Thank you, Julian, and welcome to AvalonBay Communities first quarter 2025 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon's press release, as well as in the company's Form 10-K and Form 10-Q filed with the SEC. As usual, the press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings, and we encourage you to refer to this information during the review of our operating results and financial performance. And with that, I'll turn the call over to Ben Schall, CEO and President of AvalonBay Communities, for his remarks.

Thank you, Jason. I'm joined today by Kevin O'Shea, our Chief Financial Officer, Sean Breslin, our Chief Operating Officer, and Matt Birenbaum, our Chief Investment Officer. In keeping with our custom, we've also posted an earnings presentation, which we will reference during our prepared remarks, beginning on Slide 4. Recognizing that we are in a period of heightened uncertainty regarding the impact of policy actions on the broader economy, I want to start by emphasizing that we are very well positioned, given our portfolio makeup, our unique set of strategic capabilities, and our preeminent balance sheet, to continue to deliver superior earnings growth for shareholders. We provide high-quality homes and leading apartment markets across the country, in one of the most durable real estate asset classes, with high margins and relatively low CapEx. We continue to proactively reshape our portfolio to optimize future returns, as I will touch on more in a moment. Our operating model transformation, including our leadership and technology and centralized services, continues to drive superior growth from our existing asset base and in new investment opportunities as we've detailed in prior quarters. As we look ahead, we want to particularly emphasize the earnings growth that is set to come from the development that we have underway. $3 billion of projects match funded with attractively priced capital and projects where we have substantially locked in the cost of construction. As these projects lease up this year and next, they will produce a meaningful incremental stream of earnings that is unique to AvalonBay. As we evaluate future investment opportunities, our balance sheet and liquidity position are as strong as they've ever been, as Kevin will further emphasize. And for our next cohort of development starts, we remain focused on delivering 100 to 150 basis points of spread between development yields and both our cost of capital and underlying market cap rates. We are also uniquely positioned among our peers in having raised $890 million of equity on a forward basis at an average gross price of $226 per share, which we expect to deploy into accretive development. Looking ahead, we feel well positioned to continue to execute against our strategic initiatives across a range of macroeconomic scenarios. And we will stay nimble from operations to our capital allocation decisions as we have consistently done over time and throughout cycles. Slide 5 highlights our broadly diversified portfolio, which is well positioned to continue to deliver superior growth. In terms of markets, 47% of our portfolio is in our established regions on the East Coast, 41% in our established regions on the West Coast, and now 12% in our expansion regions. At the submarket level, we have continued to rotate capital to the suburbs in response to demographic and other housing trends, increasing our allocation there to 73%. And in terms of product, we think investors often overlook that 41% of our portfolio are garden communities, 41% are mid-rise buildings, and 18% are high-rise communities, providing a breadth of offerings and price points to meet customer needs. Turning to Slide 6. Our established regions are benefiting from several tailwinds, including strong occupancy and very limited new deliveries this year and in 2026, which should support healthy pricing power. To be more specific, we are projecting that deliveries in our established regions will drop to 80 basis points of existing stock in 2026, which equates to just 45,000 units across all those markets, minuscule levels of new deliveries that we have not seen in 20 years. And while we are pleased with the portfolios we have curated in our expansion regions, we do expect these markets to continue to face operating softness until deliveries decline and market occupancies rebuild. On the flip side, this softness provides opportunities as we execute on our longer-term portfolio optimization goals, selectively increasing our allocation to our chosen expansion regions. Continuing on Slide 7, rental affordability has also improved in our established regions, given solid income growth in recent years, resulting in rent-to-income ratios below pre-COVID levels. And finally, the relative affordability of renting compared to home ownership, given both elevated home values as well as mortgage rates, continues to provide a favorable backdrop for our operating fundamentals. Our portfolio positioning translated into healthy Q1 results and, as Sean will discuss further, is evident in our healthy operating metrics heading into peak leasing season. As noted on Slide 8, we produced strong core FFO growth of 4.8% in Q1 relative to last year and exceeded our prior Q1 guidance by $0.03. Our outperformance in Q1 reflected $0.01 from revenue related to slightly higher occupancy and $0.02 of favorable operating expenses, of which approximately half is timing related. Our Q2 guidance is generally consistent with our original expectations, with Slide 9 providing the components of change relative to Q1, the main driver of which being the sequential seasonal uptick in operating expenses we experience each year. We are also reaffirming our full year 2025 outlook, which, as originally expected, includes sequential internal and external growth in the second half of the year. With that, I'll turn it to Sean to further discuss the operating environment.

All right, thanks, Ben. Moving to Slide 10, as Ben noted, Q1 same-store revenue performance was slightly ahead of our plan driven by modestly higher occupancy than anticipated. In terms of operating metrics, performance was healthy in Q1 and we're very well positioned as we head into the prime leasing season. Resident turnover continues to set new historical lows which supports higher physical occupancy. For the month of April specifically, occupancy was roughly 30 basis points above the same time last year. Additionally, our near term inventory to lease is currently trending about 30 basis points below last year which supports healthy pricing on new leases and renewals and is reflected in the nice uptick we've experienced as we move through Q1 into April. In terms of regional trends that may be of interest, the DC Metro area continues to perform as expected with occupancy and availability generally in line with last year's levels. Additionally, we've actually experienced a modest reduction in the number of lease breaks year-over-year over the last few months. We've started to hear from prospects and residents about the level of uncertainty in the job market, but to date the velocity of activity and pricing in the region has not been impacted. About 12% of our resident base is employed by the government so we're certainly monitoring the leasing, renewal acceptance, and other metrics very closely. In terms of the tech regions, notably Seattle and Northern California, we've continued to see healthy performance in Seattle consistent with our expectations which also had very strong performance in 2024 due to relatively strong job growth, return to office mandates from Amazon, Microsoft, and others, and the positioning of our primarily suburban portfolio in the region, which has benefited from minimal new supply. Northern California, specifically San Jose and San Francisco, continue to improve and at a pace that's slightly ahead of our original expectations. Performance in San Jose picked up at the end of last year but San Francisco really started to gain momentum at the beginning of this year. We're currently more than 96% occupied across the region, about 50 basis points higher than last year with San Francisco leading San Jose and the East Bay at 97.2%. Additionally, our year-to-date average asking rent has increased roughly 5%. Led by San Francisco, a year-to-date gains of roughly 7%. In LA, while we gained a modest amount of occupancy sequentially from Q4 to Q1, we haven't been able to realize as much of an improvement in rate as we would have anticipated moving through Q1 and into April. Currently, availability and occupancy are roughly in line with last year. However, year-to-date asking rent growth is below historical norms at just 3%. We'll need to see better job growth in LA, which has been weak recently, to experience stronger performance throughout the remainder of this year. Looking forward, our overall same-store portfolio metrics are flashing green and we're heading into the prime leasing season from a position of strength so we can take advantage of opportunities as they unfold or shift our tactics in response to any change in the macro environment.

All right. Thanks, Sean. I wanted to provide some more detail on how we are managing risk and optimizing opportunity in our development program given the current environment. Turning to Slide 11, starting with our development already underway, we have 19 projects currently under construction and another four completed last year that are still in lease-up at an estimated total capital cost of $3 billion. These investments have been entirely match-funded, meaning we sourced the capital required to build these projects at the same time that we started them, thereby locking in a favorable spread of 100 to 150 basis points between the cost of that capital and the projected initial return on these new investments. And these projects are generally bought out with hard costs locked in with our trade partners within 90 to 120 days of construction start. Across all of this development underway, we are currently running slightly under budget as we have seen some strong buyout savings on some of the more recent starts with subcontractors increasingly aggressive in bidding for work as their backlogs dwindle. As this pre-funded development completes lease-up throughout this year and next, it will drive outsized earnings growth. As shown on the slide, 2025 will be a trough year for us for new occupancies from our development book at 2,300 homes and only 10% of those new occupancies occurred in the first quarter. Looking forward, we expect this to rise substantially through the balance of the year and to grow further to 2,800 homes in 2026. Turning to Slide 12, our guidance at the beginning of the year anticipated increasing our start volume to $1.6 billion in 2025. These expectations have not changed, but it is important to note that we continue to maintain flexibility on this book of business, and our projected start activity is weighted more towards the back half of the year, with only $240 million started in Q1. If conditions change, we can certainly adjust our plans throughout the year. We have also largely pre-funded this activity through the equity forward transaction we completed last year at a favorable cost of capital. With all the talk about tariffs, we also thought it would be helpful to provide the conceptual illustration on the right side of the slide, which shows how the total costs of a typical AvalonBay development break down between land, soft costs, including capitalized interests, and hard costs, with the hard costs further broken down between labor, subcontractor profit, oversight and supervision, and raw materials. Materials costs generally represent about 25% to 30% of our overall hard costs and 20% of total project costs. And we estimate that with the mix of domestic and imported materials in our projects, the most recent tariffs might increase our total hard costs by about 5%, which would drive a roughly 3% to 4% increase in our overall total basis. While this is a meaningful increase and could be enough to tip some projects into being infeasible, these potential headwinds, which vary from project to project, are currently, in most cases, being more than offset by the larger macro backdrop of declining start activity. We have great visibility into this phenomenon because we generally act as our own general contractor on almost all of our developments. And on those jobs we are actively bidding today, our phones are ringing off the hook with deeper bid coverage and stronger subcontractor availability than we have seen in years. While things are certainly subject to change, this bodes well for near-term potential starts. As shown on Slide 13, we are also continuing to make steady progress on our longer-term portfolio allocation goals as we execute on our portfolio trading strategy. Since the start of 2024, we have been able to increase our allocation to our expansion regions to 12% and increase our allocation to suburban submarkets to 73% through both buying and selling activity, including closing on the 8-asset portfolio acquisition in Texas that we announced back in late February. That transaction, which was funded with a combination of disposition proceeds and $235 million of equity issued at an attractive price of $2.25 a share, is underwritten to an initial stabilized yield of 5.1% at a very compelling basis of $230,000 per home for assets that have an average age of 11 years, considerably younger than our existing portfolio. These acquisitions also provide local operating scale that will have spillover benefits to increase our operating margins at our existing Texas portfolio as well. We are excited about this transaction, which creates a strong foundation for our growth in this expansion region at a good time to be reallocating capital into these markets.

Thanks, Matt. As you can see on Slide 14, we enjoy a strong financial position with excellent liquidity, a high level of matched funding, and a lowly leveraged balance sheet, reflecting our investment grade ratings of A3 and A- from Moody's and S&P. This financial strength supports our planned development starts while also providing capacity to fund further attractive investments that may arise. Additionally, and most uniquely in our sector, we enjoy $890 million in undrawn equity capital that we raised last year at a gross price of $226 per share and an initial cost of about 5%. This will be an important driver of future earnings growth as we deploy this capital in the new development starts later this year. Moreover, we recently executed several financing transactions that improve our liquidity and access to cost-effective capital. We renewed and increased our unsecured credit facility to $2.5 billion, up from $2.25 billion, and extended the maturity to April 2030 from September 2026. In doing so, we also expanded our commercial paper program to $1 billion, up from $500 million previously. This commercial paper program is backstopped by availability under our credit facility and provides us with a cheaper source of floating rate debt than is available under our credit facility. Finally, we closed our four-year $450 million unsecured delayed draw term loan, which we've hedged to an effective fixed interest rate of 4.5%. We intend to draw fully on this term loan by late May. With these transactions and the undrawn forward equity, we now enjoy $2.8 billion of liquidity. As a result of our excellent liquidity and our financial flexibility, we are exceptionally well-positioned to fund planned development starts and at the same time respond to challenges and opportunities in the current environment from a position of strength. That concludes our prepared remarks. Julian, let's please open the line to questions.

Thank you. We will now be conducting a question-and-answer session. Our first question comes from Eric Wolfe with Citibank. Please proceed with your question.

Hey, thanks. You touched upon this in your remarks, but your like-term effect of rent growth has been a little bit lower than last year. So I was just wondering from your perspective if that's mainly because you're sort of leaning into occupancy more than you were last year, or if there's maybe a little bit of impact from the recent economic disruption that we've seen?

Yeah, Eric, Sean. As it relates to rent change, what I'd say is a couple of things. First is, you were generally tracking to plan as it relates to rent change. And as Ben and I noted, debt performance in Q1 was due to slightly higher occupancy. So we're basically tracking consistent with what we thought. As it relates to last year, you know, really a combination of different things. But, you know, as you might remember last year, we had an earlier acceleration of occupancy at the very beginning of the year, January and February. And so we hit harder on rate earlier, I would say, in the quarter. So from a year-over-year comp standpoint, that's really the delta that you're seeing there in terms of the year-over-year change in asking rent, and what we're seeing this year relative to last year.

That's helpful. And you've outlined this plan to grow your expansion markets to 25% of your portfolio, but you also mentioned staying nimble. So I was curious if there was anything that would happen from an economic or policy perspective that would cause you to rethink that plan. Just wondering if there's anything in the near term that would cause that allocation to change.

Eric, it's Ben. As you know, most of our movement towards our 25% target in expansion regions has been through trading. And so, trading of assets out of our generally older assets out of our established regions, and then reallocating that capital into our expansion regions. So capital markets environment, somewhat sort of agnostic to that. Really, I think it'll become a function of what's happening in underlying transaction markets. They're continuing to be active, but not necessarily overly fluid. And the extent that something were to dry up in the transaction markets, that maybe would keep us a little bit slower there. The extent that things are active, we'll continue to pursue and advance towards our goal.

Thank you. And our next question comes from Steve Sakwa with Evercore ISI. Please proceed with your question.

Yeah, thanks. I guess maybe for Matt, I just wanted to circle back on the projected development starts a little bit, and just maybe drill down a little deeper on maybe the checklist or things that you're going to be sort of monitoring most closely to kind of say go, no-go. Is it kind of 30-level, 30,000 foot level things about the economy and overall job growth? Or how nuanced is it getting down to the individual project level and market?

Yeah, hey Steve. I mean, every project updates their proforma when it comes to our investment committee for construction start. And so, at the beginning of the year, we think we know where those projects are in terms of costs, and in terms of NOI, and in terms of the spread there relative to the capital we've sourced to fund it, and relative to where assets would be trading in that market. So, it is deal-by-deal. And, as we sit here at this moment, that pipeline of the remaining starts for the year look to be as profitable as we had thought at the beginning of the year, or late last year, or whenever we last marked those to market. So, as things develop through the course of the year, the costs could change. Right now, we're seeing more good news than bad news on that front. Deals that we've bid recently, we're actually seeing costs lower than where they were two or three quarters ago. So, that's helping. So, that's one big input. NOI is another big input. Obviously, if rents either start to rise or fall more meaningfully, that might change the projected yield on those deals. And then, where the transaction market is. If we see significant changes to the transaction market, that would change the equation of how the value of those assets is relative to where you could buy an asset or the yields relative to the cap rates, which are kind of tracking in the same direction, those are, that would be the other thing we'd be, we look at very carefully.

Great, thanks. And maybe for Sean, just kind of looking at the stats on Page 10 and listening to your comments, I realize things so far have played out kind of as expected, maybe a little bit better. Are you doing anything differently, kind of, as you think about the renewal process or trying to get ahead of things? Or, is it pretty much business as usual until kind of there are darker clouds to the extent that they come or what proactive changes might you be making on the leasing front?

Yes, Steve, good question. What I'd say to that is, it really depends on the region, and our view on the region. So, to give you an example, let's take Los Angeles, which has had a weak employment environment, mainly due to the entertainment sector. You've seen some things there in the ports that are a little bit concerning as it relates to the tariff impact and stuff like that. So, in a market like that, we probably would hedge slightly higher on occupancy and have more flexible renewal parameters for residents that are negotiating 30 days from now, 60 days from now, et cetera regarding a commitment that they're making to a new lease. So, I wouldn't say there's a global strategy. There is a unique market and submarket strategy depending on the circumstances of that environment. So, that's how I would think about in terms of how we position it. If you start to see very, very dark macroeconomic clouds, so to speak, you might alter a portfolio strategy overall. But I wouldn't say we're anywhere near that type of position where you're looking at something that's significant.

Thank you. And our next question comes from Jana Galan with Bank of America. Please proceed.

Okay. Hi. Good afternoon. Thank you for taking my question. This is likely for Matt. On the development pipeline, I appreciate you highlighting 2025 as kind of a lighter delivery year with completions that are kind of more backend weighted and walking us through the home counts. But could you kind of tie this into what type of FFO headwind this is in 2025 versus 2024 and how it will be a tailwind in 2026?

Yeah, this is Kevin. I want to make sure I'm kind of understanding. You want to understand how given the cadence of occupancies out of our development book this year versus last year versus next year, how that plays through from earnings growth headwind.

Exactly.

Okay. So, yeah, and back on Slide 11 here, that's where we have the data for that. So, as you look at 2025 versus 2024, obviously you have 2,300 homes being occupied this year on a projected basis versus 2,600 homes last year. So, last year, if I recall correctly, we probably had maybe $45 million or so of development NOI, maybe low $40 million range, $10 million to $15 million more than we guided to in February of this year, where we guided to $30 million of NOI. So, certainly there's a lot that happens on a rolling two-year basis that informs the development NOI number, but this is the easiest snapshot to look at, which is occupancies in a calendar year period, and there are 300 homes lower this year than last. So, that's a driver towards less development NOI in 2025 versus 2024. So, a little bit of a headwind there. We also, if you're looking more broadly, at the delta between our overall core FFO growth rate, which this year is healthy given what we have forecast for the year of 3.5%. The other headwind we have relative to 2024 was we had higher levels of interest income on cash last year versus this year. So those are the two biggest pieces if you look at sort of core FFO growth relative to external growth platforms, referencing a base of what we get off the internal growth platform this year. So, those are two pieces that I would call out for you, sort of lower occupancies in 2025 and lower cash income. This actually came up in the last call where I was asked to quantify how many cents of earnings growth we anticipated this year off of external growth. And if I recall correctly, the estimate was $0.14, which equated to about a 130 basis points of estimated external growth in 2025 versus 2024 and again that was somewhat muted by lower occupancies and lower cash income. As you look into 2026, you know there's more of a tailwind, so it's a good news story there, all else equal, because we see ourselves going from 2,300 occupancies in 2025 to 2,800 homes next year. So, one can anticipate a higher level of development NOI in 2026 versus this year, where again in our initial outlook, we only had $30 million of development NOI forecast in 2025.

Thanks Kevin. And then, it's great to hear the DC is still maintaining its kind of strong momentum. I guess, you being headquartered in Greater DC, you probably have a better perspective on whether we're all kind of overreacting to news headlines, but just curious if you could kind of comment to what you're seeing, the mood on the ground, the job growth post the changes, and we're hearing from the office companies that there is a lot of good demand from defense companies and growth in Northern Virginia.

Yeah, Jenna, this is Sean. I'm happy to comment, others can as well. What I would say is, generally speaking, there's a fair amount of chatter about it across the region. We certainly hear about it from prospects and residents in terms of just some uncertainty about, you know, I got a job today, you know, hopefully I have a job tomorrow kind of thing. There's nothing in the data yet to say that it's impacting behavior materially. We'll see how the economic data unfolds here over the next several months, including job growth. But I'd say it's primarily discussion points right now in terms of what we're hearing on the ground at our communities and what I'd say just hearing in the general community in terms of what's happening in restaurants and various other things. That's really what you're hearing for the most part.

Thank you. And our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed with your question.

Great, thanks, and good afternoon. I wanted to hit specifically on the renewal rate growth, which is really moderated and lower than it's been in some time in the first quarter, sort of recognizing there was some pickup in April, but what do you attribute to that moderating renewal rate growth and what's really holding you back from achieving a higher increase? And I guess whether you think you're near a low point, absent any macro-related headwinds.

Yeah, this is Sean, but the first thing I would say is, as I mentioned earlier, things are basically tracking where we expected them to be in terms of overall blended rent change. As it relates to renewal specifically, and even on the move-in side, what we communicated on the previous call when we provided our outlook is that we did expect rent change to be stronger in the second half of the year as compared to the first half of the year as a function of the year-over-year comps. And what I mentioned earlier in response to a question is, last year occupancy strengthened much earlier than we anticipated in late January, February, so we were able to hit the gas a little harder on rate at that point in time. And so when you look at the year-over-year change in rate, there's just not as much to gain there at this point in time as compared to what we see as we move further through the second quarter into the back half of the year. So, I would think of it that way in terms of the quarterly cadence of it, and this being the point at which we see the weakest point of renewal rent growth, and we do see that lifting up as we move through the year.

Hey Austin, it's Matt. I'd say it was unique in the sense that the opportunity to buy 8-assets from the same seller, they all kind of fit into our buy box. We are looking for something rather specific. These are all relatively simple walk-up garden assets in suburban submarkets in our target geographies. And that doesn't happen all that often. So, mostly what we've done until this point has been buying kind of one-offs, and that's still kind of the base case assumption. So to the extent other opportunities present themselves that have a similar confluence of factors, we'll certainly be interested in it. I think I talked about it a little bit on the last call even as well. But frequently when larger portfolios come to market, they're in more broad spread geographies than what we're looking for or it includes a mix of different types of assets, including assets that we would have to lay off and take some risk with that. So, this was a little bit of a unique situation.

The other element I'd add, Austin, is it does feel like to us a more opportune time to execute on that trade. You think about where rents in these markets have traveled over the last three years. You look at the basis at which we can enter these markets and the Texas transaction being a good example of that at $230,000 a door, and we're thinking about long-term both earnings and value creation. We can find opportunities to lean in more on the margin we're looking to.

And our next question comes from Jamie Feldman with Wells Fargo. Please proceed.

Hi, this is Cooper Clark on for Jamie. Thanks for taking the question. I wanted to ask if you're still seeing outperformance in your suburban assets versus urban across all of your markets year-to-date, and does the potential for a stronger urban recovery on the West Coast and Sun Belt have any effect on your target allocations moving forward?

Yeah, Cooper, this is Sean. If I take the first one and Matt or Ben can talk about the allocation topic. It depends on what metric you're looking at in terms of outperformance. In terms of revenue growth year over year, the suburban portfolio is outperforming. If you're looking at sort of near-term rent change, that's a little bit more of a push right now. I'd say in part due to recent trends in San Francisco getting stronger and some general improvement in a couple of other urban areas. Seattle is an example. It's not that urban Seattle is great, but on a year-over-year basis, when you start looking at asking rents and then rent change, it's starting to get better. So depending on which metric you're looking at, you get a different answer there.

Yeah, I'd just add on to that as it relates to the overall portfolio strategy and the expansion regions, it's still, across our geography, both expansion and established regions, 2025 and even 2026, there's still more supply as a percentage of stock urban than suburban. That surprised me a little bit because, you would have thought that the urban supply spigot would have been shut off a couple years ago. Those deals take longer to build. They're easier to entitle. Sometimes there's other things driving it, like opportunity zones. So I would say the longer-term supply dynamics still favor the suburbs, at least in the expansion regions we've selected.

Thank you. And then switching over to turnover, just wondering how much of the lower turnover is driven solely by lower tenant move-outs to buy homes versus other factors and maybe benefits from the horizon rollout? I guess if tenant move-outs to buy homes return to pre-pandemic levels, do we still have turnover at historical lows?

Yeah, Cooper, good question. What I would tell you is that the, you know, for the last several quarters now, we've seen sort of move-outs to buy, if you want to describe it that way, are relatively low levels, yet kind of 8% to 9% range. But the overall level of turnover has continued to come down. So I would think of it as the move-out piece on the home side being relatively stable. There are other factors that are driving people's desire to stay longer with us beyond that. So, certainly to the extent that you saw an increase in people moving out versus at home would have an impact, yes, but you've got all of the other factors kind of moving south, so to speak.

Thank you. And our next question comes from Adam Kramer with Morgan Stanley. Please proceed with your question.

Hey guys, thanks for the time here. I think last quarter you kind of framed the job growth outlook for the year as moderating but healthy. I was wondering as you kind of sit here today, obviously a lot has changed, it's just been a few months, but a lot has changed in the macro. I'm wondering what you guys are kind of forecasting or what's the third-party forecast that you guys use and kind of base your guidance and thoughts around how that's changed, if it has at all, in terms of the job growth outlook for the year.

Yeah, Adam, it's Ben. I'll take that. So, going into the year, we looked at NABE, the National Association of Business Economists, looked at their consensus in terms of projected job growth. And to your point, it was moderating expectations relative to 2024 to the tune of a million for net new jobs. Given the last couple of months and given uncertainty and given some of the policy impacts on growth, that consensus estimate has come down more to the tune of kind of a million net new jobs. So, still net positive, but definitely some more sort of concerning horizons out there that we're closely monitoring.

Thank you. And our next question comes from Rich Hightower with Barclays. Please proceed with your question.

Hey, good afternoon, everybody. I just want to go back to the Texas portfolio deal really quickly. So, I think, you know, market reaction to the initial yield or even the stabilized yield was maybe not so positive. But if I think about the math on Avalon source of funds, you issued OT unit at 225, which is kind of at the midpoint of FFO guidance is around a 5% implied equity yield. And even lower than that, if we think about AFFO. So, that's attractive, your cost of debts inside of that. You did use some cash to fund part of the Dallas portfolio. So, just help us understand how we should think about sort of cost of capital, source of funds, how you thought about it relative to that pricing? And then, these units are 11 years old on average. Is there a CapEx on the way that would sort of skew that calculation? Just help me think through the math there, if you don't mind.

Sure. I think, you know, Rich, you're headed in the right direction there. Maybe I'll make a couple of clarifications. So, you split it into two transactions, just in terms of how we funded it. The Austin deals were funded through 1031 exchanges. So, very consistent with how we've been executing on our trading activity over the last number of years. The Dallas transaction was funded through a combination of their down rate units for us versus operating partnership units. But the math that you're indicating is consistent with our math, which is an initial cost of capital at 225 and then around 5%. And so when you line that up relative to our initial stabilized yield on this transaction at 5-1, kind of right in that type of range. And if we find opportunities where that initial yield relative to our cost of capital is relatively on square with itself, but we can advance our portfolio allocation objectives, we'll do that. Then there's the added elements of the benefits of scale. And there's a micro dynamic as it related to this portfolio. Not only was the, these were the submarkets and the product type that we wanted, but there was also very heavy geographic overlap, close proximity to our existing assets in the market. So the acquisitions benefited from that, but also our existing assets in those markets benefit from that additional density as you think about our increased neighborhooding.

And then a little bit more broadly, we are now at the point, and this is the type of step function type of opportunity, not huge, but step function type of opportunity where we can get a more fulsome team on the ground. Our operating scale is closer to what you would think about as a full region. And so for our next acquisition, either an individual asset or a portfolio, we can then bring those assets on at an even lower marginal type of cost.

Okay, that's actually very helpful. And then is there any sort of CapEx on the come given the age of these assets?

Yeah, so we did underwrite some upfront CapEx like we do on most acquisitions that should cover that. And what I would say is the way to think about it in general, the assets on average are 11 years old. So that is younger than our existing portfolio. I think the average age is 18 or 19 years old. So kind of on a dollars per door basis, the CapEx on a go-forward basis, we would not expect to be higher than our portfolio as an average. In fact, it might be a little bit less. Because these are simple garden assets. There's no parking decks, there's no enclosed corridors, that kind of thing.

Okay, but that would not be included in either the yield or that 230,000 a door calculation, just to be clear, right?

The 230 a door does not include the upfront CapEx. The 5-1 yield does include, that's a stabilized yield. So that's with our operations. And that is with the initial CapEx, we plan to put into it into the denominator.

Thank you. And our next question comes from Michael Goldsmith with UBS. Please proceed with your question.

Good afternoon. Thanks a lot for taking my question. During your prepared remarks, you called out Northern California as a particularly strong market. So can you talk a little bit about what's driving that going forward?

Yeah, Michael, it's Sean. I mean, I think there's a couple of things, but particularly for the city of San Francisco and the various submarkets within it, I think it's a combination of really three things, or four things actually. One, return to office mandates that have accelerated in part due to an improvement in the quality of life on the ground in terms of some of the concerns that persisted over the last couple of years, getting modestly better kind of month by month, based on what we're seeing and what we're hearing from our teams, prospects and others. So kudos to the mayor and others for the efforts they're putting forth there. We are hearing about some pickup and job growth and some office leasing that's getting better. So that's helpful in terms of people wanting to bring jobs into the city. AI is certainly a big part of that. And then supply continues to dwindle to very negligible levels. I think we're talking about, as you get into 2026, as an example, to give you a sense of where things have been, talking about like 700 units being delivered across the entire San Francisco MSA. That is probably a 20, 30 year low. So you get a combination of all those factors, all of them influencing sort of current performance and to the extent they're durable from a demand standpoint. Yeah, those drivers, the supply side will be negligible for the foreseeable future.

Got it. And as my follow-up, I don't know if you said it discreetly, but you maybe provided some of the numbers that go into it. But it sounds like renewals for the second quarter in the high fours to low fives based on where they settle in. But what are you expecting in terms of your second quarter blended rate? Thanks.

Yeah, we didn't provide that specific guidance. But I did mention that renewal offers were going out in the low to mid 5% range.

Thank you. And our next question comes from Alexander Goldfarb with Piper Sandler. Please receive the question.

Hey, good afternoon, and thank you for taking my question. I don't think it was asked, but I mean, a lot's been covered. The seasonal OpEx increase in the second quarter, can you just walk through that? I always think about leasing costs more hitting in sort of third quarter when the units actually, when more of the units have fully turned. But maybe this is just leasing costs? Or what else is driving the seasonal impact in the second quarter?

Yeah, Alex, this is Sean. I'm happy to take that one. So sequentially from Q1 to Q2, there's kind of three or four main drivers. Most are normal, but there are a couple unusual ones. The unusual one is, as noted, we had some benefit in terms of lower OpEx in Q1 of this year related to property taxes, some appeals, and some assessments that came in lower than anticipated. So about a third of the increase is related to the benefit we sort of realized in the first quarter, bringing the base down, if you want to think about it that way. So if you look at the absolute increase from quarter to quarter, about a third relates to just that piece of it. And then as you pointed out, turn costs in terms of you have higher expirations in Q2, you tend to see more turnover in Q2. Also, seasonally, we start to increase what we call non-routine or maintenance projects in the spring season. It's kind of spring through the summer, but you want to get started in the spring to have the benefit of those projects being completed for summer leasing season. Yeah, so you've got a number of things like that. It's an increased marketing, various other categories. So a lot of that is normal seasonal trends. I'd say the one unusual thing is, again, about a third of it relates to what happened in the first quarter with some benefit in areas that were not anticipated.

Okay, and then the second question is, in the opening comments, you guys talked about that you were hearing some resident concerns, but you weren't seeing anything of the fundamentals, leasing was still strong. Then there was a direct question on DC where you mentioned resident concerns, but I want to go back to just the general in the opening statement. Can you just talk about that? Because you're like the only apartment REIT that so far has really talked about resident concerns. So just curious in your experience, do resident concerns, is that usually a good indicator for you guys that bad stuff's about to happen? Or there's just normal nervousness among people with their lives, and sometimes it does portend economic downturn or something, other times it doesn't. So I'm just trying to figure out how reliable that sort of feedback from residents is.

Yeah, Alex, it’s Sean, I'm happy to take that again. What I said in my prepared remarks and then just reinforce it a couple questions ago is that we have not seen any impact on our data in terms of leasing velocity, renewal acceptance, pricing, et cetera, across the region. But I did say, and I think other people are hearing this and may have said it as well on calls, is that there's chatter in the market, as you might imagine, from people that are prospects, residents, or just people in the general community wondering about, I have a job today, well, I have a job tomorrow, what's the impact of this going to be over time, et cetera. That's not, you know, scientific data, that's just chatter that's coming through in a variety of different ways. So I'd say people are a little anxious about it, for sure. Not unheard of, given what's happening in the environment. And obviously that's happening not just here in D.C., but, a lot of federal employment is spread around the country too. So I think you're hearing that chatter, it doesn't mean that something's happening tomorrow. Typically, when we hear that kind of chatter, if there's something that's going to happen, it's typically a lag effect anywhere from six to eight months in terms of what it actually means in terms of someone making a different decision. They tend to hunker down first and you see them take out discretionary spend like you're hearing about the airlines now as an example, throwing guides, things of that sort because people not making decisions on discretionary costs. But in terms of our historical experience people tend to want to stay where they are in their homes when there is some uncertainty. And so, I think that's all you're hearing is a little bit of uncertainty. People wondering how it's going to unfold and leave it at that.

That's perfect. Really appreciate that. Thank you.

Yup.

And our next question comes from Haendel St. Juste with Mizuho Securities. Please proceed with your question.

Hey guys, good afternoon. A couple quick ones for me. So, first I just wanted to go back and try once more. If you guys are willing to provide a guide for a second quarter blends. And then my real question was more on LA and Boston, two markets which look a little slower relative to the rest of your coastal markets. Curious about your kind of expectations for those markets the next couple quarters.

Yeah Haendel on the guides, all I would say is we are providing where the renewal offers went out in the low to mid fives, so that's on that point. And then Boston and LA. The only thing I mentioned in my prepared remarks and then the response to another question is just we're monitoring things closely at LA. We did see a nice sequential change in occupancy upward which was helpful. But we haven't seen enough movement in asking rent since the beginning of the year to allow us to push rents harder. And I think that's a function of you know, employment growth there has been weak across LA. Family to the entertainment industry. There's probably also a little bit of uncertainty related to tariffs and impact on the ports Long Beach, LA in terms of economic activity. So we just haven't seen a lot of movement there. Occupancy is stable, but we're going to need to see better job growth probably and maybe a little less uncertainty to see stronger performance. In terms of New England, I don't think I'd say it's January and February was a little slower than we anticipated. But we've started to see significant upward trend in asking rents for March and April which is quite positive. So that's all we're really seeing in New England. We're keeping a close eye on it in terms of any impacts from government funding on research or various other things. But we're not hearing or seeing anything related to that having a negative impact. I think it just started a little bit slower than we would have thought and really accelerated recently.

Appreciate that. Maybe one for Kevin. I was looking at the FFO picture for the year, looks like there's a pretty big ramp implied the back half of the year, I get that. A lot of that's probably most of it coming from the development. But I'm curious if there's anything else that you'd point to or perhaps is underappreciated in the back half of your numbers. Thanks.

Hey Haendel. It’s Kevin. We anticipate similar factors driving sequential earnings growth throughout 2025, consistent with our business model and the growth patterns we've seen in previous years from the first to the fourth quarter. We expect a sequential increase in same-store revenue in each quarter for the rest of the year, along with a seasonal rise in sensor offbacks, as Sean mentioned in Q2 and to a lesser degree in Q3, followed by a decline in same-store offbacks in Q4. Additionally, we expect development to increase sequentially each quarter as occupancies build up over the year. I refer back to the chart on Slide 11, which illustrates our 2,300 occupancies over the year. These are the key factors driving our growth. We do anticipate a slight increase in capital costs in the second half as we reduce equity forward, but these are the usual variables we encounter every year in a normal environment, and they align with how our business operates. Over the past few years, the difference in core FFO per share between the first and fourth quarters last year was $0.10, and the year before that was $0.17. This is simply how our business operates, and we expect similar trends this year.

Got it. Got it. Thank you.

Thank you. Our next question comes from Linda Tsai with Jefferies. Please go ahead with your question.

Hi, thanks. Just two quick ones. The timing of the settlement of the $890 million in undrawn forward equity, would that be more a 3Q or 4Q event?

This is Kevin again. Its timing is just sort of a function of our evolving capital uses and capital needs throughout the year. I'd say at this point what we anticipate is perhaps a little bit in Q2, the vast majority in the third and fourth quarter. And so that's probably what I would anticipate from an analyst point of view in terms of what you might want to dial in for your assumptions. Obviously, when we get to the second quarter call, we'll have clearer visibility on our capital uses and sourcing activity and our needs for the year. So we'll probably have a little more clarity for you at that point. But I do think right now the vast majority is in the second half, perhaps a little bit towards the end of the second quarter.

Thanks. And then does the improvement in SF and the improving political climate in California make you think differently about the pace of diversification away from coastal markets?

Yeah, I think, this is Matt. I guess the short answer is no. We've got a kind of a longer term vision for a diversified portfolio that's got exposure to different regional economic drivers and different regional regulatory exposures and constraints. So we are on the path and we will continue to keep an eye open for deep structural changes. But what we're seeing in California, it's good to see the economy picking up, particularly in Northern California, and that's a significant part of our portfolio. We know that's a high beta market. The longer-term trends, we are seeing some more support for increased supply in California, which is good. But there's also continued landlord-tenant regulatory framework and constraints, which lead us to just want to limit how much exposure we have there in total.

And our next question comes from John Kim with BMO Capital Markets. Please proceed with your question.

Thank you. That development cost breakdown on Page 12 is very helpful, a little surprising. Is this because this is illustrative of your suburban garden style assets? There's a note on the page about that. And I was wondering if there's a difference between mid-rise garden and established versus your expansion markets.

This is Matt. It's kind of a blended average of all. The vast majority of what we build is wood frame. So probably the most of what we build is high-density wood frame, mid-rise, either podium or what we call wrap, which would have a structured parking deck and four, five, six-story wood frame apartment building, either on top of the parking or next to the parking. We are doing more lower-density, three-story walk-up and BTR-type product. We're starting to develop more of that. It is about 40% of our existing portfolio, as Ben mentioned, which is frequently underappreciated. So and high-rise is almost – we have almost no high-rise in our current development pipeline. So it does vary somewhat by product type, but it probably varies more just by location. So in the higher rent locations, land will be a higher percentage. In California, that land percentage is probably more like 20%, 25%. We're not actively developing in New York these days, but you'd see it even higher there. In some markets that are more garden markets, site costs are higher and the land is less. In North Carolina, land is sometimes not even 10%, but you'll have more site costs. You're moving more dirt around. So it does vary. It's probably more regional than it is product type.

Okay. And maybe a question for Sean. You mentioned on renewals you're getting 100 to 150 basis point pushback or leakage on what you signed versus what you sent out. Is that higher than what it's been historically for you? I know you made a change recently to move all renewals on your app.

Yeah, John. No, the 100 to 150 basis point is the typical spread. The only time you'd see it significantly wider or significantly compressed is in extraordinarily weak markets or extraordinarily strong markets. But 100 to 150 is a long-term average. I think that's a fair point. And then in terms of the second part was something about the app. I'm sorry, I didn't get that part.

Yeah, I was just wondering if people were just more willing to push back on an app rather than over the phone or...

Oh, no. No, if anything, our centralized renewal team, it's a pretty strict discipline as it relates to negotiating guardrails, what they're allowed to do. And it really comes down to where the, at the time someone's having a conversation with a resident, where their spot rent is relative to the prevailing asking rent for a similar apartment at that community at that time. That really is a key driver of it more than anything else. So if anything, it's more strict now than it's been in the past because of the focus of the centralized team on just that activity.

Thank you. And our next question comes from Alex Kim with Zelman and Associates. Please proceed with your question.

Hey, guys. Thanks for taking my question. Just a quick one for me here. And I apologize if I missed it, but I'm just curious how lease of velocity has trended this far and any changes to concessions usage to start the year? Thanks.

Yeah, Alex, this is Sean. So far, so good. We really only had, if you looked at our development attachment, three communities in lease up during the quarter that we noted. And for the first quarter, we leasing and occupancy was running around 22, 23 a month. And concessions were roughly half a month on average. So overall, relatively consistent with what you'd expect in the first quarter. Certainly would expect that to ramp up as you get into the second and third quarter kind of peak leasing seasons. Not necessarily. I mean, you keep in mind, we're trying to lease up an entire community in one year or less as compared to stabilized assets where we have 40% turnover or something like that. So it's really more a function of market environment and how it unfolds over the next several months as to concession usage. But right now we're clearing the market at that level of concession. I don't have any reason to believe it would change at this point in time. But if you saw the market shift to be much stronger, much weaker, that would typically drive the concession volume.

And with that, there are no further questions at this time. I'd like to turn the call back to Ben Schall for closing remarks.

Thank you. And thank you everyone for joining us today. We look forward to connecting soon.

Thank you. And with that, that does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.