Richard Anderson

Richard Anderson questioned how critical the return-to-office trend is for the 2026-2027 leasing outlook and whether a 2-3 day hybrid week is sufficient for BXP's business model.

Answer

Chairman & CEO Owen Thomas confirmed that accelerating return-to-office is helping leasing, alongside strong corporate earnings. He argued that even in a hybrid model, companies need space for all employees on the same collaboration days, which makes it difficult to reduce footprints. Therefore, the specific number of days per week is less critical than the need for a centralized, collaborative workplace.

Rich Anderson sought more detailed information on the future development process, specifically if the focus would shift more towards build-to-suit leases and the long-term outlook for the $4.2 billion early-stage pipeline beyond 2026. He also asked if a run-rate development exposure, as a percentage of assets, would be committed at the upcoming Investor Day, and inquired about the Board's comfort level regarding the dividend payout ratio when considering a reset for the $5.28 annual dividend.

Answer

Joel Marcus, Executive Chairman and Founder, referred to the supplemental's pie chart (page 46), indicating a strategic focus on reducing the land bank by creating value for alternative uses and potentially selling non-mega campus projects and stable near-term projects. He reiterated the goal to reduce non-income-producing assets from 20% to 10-15% over the coming years. Regarding the dividend, Joel Marcus stated the Board would review it in Q4, aiming to provide a clear framework for 2026. Marc Binda, CFO and Treasurer, added that there is potential room in taxable income, possibly up to 30-40%, and the Board would consider retained cash flows, capital needs, and AFO coverage.

Rich Anderson asked for more details on the future development process, including a shift towards build-to-suit leases and the outlook for the $4.2 billion early-stage pipeline post-2026. He also asked if a run-rate development exposure would be committed at Investor Day and about the board's comfort level with the dividend payout ratio.

Answer

Joel Marcus, Executive Chairman and Founder, referred to the company's strategy to reduce its land bank by creating value for alternative uses and potentially selling non-fully stabilized projects, aiming to reduce non-income-producing assets from 20% to 10-15% over the coming years. Regarding the dividend, Joel Marcus stated the board would review it in Q4, aiming to frame 2026 clearly. Marc Binda, CFO and Treasurer, added that there is potential room up to 30-40% in taxable income, with the board considering retained cash flows, capital needs, and AFO coverage.

Richard Anderson of Wedbush Securities questioned if the long-term strategy involves development becoming a smaller part of the business and asked about the expected use of seller financing in the disposition program.

Answer

Executive Chairman Joel Marcus clarified they will use a 'scalpel, not a sledgehammer,' monetizing non-strategic land while holding onto parcels critical to their mega campuses. Executive Peter M. Moglia stated that while seller financing was used last year, none is currently in process, though they remain open to it on the right terms.

Richard Anderson asked if leasing progress on key 2025 expirations was ahead of plan, sought details on the source of G&A savings, and questioned the company's outlook on the new political administration's impact on the life science industry.

Answer

Executive Joel Marcus confirmed leasing is "ahead of plan" and detailed that G&A savings are broad-based, covering legal, IT, and payroll. He expressed strong optimism about the new administration, citing a more favorable FTC and skilled FDA appointees as significant positives for the industry.

Richard Anderson inquired about the potential size of the non-core asset disposition pipeline and questioned if the full-year guidance for realized gains implied a significant gain in the fourth quarter.

Answer

CFO Marc Binda clarified that while 24% of ARR is outside mega campuses, not all of it is for sale, and noted that a portion of the land bank is also a potential capital source. He also corrected the analyst's year-to-date realized gains figure, stating the $85.2 million reported puts them on track to meet guidance without a large Q4 event.

Richard Anderson asked about the reconciliation between Welltower's significant investments in technology and people, which yield high returns, and the potential for "rent fatigue" among residents who experience annual rent increases of 10-12%, questioning how the company monitors this to ensure long-term sustainability.

Answer

CEO Shankh Mitra stated that technology and people investments yield significantly higher returns than real estate, visible in the P&L. Regarding rent, he noted that average resident stays are 18-24 months, typically involving only one rent increase. Philosophically, the company prioritizes delayed gratification, leaving money on the table for greater future gains, believing that happy customers and employees, fostered by these investments, drive long-term growth duration.

Richard Anderson inquired about the strategy to consolidate with 'fewer, deeper' operating partners, asking about the optimal number of partners and if there has been any pushback, particularly from international operators.

Answer

CEO Shankh Mitra confirmed the strategy is to concentrate on fewer, high-performing partners to reduce complexity and enhance regional density. He stated there is no specific target number, but the focus is on partners who are philosophically aligned with Welltower's vision. He reported no pushback and highlighted the strong growth in its Canadian and U.K. businesses.

Rich Anderson of Wedbush questioned the role of the medical office and post-acute segments, asking if their stable nature is 'out-of-sync' with the high-growth senior housing business.

Answer

CEO Shankh Mitra affirmed that these segments play an "extraordinarily important role" in long-term portfolio construction and creating sustainable, diversified cash flow growth. He mentioned that future capital allocation to medical office depends on where long-term inflation settles, but both segments are core to the company's strategy.

Richard Anderson asked if the $0.045 FFO guidance increase from external investing was purely from current year activity or if it included outperformance from prior year acquisitions.

Answer

Tim McHugh (EVP & CFO) clarified that the $0.045 is from incremental capital activity since the last guidance update. Outperformance from prior-year acquisitions is captured in the fundamental operating segments' guidance increase. Shankh Mitra (CEO & CIO) added that the full earnings impact of recent deals will be felt in future periods.

Rich Anderson first asked how long EastGroup Properties could sustain its 22% cash releasing spread if deliberate tenant behavior persists, and how much embedded growth remains. He then inquired if manufacturing onshoring/nearshoring is the primary dynamic to revitalize the industrial sector, preceding consumption.

Answer

Marshall Loeb, CEO, and Brent Wood, CFO, explained that due to lease terms of three to ten years, it would take several years for the embedded growth to fully materialize or for market conditions to significantly deteriorate. They emphasized that the market rarely stays flat and that tight supply could quickly shift rents with increased demand. Marshall Loeb then clarified that while EastGroup's strategy is consumer-oriented, manufacturing onshoring/nearshoring is indeed a new and significant demand source, particularly in markets like Texas, Arizona, and the Carolinas, attracting suppliers to large plants, acting as an additional driver similar to e-commerce.

Rich Anderson asked how long the 22% cash releasing spread could persist if the 'deliberate tenant' trend continues, before reverting to single-digit numbers. He also inquired if manufacturing onshoring/nearshoring is the primary dynamic to revive the industrial market, leading consumption.

Answer

CEO Marshall Loeb explained that with 15-20% of the portfolio rolling annually and lease terms of 3-10 years, it would take several years for cash spreads to significantly decline if the market remained flat, which he doesn't expect. CFO Brent Wood added that tight supply suggests the market is set for a quicker turnaround. Regarding manufacturing, Marshall Loeb agreed it's a new demand source, citing Tesla, Intel, and Texas Instruments suppliers in their markets, and that it could be a significant driver, similar to how e-commerce added a new demand source.

Richard Anderson asked if management could draw parallels from past periods of uncertainty to inform their current strategy and decision-making process.

Answer

Executive Marshall Loeb distinguished the current 'man-made' situation from past crises, suggesting it could resolve more quickly. The current strategy emphasizes speed and decisiveness, with a motto of 'done is better than perfect' to secure leases. Executive Brent Wood added that they are sticking to their proven 'recipe' of disciplined execution, relying on their strong balance sheet, and staying alert for opportunities created by market dislocation.

Richard Anderson of Wedbush sought to better understand the cadence of the $300 million in planned development starts, asking if the strategy was shifting from being reactive to on-the-ground leasing to proactively preparing for an anticipated future supply shortage.

Answer

Executive Marshall Loeb confirmed it is a combination of both. The traditional model of starting a new project once an existing one is leased remains key. However, they are also strategically positioning for a market tightening in late 2025, aiming to capitalize on the lack of new supply and the slower reaction time of private developers who face permitting and financing hurdles.

Richard Anderson asked about the shift in management's description of the market from 'improving slowly' last quarter to 'choppy' this quarter, and how the outlook for 2025 has evolved over the last three months.

Answer

President and CEO Marshall Loeb clarified that there was no reversal in trend, describing the environment as 'two steps forward, one step back' due to tenant deliberation amid election and interest rate uncertainty. He expressed increased optimism for 2025, anticipating a 'V-shaped' recovery once business confidence returns, driven by strong fundamentals like low vacancy and a shrinking construction pipeline.

Rich Anderson sought insight into the pacing and cadence of the life science sector's recovery, specifically when the company anticipates occupancy bottoming, the onset of distress purchasing, and the return of pricing power.

Answer

President and CEO Scott Brinker projected a 12-24 month window for the sector's full recovery, with core submarkets and incumbent landlords likely recovering faster. He noted that the current investment opportunities are a mix of opportunistic and distress-driven. He highlighted a recent positive shift in sentiment, citing real-time positive news like a tenant acquisition by Eli Lilly and favorable phase three data.

Rich Anderson asked for a pacing or cadence of the life science recovery, specifically when the bottoming of occupancy, distress purchasing, and pricing power might occur, suggesting timelines like early 2026 for bottoming and 2027 for pricing power. He also inquired about the buyer pool for outpatient medical sales, characterizing the audience (e.g., health systems, private equity).

Answer

Scott Brinker, President and CEO, clarified that lab investment is opportunistic, not solely distress-driven, and anticipates a 12-to-24-month window for the sector's full recovery, with core submarkets and incumbent landlords recovering faster. He highlighted continued positive surprises, such as a tenant acquisition by Eli Lilly and favorable phase three data. Regarding outpatient medical buyers, Mr. Brinker stated it's 'all of the above,' including health systems looking to buy back assets, private equity, and other institutional buyers.

Rich Anderson inquired about the potential timeline for the market to transition from its current bottom/flat state to a growth trajectory, considering factors like supply, rent growth, tenant sentiment, and port activity.

Answer

Michael Frankel, Co-Chief Executive Officer, highlighted a favorable market backdrop with 5% overall vacancy (lower for high-quality product), resilient tenant health (zero bad debt in Q3), diverse demand drivers, a helpful interest rate environment, and tenants becoming desensitized to tariff changes. He attributed outperformance to superior property quality and the team's proactive approach. While acknowledging macroeconomic and geopolitical uncertainties make predicting the exact recovery arc or rent inflection point impossible, he emphasized the company's strong position with multiple growth drivers.

Richard Anderson questioned the volatility of market rent changes, asking how the company underwrites new projects in this environment. He also asked about space utilization trends and the status of the CFO search.

Answer

Co-CEO Michael Frankel reiterated the company's view of moderate rent normalization rather than dramatic declines and stated that redevelopments are underwritten with a granular, bottoms-up approach. He confirmed tenant space utilization remains high. Regarding the CFO search, he reported 'great progress' and said an announcement would be made once a decision is finalized.

Richard Anderson questioned if the combination of strong leasing velocity and negative cash re-leasing spreads resulted in overall in-line performance. He also asked for a multi-year outlook on how NOI growth might track against rising interest expenses.

Answer

CFO Peter Seymour explained that cash spreads are volatile and were not a disappointment, while President and CEO Jordan Kaplan expressed that he was impressed rental rates have held firm given market conditions. Kaplan projected that future NOI growth from leasing up the portfolio and potential market rent acceleration could offset the anticipated 100-200 basis point increase in borrowing costs.

Richard Anderson of Wedbush Securities asked about the process that led to the commitment to a multi-tenant strategy for the Studio Plaza redevelopment. He also questioned if the current interest rate environment was causing a change in the company's approach to its balance sheet and variable-rate debt exposure.

Answer

President and CEO Jordan Kaplan explained that while they wouldn't turn down a single large tenant, the company's preference and comfort level is with the distributed risk of multi-tenant buildings. On the balance sheet, he clarified that variable-rate exposure is a function of loan terms, not a strategy, and that the company prefers fixed-rate debt, as evidenced by the two recent fixed-rate financings in the 6% range.

Richard Anderson of Wedbush Securities asked what gives management confidence that suitable external growth opportunities in the office space will materialize. He also questioned if there is a path to achieving positive FFO growth in 2025, given the headwind from the Studio Plaza vacancy.

Answer

President and CEO Jordan Kaplan stated that they are seeing a growing pipeline of the types of multi-tenant buildings they prefer to acquire, as distressed sellers are slowly getting 'worn out.' Regarding 2025 FFO growth, Kaplan declined to give guidance but noted that even with successful leasing at Studio Plaza, it takes time for that activity to translate into FFO due to build-outs and rent commencement.

Richard Anderson of Wedbush Securities asked why the company's tone wasn't more optimistic given the strong LOI pipeline. He also inquired about the difference in negotiating power today versus when deal volumes were higher and the status of conversations with S&P for a potential ratings upgrade.

Answer

Chairman and CEO Jay Sugarman explained the cautious tone reflects the frustration of a volatile market where deals can fall apart, though he noted persistence is paying off. Chief Investment Officer Timothy Doherty added that the consistency of their capital is a key advantage. Regarding the S&P rating, CFO Brett Asnas stated they are in a positive outlook period and are in continuous dialogue with the agency, with the hope of securing a third single-A rating.

Richard Anderson asked if the funding of buybacks through asset sales could simultaneously trigger a Caret gain and attract new investors. He also requested an update on the Park Hotels & Resorts master lease and questioned if there's a risk of the portfolio becoming too concentrated in multifamily.

Answer

Chairman and CEO Jay Sugarman confirmed that creating an accretive transaction that highlights Caret's value is the goal. He stated the dialogue with Park is ongoing but no agreement has been reached. On concentration, Chief Investment Officer Timothy Doherty and Mr. Sugarman explained that while multifamily is a focus due to strong fundamentals, their investment process always starts with a disciplined analysis of the location's quality and long-term dynamics, regardless of property type.

Richard Anderson of Wedbush Securities inquired about the status of the NHC lease renewal, the impact of Medicaid uncertainty on the process, and the board's strategy. He also questioned the cause of the low Q1 SHOP NOI growth and asked for an update on the SLM loan portfolio.

Answer

CEO Eric Mendelsohn stated that while dialogue with NHC is ongoing, the Medicaid and provider tax issues create uncertainty. He noted the board has an independent committee and has retained Blueprint Advisors to ensure a fair market deal. CIO Kevin Pascoe explained the SHOP seasonality was expected, though a one-time expense had a small impact, and reiterated confidence in the full-year guidance. Pascoe also confirmed the SLM situation is largely resolved, with a recent $2.5 million payment received.

Richard Anderson inquired about the expected 2025 rent and interest income from the SLM portfolio compared to 2024, the status of the $14.5 million SLM mezzanine loan, and the potential market rent coverage for the NHC lease expiring in 2026.

Answer

CFO John Spaid projected that 2025 run-rate rent and interest from SLM would be about 55% of 2024 levels, with rent alone at 70%. CIO Kevin Pascoe added that recovery on the SLM mezz loan is expected but the amount is TBD as negotiations continue. CEO Eric Mendelsohn stated the NHC assets are in robust markets and could command market coverage of 1.3x to 1.4x.

Richard Anderson asked for clarification on the SLM tenant default, including the expected timeline for recovering lost NOI in 2025 and whether the newly transitioned properties would be on a cash basis. He also inquired about the timing for a new Chairman announcement and potential impacts from the recent election.

Answer

Chief Investment Officer Kevin Pascoe detailed the SLM transition, expecting a return to normal income levels in the second half of 2025, with two cash-flowing properties resuming rent payments sooner. President and CEO Eric Mendelsohn stated that a new Chairman would likely be announced after the current Chairman's retirement at year-end and expressed cautious optimism about the new political administration, citing a previously industry-friendly CMS head.

Richard Anderson questioned the potential pipeline for internal triple-net to SHOP conversions, the long-term target for SHOP as a percentage of the company, the acuity focus for future SHOP deals, and whether there were any issues with top-10 tenant Genesis.

Answer

Co-CEO Pamela Shelley-Kessler stated there are no current plans for further internal conversions, as SHOP growth will be external. She also noted the focus is on larger, continuum-of-care properties (IL/AL) rather than stand-alone memory care. Clint B. Malin, Executive VP, confirmed that Genesis is current on rent and has not requested any assistance, highlighting the strength of their portfolio with LTC.

Richard Anderson of Wedbush Securities questioned the long-term strategy for RIDEA, asking about its potential scale, the timeline for it to meaningfully impact growth, and the rationale for adopting the structure now. He also asked about any rent loss risk from a non-renewing tenant during 2025.

Answer

Co-CEO Pamela Shelley-Kessler projected that most RIDEA growth will be external and could eventually comprise 25-50% of the portfolio, driven by strong operator demand. Co-CEO Clint B. Malin explained the timing was influenced by lessons from the pandemic and current deal pricing. He also assured that LTC expects to collect all rent from the non-renewing tenant through the lease maturity in early 2026.

Richard Anderson sought details on the $150-$200 million RIDEA conversion plan, asking if it represents the full potential for internal conversions, involves single or multiple operators, and how partnerships for external growth would work. He also asked about ALG's rent payments and the possibility of accelerating the Brookdale purchase option.

Answer

Co-President and CIO Clint B. Malin stated the conversions would involve multiple operators and that future growth would primarily be external. He also confirmed ALG's rent payments were current net of deferrals. Co-President and CFO Pamela Shelley-Kessler noted there is no catalyst to bring the carefully laddered Brookdale purchase option forward.

Richard Anderson of Wedbush Securities asked if the lack of interest in large portfolios was due to asset quality or a strategic commitment to simplicity. He also questioned if SHOP conversions were part of the strategy and whether rent coverage growth has peaked given moderating reimbursement rates.

Answer

CEO Rick Matros confirmed the strategy is a commitment to predictability and simplicity, avoiding 'big swings' while still achieving growth. He stated there is little left to convert to SHOP within the portfolio. On coverage, he believes there is still room for growth, citing continued occupancy gains, moderating labor costs, and expected outsized Medicaid rate increases this summer, which should offset lower Medicare rate growth.

Richard Anderson of Wedbush Securities inquired about the accretion math for acquisitions and the potential impact of federal budget negotiations on Medicaid.

Answer

CFO Michael Costa outlined that a low-to-mid 7% initial yield is breakeven or slightly accretive and that funding would likely be a 60/40 equity-debt split. CEO Rick Matros expressed confidence that the portfolio could withstand potential Medicaid cuts due to its operational strength and the political guardrails in place.

Richard Anderson of Wedbush Securities asked about competition from other REITs on acquisitions, the company's interest in debt investments, the reason for the strong turnaround in SHOP growth, and whether SNF coverage gains are nearing a peak.

Answer

CEO Rick Matros stated that cost of capital is not a barrier in competing for skilled nursing assets and that Sabra is unique among its peers in pursuing SHOP deals. CFO Michael Costa clarified that debt investments are not a focus. Regarding SHOP growth, Costa explained that a low growth figure earlier in the year was an anomaly due to a tough comp. Matros believes there is more than a year left of strong SNF coverage improvement, driven by outsized rate increases and operating leverage from rising occupancy.

Richard Anderson of Wedbush Securities questioned management's confidence in the Genesis situation, noting the remaining letter of credit seems small relative to future rent. He also asked for the "real number" for the fiscal 2026 CMS rate update, considering value-based adjustments and other cost pressures.

Answer

CEO Taylor Pickett reiterated his lack of worry about Genesis, stating that while the letter of credit is less than a month's rent, a non-payment would trigger a default, and the underlying assets are "incredibly viable." SVP Megan Krull addressed the CMS rate, stating the 2.8% proposed rate is the true number and was in line with expectations. She added that Omega's strong operators typically perform well on quality metrics, and the company focuses more on Medicaid, which has been keeping pace with inflation.

Richard Anderson inquired about the priority of share buybacks versus acquisitions, the tenant mentality driving short-term leases, and whether management would have raised guidance if not for macro uncertainties.

Answer

Executive Anthony Saladino stated that while buybacks are compelling, expanding the platform remains the priority, and any repurchases would be balance sheet neutral. Executive Jeffrey Witherell noted that while some tenants are seeking short-term space due to supply chain shifts, the specific ODW leaseback is related to that tenant's campus consolidation, not tariffs. Saladino affirmed confidence in the current guidance range, citing strong leasing and deployment momentum.

Richard Anderson questioned the optimism surrounding the St. Louis lease given its short-term nature, asked for an update on leasing the vacant Cleveland properties, and sought to clarify if the guided $360 million in acquisitions would fully deploy the capital from the Sixth Street transaction.

Answer

EVP of Asset Management James Connolly explained the St. Louis tenant, a large international distributor, signed the lease based on one contract and has already expressed intent to add more contracts and space. Regarding Cleveland, Connolly noted the market is very tight and they expect to have deals for the remaining space in the next couple of months. President and CFO Anthony Saladino confirmed that the guided acquisitions, combined with the Memphis portfolio purchase in 2024, would get them close to deploying the full amount from the Sixth Street deal.

Richard Anderson of Wedbush Securities asked for the key learnings from the recent Cleveland tenant failures regarding credit monitoring, questioned if the 6.2% Chicago cap rate was influenced by other elements of the Sixth Street deal, and sought clarity on the net impact on NOI growth for 2025.

Answer

James Connolly, Head of Asset Management, explained that the failed tenants were in new, less-established industries and that future deals with similar tenants would require stronger financial backing. Executive Anthony Saladino added that one tenant was already on their watchlist. Executive Jeffrey Witherell defended the 6.2% cap rate, stating it aligns with market trades for similar portfolios and that Sixth Street's investment was a holistic backing of the company. Witherell expressed confidence in significant NOI growth for 2025, driven by leasing up vacancies and contributions from new acquisitions.

Richard Anderson asked about the timeline and priority of the new CEO's strategic initiatives and inquired about the company's general strategy regarding its joint venture model.

Answer

CEO Peter Scott explained that portfolio optimization and deleveraging are near-term priorities intended to be reflected in 2026 guidance, while leasing upside is a 2-3 year goal. He stated that he views joint ventures as a valuable tool for growth through acquisitions but clarified that the current portfolio optimization plan involves outright sales of non-core assets rather than contributing them to JVs.

Richard Anderson questioned if the company's clearly defined strategic plan could hinder the CEO search and asked if the company is having success pushing rent growth to outpace inflation.

Answer

Interim CEO Constance Moore asserted the strategy is not a hindrance, as the board has assured candidates that a new CEO will have the latitude to evaluate the team and strategy. COO Robert Hull explained that while they use an IRR-based model that balances rent with occupancy costs, all new leases include annual escalators of 3% or more, embedding stable long-term growth.

Richard Anderson inquired about the company's future communication strategy after the current occupancy push, the potential for a pivot in capital allocation away from buybacks, and the strategic rationale behind recent executive leadership changes.

Answer

Executive Todd Meredith indicated that while the focus on occupancy gains will continue into 2025, the company will remain transparent about its goals. He described the capital allocation framework as dynamic, not a static pivot. He explained the leadership changes were to align executives with key initiatives: operations (Rob Hull), investments (Ryan Crowley), and bringing a fresh perspective to the CFO role (Austen Helfrich).

Richard Anderson questioned if entering the SHOP model is now a higher priority, sought clarification on whether the $500 million pipeline includes UK deals, compared US vs. UK returns, and asked for details on the net impact of the CMS fiscal 2026 reimbursement update.

Answer

President and CEO Dave Sedgwick explained that while the company is focused on the UK, it remains patient in looking for the right entry into the SHOP model. He confirmed the $500 million pipeline is exclusively for US deals, which are mostly higher-yielding skilled nursing facilities. He stated the net CMS rate increase for CareTrust's portfolio is approximately 2.2%, which is considered manageable and in line with historical trends.

Richard Anderson asked about the willingness to do new deals with tenant PACs, how a SHOP strategy might be executed, and for a breakdown of 2024's investment volume between normal pipeline replenishment and larger, discrete portfolios.

Answer

President and CEO David Sedgwick indicated a likely 'holding pattern' on new deals with PACs until they release earnings. On SHOP, he stated all options are on the table. He explained that a simple breakdown of 2024 investments is difficult, as large deals like the Tennessee portfolio are not included in the quoted pipeline until they are highly certain.

Richard Anderson asked about the operational transition for the new portfolio, the risks of rapid growth, the current skilled nursing reimbursement cycle, and the company's optimal rent escalator structure.

Answer

President and CEO David Sedgwick expressed confidence that risk is managed by maintaining a strict underwriting discipline focused on operator quality. He characterized the current environment as stable, with the key difference from the past being the start of a major demographic tailwind that will drive occupancy. He identified CPI-based escalators with floors and ceilings as optimal. Chief Investment Officer James Callister added that there will be a ramp-up period for new operators to reach stabilized coverage.

Richard Anderson of Wedbush Securities asked about the drivers of declining resident turnover and whether it could become too low, potentially limiting rent growth opportunities. He also questioned if the decision to maintain guidance was influenced by macro concerns or simply standard Q1 practice.

Answer

COO Mike Lacy attributed the record-low turnover to a transformational shift towards focusing on the lifetime value of a resident, enabled by new tools and training for associates. CEO Tom Toomey emphasized that the goal is optimizing total revenue, not just one metric like turnover, and that dynamic pricing ensures they don't sacrifice revenue. Regarding guidance, CFO Joe Fisher stated that it is UDR's standard practice not to adjust guidance after Q1, regardless of the strong start, as they focus on finishing the year.

Richard Anderson of Wedbush asked about the strategic shift of the Developer Capital Program towards stabilized assets and questioned the differing views among peers on the Sunbelt recovery timeline.

Answer

CEO Tom Toomey explained the program's shift is a market-driven response, as few new development projects currently make financial sense. On the Sunbelt, CFO Joe Fisher stated UDR's analysis points to equilibrium by mid-2025 as supply moderates, though job growth is a wildcard. SVP Mike Lacy added that UDR's strong other income growth in the Sunbelt (12-13%) is a key differentiator supporting its relative performance in the region.

Richard Anderson of Wedbush questioned the Brookdale transition strategy, asking if Ventas was leaving value on the table by not converting the entire portfolio to a RIDEA (SHOP) structure.

Answer

CEO Debra A. Cafaro, after a connection issue, briefly responded that the entire Brookdale portfolio is improving. She noted that while the 45 assets are moving to SHOP, the remaining leased assets are also improving NOI through a significant rent increase on lease renewal.

Richard Anderson questioned the acquisition focus on high-performing assets over more value-add opportunities, given the strong market fundamentals. He also asked for data points proving that post-pandemic occupancy can stabilize at a level higher than before.

Answer

CEO Debra A. Cafaro and Executive J. Hutchens explained the strategy is about balanced portfolio construction, as the existing SHOP portfolio already contains significant value-add opportunity. Hutchens confirmed that over half the portfolio has already surpassed pre-pandemic occupancy, and the industry is just entering a period of strong demographic-driven demand.

Richard Anderson from Wedbush asked if Ventas' operational expertise creates a competitive moat for acquisitions, queried the outlook for investment spreads, and sought clarity on the Brookdale lease renewal deadline.

Answer

CEO Debra Cafaro affirmed that Ventas' scale, data analytics, and experience provide a significant competitive advantage. On the Brookdale lease, she confirmed that the November 30 date is the contractual deadline for Brookdale to exercise its renewal option.

Richard Anderson asked for evidence to support the claim that the West Coast outperforms in recessions and questioned when the company might consider investing more in improving downtown San Francisco areas.

Answer

Executive Angela Kleiman cited long-term rent growth CAGR data and the resilience of the tech sector, which has already retrenched, as evidence of the West Coast's defensive characteristics. Executive Rylan Burns responded that while they underwrite all opportunities, recent downtown San Francisco transactions have occurred at low cap rates that already price in recovery, making suburban Peninsula markets a better relative value at present.

Richard Anderson of Wedbush Securities asked if Essex's external growth strategy would lean more toward its northern regions given regulatory concerns in L.A. He also questioned the long-term rationale for maintaining a structured finance business if fee-simple ownership is more NAV accretive.

Answer

Executive Angela Kleiman confirmed that 2024 investment activity was heavily focused on the northern regions due to superior fundamentals and recovery potential, a trend that will continue. Regarding structured finance, she explained the business was attractive when construction costs were high but is now being rightsized. It is being maintained at a smaller scale to provide visibility into local developer activity and supplement returns.

Rich Anderson explored the relationship between the high Q1 retention rate and the rapid pace of early leasing, and asked if STAG is tracking new tenant origins as evidence of nearshoring trends.

Answer

CFO Matts Pinard and CEO William Crooker confirmed the high 85% Q1 retention is linked to completing a large volume of renewals early, and they expect the rate to normalize toward the 70-75% full-year guidance. On nearshoring, Pinard stated that while hard data is limited, diversifying supply chains is a clear driver of demand. He cited a new 7-year lease with a 3PL in Savannah as a direct result of this trend, which they believe will be a net benefit for their portfolio.

Rich Anderson asked for the bull and bear case scenarios for the American Tire bankruptcy and questioned how quickly the acquisition pipeline reacts to macroeconomic changes like interest rate hikes.

Answer

CEO William Crooker stated that American Tire's leases are at market rates and the facilities are actively utilized, but he declined to speculate on the bankruptcy's outcome. Regarding the acquisition pipeline, he described it as dynamic, noting that STAG immediately adjusts its return requirements to its cost of capital, which allows it to continue finding opportunities even in a rising rate environment.

Richard Anderson asked for clarification on modeling same-store NOI growth for the year, questioned why the stock might be underperforming despite strong fundamentals, and inquired about the potential for clustered impacts from government early retirement offers.

Answer

EVP and CFO Anthony Mifsud explained that full-year same-store NOI guidance is unaffected by the quarterly timing of tax refunds. President and CEO Stephen E. Budorick opined that market fear, not fundamental weakness, was affecting the stock price, creating an investment opportunity. He also stated that government retirement offers were targeted broadly and are not expected to impact the priority missions COPT supports, noting that DoD is actively recruiting.

Richard Anderson of Wedbush Securities asked about the portfolio's natural or maximum occupancy level, sought to confirm the normalization of 2024 same-store NOI growth, and inquired about the acquisition pipeline following recent purchases.

Answer

EVP Britt Snider suggested that 95% to 96% represents the portfolio's natural occupancy level. EVP Anthony Mifsud confirmed the 2024 same-property NOI growth normalization and stated there are no similar one-time items anticipated in the 2025 forecast. Regarding acquisitions, Mr. Snider noted they are seeing some distressed opportunities, but CEO Stephen E. Budorick emphasized that any purchase would be opportunistic and must meet strict criteria related to Defense/IT use.

Richard Anderson asked if the 3900 Rogers Road acquisition includes a SCIF component and why the building was previously vacant. He then questioned if recent acquisition successes might accelerate the disposition of non-core regional office assets. Finally, he inquired if the returns on the Des Moines project would be similar to past data center developments.

Answer

President and CEO Stephen E. Budorick confirmed the Rogers Road property will be fully SCIF'd and was previously a call center. He stated that recent successes do not change the timeline for regional office sales, as the broader debt markets for office investment remain unsupportive of achieving good value. He also affirmed that the return framework for the Des Moines project will be in the 'same basic framework' as prior developments.

Richard Anderson from Wedbush Securities asked about the speculative development pipeline, questioning the leasing outlook for the unleased projects and the circumstances under which the company might reconsider its $800 million speculative development cap. He also asked if the current environment prompts more consideration of build-to-suits.

Answer

CFO Scott Musil clarified that the developments under construction are not included in 2025 guidance. CEO Peter Baccile explained the development cap is based on market cap and is a limit, not a target, stating there's no reason to reduce it as starts are based on risk-adjusted returns, not available capacity. He affirmed they are always open to build-to-suits but will proceed with speculative starts where there is unmet demand, and EVP Peter Schultz added that projects are flexibly designed for single or multi-tenant use.

Richard Anderson of Wedbush inquired about the leasing outlook for the speculative development pipeline, the rationale for its size, and whether the current environment might shift focus towards more build-to-suit projects.

Answer

CEO Peter Baccile explained that the speculative development cap is a governor based on market capitalization, not a target, and there is no plan to reduce it. He stated the company proceeds with starts based on market opportunity, not available capacity. He and EVP Peter Schultz also noted that projects are designed with flexibility for multi-tenant use and that the company is always open to build-to-suit opportunities.

Richard Anderson asked for specifics on why the upcoming election is causing tenant hesitation, requested insight into the baked-in same-store NOI growth for 2025, and inquired about current market rent growth and its potential speed of recovery.

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CEO Peter Baccile explained that election-related uncertainty about the broad economic landscape, not specific candidates, is causing delays in new growth investments. CFO Scott Musil declined to give 2025 guidance but pointed to strong leading indicators, such as a 33% cash rental rate increase on 37% of 2025 expirations already leased. Peter Baccile stated that market rents are currently 'flattish to up a little bit' (or up 2-3% excluding Southern California) and that a recovery could begin in the second half of 2025 as new supply diminishes.

Richard Anderson questioned the company's confidence in accelerating rental home additions from 565 in 2024 to a target of 800 in 2025. He also asked about the likelihood of homes in inventory being sold rather than rented and sought commentary on the economic drivers and potential for converting current renters into homeowners, particularly in light of potential changes to financing laws.

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EVP & COO Brett Taft explained that the confidence in hitting the 800-home rental target comes from a stronger starting inventory position compared to the prior year and robust demand in key markets. He acknowledged that many inventory homes could be sold, which is a welcome outcome, and the company would simply replace them. President & CEO Samuel Landy elaborated on the renter-to-owner dynamic, stating that while some residents will always be transient renters, there is a significant opportunity to convert long-term residents to homeowners, a trend that would be dramatically accelerated by favorable changes to financing laws.

Richard Anderson questioned the financial impact of storm costs on quarterly NOI growth, the reasons for flat sequential same-store occupancy, the potential obsolescence within the rental home portfolio, and the methodology for including expansion sites in same-store calculations.

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EVP and COO Brett Taft quantified storm costs from the Midwest at approximately $240,000, noting that even without them, NOI growth would have been around 9%, but other one-time charges were also a factor. He and President and CEO Samuel Landy attributed flat occupancy to normal fluctuations and regional differences, expressing confidence in future growth. Samuel Landy stated that since the rental program began in 2011, virtually no homes are obsolete. EVP and CFO Anna Chew confirmed that expansion sites are included in same-store community calculations immediately, but their impact has not been material.

Richard Anderson of Wedbush asked about the recent revolver covenant adjustments, inquiring about the potential for future flexibility and the trade-off with reduced lender commitments. He also asked for more detail on the rightsizing of Quixote, including whether more market exits like New Orleans are planned.

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CFO Harout Diramerian explained the revolver amendment was about creating flexibility and aligning with market terms, setting the company up well for 2025 and 2026. EVP of Leasing Arthur Suazo clarified that the Quixote rightsizing is ongoing, with a second phase of cost-saving initiatives underway. He noted these efforts are focused on eliminating specific stages and associated payroll rather than full market exits like the one-off case of New Orleans.

Richard Anderson inquired about Hudson Pacific's appetite for its non-San Francisco Bay Area assets and whether they might be a source of future sales. He also asked about the potential to recapture the previously mentioned ~$100 million in lost EBITDA from the studio business downturn.

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CEO and Chairman Victor Coleman indicated that while some high-quality Peninsula assets are long-term holds, they would consider exiting certain submarkets like Redwood Shores. President Mark Lammas addressed the EBITDA question, breaking down the potential recovery between same-store studios and the Quixote business. He estimated that as production show counts return to normalized levels of around 120, the combined studio platform could generate approximately $75 million in run-rate EBITDA.

Rich Anderson of Wedbush Securities asked if the timeline to rebalance the portfolio would be extended due to market conditions, whether the company would accept FFO dilution for AFFO-neutral deals, and for the current size of the acquisition pipeline.

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CEO Anne Olson confirmed the portfolio rebalancing timeline would likely be longer due to low transaction volume but stressed the company's readiness to act. She affirmed they would consider slightly FFO-dilutive deals if they are cash-flow neutral and offer superior growth. She estimated the current pipeline of interesting deals at around $0.5 billion, a significant decrease. SVP Grant Campbell added that reduced interest rate volatility is needed to spur market activity.

Richard Anderson asked how much closer AvalonBay expects to get to its 25% expansion market allocation target in 2025. He also questioned whether acquiring in those markets will become less appealing as they recover, making development the primary path to reaching the target.

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CEO Benjamin Schall stated that the company is taking a measured approach and expects to increase its expansion market allocation by another 2-3% in 2025, similar to the prior year. He clarified that he views growth as an 'and' proposition, not 'either/or.' The company is in a strong position to grow through both acquisitions and development, with the specific choice being made at the submarket level based on relative economics like replacement cost.

Rich Anderson of Wedbush asked about the underlying economic assumptions, particularly for 2025, that support the company's more optimistic outlook for development deliveries in 2026. He also asked for the bull case for investing in multifamily REITs in the upcoming year.

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CEO Benjamin Schall outlined that consensus forecasts show slowing but still positive job growth in 2025, with a potentially favorable mix of higher-income jobs. He noted that while job growth may slow, so is new supply. The bull case for AvalonBay, he explained, rests on the continued outperformance of its suburban coastal portfolio, its ability to lean into accretive external growth through development, and potential for increased transaction activity.

Richard Anderson asked Eric Bolton about his transition to Executive Chairman and the future leadership dynamic with the new CEO. He also questioned if the extraordinary supply pressure could lead to an equally extraordinary positive snapback in rent growth in 2026.

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H. Bolton, Executive Chairman, described his future role as a 'dimmer switch,' where his involvement will gradually decrease while he remains available to support the new CEO, Brad Hill, and the board. He expressed strong optimism for 2026, agreeing that the severity of the current supply cycle could indeed set the stage for a significant recovery. He believes the dramatic fall-off in new supply against a backdrop of strong demand will have a 'hugely positive' impact on performance.

Richard Anderson sought clarification on the long-term target for expansion market exposure, questioning if it had been lowered from 25% to 20%, and asked about the expected cadence to reach that target.

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CEO Mark Parrell clarified that the target remains a range of 20% to 25% and he was merely using shorthand; there has been no change in strategy. He agreed with the analyst's math that executing the 2025 transaction plan could bring their expansion market exposure to around 15% by the following year, expressing a desire to complete the strategic rotation as quickly as value-accretive opportunities allow.

Richard Anderson asked about the long-term plan for the commercial paper used in the Blackstone deal financing. He also questioned the strategic reversal of re-entering the Sunbelt nearly a decade after a major disposition in the region.

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CFO Bob Garechana clarified that the commercial paper balance will be paid down with proceeds from dispositions planned for Q4. CEO Mark Parrell explained the strategic shift was driven by a combination of rising regulatory risk in coastal markets, the migration of their affluent customer base, and significantly higher homeownership costs in the Sunbelt, which creates a more durable renter demographic.

Richard Anderson asked about the persistence of low multifamily cap rates (sub-5%) despite market uncertainty and whether these rates need to adjust for Camden to become an active buyer.

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Chairman and CEO Richard Campo attributed low cap rates to multifamily becoming the number one investment choice for institutional capital, driven by the expected moderation in supply in 2026-2027. He noted that recent deals have priced in the mid-4% cap rate range due to more buyers than sellers. Campo stated that Camden will transact in the 4.5% to 5% range if they can buy below replacement cost and underwrite future rent growth, but also noted that rising Treasury yields could push cap rates back toward 5%.

Richard Anderson of SMBC asked if strong Sun Belt performance could foreshadow a coastal market recovery and questioned if AIR's new simplified, deleveraged structure might allow for taking on more incremental risk.

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CEO Terry Considine acknowledged a potential performance convergence but noted it would be for different reasons, as coastal markets face structural headwinds. He firmly stated that AIR's strategy will remain focused on simplicity, operational excellence, and risk reduction across financial, portfolio, and development activities. He believes the company's ability to make properties more productive will drive outperformance in any economic environment.

Richard Anderson questioned if AIR's new simplified, low-risk model would lead to hesitancy in pursuing value-add acquisitions in a 'risk-on' environment and asked about the disposition strategy, particularly if specific assets were targeted for sale.

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CEO Terry Considine asserted that the company would not be hesitant and would enthusiastically pursue value-add acquisitions when opportunities arise. He also clarified the disposition strategy, noting opportunities to exit New York City and lighten the allocation to California, likely through joint ventures. He highlighted that these would be low cap rate executions, addressing leverage without significant FFO dilution, and acknowledged the improved tax basis makes portfolio management easier.

Rich Anderson of SMBC asked for the rationale behind Aimco's strategic shift from a complex, diversified model to a simplified one, and questioned if this could put the company a step behind on development opportunities post-recession.

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Chairman and CEO Terry Considine explained that the public markets increasingly favor the predictable FFO of a simple business over the NAV-creation of more complex ventures. He stated the separation allows the market to value each business type appropriately and expressed confidence in the long-term demand for the stable, cash-dividend business that will become AIR.

Rich Anderson of SMBC asked if Aimco is observing an urban-to-suburban shift within its portfolio and if it is proactively managing these transfers. He also questioned whether management views Q2 as a definitive trough, given the shifting geographic nature of the pandemic.

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EVP Keith Kimmel confirmed they facilitate resident moves between properties via their 'coast-to-coast' program and are proactively contacting residents to meet their needs. Regarding a market trough, Kimmel noted that while some areas are improving, the situation remains dynamic and they expect 'choppy water ahead.' Chairman and CEO Terry Considine added that local government regulations are a key variable creating disparate outcomes even in nearby markets.