DCP Dilution Impact
Q: Explain the $0.025 per share dilution from DCP assets.
A: The company expects a $0.025 per share dilution due to taking ownership of two DCP assets. This includes a $0.02 dilution from potentially acquiring a Philly asset if it's not refinanced, moving from a high-yield DCP investment to a lower-yield acquisition. Additionally, the assumption of $75 million in payoffs in the back half contributes to the remaining dilution.

Oakland Property Decision
Q: Why not sell the Oakland Lake Merritt property?
A: Despite challenges in Northern California, the company believes holding the Lake Merritt property offers better value than selling it in a distressed market. They anticipate upside through real estate tax resets, increased income, and stabilization efforts, planning to reassess in a couple of years when market conditions improve.

Lease Rate Growth Outlook
Q: Will lease rate growth bottom in first half and improve?
A: The company anticipates lease rate growth to average 0.6% in the first half of 2024, similar to the second half of last year, with an expected increase to 1% in the second half. Early trends show a promising 150 basis point increase from December to January, suggesting potential improvement moving into 2025.

High Supply Market Guidance
Q: How do you guide in high supply markets?
A: The company acknowledges facing elevated supply but notes that deliveries are similar to late 2023 levels. With strong occupancy and positive leasing trends, they believe they can navigate challenges, especially entering a seasonally stronger period, and are seeing encouraging signs that may indicate a market floor.

Recovery in Northern California & Seattle
Q: What's the recovery trend in Northern California and Seattle?
A: In San Francisco, occupancy is around 97% to 97.5%, with concessions decreasing and rents starting to rise. They observed a 700 to 750 basis point improvement in rental blends from December to January. In Seattle, rental blends increased by 250 basis points, driven by improved demand and reduced concessions, particularly in the Bellevue area.

DCP Book Strategy
Q: Will you shrink the DCP book or reinvest?
A: While some natural shrinkage may occur due to potential asset takeovers and $75 million in anticipated payoffs, the company intends to redeploy capital into traditional DCP investments or recaps. They do not plan to significantly reduce the DCP portfolio further and aim to maintain or grow it over time.

Distressed Real Estate Opportunities
Q: Will distressed real estate present more opportunities?
A: The company expects some developers to face distress, but widespread distressed pricing is unlikely due to strong capital availability from sources like Fannie Mae and Freddie Mac. They anticipate selective opportunities rather than a significant influx of distressed assets, as multifamily remains attractive to investors.

Revenue Generation & Cost Savings
Q: What are current opportunities for revenue and cost savings?
A: Initiatives such as WiFi rollouts are expected to contribute about $6 million in incremental revenue in 2024, with 20,000 units installed and 12,000 more planned. The company is also utilizing AI for fraud detection and enhancing customer experience to reduce turnover by 100 basis points, leading to additional revenue and expense savings.

Occupancy Levels vs Guidance
Q: Occupancy in January was higher; why is guidance flat?
A: January's elevated occupancy of 97.2% is likely a peak. The company plans to trade some occupancy for rent growth in the spring, expecting occupancy to adjust to around 97% or the high 96% range as they push rental rates during the leasing season.

Renewal Rate Growth Assumption
Q: Why is renewal rate growth assumed at 3% in 2024?
A: The company anticipates renewal rate growth of 3% for the year, starting with renewals at 3.5% to 4%, which typically negotiate down by about 50 basis points. They plan to adjust renewals based on market rent movements, aiming for consistency throughout the year without significant regional disparities.

Sunbelt Market Expectations
Q: What's the outlook for Sunbelt markets?
A: The company expects full-year rental blends in the Sunbelt to contribute about negative 100 basis points to revenue, factoring in higher supply. However, other income initiatives are expected to contribute 90 basis points, double the portfolio's average, helping offset challenges. They anticipate continued strong job and wage growth supporting absorption.

Bad Debt Reserves in Guidance
Q: What's the bad debt reserve in guidance?
A: The company assumes a flat bad debt reserve year-over-year, maintaining a collection rate of 98.5%, consistent with the last six months. While bad debt levels have stabilized, they are not factoring potential improvements from fraud prevention efforts in their guidance, though they see upside potential.

Expense Growth in Sunbelt
Q: What's expense growth expectation in the Sunbelt?
A: Expense growth in the Sunbelt is slightly higher, within about 100 basis points of the overall portfolio, due to factors like increased personnel costs amid supply pressures and expenses related to WiFi rollouts. The overall expense growth guidance midpoint is 5.25%.

Concessions in San Francisco & Seattle
Q: What concessions are being offered in SF and Seattle?
A: In San Francisco, concessions have been reduced from about three weeks to approximately one and a half weeks, leading to improved rental trends. In Seattle, the company hasn't offered concessions over the past year, instead adjusting market rents as needed, and currently offers no concessions.

Capital Deployment & Hurdle Rates
Q: What would make you more active in capital deployment?
A: The company is cautiously considering capital deployment, focusing on opportunities with joint venture partners like LaSalle. They've noted improvements in debt costs and asset pricing, and are contemplating development projects with current NOI yields in the 5.5% to 6% range, potentially delivering into a stronger market in 2025 or 2026.

Renewal Rates & Move-out to Buy
Q: Are more households choosing to rent over buying?
A: High affordability barriers in the single-family housing market are leading more households to rent. The company's move-outs to buy are significantly below historical levels, indicating that residents are staying in the renter pool, which supports retention and pricing power.

Innovation and Other Income
Q: Has the outlook for innovation income changed?
A: The company's outlook remains consistent, expecting $5 million to $10 million in contributions from innovation and other income in 2024. Initiatives like the WiFi rollout, with 20,000 units installed and more planned, are progressing as expected, with greater benefits anticipated in the coming years.

DCP Exposure and Impairments
Q: How many DCPs are on cash basis vs accruing?
A: The majority of DCP investments are accruing interest due to their development stage. As assets reach operational status and generate cash flow, they begin paying the senior loan with cash, but the company's preferred position typically continues to accrue until specific milestones are met.

State of Emergency in SoCal
Q: Are renewal rates impacted by SoCal's state of emergency?
A: Under price gouging regulations during the state of emergency, rent increases are capped at a maximum of 10%. The company reports minimal impact on operations, with only about 10 to 12 units affected by issues like leaks, and continues to monitor the situation closely.

Softness in New York Market
Q: What's happening in the New York market?
A: The company is experiencing seasonal softness in New York, particularly in the financial district. Rental blends improved by about 150 basis points from December to January, moving from negative 1.2% to positive 0.2%, and they are cautiously optimistic as they observe market trends and adjust strategies accordingly.