Julien Blouin

Julien Blouin asked about the interplay in Seattle between Amazon and Microsoft's return-to-office plans and ongoing corporate layoffs, questioning if RTO benefits can outweigh continued layoffs. He also inquired why the South Bay market is performing well despite fears of AI-native companies disrupting legacy tech and its perceived lack of AI-native HQ benefits compared to San Francisco.

Answer

Angela Kleiman (President and CEO) explained that Seattle moves quickly, and RTO enforcement (like Amazon's in January) drives compliance, alongside a 30% reduction in supply. She noted that layoffs are often due to eliminating non-profitable businesses or expanding into new units, not distress, supported by increased office absorption and leasing. For South Bay, she stated it's a deeper market than Seattle, where AI disruption in some applications is offset by expansion in others (e.g., agentic AI) within the same submarket, benefiting from the concentration of tech companies.

Julien Blouin asked how the push and pull between return-to-office plans and corporate layoffs in Seattle would play out, and why the South Bay market is holding up well despite fears of AI-native companies disrupting legacy tech.

Answer

Angela Kleiman (President and CEO, Essex Property Trust) explained that Seattle moves quickly, with layoffs offset by RTO enforcement and a 30% reduction in supply. She noted layoffs are often strategic, not due to distress, supported by increased office absorption. For the South Bay, she stated it's a deeper market where AI disruption in one area often leads to expansion in another within the same submarket, leveraging the concentration of tech companies.

Julien Blouin asked if there is a scenario where conditions in Los Angeles could weaken further, specifically due to the impact of tariffs on the local port-driven economy.

Answer

Executive Angela Kleiman stated that any tariff impact is likely to be national and affect costs more than revenues. She noted that Essex's tenant base in L.A. is not heavily port-driven and that the ongoing, significant improvement in delinquency provides a potential offset to other macro pressures in the region. Furthermore, overall portfolio delinquency remains steady, showing no signs of consumer weakness.

Julien Blouin from Goldman Sachs asked for the source of confidence that Seattle and San Jose will lead portfolio growth despite prior supply warnings. He also followed up on bad debt, questioning if there is potential for further improvement in L.A. and Alameda beyond what is guided.

Answer

Executive Angela Kleiman explained that stronger demand in the northern regions should allow for quick absorption of new supply, which is also weighted toward the first half of the year. Executive Barb Pak stated that while continued improvement is needed in L.A. and Alameda, the vast majority of the bad debt recovery tailwind was realized in prior years, so future progress is expected to be more incremental.

Julien Blouin of Goldman Sachs asked about the company's interest in consolidating its remaining JV units, the potential for Prop 13 tax benefits, and if acquired older assets offer value-add opportunities.

Answer

Executive Rylan Burns stated that while they would like to own all the assets, they are committed to their JV partners and do not plan to consolidate all partnerships. He confirmed some JVs have Prop 13 benefits. Regarding value-add, he said that while it's more efficient to execute renovations on a consolidated basis, there were no significant value-add opportunities to highlight from the most recent acquisitions.

Julien Blouin asked about the trend of absorption volumes in MAA's markets, noting a slowdown in Q4 2025 compared to Q4 2024, and expressed concern about slowing absorption amidst the current job and migration environment.

Answer

Tim Argo, COO of Mid-America Apartment Communities, acknowledged a seasonal slowdown in Q4 absorption, which was not unexpected given fewer units to absorb as supply declines from its peak. Brad Hill, President and CEO, added that market-level occupancies have significantly improved over the past year, with lease-ups filling, indicating firming market conditions despite declining absorption numbers.

Julien Blouin asked about the trend of absorption volumes in MAA's markets, noting a slowdown in Q4 2025 compared to Q4 2024, and inquired if MAA is concerned about slowing absorption amidst the current job and migration environment.

Answer

Tim Argo, COO of Mid-America Apartment Communities, acknowledged a seasonal slowdown in Q4 absorption but stated it was not surprising given fewer units in lease-up. Brad Hill, President and CEO, added that declining new deliveries naturally reduce absorption numbers, and MAA focuses on firming market-level occupancies, which have shown significant improvement over the past year.

Julien Blouin asked whether a potential recession would impact MAA's markets differently this time, given the current high supply environment and weaker pricing power.

Answer

CEO Brad Hill expressed confidence that MAA's portfolio would not perform differently than it has in past downturns, citing its historical outperformance. He pointed to the Sunbelt's resilient and diversified job growth, pro-business governments, and strong demand drivers like migration and the high cost of single-family homeownership as key factors that support continued stability.

Julien Blouin from Goldman Sachs sought to confirm the negative 30 bps earn-in and negative 70 bps gain-to-lease figures and questioned the feasibility of achieving positive new lease spreads by spring 2025.

Answer

Tim Argo, EVP and COO, confirmed the earn-in and gain-to-lease numbers were stated correctly. While not committing to positive new lease spreads by a specific date, he expressed confidence that performance in 2025 will be much better than in 2024, citing moderating supply, strong demand, and easier prior-year comparisons. He also noted that Q4 leasing volume is low, limiting its overall impact.

Julien Blouin questioned the subdued incremental margins despite strong top-line growth, asking if the compensation environment for leasing brokers was becoming more competitive and making it harder to achieve expected margins. He also inquired if JLL was still on track for its midterm margin target of 16-19% and if these targets would be updated with the 2030 strategy, questioning the rationale for persisting with long-term targets given market visibility challenges.

Answer

CFO Kelly Howe stated that the market for talent is always competitive but JLL feels good about its broker talent, retention, and recruitment due to platform investments, not seeing it as a significant headwind to profitability or incremental margins. She confirmed that JLL is on track to achieve the lower end of its midterm margin targets set in 2022. CEO Christian Ulbrich added that the 2030 strategy work identified significant organic growth opportunities across service lines, combined with AI's efficiency benefits, provides good reason to believe the positive margin trend will continue, justifying the long-term targets.

Julien Blouin questioned the relatively subdued incremental margins despite strong top-line growth, the competitiveness of the compensation environment for leasing brokers, and the company's progress towards its midterm margin targets, as well as the rationale for setting long-term targets.

Answer

Kelly Howe (CFO) acknowledged the competitive talent market but stated that JLL's platform investments help with broker retention and recruitment, not seeing it as a significant headwind to profitability. She confirmed the company is on track to achieve the lower end of its 2022 midterm margin targets. Christian Ulbrich (CEO) explained that long-term targets are supported by identified organic growth opportunities across service lines and continuous efficiency gains driven by AI.

Julien Blouin of Goldman Sachs Group, Inc. asked about the capital allocation strategy for the second half of the year, specifically the mix between share repurchases and M&A, and inquired about the types of capabilities JLL would target in potential acquisitions.

Answer

CEO Christian Ulbrich stated that share repurchases will increase in Q3 and Q4. He reiterated that the capital allocation priority is organic growth first, followed by buybacks, with a very high bar for M&A. He specified that any M&A would likely be smaller, 'infill' acquisitions to add capabilities or geographic scope within their recurring revenue businesses, as investing in their own platform currently offers a better return.

Julien Blouin questioned JLL's M&A strategy in the current macro environment and asked if decision-making delays seen in leasing were also affecting investment sales.

Answer

CEO Christian Ulbrich confirmed JLL's M&A focus is on value-accretive, resilient businesses, leveraging a strong balance sheet for opportunities. CFO Karen Brennan added that for investment sales, while bidding intensity is stable, bid variability is expanding as buyers adjust underwriting, but healthy debt markets are providing support.

Julien Blouin of Goldman Sachs inquired about the trend in capital markets activity in early 2025 compared to Q4 2024, and asked about the sustainability and drivers of market share gains in industrial leasing.

Answer

CEO Christian Ulbrich reported a strong start to 2025 for the Capital Markets business and expects the trend to remain stable throughout the year, assuming stable interest rates. CFO Karen Brennan attributed the outperformance in industrial leasing to a rebound in larger transactions, where JLL has a competitive advantage, and noted continued investment in the platform.

Julien Blouin questioned the long-term margin potential for investment management, strategic options for realizing segment value, and the current shaping of capital markets activity and pipelines for Q4.

Answer

Jay Hennick (Global Chairman and CEO) emphasized building the investment management platform for the long term, even if it means short-term margin impact, and remaining open to acquisitions. Christian Mayer (CFO) expressed confidence in exceeding last year's Q4 capital markets performance, noting solid pipelines.

Julien Blouin questioned the long-term margin potential for investment management, strategic options for realizing segment value, and the current shaping of capital markets activity and pipelines for Q4.

Answer

Jay Hennick (Global Chairman and CEO) emphasized building the investment management platform for the long term, even if it means short-term margin impact, and remaining open to acquisitions. Christian Mayer (CFO) expressed confidence in exceeding last year's Q4 capital markets performance, noting solid pipelines.

Julien Blouin (via Ryan Trieste) asked about the types of businesses and acquisition multiples Colliers is targeting in the engineering segment, and requested details on the fundraising environment for real estate versus infrastructure funds.

Answer

CEO Jay Hennick explained that tuck-under engineering acquisitions are available at favorable rates, while larger platform acquisitions would command higher valuations. He declined to provide a specific breakdown of fundraising by strategy for competitive reasons. CFO Christian Mayer added that fundraising has been active across all strategies, including traditional real estate and infrastructure.

Speaking on behalf of Julien Blouin, Ryan Trieste asked about the types of businesses and valuation multiples Colliers is targeting for future engineering acquisitions, and for an update on the fundraising environment for real estate versus infrastructure funds.

Answer

CEO Jay Hennick explained that while tuck-under engineering acquisitions can be done at favorable rates, larger platform acquisitions, especially in new markets like Europe or new specialties, would command higher valuations. For competitive reasons, he declined to detail fundraising by strategy, but CFO Christian Mayer confirmed that fundraising has been active across all strategies, including traditional real estate, infrastructure, and alternatives.

Speaking on behalf of Julien Blouin, Ryan Trieste asked about the types of businesses and valuation multiples Colliers is targeting for acquisitions in the engineering segment. He also requested more detail on the fundraising environment for real estate versus infrastructure funds.

Answer

CEO Jay Hennick stated they are active in engineering M&A, pursuing tuck-under deals at favorable rates and higher-valued platform acquisitions, potentially in Europe or for specialties like power. For competitive reasons, he declined to break down fundraising by strategy, but CFO Christian Mayer confirmed that all strategies have seen active fundraising year-to-date.

Speaking on behalf of Julien Blouin, Ryan Trieste asked about the types of businesses and valuation multiples Colliers is targeting for acquisitions in the engineering segment. He also requested more detail on the fundraising environment for real estate versus alternative infrastructure funds.

Answer

CEO Jay Hennick explained they are pursuing both tuck-under acquisitions at favorable rates and higher-value platform acquisitions, potentially in Europe or in specialties like power. Citing competitive reasons, Mr. Hennick declined to break down fundraising by strategy. However, CFO Christian Mayer confirmed that they are seeing fundraising activity across all strategies, including traditional real estate, infrastructure, and alternatives.

On behalf of Julien Blouin, Ryan Trieste asked about the types of businesses Colliers is looking to acquire in the engineering sector and the corresponding valuation multiples. He also requested more detail on the fundraising environment, comparing real estate funds to alternative infrastructure funds.

Answer

CEO Jay Hennick explained that they are pursuing both tuck-under acquisitions at favorable rates and larger platform acquisitions at higher valuations, particularly in new geographies like Europe. For competitive reasons, he declined to provide a specific breakdown of fundraising by strategy. CFO Christian Mayer added that fundraising has been active across all strategies, including traditional real estate and infrastructure.

Julien Blouin questioned the sustainability of the Engineering segment's low-teens internal growth rate compared to prior guidance. He also asked if Colliers was losing market share in leasing and whether that was an acceptable outcome given capital allocation to other segments.

Answer

CFO Christian Mayer clarified that the low-teens growth in Q1 was exacerbated by seasonality and that the full-year expectation remains in the mid-to-high single-digit range. CEO Jay Hennick asserted that Colliers is taking market share, primarily from secondary players, due to its balanced global platform, and that capital allocation is not a constraint on growth in any segment.

Julien Blouin asked if the streamlining efforts in the Investment Management business bring forward the feasibility of a spinoff or sale and over what timeframe. He also questioned whether the 2025 Capital Markets outlook reflects general uncertainty or a real drop-off in recent deal activity.

Answer

CEO Jay Hennick responded that while no decision on a spinoff has been made, the integration efforts do create that optionality for the future. He emphasized the need to first build momentum in revenue and profitability. Regarding Capital Markets, CFO Christian Mayer cited macro uncertainty and FX headwinds for the cautious outlook, while Mr. Hennick added that although clients are keen to transact, a valuation gap between buyers and sellers persists.

Julien Blouin asked for an assessment of the commercial real estate transaction market recovery, considering pent-up demand from both buyers and sellers, and the remaining growth potential. He also questioned Q4 deal activity and pipelines compared to the prior year, and the factors behind the advisory segment's slightly lower incremental margins.

Answer

CEO Robert Sulentic described the sales recovery as expected to be longer and slower than historical patterns but steady, driven by closing buy-sell expectation gaps and strong pipelines. CFO Emma Giamartino confirmed strong Q4 pipelines and activity, noting that the advisory segment's incremental margins were impacted by increased incentive compensation due to strong performance.

Julien Blouin asked CEO Robert Sulentic for his perspective on the current stage of the commercial real estate transaction market recovery, considering the impressive advisory sales results and the latent demand from both older and newer real estate funds. He also asked CFO Emma Giamartino about Q4 2025 deal activity, pipeline comparisons to last year, and the reason for slightly lower incremental margins in the advisory segment.

Answer

CEO Robert Sulentic indicated that the company expects a longer, slower recovery in sales, currently in its early stages, with strong pipelines and a closing gap between buyer and seller expectations. CFO Emma Giamartino confirmed strong Q4 pipelines and activity, noting that the guidance range incorporates Q3 outperformance. She attributed the lower advisory incremental margins to an increase in incentive compensation due to strong segment performance.

Julien Blouin from Goldman Sachs Group, Inc. asked about the benefits realized from the Turner & Townsend integration and which specific pipeline activities are driving the increased full-year guidance.

Answer

President, CEO, and Chairman Robert Sulentic highlighted significant new business wins and efficiency gains from moving legacy staff onto Turner & Townsend's systems. CFO Emma Giamartino specified that the guidance increase is driven by Q2 outperformance and a stronger-than-expected leasing pipeline for the second half of the year.

Julien Blouin inquired about the potential impact of a recession on earnings given the increased mix of Resilient businesses and asked what the capital markets pipeline indicates for the second quarter.

Answer

CFO Emma Giamartino explained that due to the significantly higher mix of Resilient businesses (60% of SOP vs. ~11-20% in 2011), an earnings decline in a recession would be materially lower, estimating it would be less than half the 85% drop seen during the GFC. Regarding capital markets, she noted that while there was a brief pause due to uncertainty, transaction activity remains strong, and the pipeline supports continued activity as long as the 10-year Treasury rate remains stable and below 5%.

Julien Blouin asked why management considers the Investment Management division to be underappreciated and how share repurchase activity fits into the company's 2025 capital allocation strategy.

Answer

CEO Bob Sulentic stated the entire Real Estate Investments segment is underappreciated, citing strong fund performance and future growth potential from new leadership and balance sheet strength. CFO Emma Giamartino added that they will continue to prioritize M&A in 2025 but will use buybacks to deploy capital if suitable M&A targets do not materialize, as they believe the shares remain undervalued.

Julien Blouin asked for help framing the potential size of the spec home supply impact from builders and inquired about the quality, features, and location of this inventory compared to Invitation Homes' own portfolio.

Answer

Chief Executive Officer Dallas Tanner responded that they see regular deal flow from builder partners on spec inventory that fits their traditional product profile and that the quality is generally high. He is not alarmed by the volume, but recognizes it as a market dynamic driven by elevated mortgage rates. This environment allows the investment team to be more aggressive in acquiring scattered homes and informs their development strategy. He reiterated that the $1,100 monthly cost savings to lease vs. own creates a dislocation they can capitalize on.

Julien Blouin of Goldman Sachs asked about the new lease rate trajectory, questioning if the positive 1.3% in July would weaken seasonally and how the rent curve might compare to last year, given the willingness to flex occupancy.

Answer

President Charles Young confirmed that the year is following a typical seasonal pattern, with a peak in Q2 followed by a step-down in Q3 and Q4. He noted that while new lease rates are affected by supply in larger markets, the renewal side remains strong and is expected to maintain its current range, providing a balance to the overall blended rate.

Julien Blouin of Goldman Sachs asked about the outlook for new lease rates, questioning if they would weaken further seasonally and how the company's willingness to flex occupancy might impact rate growth in Q4.

Answer

President Charles Young confirmed that the leasing season is following a typical curve, peaking in Q2 before moderating in Q3 and slowing into the Q4 holidays. He noted that new lease performance is affected by supply absorption in larger markets, making it unpredictable. However, he expressed confidence in the renewal side, which is two-thirds of the business and expected to remain strong, helping to balance the overall blended rate.

Julien Blouin from Goldman Sachs Group, Inc. asked about the defensiveness of the SFR sector in a potential macro downturn, especially given the wide affordability gap versus homeownership.

Answer

CEO Dallas Tanner affirmed the sector's defensive characteristics, highlighting that the value proposition of space, location, and good schools at a lower cost than owning is compelling in any cycle. He noted that SFR is often more affordable than multifamily on a per-square-foot basis and has proven resilient through multiple cycles of economic uncertainty, positioning it as both a defensive and growth-oriented business.

Julien Blouin from Goldman Sachs followed up on renewals, asking if the wider-than-historical spread between the asking rate and the realized rate is expected to persist for the next few quarters in high-supply markets.

Answer

President and COO Charles Young indicated that providing specific renewal 'ask' figures can be confusing and that focusing on actual results is more important. He reiterated that renewal rates are accelerating into November (north of 4%) and early signs for December are also positive. He emphasized that the ask-to-achieved spread will vary dynamically by market and home, but the key takeaway is that results are improving and residents want to stay.

Julien Blouin of Goldman Sachs asked if the early signs of softness in D.C. and Boston suggest that blended rent growth in those markets could decelerate more than seasonally normal in the back half of the year, despite a strong Q2.

Answer

EVP & COO Michael Manelis advised against reading too much into it yet. He characterized them as 'headline risk markets' and noted the softness was minor and manageable. He believes that a standard lean towards occupancy during the shoulder season, combined with normal seasonal deceleration, should be sufficient without underperforming historical trends.

Julien Blouin of Goldman Sachs asked if the commentary on prioritizing occupancy in D.C. and Boston implied that blended rent growth in those markets might decelerate more than seasonally normal in the second half of the year, despite strong Q2 performance.

Answer

EVP & COO Michael Manelis clarified that this was not the case. He described D.C. and Boston as 'headline risk' markets where a focus on occupancy is prudent for the upcoming shoulder season. He believes normal seasonal rent deceleration should be sufficient to maintain high occupancy without requiring a more aggressive slowdown in rent growth.

Julien Blouin of Goldman Sachs asked for any available data points or trends on new lease rates heading into April, given the high level of market uncertainty.

Answer

COO Michael Manelis declined to provide specific monthly stats but directed attention to the Q2 blended rate guidance, which implies sequential improvement. He noted that with renewal performance stable, the guidance indicates that new lease rates in April are following a positive seasonal trajectory, and he expects that sequential build to continue into May and June.

Julien Blouin asked about the likelihood of rent freezes and eviction moratoriums passing in Los Angeles and requested the blended lease rate growth for January to see how it was tracking against Q1 guidance.

Answer

CEO Mark Parrell called the L.A. proposals 'terrible ideas' that discourage housing investment and harm the city's reputation, advocating for more targeted, pro-housing solutions. COO Michael Manelis declined to provide a specific January metric, emphasizing that results are best viewed over a full quarter, but confirmed sequential improvement and reiterated confidence in the Q1 blended rate guidance of 1.4% to 2.2%.

Julien Blouin questioned the strategy of deploying leverage for acquisitions when the spread between cap rates and debt costs is historically tight. He also asked why the company is not tilting more aggressively towards development at this point in the cycle.

Answer

CEO Mark Parrell justified the acquisitions by emphasizing the value of buying below replacement cost, which implies better long-term growth and lower future supply risk. CIO Alex Brackenridge added that development is focused on markets with fewer buying opportunities, as building into the current high-supply expansion markets is not the best risk-adjusted return.

Julien Blouin of Goldman Sachs asked about the EMEA services turnaround, seeking to understand the drivers and future visibility, and questioned the source of the region's significant margin improvement.

Answer

CFO Neil Johnston and CEO Michelle MacKay explained that the EMEA margin improvement was driven by significant efficiency work and restructuring. The focus is now shifting to top-line growth, which will create further operating leverage. They noted the project management business has been a particular focus area with recent wins.

Julien Blouin asked if trade policy uncertainty is causing a slowdown in the industrial sector and questioned the sustainability of the strong Q4 Capital Markets performance in the APAC region.

Answer

CEO Michelle MacKay responded that while it's too early to draw definitive conclusions on trade policy's impact, the real estate sector has historically navigated such changes, and uncertainty often drives demand for advisory services. Regarding the impressive APAC Capital Markets strength, MacKay attributed the performance to the successful payoff from strategic investments and talent acquisition made in the region, particularly Japan and Australia, in late 2022.

Julien Blouin from Goldman Sachs questioned whether the strong new lease trends were driven more by lease expiration management or by improved pricing power. He also asked why AMH's new and renewal lease spreads are tighter compared to peers.

Answer

CEO Bryan Smith clarified that the current strength is from pricing power in key markets and improved revenue optimization, as the main benefits of the lease expiration program are yet to come. He confirmed the tight renewal spreads are a core strategy to provide residents with demonstrable value relative to the market, fostering trust and retention.

Julien Blouin asked how much of the strong new lease performance is driven by the lease expiration strategy versus improved pricing power, and also why AMH's new and renewal lease spreads are much closer together compared to peers.

Answer

CEO Bryan Smith explained that the current strength is more from pricing power in key markets like Seattle and the Midwest, as the full benefits of the lease expiration shift are expected later in the year. He confirmed the tight new-to-renewal spread is a strategic choice to ensure residents receive fair market value, which builds trust and supports long-term retention.

Julien Blouin asked about the drivers behind strong new lease trends and questioned if the narrow gap between new and renewal lease rates was a strategic choice.

Answer

CEO & Trustee Bryan Smith explained that the strong new lease performance is a result of multiple factors, including good pricing power in key markets and improved revenue optimization, with benefits from the lease expiration program expected later in the year. He confirmed that keeping new and renewal rates close is a core strategy to ensure residents receive and recognize good value, which is supported by sophisticated pricing and communication.

Julien Blouin from Goldman Sachs requested details on demand-side metrics like tenant engagement and income levels. He also asked what provides confidence for the significant sequential improvement baked into the 3% new lease rate growth assumption for 2025.

Answer

COO Lincoln Palmer shared strong resident metrics, with new tenant incomes north of $150,000 and income-to-rent ratios at 5.5x. He highlighted leading indicators like a 30% sequential and 15% year-over-year increase in foot traffic to homes in January. CEO Bryan Smith added that this demand momentum, combined with a well-occupied portfolio and high-quality assets, provides the confidence for continued rate growth through the spring leasing season.

Julien Blouin asked for the specific metrics that support management's confidence in strong future demand and whether rising resident incomes are a key indicator. He also inquired if the trend of lower resident turnover is expected to continue.

Answer

COO Bryan Smith pointed to strong demand metrics, including nearly 1 million new users on the company's website in Q3 and a significant uptick in users setting up accounts to monitor available homes. He also confirmed that the high stated household income of new applicants, over $150,000, is a testament to the quality of the assets. He attributed strong retention to market conditions and investments in the resident experience, which he expects to continue.

Julien Blouin of Goldman Sachs asked about the risk of homebuilders pressuring Millrose to write down land values, the success rate of implementing cross-asset pooling on non-Lennar deals, and the expected yields and credit enhancements for the new Taylor Morrison Yardley partnership.

Answer

CEO Darren Richman explained that Millrose's role is capital efficiency, not risk mitigation, and strong credit enhancements prevent write-down pressure. He noted that 97% of the portfolio is now pooled. While declining to give specific deal terms, he guided that the average non-Lennar yield would likely compress towards 11% as the company prioritizes credit enhancements over rate. COO Robert Nitkin added that this focus on downside protection and high-quality partners is a deliberate strategy in the current environment.

Julien Blouin of Goldman Sachs inquired about the expected yields on large-scale transactions like the New Home deal, questioning if they align more with the standard non-Lennar rates. He also asked about the significance of Millrose's role in facilitating M&A and the potential for future opportunities. In a follow-up, he questioned the longer duration of third-party deals compared to Lennar's and how Millrose mitigates the associated risks.

Answer

CEO Darren Richman confirmed that yields on large deals are consistent with other non-Lennar transactions, though they may be slightly lower in exchange for enhanced credit features like cross-collateralization. He emphasized that Millrose is increasingly a central tool for M&A in the homebuilding sector. COO Robert Nitkin clarified that the reported duration reflects the final homesite takedown, with the weighted average life being much shorter, and noted the shorter duration for new Lennar deals aligns with their strategy for work-in-progress inventory.

Julien Blouin of Goldman Sachs inquired about the expected yields on large, non-Lennar transactions like the New Home/Landsea deal and how they compare to existing deal structures. He also asked about the longer duration of these third-party deployments versus Lennar deals and the risk mitigation strategies employed.

Answer

CEO and President Darren Richman explained that yields on large deals are consistent with other non-Lennar transactions, though they may be slightly lower in exchange for enhanced credit features like cross-collateralization. COO Robert Nitkin clarified that the reported duration for third-party deals reflects the final takedown date, with the weighted average life being significantly shorter, a timeframe the company is comfortable with.

Julien Blouin of Goldman Sachs inquired about the expected yields on large-scale transactions like the New Home/Landsea deal, Millrose's strategic importance in facilitating homebuilder M&A, and the reasons for the longer duration observed in new third-party deployments compared to those with Lennar.

Answer

CEO and President Darren Richman explained that yields on large deals are consistent with other non-Lennar transactions, though sometimes slightly lower in exchange for enhanced credit features like cross-collateralization. He highlighted that Millrose is becoming a central tool for M&A in the homebuilding sector, which supports the company's optimistic funding targets. COO Robert Nitkin clarified that the weighted average life of third-party deals is significantly shorter than the final takedown date, making the duration comfortable and appropriate for their strategy, contrasting with Lennar's use of the platform for shorter-term inventory.

Julien Blouin from Goldman Sachs questioned if there was a reacceleration in activity in July, asked about the confidence level in the 2026 targets given the strong performance, and inquired about any potential market impacts from the New York City mayoral race.

Answer

CFO Michael Rispoli responded that pipelines have been consistently strong throughout the year without a noticeable slowdown and that confidence in achieving the 2026 targets has increased. CEO Barry Gosin addressed the NYC mayoral race, expressing sanguinity about the city's resilience. He noted that institutional checks and balances, such as the governor and a more moderate city council, limit a mayor's power, and that New York's unparalleled talent pool remains a key strength.

Julien Blouin questioned the decision to maintain full-year guidance despite a strong first quarter, asking if it was due to macroeconomic uncertainty, something seen in April, or general conservatism. He also asked how closely the 10% Q2 pipeline growth correlates to expected transaction volumes.

Answer

Executive Jason McGruder attributed the decision to maintain guidance to the uncertain macro environment, stating that they would have otherwise considered raising it. He confirmed good visibility for the first half and noted that the transaction business only needs low single-digit growth in the back half to meet the guidance midpoint. He also affirmed the 10% pipeline growth is pretty consistent with expected transaction volumes.

Julien Blouin from Goldman Sachs asked about year-to-date trends in capital markets, the outlook embedded in 2025 guidance, and whether trade policy uncertainty is impacting the industrial sector.

Answer

CFO Michael Rispoli stated that pipelines remain strong and the company anticipates double-digit growth in capital markets over the next two years, which is factored into guidance. CEO Barry Gosin expressed confidence in the industrial sector, believing that positive drivers like reshoring and advanced manufacturing will overcome any potential slowdowns from trade policy uncertainty.

Julien Blouin from Goldman Sachs inquired about the Boston market, asking for the outlook given risks from university funding cuts and softness in the biotech sector. He also asked which of UDR's regions would prove most resilient in a macroeconomic downturn.

Answer

COO Mike Lacy acknowledged Boston started the year better than expected but anticipates some slowdown due to new supply, particularly in the North Shore. CFO Joe Fisher provided context, noting that the life science sector is only 3-4% of the MSA's total employment and that Boston has a favorable forward supply outlook. Regarding resilience, Fisher stated it depends on the recession's driver, but historically, markets like D.C. and Boston are less volatile. He emphasized that UDR's diversified portfolio provides insulation regardless of the cause.

Julien Blouin asked for specifics on January leasing trends and whether strong Sunbelt absorption reflects pent-up demand that could eventually be depleted.

Answer

COO Mike Lacy did not provide specific January metrics but confirmed that occupancy, turnover, and leasing trends were on track with expectations. CFO & CIO Joe Fisher attributed strong Sunbelt absorption to a combination of factors including rental affordability versus ownership, new household formation from younger cohorts, and return-to-office trends, which he believes are sustainable tailwinds as supply normalizes.

Julien Blouin asked about the wide range in the 2025 development starts guidance, seeking to understand the key factors that would cause starts to trend toward the low end versus the high end of the range.

Answer

Chairman and CEO Richard Campo explained that the decision depends on achieving a target return spread of 100-150 basis points above acquisition yields and gaining more confidence in the 2026-2028 rent growth outlook. He suggested that as the market's positive inflection point becomes clearer mid-year, they may lean toward the high end. Additionally, opportunities to take over stalled projects from merchant builders could also push activity toward the top of the guided range.

Julien Blouin asked for the expected trajectory of new lease and renewal rates for November and December, and where the mid-3% renewal offers might ultimately shake out.

Answer

President and CFO Alexander Jessett projected that Q4 leasing would look similar to October's results, with effective new lease rates around -4.4% and renewals around +3.4%. However, he noted that the overall blended rate, which was -0.8% in October, should improve slightly in November and December. This is because the weighting shifts towards a higher volume of renewals relative to new leases during those months, which will positively influence the blended average.

Asked if PENN District leasing positively impacted quarterly leasing spreads and inquired about the future trajectory of the company's debt covenants.

Answer

The major PENN District lease with Major League Soccer was a new, first-generation lease, so it did not affect the leasing spread calculation. Debt covenants are expected to tighten over the next few quarters, primarily due to a swap expiration at 555 California Street, but the company will maintain a sufficient cushion and expects the metrics to improve as new income comes online.

Asked for a breakdown of expected 2024 taxable income, whether the dividend will remain at the minimum required level, and for an update on the PENN 1 ground lease renewal.

Answer

The company is not comfortable disclosing a 2024 taxable income forecast at this time. The current policy is to pay the minimum required dividend, with the final amount heavily dependent on gains from any asset sales. The PENN 1 ground lease renewal is in arbitration, and they cannot speculate on the outcome, though their expectation is for a number lower than the original estimate.

Julien Blouin of Goldman Sachs, on for Caitlin Burrows, asked if PENN District leasing impacted Q1 leasing spreads and questioned the future trajectory of debt covenant metrics, given tightening coverage ratios and an upcoming swap expiration.

Answer

President and CFO Michael Franco clarified that the quarter's major PENN District lease with Major League Soccer was a new, first-generation lease and therefore did not affect leasing spread calculations. He acknowledged that debt covenants will tighten further in Q2 due to a swap expiration at 555 California Street but affirmed that Vornado maintains a 'sufficient cushion' and expects the metrics to improve as new lease income comes online.