Seasonality Expectations
Q: Are you guiding to no deceleration in Q4?
A: Michael stated they expect normal seasonal deceleration in both the third and fourth quarters. " They originally modeled full-year blended rates at about 2%, now expecting closer to the mid-2% range. " The portfolio is over 96% occupied, with solid application volumes and pricing trends aligning with a normal year. "

L.A. Supply and Evictions Impact
Q: When will L.A.'s pricing weakness from evictions improve?
A: Michael mentioned they saw a 70 basis point year-over-year occupancy lift in L.A. but new lease changes remain negative due to new supply in key submarkets like Hollywood and Downtown. " They expect continued pressure from supply for the rest of the year but anticipate upside potential in 2025. " Despite softer new lease changes, total revenue is strong as they fill units with paying residents. "

Capital Deployment and IRR Hurdles
Q: How are you thinking about IRR hurdles today?
A: Alex said they're pricing acquisitions, generally newer products in the suburbs, around a 5% cap rate. " Under conservative growth assumptions, they're targeting IRRs around 8%, which fits within their cost of capital. "

Expansion Markets and Supply Impact
Q: How will new lease growth progress in expansion markets?
A: Michael noted challenging operating conditions in expansion markets due to supply. " They're offering concessions averaging 6 weeks to 35%–50% of applicants. " They don't foresee marked deceleration but expect difficult conditions for the balance of the year. "

Margin Expansion Opportunity
Q: How should we think about margin expansion opportunity?
A: Mark indicated that with inflation easing, they aim to blunt expense growth but property taxes, being 45% of expenses, make it challenging to consistently keep growth below 3%. " They're focusing on revenue opportunities and aim for margins approaching 70% or better by leveraging technology and operational efficiency. "

Regulatory Landscape and Advocacy Costs
Q: Can you discuss increased advocacy costs and regulatory risks?
A: Mark explained that advocacy costs are up due to fighting rent control measures in California, expecting to spend $10 million or more this year. " Regulatory efforts are focused on state and local levels, particularly in California, where they are working to educate voters against rent control initiatives. "

Occupancy Guidance Increase
Q: Does increased occupancy guidance reflect stronger demand or leaning into occupancy?
A: Michael stated the raise reflects achieved occupancy gains, with expectations of normal seasonality ahead. " East Coast markets are over 97% occupied. " They focus on maximizing revenue, balancing occupancy and rate based on market and submarket conditions. "

Sustainability of Lease Pricing Spread
Q: Is the spread between renewal and new lease pricing sustainable?
A: Michael said a spread of 300 to 400 basis points between renewals and new leases is common. " Some tightening is expected, but maintaining a spread is normal, and they don't anticipate the rates aligning completely. "

Hollywood Impact on L.A. Market
Q: Any impact from Hollywood industry disruption in L.A.?
A: Michael hasn't observed any impact on demand in L.A. from the industry's disruption. " Occupancy remains strong at over 95.5%. " The primary challenge is the influx of units from evictions, which will take a few quarters to absorb. "

Transaction Market and Cap Rates
Q: How are buyers underwriting assets and cap rates?
A: Alex observed that acquisitions are generally priced around a 5% cap rate. " Underwriting varies by market; in expansion markets, buyers anticipate initial slight negative rent growth with recovery as supply diminishes. "

Commercial Dispute and Construction Charges
Q: Can you explain the commercial dispute and defects charge?
A: Bob stated they took a charge of about $9 million " , related to a commercial dispute over a ground lease and a construction defect reserve. These are unique, non-recurring situations, and they may recover some amounts in the future. "

Acquisitions vs. Development Strategy
Q: Are you favoring buying existing assets or investing in development?
A: Mark indicated they are open to both but currently lean towards existing assets. " They see opportunities as owners sell due to financing pressures and prefer existing assets over development due to funding and execution risks associated with development projects. "