philosophical shifts, data utilization, and process differences for the next 5-10 years.

Answer

Michael Manelis, Chief Operating Officer, identified Boston as another market with more softening than expected, attributing it to a weaker biotech sector, reduced university/research funding, and immigration challenges. Bob Garechana, Chief Investment Officer, stated there would be no wholesale change in strategy but emphasized accelerating a data-driven mindset, leveraging larger data sets, relational data, and Equity Residential's extensive historical data for improved decision-making.

John Pawlowski questioned the urban versus suburban breakdown of the projected 2026 supply decline, its impact on their ideal portfolio mix, and asked for on-the-ground observations in Washington, D.C. regarding potential federal government employment changes.

Answer

CEO Mark Parrell confirmed that urban supply is expected to decline more significantly, which reinforces their strategy of maintaining a strong urban presence. He stated their positive view on urban concentration has not materially changed. Regarding D.C., COO Michael Manelis reported very strong current occupancy at 97.1% with no negative impact seen yet from federal workforce uncertainty. Mark Parrell added that D.C.'s diversified employer base and potential return-to-office mandates could mitigate risks.

John Pawlowski requested specific metrics to frame the impact of Amazon's return-to-office announcement in Seattle. He also asked for an update on the progress of working through the eviction backlog in Los Angeles and its ongoing effect on market fundamentals.

Answer

COO Michael Manelis highlighted a 40% year-over-year drop in concessions and a clear shift in migration from suburbs to the urban core as key metrics for Seattle's recovery. For Los Angeles, he stated they are over two-thirds through their eviction backlog and the process timeline has improved, but pressure from excess inventory will likely persist for a couple more quarters.

John Pawlowski asked how much pro forma rents for the $800 million in 2026 development starts had to be lowered due to market rent softness, and if the high projected yields (6.5%-7%) are idiosyncratic or representative of broader market economics. He also inquired about expected pressure from property tax abatements, utility costs, and Avalon Connect in 2027 and beyond.

Answer

Matthew Birenbaum, CIO, noted that for some deals, lower pro forma rents were offset by lower hard costs, maintaining yields. He clarified that the high yields are due to 'more select' deals, often with unique factors and AvalonBay's long-standing market presence. Sean Breslin, COO, confirmed that property tax abatement headwinds are expected to continue for a few years. For Avalon Connect, bulk internet costs are stabilizing in 2026, and smart access costs will continue for 18-24 months but are less impactful.

John Pawlowski asked about the extent to which pro forma rents for the $800 million in 2026 development starts had to be lowered due to recent market rent softness, particularly in East Coast regions. He also questioned if the high projected yields (6.5%-7%) were idiosyncratic or representative of broader market economics, and inquired about expected property tax abatement and Avalon Connect cost pressures in 2027.

Answer

Matthew Birenbaum, CIO, noted that while pro forma rents were slightly lower, hard costs also decreased, often balancing out the impact on yields. He clarified that the high yields are due to select, long-entitlement deals and AvalonBay's ability to secure a larger share of a shrinking pie, not necessarily indicating a broader market reacceleration. Sean Breslin, COO, confirmed continued headwinds from property tax abatements in 2027 and beyond, and explained that the bulk internet component of Avalon Connect costs would largely phase out after 2026, with smart access costs continuing for 18-24 months.

John Pawlowski followed up on D.C. cap rates for recent dispositions and sought more details on the repair and maintenance expense surprise.

Answer

Chief Investment Officer Matt Birenbaum clarified that the D.C. sales cap rate was around mid-fives overall, with the residential component in the low-to-mid fives. COO Sean Breslin attributed the repair and maintenance surprise to a 'smattering of different things' and a 'bad streak' in Q3, including slightly higher costs per turn and issues with skips and evicts, indicating an underestimation of Q3 expenses relative to Q2.

John Pawlowski followed up on the cap rates for D.C. dispositions and sought more details on the unexpected increase in repair and maintenance expenses, specifically if labor availability or other factors were responsible.

Answer

Matt Birenbaum, Chief Investment Officer, clarified that the D.C. sales had an overall transaction cap rate of approximately 5.5%, with residential components likely in the low to mid-fives. Sean Breslin, Chief Operating Officer, attributed the repair and maintenance surprise to a 'smattering of different things,' including a 'bad streak' in Q3, slightly higher costs per unit turn, and increased expenses for skips and evictions, rather than a single pattern or labor availability issue.

John Pawlowski inquired about the typical discount to replacement cost AvalonBay is able to achieve when acquiring assets in its target markets. He also asked for clarification on the company's commentary about portfolio trading, questioning if the optimism was driven by a desire to accelerate its strategic shift or by seeing better pricing.

Answer

CIO Matthew Birenbaum explained that for 5-to-10-year-old assets, they might see a 10-20% discount to replacement cost, which they view as appropriate. He clarified his earlier comment on portfolio trading, stating that while their balance sheet supports a large trade and the timing is attractive, they are not currently seeing a specific portfolio that meets their criteria. The hope is to increase trading activity, but nothing is imminent.

John Pawlowski asked if RTO enforcement has created a new wave of demand in Seattle or the Bay Area, and about the lag effect of Seattle layoffs on move-outs and blended lease spread expectations.

Answer

Angela Kleiman (President and CEO, Essex Property Trust) clarified that RTO *enforcement*, like Amazon's in January, is what drives compliance and demand, not just the announcement. She stated that the bulk of layoff impact in Seattle was felt in Q4 and early January, with no expectation of a 'second shoe to drop,' and leasing activities/renewal rates are consistent with historical patterns, also noting a 30% decline in Seattle supply.

John Pawlowski asked if work patterns have normalized with Amazon's RTO policy and if a 'second wind' of demand is observed in Seattle or the Bay Area, or if gradual momentum is expected. He also inquired about any uptick in move-out notices in Seattle due to layoffs and forward-looking blended lease spread expectations.

Answer

Angela Kleiman (President and CEO) clarified that RTO enforcement (like Amazon's in January) is key to driving compliance and demand, and she expects a similar playout. She believes the bulk of layoff impact in Seattle was felt in Q4 and early January, with no expectation of a 'second shoe to drop,' as leasing activities and blended renewal rates are not significantly different from historical patterns. She expects blended spreads for the whole year 2026 in Seattle not to look meaningfully different from H2 2025, also noting a 30% decline in Seattle supply.

John Pawlowski from Green Street Advisors questioned the assertion that Bay Area job growth is stronger than BLS data suggests and asked about the leverage on a new preferred equity deal.

Answer

President & CEO Angela Kleiman argued that BLS data is less reliable due to lower participation rates and pointed to the contradiction of the Bay Area having the best rent growth despite negative reported job growth. She cited rising tech job openings as a better indicator. EVP & CIO Rylan Burns confirmed the new preferred equity deal has a total loan-to-cost in the 70%-80% range, consistent with their underwriting standards of capping leverage at 85%.

John Pawlowski from Green Street requested specific metrics on leasing improvements in Seattle following stricter return-to-office mandates and questioned the rationale for excluding advocacy costs from core FFO.

Answer

Executive Angela Kleiman noted that Seattle demand spiked 30-45 days after Amazon's initial RTO announcement, and future benefits depend on when new mandates are enforced. Executive Barb Pak defended excluding advocacy costs by defining them as non-recurring, with the last such expense occurring four years prior. She stated this is standard industry practice and the company is transparent about the amounts.

John Pawlowski asked about the internal changes and skill set development within Omega Healthcare Investors to adapt to the more operationally intensive RIDEA business model, moving from a triple net credit investor framework.

Answer

President Matthew Gourmand acknowledged that RIDEA is a higher-risk, potentially higher-return model requiring a different skill set. He detailed that Omega has thoroughly re-evaluated every element, including underwriting quality, bringing in new team members with decades of senior housing experience and deep operator benches. They've intensely focused on understanding P&L elements, occupancy drivers, CapEx differentiation, market tiers, and demographics, taking a conservative and judicious approach to this new venture, similar to their UK expansion. John Pawlowski also asked Megan Krull about any concerning anecdotes or potential draft legislation for staffing mandates at the state level. Senior Vice President Megan Krull responded that there are no new concerns beyond past rumblings, and no widespread push for new state-level staffing mandates.

John Pawlowski from Green Street questioned the internal changes Omega Healthcare Investors has implemented within its investment and asset management teams to adapt to the more operationally intensive RIDEA business model. He also asked Megan Krull about any concerning anecdotes or potential draft legislation regarding staffing mandates at the state level.

Answer

Matthew Gourmand, President of Omega Healthcare Investors, detailed that adapting to RIDEA involved significant internal changes, including hiring new team members with decades of senior housing experience and deep operator networks. He emphasized a thoughtful and intense approach to understanding risks, scrutinizing P&L elements, CapEx differentiation, market tiers, and demographics, while maintaining a conservative stance and judiciously dipping into the RIDEA model. Megan Krull, Senior Vice President, Data Intelligence and Government Relations, stated that there were no new concerning rumblings or widespread draft legislation for staffing mandates at the state level beyond what has been heard in the past.

John Pawlowski of Green Street asked if Omega has experienced any negative surprises in state-level reimbursement or staffing rules recently and if any states are rumored to be considering new restrictive staffing mandates.

Answer

SVP of Operations Megan Krull responded that she has not seen anything significantly negative, with most states providing sizable reimbursement increases. She added that while states are always considering new rules, most are holding off to see the outcome of the federal staffing mandate.

John Pawlowski asked about potential occupancy declines in the near term for the former Sovereign Wealth JV assets during operator transitions and the expected timeline to reach stabilized occupancy. He also sought to understand the composition of tenants in the post-Labor Day pipeline, differentiating between traditional wet lab users and other types like AI or quasi-office users, and the rental implications of this convergence.

Answer

President and CEO Scott Brinker stated that while a small, temporary occupancy decline is possible during the target April 1st transitions for the former Sovereign Wealth JV assets, significant upside of 50%+ NOI growth is expected in 2-3 years. Chief Development Officer Scott Bohn described the tenant composition in the pipeline as a good mix, including office-related users, GMP manufacturing, wet lab spaces, and even a drone manufacturer, leveraging the robust infrastructure of Healthpeak's buildings. He noted that while straight office space commands lower rents than lab space, the overall economic package, including controlled TIs, is considered, with TIs on new leasing trending down.

John Pawlowski asked about the expected occupancy declines and stabilization timeline for the Sovereign Wealth JV assets undergoing operator transition. He also sought to understand the composition of tenants in the post-Labor Day pipeline, differentiating between traditional wet lab users and other types like AI or quasi-traditional office users, and the rental implications of this convergence.

Answer

President and CEO Scott Brinker expects the Senior Housing operator transitions to be completed by April 1, with a small, immaterial decline in occupancy. He anticipates significant upside, with 50%+ NOI growth potential in 2-3 years. Chief Development Officer Scott Bohn described the lab pipeline as a good mix, including office-related users, GMP manufacturing, wet lab spaces, and even a drone manufacturer. He noted a convergence of demand in the Bay Area, with AI/AI-adjacent users seeking both office and lab space. While straight office space commands lower rent, Bohn emphasized evaluating the total economic package, including controlled TIs, which have seen reductions in new leasing.

John Pawlowski asked about the impact of the Trump administration's policies, including tariffs and the surge in multinational pharma R&D commitments, on lab space and leasing demand. He also inquired about the building blocks for 2026 earnings, including realistic occupancy gains, pricing power, and further G&A savings from the AI platform.

Answer

Scott Brinker, President and CEO, noted that regulatory uncertainty in early 2025 negatively impacted sentiment, but positive news from Washington and the FDA, including efficient processes and priority reviews, has significantly improved the biopharma sector's outlook and driven demand. He mentioned 10 tenants received fast-track reviews. For 2026 earnings, Mr. Brinker stated that while two-thirds of the portfolio (outpatient and CCRC) are performing well, the life science occupancy loss will carry into 2026, alongside impacts from purchase options, seller financing, and refinancing. Full guidance will be provided in February 2026.

John Pawlowski inquired about the impact of the Trump administration's policies, including tariffs and increased pharma R&D commitments in the U.S., on lab space demand and leasing activity.

Answer

President and CEO Scott Brinker highlighted that increased regulatory certainty and positive news from Washington and the FDA have significantly improved sector sentiment. He noted that 10 tenants in the portfolio have received fast-track or priority reviews, and positive agreements with major pharma companies have contributed to a more favorable environment, driving demand.

John Pawlowski posed a two-part question: is the company actively considering international expansion, and what specific 'non-traditional avenues of growth' outside of standard SFR is management exploring.

Answer

Chief Executive Officer Dallas Tanner answered both. He stated there are no current plans for international expansion, as the opportunity in the U.S. remains significant. Regarding non-traditional growth, he mentioned exploring structures to support regional builders, investing in more infill townhome projects that share SFR characteristics, and paying attention to a potential long-term convergence of multifamily and SFR operating structures, though that is not an active pursuit.

John Pawlowski of Green Street Advisors, LLC followed up on the balance sheet, asking about the cost and strategic rationale for the $2 billion interest rate swap book versus simply issuing long-term fixed-rate debt.

Answer

EVP & CFO Jonathan Olsen acknowledged that the long-term goal is a more traditionally fixed-rate balance sheet, calling the swap book a legacy of the prior capital structure. He explained the cost is a de minimis credit charge from the counterparty. The overall strategy is to make interest expense more knowable and less volatile, but he agreed that over time, the company will become less reliant on hedging.

John Pawlowski from Green Street asked if the 25% of leases with 24-month terms have in-place rents that are now above market, potentially creating a drag on reported new and renewal rent growth figures.

Answer

CFO Jonathan Olsen stated he would not characterize the multi-year lease book as substantially above market. He pointed to a current loss-to-lease of around 1.5% to 2.0% across the portfolio. He suggested that the biggest opportunity for capturing below-market rents lies with long-tenured residents who have renewed multiple times, as the average length of stay now approaches 40 months.

John Pawlowski of Green Street Advisors, LLC asked for an explanation of the significant year-over-year increase in share-based compensation and whether the current run rate is sustainable.

Answer

CFO Jonathan Olsen explained the increase was due to a structural change in their compensation program. The company has shifted from periodic, multi-year outperformance plans to more frequent annual performance-based grants, which alters the timing and accounting of the expense, making year-over-year comparisons less direct.

John Pawlowski from Green Street challenged management's positive tone on the renewal book, pointing out that renewal growth rates are now lower than some apartment REITs and suggesting more widespread price sensitivity among existing tenants than acknowledged.

Answer

President and COO Charles Young defended the performance, stating that renewal asks have been increasing since August and that November renewals are showing 'nice acceleration' to north of 4%. He explained that the focus is on balancing revenue growth with maintaining high occupancy by 'closing the back door.' Young reiterated that they feel good about where renewals are, especially given the high retention rate.

John Pawlowski sought confirmation that the announced distribution range is net of all expected costs. He also questioned the 12-month liquidation timeline, asking for specifics on how the TOPA process in D.C. and ROFR in Maryland might affect timing, and inquired about the leasing outlook for the Watergate property.

Answer

CFO Steven Freishtat confirmed the distribution estimates are net of all expected expenses and liabilities. COO Tiffany Butcher clarified that the 12-month timeline is for the entire remaining portfolio and is a realistic timeframe that accounts for their experience with regulatory processes like TOPA. CEO Paul T. McDermott provided an update on Watergate, noting the 82% leased figure is their year-end 2025 goal and they are in discussions with the largest tenant.

John Pawlowski questioned whether the growing uncertainty around federal employment in D.C. is causing a pause in leasing decisions, asking about leading indicators like foot traffic. He also asked for an explanation for the high sequential same-store revenue growth in the Atlanta portfolio.

Answer

COO Tiffany Butcher responded that they are seeing normal seasonal leasing trends in the D.C. metro with no atypical impacts on traffic or other key metrics, attributing this stability to their well-positioned Class B portfolio. CFO Steven Freishtat explained that the 6% sequential revenue growth in Atlanta was driven roughly 50% by an improvement in bad debt and 50% by business interruption insurance proceeds from a prior event.

John Pawlowski of Green Street Advisors, LLC asked for historical context on why the 'lease-up portfolio' was under-managed and what specific actions, like the 'ready to occupy' (RTO) program, would unlock its potential. He also questioned why the disposition portfolio commanded a high 7% cap rate despite being only 80% occupied.

Answer

President & CEO Peter Scott stated that historical underinvestment and deteriorated health system relationships were key issues, which are now being fixed. EVP & COO Rob Hull added that the RTO program is seeing success, leasing over 100,000 sq. ft. year-to-date by capturing tenants needing to move quickly. EVP & CIO Ryan Crowley explained the 7% disposition cap rate reflects a mix of assets, including some with value-add components and others in undesirable markets with lower occupancy, lower margins, and older vintage.

John Pawlowski asked about the timeline for refinancing the large 2026 debt maturities and questioned why the FAD trajectory seemed to underwhelm versus mid-2024 commentary that suggested dividend coverage was closer.

Answer

CFO Austen Helfrich confirmed that addressing the 2026 maturities is a focus for the second half of 2025. Interim CEO Constance Moore clarified the current outlook for dividend coverage is late 2025 or early 2026, with timing dependent on leasing velocity. Helfrich added that FAD per share grew over 10% in the second half of 2024 and the new guidance reflects the current team's view.

John Pawlowski of Green Street Advisors asked about historical turnover rates and how they inform future expectations, and also inquired about the drivers and sustainability of the recent double-digit growth in fee income.

Answer

CFO Christopher Lau explained that higher H1 turnover was a timing effect of the lease expiration initiative, with underlying retention remaining stable. He expects turnover to moderate in H2. He also clarified that the fee income growth was timing-related due to higher leasing volume in H1 and is expected to normalize and grow in line with rents for the full year.

John Pawlowski asked how historical turnover rates inform future expectations and inquired about the sustainability of the double-digit growth in fee income seen in the first half of the year.

Answer

SEVP & CFO Christopher Lau clarified that recent turnover trends are a matter of timing due to the lease expiration management initiative shifting activity to the first half of the year, with full-year turnover expected to be similar to the prior year. He explained that the fee income growth is also timing-related, as fees correlate with leasing volume, and expects it to moderate in the second half.

John Pawlowski asked for insights on historical turnover rates compared to current levels and inquired about the drivers behind the significant growth in fee income during the first half of the year.

Answer

CFO Christopher Lau clarified that the recent increase in turnover was a result of the strategic timing shift of lease expirations to the first half of the year, not a change in underlying resident retention. He explained that the growth in fee income was also timing-related, as fees correlate with leasing volume, and is expected to moderate in the second half of the year.

John Pawlowski from Green Street asked for specifics on how stabilized yields on earlier build-to-rent vintages compare to initial yields. He later inquired about corporate governance, specifically the long-term target for the board's size.

Answer

CEO Bryan Smith explained that as development communities stabilize, yields migrate from the initial mid-5% range into the 6% range by year three, after accounting for stabilized expenses and property tax resets. CFO Chris Lau confirmed that by year three, property taxes have settled and turn activity is occurring. Regarding governance, Smith stated that the board's size and composition are active discussion points for the board and its committees, but deferred to them for a final decision.

John Pawlowski questioned the financing choice for the portfolio acquisition, asking why the company used balance sheet capacity instead of selling more assets. He also asked for a quantification of the NOI growth lift from build-to-rent (BTR) properties on 2024 same-store results.

Answer

CFO Chris Lau explained that using the balance sheet provided speed and certainty for the seller, a key advantage that was made possible by the company's strong financial position. He noted this approach keeps leverage at target levels and preserves capacity for future growth, while the disposition program remains robust. COO Bryan Smith addressed the BTR question, stating that new development homes are still less than 10% of the same-home pool, so their positive performance characteristics do not yet have a material impact on the overall portfolio's growth rates.

John Pawlowski of Green Street Advisors, LLC asked about the underwriting yields on potential development starts, questioned if development is the best use of capital, and asked for the rationale behind significant FFOA add-backs for seemingly recurring costs.

Answer

President & CIO Joseph Fisher stated potential starts in Virginia and Texas would yield in the mid-5s on current rents, which is accretive on an incremental capital basis due to legacy land costs. He acknowledged it's not the highest priority. Regarding add-backs, Fisher explained they are for episodic items: legal costs are primarily for the RealPage litigation, software costs are for a one-time CRM transition and write-off, and casualty charges relate to large, infrequent weather events and prior-year reclassifications.

John Pawlowski from Green Street asked if UDR's on-site personnel and R&M cost structure has stabilized and if there is a lingering impact from repairing units damaged during the eviction moratorium.

Answer

SVP of Operations Mike Lacy responded that the operating model is 'better than stabilized' and expects future cost growth in these areas to be muted. He noted that declining turnover from the customer experience project will constrain R&M costs. He also stated there is no significant tail of repair costs from past evictions, as the number of 'squatters' has returned to historical norms and damage is less severe.

John Pawlowski of Green Street Advisors, LLC inquired about the near-term plans for the remaining land portfolio, the expected occupancy trajectory for Liberty Towers, and the timeline for completing its renovation.

Answer

CEO Mahbod Nia stated that while the land market is difficult, Veris would like to make more progress on sales without resorting to a fire sale. COO Anna Malhari indicated that Liberty Towers occupancy might see some volatility but should stabilize in the low 80s going forward. She projected the full renovation would take approximately three years, likely completing around year-end 2027 or early 2028.

John Pawlowski asked about the renovation at Liberty Towers, questioning if the occupancy decline was more severe than expected and where it might bottom out. He also sought to understand which properties are excluded from blended lease statistics and the specifics of the $1 million synergy from taking full control of the Sable property, which Veris already owned 85% of.

Answer

Chief Executive Officer Mahbod Nia acknowledged that Liberty Towers' occupancy was slightly lower than planned due to renovation delays but expects improvement from current levels. Chief Operating Officer Anna Malhari clarified that only two immaterial, non-managed assets are excluded from leasing statistics. Regarding Sable, Nia explained the legacy JV agreement, inherited from when Veris was an office company, outsourced management. The $1 million synergy represents the direct savings from eliminating the third-party management fee, with further savings from operational consolidation.

John Pawlowski asked about the job growth assumptions underpinning the full-year revenue guide and sought data points indicating a rent growth inflection in heavily supplied markets like Atlanta and Raleigh.

Answer

CEO Scott Schaeffer and President and CFO Jim Sebra emphasized that the outlook is driven by a dramatic drop in new supply, with their submarkets expected to see 8.5% positive net absorption in 2025 versus negative absorption in 2024. EVP of Operations Janice Richards added that Atlanta and Raleigh have seen improving new lease trends each month, while Charlotte and Colorado will face more prolonged supply pressure.

John Pawlowski questioned the MH occupancy decline during the quarter, suggesting it seemed larger than the stated storm impact. He also asked for a specific definition of the guided 'modest' occupancy increase and why annual RV revenue growth was below the revised range.

Answer

Paul Seavey, an executive, clarified the occupancy percentage was skewed by the addition of new expansion sites to the denominator. Patrick Waite, an executive, defined 'modest' as 25 to 50 sites. Regarding RV growth, Paul Seavey noted a tough leap-year comparison impacted Q1 results, while Marguerite Nader, an executive, added that the full-year guidance reflects a delay at a single marina property.

John Pawlowski asked about leading indicators for seasonal RV revenue for the upcoming winter season, the expected flow-through from annual RV rate growth to revenue growth, and whether there has been higher attrition among recent transient-to-annual converters.

Answer

Paul Seavey, EVP and CFO, indicated that Q4 seasonal reservations are tracking slightly ahead of forecast, while leading indicators for Q1 are currently flat to slightly down. He also noted that revenue growth next year might see a slight drag as occupancy from displaced residents normalizes. Patrick Waite, EVP and COO, added that while there might be slightly higher attrition from the larger group of post-COVID campers, the company is rebuilding its customer base at a pace consistent with pre-COVID levels.

John Pawlowski of Wells Fargo & Company inquired about the increased confidence in the 2025 acquisition pipeline and the rationale for guided deceleration in SHOP growth.

Answer

CEO Rick Matros and EVP Talya Nevo-Hacohen explained that a higher volume of opportunities from sources like private equity exits and an improved cost of capital are driving acquisition confidence. CFO Michael Costa clarified that the SHOP growth guidance reflects conservatism as occupancy nears stabilization, while acknowledging that operating leverage is increasing as evidenced by flat expense growth.

John Pawlowski asked if the $285 million FAD CapEx guidance is a new sustainable level and whether it includes the Brookdale repositioning. He also sought clarification on a comment about RevPOR growth being 30-40% higher in high-occupancy properties.

Answer

CFO Robert Probst explained the higher FAD CapEx is the new normal, driven by a larger portfolio and inflation, and does not include separate redevelopment CapEx like the Brookdale project. Executive J. Hutchens clarified that it is the RevPOR *growth rate* that is 30-40% higher in top-tier occupancy properties, indicating future pricing power.

John Pawlowski asked where capital expenditures as a percentage of NOI for the senior housing business are expected to stabilize over the next two to three years.

Answer

John Burkart (COO) explained that the company is implementing a new CapEx strategy focused on long-term life cycle costs, which may elevate spending in the short term by bundling projects. This strategy is designed to lower the long-term run rate and improve the customer experience, though it creates some near-term noise in the numbers.

John Pawlowski from Green Street requested context for the nearly 13% sequential revenue growth in Boston and asked management to identify the most concerning operational trend observed in recent months.

Answer

President of Property Operations Keith Kimmel explained that Boston's strong sequential revenue was driven by a combination of high occupancy in the upper 97% range, blended lease rate growth in the mid-teens, and a one-time catch-up payment from a commercial tenant. Regarding concerns, Kimmel stated he saw none, instead highlighting positive trends like the significant loss-to-lease and strong resident income growth, which signal future opportunities.

John Pawlowski sought clarification on the imminence of dispositions for deleveraging, asked if the forecast for returning to pre-COVID occupancy implied a specific target like low-97% by year-end, and inquired about other potential major portfolio repositioning beyond shrinking in California and New York.

Answer

CFO Paul Beldin apologized if his remarks implied imminent dispositions, clarifying the intent was to convey a commitment to reaching leverage targets judiciously. Keith Kimmel, President of Property Operations, confirmed the path to pre-COVID occupancy levels (e.g., low 97%) exists but depends on continued economic improvement. Executive Conor Wagner added that a key strategic goal is to increase allocation to the Sun Belt, guided by principles of geographic and price point diversification.

John Pawlowski of Green Street challenged the post-spin independence of Aimco and AIR, and later asked for tangible evidence supporting the claim that markets had bottomed, questioning if occupancy gains were driven by increased concessions.

Answer

Chairman and CEO Terry Considine deferred spin-related questions but acknowledged the concerns. EVP of Property Operations Keith Kimmel provided evidence of a market bottom, citing suburban occupancy rising from mid-95% to mid-high 96% and improvements in Los Angeles. He explained that performance gains are a mix of retention and strategic concessions, with a primary focus on securing high-quality, long-term residents.

John Pawlowski of Green Street Advisors sought clarification on Aimco's 'muddling through' strategy, asking if it implies sacrificing rental rates to maintain occupancy. He also asked which markets still lack visibility on a market bottom and are in the early stages of deterioration.

Answer

Keith Kimmel, EVP of Property Operations, responded that their strategy is to balance all factors for long-term value, not to defend occupancy at all costs. He identified the Bay Area peninsula as a market where a trough is not yet clear. In contrast, he noted early signs of stabilization in Mid-Wilshire Los Angeles and continued strength in San Diego, Boston, and Washington D.C.