Rent Growth and Occupancy Outlook
Q: Will occupancy remain high, and what's the rent growth outlook?
A: Occupancy is currently at 95.5%, and we expect it to stay around this level through the year, possibly dipping slightly due to seasonality but remaining above 95% to maintain pricing power. We're sending out renewals at 4.6%, typically achieving renewals just above 4% after negotiations. Blended lease growth is expected to be 1.6% in Q3 and 1.3% in Q4, consistent with prior expectations.

Development Pipeline Yields and Plans
Q: What yields are expected on new developments, and are more starts planned?
A: The new Charlotte projects have untrended yields in the mid to high 5% range and trended yields in the 6%, with IRRs in the low to high 8% range. We don't plan to start more developments this year due to timing but anticipate starting projects in 2025 and expanding the pipeline, possibly acquiring projects from developers who can't secure financing.

Expense Management and Cost Outlook
Q: How are expenses trending, and what about property taxes and insurance?
A: Expense growth is lower than expected at 2.85% versus the long-term average of 3%. Property taxes are up only 0.2% this year but expected to return to a normal 3% growth rate. Insurance costs, which were up 40% last year, are expected to decrease by 3% this year due to increased competition among providers.

Bad Debt Improvement
Q: How is bad debt trending, and what improvements are seen?
A: Bad debt is improving, down to 80 basis points in Q2 and expected to be 75 basis points for the rest of the year. Significant improvements are noted in California, dropping from 2.6% in Q1 to 2.1% in Q2, and Atlanta, from 1.8% to 1.4%. We are approaching our normal bad debt level of 50 basis points.

Capital Allocation and Potential Equity Issuance
Q: Will you consider raising equity for acquisitions?
A: If we can acquire portfolios that enhance our strategic plan and are accretive, we would consider using equity alongside debt while maintaining our strong balance sheet. We anticipate a robust transaction market over the next 18 months and are open to all capital sources if the math works.

Market Conditions in Houston and D.C.
Q: How are Houston and D.C. expected to perform?
A: Both markets are expected to be top performers, with D.C. likely ending the year as our number 1 or 2 market. Houston shows robust growth, benefiting from both traditional energy and energy transition initiatives, including a $2 billion hydrogen hub.

Supply and Demand in Over-supplied Markets
Q: Are over-supplied markets like Austin and Nashville bottoming out?
A: We believe we're still in the middle of the supply cycle in Austin and Nashville, likely extending into mid-2025. Despite high supply, strong absorption driven by in-migration mitigates the impact, but it's uncertain if we've reached the bottom yet.

Impact of Employment Trends
Q: How does slowing employment growth affect you?
A: A slowdown is positive as it helps the Fed potentially lower rates, which benefits us. Our markets continue to attract jobs and in-migration, allowing us to capture household formation despite slower growth.

Land Costs and Acquisition Opportunities
Q: Are land costs decreasing, and are there acquisition opportunities?
A: Land costs remain sticky with sellers reluctant to reduce prices. However, opportunities exist to acquire land or projects from developers unable to secure financing.

Turnover Rate Improvement
Q: How is turnover trending?
A: Turnover typically increases in Q3, but we've improved from 53% in July 2023 to 47% in July 2024, a 600 basis point improvement year-over-year.

Loss to Lease Position
Q: What is your current loss to lease position?
A: We are at a loss to lease position of approximately 1%. Markets like D.C. and San Diego have larger losses, while markets like Nashville and Austin have gain to lease.

Hurricane Impact on Guidance
Q: How does the hurricane affect your guidance?
A: The hurricane impact is treated as a non-core expense. We increased core FFO by $0.05 per share and non-core FFO by $0.03, with the $0.02 difference reflecting the anticipated hurricane impact.

Acquisition Cap Rates and NAV
Q: What are your thoughts on cap rates and NAV estimates?
A: Transactions are occurring at cap rates in the low 5% range, whereas public market valuations imply higher cap rates. The public market may be slow to adjust to actual transaction cap rates, and we'll see how the market evolves.

Blended Lease Growth Expectations
Q: How will blended lease growth improve in H2?
A: Blended lease growth is expected to reach 1.6% in Q3, up from 1.2% in July, due to easier comps and strong renewals. Our renewal rates are up 4%, and decreasing turnover should drive growth.