Good day, and welcome to the Equity Residential Fourth Quarter 2024 Earnings Conference Call and Webcast. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Marty McKenna. Please go ahead, sir.

Good morning, and thanks for joining us to discuss Equity Residential's fourth quarter 2024 results. Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer; and Bob Garechana, our Chief Financial Officer. Alex Brackenridge, our Chief Investment Officer, is here with us as well for the Q&A. Our earnings release and management presentation are posted in the Investors section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now I will turn the call over to Mark Parrell.

Thank you, Marty. Good morning and thank you all for joining us today to discuss our fourth quarter and full year 2024 results and outlook for 2025. I will start us off, then Michael Manelis, our COO, will speak to our 2024 operating performance and 2025 revenue guidance. Then Bob Garechana, our Chief Financial Officer, will cover our 2025 expense and NFFO guidance. Then we'll go ahead and take your questions. We also posted a management presentation to our website last night with some additional detail. Before I get to the meat of my remarks, I want to spend a minute thanking my colleagues in the Los Angeles market for all they've done to support our residents and each other during this very difficult time. We are fortunate to have not had any property seriously impacted by the fires, but our teams and everyone else in LA has been through a lot. A special shout out to all the firefighters, first responders, and everyone else who worked tirelessly to battle the blazes. Now, turning to 2024, we finished the year with solid same-store revenue results that were significantly better than the midpoint of what we had expected at the beginning of the year. However, with slowing bad debt improvement in the fourth quarter, we ended at the lower end of our previously upwardly revised guidance expectations. Demand remains very good across our portfolio, with levels of supply being the main determinant of market performance. Before putting 2024 in the rearview mirror, I want to thank my colleagues across our 300 plus properties and at corporate who once again did a great job managing expense growth while providing outstanding customer service. We are very proud of delivering same-store expense growth in 2024 of 2.9% and achieving an average of only 3.2% same-store expense growth over the past five years. Well done, team! And now, moving on to 2025. While we're expecting similar annual same-store revenue growth in 2025 as last year, the pace of our same-store quarter-over-quarter revenue growth should show acceleration throughout the year, with the back half of 2025 being considerably better than the first half. This contrasts with the deceleration in quarterly growth we observed in 2024. In both our earnings release and in the management presentation, we provided guidance for our 2025 operations. Michael and Bob will provide some color on that guidance in just a minute, but I want to take a moment to talk about the economic outlook that supports these guidance expectations. Based on the third-party economic projections we use, we expect office-using job growth, which we see as a key driver of our business, to be higher in 2025 than in 2024, especially on the West Coast. The improvement we've seen in our downtown Seattle operations, along with the beginnings of recovery in the San Francisco market, both downtown and on the Peninsula, are consistent with that theme. Unemployment among college graduates, who make up the bulk of our residents, is currently very low at 2.4%, and we expect it to stay in that range in 2025. With the supply of housing already tight in most of our markets, we view this setup as very positive for our business. I also note that our current earnings guidance is driven by the positive signs we see our operating dashboards showing, as well as our deep understanding of supply and demand dynamics in our markets, rather than primarily focusing on external headlines. While we acknowledge that there is a higher level of uncertainty in the forward path of the economy than usual, given various recent governmental actions relating to tariffs and other matters, the precise impact of these actions on the larger economy and our business is hard to estimate currently; it will evolve over time and is not included in our guidance expectations. That said, being a strong cash flow business without foreign operations and with a fortress balance sheet in times of heightened uncertainty is a definitive positive. We're keeping an eye on supply in our coastal established markets where we generate 90% of our net operating income. We expect completions of competitive units to be similar in 2025 compared to 2024, but at a considerably lower level as a percentage of existing apartment inventory than in the Sunbelt markets. With some localized exceptions that Michael will discuss, we expect this coastal supply to be absorbed well in these housing-starved markets. While there continues to be much conversation about declines in Sunbelt starts, we find it at least as notable that 2024 competitive starts in our coastal footprint were about half of the normal levels, with 2025 starts likely to be similarly restrained. In fact, as a percentage of existing inventory, total starts in our established markets over 2024 were at rock-bottom levels last seen just after the great financial crisis. Consequently, we foresee 2026 total deliveries in our coastal markets around 30% lower than the pre-pandemic average. In summary, the supply versus demand setup is favorable in our coastal markets now and is expected to become even more favorable later this year and into 2026. Turning to our expansion markets in Atlanta, Austin, Dallas, and Denver, where we have about 10% of our net NOI, we foresee 2025 deliveries to be lower than in 2024, but still at an elevated level. We also expect that the expansion markets will still be working off the supply delivered in 2024 in 2025. Overall, demand remains strong in our expansion markets, and these high job growth markets will eventually absorb the current and incoming supply, but it will take some time to do so, and we anticipate that progress will be uneven. In a moment, Michael will go over what we are currently observing in these markets. When we apply all this to our capital allocation strategy, it confirms again the wisdom of having a strategically diversified portfolio. Our goal is to own an apartment portfolio with the highest long-term total return in the sector, focusing on cash flow growth while considering risk and minimizing volatility. We are achieving this goal by catering to well-earning renters in approximately 12 metro areas that we believe offer the most desirable lifestyles for this demographic and present the best balance of long-term demand, supply, regulatory, and resiliency opportunities and risks, where we can efficiently operate our properties with our industry-leading teams and systems. We made substantial progress towards reaching our goal of having 20% of our NOI in our expansion markets by investing almost $2 billion in acquisitions and development projects in these markets during 2024 while disposing of about $1 billion of older assets located entirely in our coastal markets. Our portfolios in the expansion markets feature newer, well-located properties with a healthy balance between suburban and urban. We have provided guidance for $1.5 billion of acquisitions and $1 billion of dispositions in 2025. As you can see, we expect to fund the bulk of our acquisition activity using proceeds from disposals. We also assume in our guidance that we will be a net acquirer and that we will fund that net acquisition activity using debt. You should expect material net acquisition activity, as we did in 2024 when we acquired $600 million using debt. The numbers support that activity. Currently, transaction activity is very light. If market volatility abates, we hope that activity will pick up. Alex Brackenridge, our Chief Investment Officer, is here in the Q&A period to provide additional insights. Finally, I want to thank Barry Altshuler, our Regulatory Affairs Guru, and others across the rental housing industry for doing an outstanding job advocating for pro-housing solutions such as less regulation and better public-private partnerships to encourage more supply, while standing against anti-housing ideas like rent control. We saw great success in California and across the country last quarter. Equity Residential will continue to be a leader with its industry partners in advancing pro-housing policies while political risk remains in our markets. We have undoubtedly witnessed a shift towards more thoughtful housing policies and a focus on quality of life and public safety in our central cities. And with that, I'll turn the call over to Michael Manelis.

Thanks, Mark, and thanks to everyone for joining us today. This morning, I will review our fourth quarter 2024 operating performance and our operating outlook for 2025. In addition to our earnings release published last night, we've also published a detailed management presentation that provides additional color on the drivers of our guidance that I will refer to. We ended the year with continued healthy fundamentals and solid demand from a well-employed renter population, which drove strong occupancy of 96.1% and a blended rate growth of 1%, both of which met our forecast for the quarter. I'd also like to highlight that our fourth quarter turnover was just 9%, bringing our full-year turnover to 42.5%, which is the lowest we have reported in our 30-year history as a public company. This clearly demonstrates our success in creating remarkable resident experiences and reflects the favorable supply-demand dynamics in our portfolio. On the expense side, for the full year, we have kept growth in same-store operating expenses below 3%, with a special call out to our relatively flat payroll growth and 2% growth in repairs and maintenance, including a 5.5% reduction in turnover expense. This again highlights our ability to share resources across properties and minimize reliance on outsourced labor. We are pleased to report that two-thirds of our properties have a shared resource model in place, and we're excited about the additional opportunities that further automation and centralization provide. Moving to 2025, our same-store revenue growth guidance range is 2.25% to 3.25%, with an expense rate growth range of 3.5% to 4.5%. Bob will provide color on the expense guidance in a moment, but let me focus your attention on the building blocks for revenue growth as detailed on Page 6 of the management presentation. Our revenue midpoint assumes the following: we start with embedded growth of 80 basis points in 2025, which is 40 basis points lower than our starting point in 2024 and at the lower end of the historical averages, but the gap is largely expected to be made up through stronger leasing activity during 2025. That strong leasing activity will be driven by continued strength in overall demand from better job growth forecasted in our markets and very manageable levels of competitive new supply, particularly in our established markets, which comprise 90% of the total portfolio. This is expected to yield blended rate growth between 2% and 3% for the full year, which is about 60 basis points better than what we delivered for the full year 2024, with a good portion of that improvement coming from the recovery of some of our West Coast markets that I will discuss later. We also expect continued strong resident retention as a result of both the benefits of a centralized renewal process, our enhanced data and analytics insights, and the high cost and low availability of owned housing in our markets. As I said earlier, turnover in the portfolio remains the lowest that we have seen in the history of our company, and we expect that trend to continue in 2025. This leads to approximately 3% residential same-store revenue growth, which is identical to 2024 and is then partially offset by declines in non-residential same-store revenue to get to the 2.75% midpoint of our guidance range, as described on Page 6 of the management presentation. Occupancy should hold at levels similar to last year, and that strength will allow us to capture rate. Operating results will also benefit from our continued execution on innovation initiatives with the majority of it running through the other income line. This year, we will be focusing on our analytical efforts with data-driven pricing and retention strategies, expanding automation to drive additional operating efficiencies and, all the while, striving to ensure that we provide a great customer experience. In 2025, we expect about 70 basis points or nearly $20 million in other income growth, with the majority coming from initiatives that we have discussed in the past and the further rollout of our Internet connectivity and technology programs. Bob will walk through the associated expenses, but net-net, these will be additive to earnings overall. In terms of the overall market performance, Seattle and DC should lead the pack with same-store revenue growth of approximately 4%, and New York and San Francisco will follow very closely behind. While we did include some further recovery in downtown Seattle and San Francisco in our guidance, both markets have the potential to outperform if we get more robust pricing power early in the year. In our expansion markets, which reflect only 10% of the total company NOI, we expect to produce negative same-store revenue growth given the impact of elevated, albeit declining, levels of supply that need to work through the system. As we look at the individual markets, let's start with Los Angeles, where I would like to echo Mark's comments with tremendous gratitude to our amazing team in this market. Our guidance does not assume potential operational impacts in either revenues or in terms of cleanup expenses from the fires that I will discuss in a moment. Here's what we have included. First, the market will see more supply than it did in 2024, but we expect the impact on our portfolio to be manageable and consistent with last year, with the Mid-Wilshire, Koreatown submarket fueling the most competitive pressure, followed by the San Fernando Valley, which will see an increase, but without significant impact to us. Our guidance assumes that the market will continue to work through delinquency and bad debt issues, which will contribute to additional revenue growth. As I'll discuss in a moment, depending on the regulatory actions taken in LA, this improvement may happen more slowly than what is now assumed in our guidance. Physical occupancy and pricing trends started improving late last year, and we modeled a continued pace of improvement, resulting in our full year same-store market revenue projection for LA to be around 3%, but again, this may be impacted by any regulatory limits placed in response to the fires, which brings us to the potential impact from the virus. While there has been considerable speculation, we believe it is still too early to fully understand the operational impact. There will likely be more demand in the market as fire-impacted residents seek new accommodations, particularly in the two and three-bedroom units which comprise about 45% of our LA portfolio, as we have already seen in certain submarkets. There will also likely be cleanup expenses that the company incurs from the fires and various governmental actions that could negatively impact our operations. There are also likely twists and turns in the recovery process and governmental response. For now, we feel like the base case we outlined is our best assumption. We'll keep you posted on what happens here, and we anticipate that we'll have better insights during our first quarter call in April. Staying on the West Coast, San Diego and Orange County were among the better performers last year. In 2025, we expect these markets to continue to see strong demand. Job growth in both markets is expected to exceed levels seen in 2024, and the general lack of housing makes renting in these markets the most attractive option. Both markets are expected to see slightly more competitive new supply in 2025, but overall, we expect good performance here. In San Francisco, we are optimistic about the mayoral administration and its commitment to improving the quality of life in the city. Job growth expectations continue to improve, and demand in the downtown and Peninsula submarkets are strong, leading to additional pricing power in 2025. As I mentioned a moment ago, we have modeled some improvement in operating conditions for the overall market of San Francisco, with growth primarily coming from both the Peninsula and downtown submarkets. A more robust recovery is certainly possible if demand and pricing improve early enough in the year. Concession usage remains elevated in the San Francisco market, especially in the downtown submarket, but overall improved significantly in 2024. With improving occupancy, we will begin to see net effective pricing improvements in the market as rents and occupancy increase, likely leading to a further pullback in concessions if these occupancy gains hold. New supply forecast for 2025 in San Francisco is very similar to 2024 quantities, with almost no supply expected in downtown San Francisco and most concentrated in the South Bay, where absorption has been strong. We also feel very positive about Seattle in 2025. Despite heightened pockets of supply, particularly in the Urban Core and Redmond, we finished 2024 in a strong position and expect increasing pricing power resulting from continued demand as employers like Amazon bring their teams back to the office, while supply begins to abate in the second half of this year. Quality of life issues in the city continue to improve, and the city shows a bounce after a period of stagnation. Competitive deliveries with our portfolio peaked in the fourth quarter of 2024, and our pricing power held up during a time when it normally declines. We expect Seattle to be one of our strongest revenue growth markets in 2025. Moving to the East Coast, starting with Boston. With high occupancy and limited new competitive supply, this market should perform well in 2025. The market is supported by a strong employment base in finance, tech, life sciences, health, and education. Overall, new deliveries will be about the same in 2025 as last year, but the majority of the deliveries will be in the suburbs, which bodes well for us, given 70% of our assets are located in the Urban Core Boston. Our urban assets outperformed suburban ones in 2024, and we anticipate that spread will be even greater in 2025. New York was a top performer in 2024, and we expect that to continue in 2025. The employment base is strong, market occupancy is high, and there's almost no new competitive supply being delivered in Manhattan, where we have the majority of our portfolio. Washington, D.C. was our top performer last year, and our expectations remain high for 2025. The absorption here has been impressively strong, considering that the market has been delivering more than 10,000 units a year and will do so again in 2025. We're almost 97% occupied in the market, which is a good start to the year. The wild card here is the impact of the new administration and its focus on cost-cutting and returning federal employees to the office on the local job market. In the expansion markets, our long-term outlook remains positive as we expect to continue to see higher-than-average job growth in those metro areas. However, our near-term operating environment is challenging. We have seen stability in new lease rates and occupancy in Atlanta and Dallas over the last two months. While volatility is possible, we currently expect new lease rates to improve as they usually do during the busy spring leasing season in these markets. In Denver, current conditions are challenging, with new deals in close proximity to our assets that could push improvement later in the year. Even with hopeful improvements in operating conditions, we expect same-store revenue in our expansion markets to be lower in 2025 than it was in 2024. Looking at the overall company level, as we sit here today, we really like our position. We're looking forward to capturing the opportunities the spring leasing season brings, which will help establish pricing power for the full year. I want to give a shout-out for our amazing teams across our platform for their continued dedication to our residents and focus on delivering these results. With that, I'll turn the call over to Bob to walk through the rest of our guidance expectations for 2025.

Thanks, Michael. With Michael having just walked through 2025 same-store revenue expectations, let me finish with same-store expenses, normalized FFO, and provide some color on anticipated capital markets activity for 2025. Turning to expenses. Expense management remains a core strength of EQR, as demonstrated over the years and during 2024. Our 2025 guidance of 3.5% to 4.5% implies somewhat higher growth in 2025 than 2024, as outlined on Page 6 of the management presentation, but still reflects that strength. As you can see, the incremental growth in expenses is stemming from a couple of items. First, connectivity expenses are adding approximately $5 million to expense growth as we deploy bulk WiFi in the portfolio. As Michael mentioned, they are also adding revenue, so we will be accretive to NOI for the full year. Second, we have another year of 421-a tax abatement step-ups in the New York portfolio. We're down to only a handful of properties, and step-up with most nearing the end of the period. As we have mentioned in the past, once fully taxed, there is an incremental income opportunity as affordable units convert to market rate in the future. Beyond those two items, same-store expense growth will look relatively similar to 2024, but we anticipate some incremental growth from utilities and payroll given the low growth in 2024, setting up a tough comparable period. Moving to NFFO. Page 8 provides some narrative around NFFO contributors outside of same-store, along with a bridge to the midpoint of our guidance range. This bridge can also be found in the earnings release. Beyond residential same-store NOI, let me provide some color around a couple of the larger categories. First, transaction NOI. The majority of this contribution is coming from 2024 transaction activity and our acquisitions last year. There is some impact from our assumptions in 2025, but as Mark mentioned, this will be contingent upon market conditions, so that could change. Second, interest expense. The majority of the increase in interest expense is coming from increases in anticipated balances from investment activity, mostly acquisitions, with about $0.01 of the increase also coming from refinancing our 2025 maturity and what we expect to be a higher rate. More about that in a second. Finally, lease-up NOI. The $0.01 contribution from lease-up NOI is coming from a few consolidated lease-ups. The majority of our lease-ups are from unconsolidated joint ventures in our expansion markets that are encumbered with project-level debt, and the net income from those projects runs through the income from investments in unconsolidated entities line. Four of these unconsolidated JV development deals were completed late in 2024 and will be leasing up throughout the year. Given current leasing velocity and the cessation of capitalized interest on loans, we do not expect these joint venture assets to contribute to NFFO growth in 2025. We've added specific guidance on this income to the guidance page of the earnings release. Finally, let me briefly mention our anticipated capital markets activity for 2025. We have a significant maturity, which is a $450 million, 3.375% note due in June of this year. We expect to refinance this note at or near the maturity, most likely with unsecured debt. We have ample liquidity and capacity under our recently expanded commercial paper program to float this pay-off and be opportunistic about when we refinance the maturity. All other financing activities will be dependent upon transaction activity and conditions, as Mark mentioned. Our guidance assumes $500 million to $1 billion of debt issuance because we modeled being a net acquirer of $500 million in our guidance. Expected issuance, however, will adjust based on market conditions. With that, let me turn it over to the operator to begin Q&A.

We'll take our first question from Eric Wolfe with Citi.

Hey, thanks. You mentioned that same-store revenue should accelerate throughout the year. Can you just talk about how much of that is driven by other income versus improved fundamentals? And then what type of acceleration you're expecting in the second half versus the first half? Or where you expect to start the year versus the year—however you think we should think about it?

Yes. Hey Eric, it's Bob, but I'll start with outlining the shape of what we expect revenue to be. The shape should be such that, as you mentioned, the acceleration of the year-over-year, quarter-over-quarter growth will be higher in the back end of the year than the front end of the year. And there are two main drivers associated with that. The first driver is that we're starting the year with lower embedded growth than historical averages, and a lot of the growth is coming from actual leasing activity in 2025. As you reach the second and third quarters, which are the prime leasing season, you should start to see that contribution reflect positively in the quarter-over-quarter numbers. There’s a good portion of growth associated in the back-end quarters compared to the front quarters, which will be lower because of that lower embedded growth. Additionally, you have other income, which has a similar shape. So the other income also has greater contributions in the third and fourth quarters as you roll through the program of rolling out the connectivity piece. So from a quarter-over-quarter perspective in same-store revenue, you should see the first quarter being the lowest and a little bit lower, with an increase as you see the leasing activity and other income contribute overall, reaching a higher total in Q4 relative to Q1.

Got it. That's helpful. You outlined some markets that you expect to improve throughout the year, I think many in SS and Sunbelt, at least from a blended rent perspective, maybe not from the same-store revenue for Sunbelt, but can you just talk about how much better the sort of second half blended rate growth might be versus the first half? I'm just trying to understand the degree of improvement you're expecting in those markets?

Yes, Eric, this is Michael. You would expect a shaped growth throughout the year. We provided some guidance in the release for the first quarter as to how blends will play out, which is in the 1.4% to 2.2% range. Our renewals are flat month by month throughout these quarters. I think the elevation you see in the second half of the year is expected, especially in the third quarter, which should have the strongest performance, followed by moderation in the fourth quarter. This pattern is consistent with other years as well. It will just be elevated as we move through the middle of the year.

We'll now take our next question from Steve Sakwa with Evercore ISI.

Yes, thanks. I know you're trying to get away from a ton of KPIs on the leasing side kind of month-to-month and quarter-to-quarter, but could you just maybe provide some color on where our renewal rates are going out? I guess we were pleasantly surprised that, 5% renewal increase in the fourth quarter, but new leases did come in, I think, a touch weaker than we had expected. So maybe where are you sending out renewals today across the portfolio in the first quarter?

Hey Steve, this is Michael. First, I just want to remind you, we do have a centralized renewal team handling our entire renewal process, including all the negotiations, which has really allowed us to execute various strategies across the markets as we see conditions changing. Right now, we're tightening up negotiations and preparing for renewal months that are leading into the busy leasing season. We have positive conditions improving in Seattle, San Francisco, and LA. Our current quotes in the marketplace are about to 7%, and we expect to achieve increases somewhere around the 5% range. We've got good insights, and we're confident in the stability of this renewal performance in the portfolio at this time.

Great, thanks. And then maybe on capital deployment. I know you've got net acquisition volume of $500 million, but you do have a moderately active development pipeline. I'm just curious how development factors into your thought process today regarding yields on new projects. How do those development yields stack up to the acquisition yields you're looking at?

Hey Steve, it's Alec. Right now, it's a pretty uncertain market, making it challenging to even start to peg an acquisition cap rate. As a general assumption, assume it's around 5%. The market is relatively stagnant, and everyone seems eager to buy but not many transactions are being executed due to uncertainty. You'd ideally like to target around a 6% yield, but with the current rental costs and construction costs, it's challenging to reach that target unless the product is straightforward. We're seeing more developments that are further out into suburban or ex-urban areas, which are not particularly appealing to our interests. So we're being patient. Last year, we had three starts, and nothing else is currently geared up for this year. We keep looking for the right location, particularly where we wouldn't have the opportunity to acquire existing properties.

Great. Thanks.

We'll now take a question from John Pawlowski with Green Street.

Hey, good morning. I have a follow-up question on your comments around supply likely being down 30% in 2026 relative to pre-pandemic norms. I'm curious if you bifurcated that between urban and suburban. Is it fair to assume that urban is down significantly more than that 30%? And then if so, how are you thinking about your ideal market mix right now or submarket mix between urban and suburban given urban might have a longer runway for no supply compared to the suburbs?

Hey John, it's Mark. First off, go Eagles! Second, I agree with your observation; on the urban side, we see significantly less being built. The high-rise product necessary to make those numbers work isn't feasible at this point. Consequently, we anticipate a longer runway in certain urban submarkets. This is why we've been discussing a continued focus on our legacy established markets in urban cores and maintaining an urban presence in our new markets. There are deeper pools of demand in urban areas, which traditionally had more supply, but we believe that this dynamic will shift. So, we are focused on continuing to invest in urban centers. However, every city varies, so we are evaluating opportunities market-by-market.

To Mark's point, we distinguish between central business districts (CBDs) and other neighborhoods that are dense yet offer great quality of life without the legacy issues we see in CBDs throughout the country.

Okay. But I guess, in terms of the capital allocation read-through relative to six months or 12 months ago, are you becoming more open-minded that your urban concentration should be higher than you expected six to 12 months ago, moving forward?

I don't think that has changed significantly. It's more of a balancing act. There are a few assets in urban centers on the West Coast that we may sell over time because we may be over-concentrated in specific submarkets. We just talked about the benefits of urban concentration, even during challenging conditions like COVID. The perception of urban markets has shifted; we believe in the potential of urban areas now more than ever.

Okay, my last question, Michael, just on the D.C. market. I know it's still early, but what is your local team observing on the ground in terms of foot traffic and pricing power for existing or new tenants given potential layoffs for federal employees?

Yes, it's a great question, John. Currently, our D.C. portfolio is occupied at 97.1%. Pricing trends are on par or slightly better than expected for this time of year. Regarding feedback from the on-site team, we haven't seen significant changes yet, although there is some unease present in the market. There's still uncertainty about overall demand due to potential layoffs compared to the push to bring employees back into the office. Thus, we need to monitor how this evolves in the coming months. The market is currently very strong, as evidenced in the occupancy data.

The diversity of employers in D.C. is now much stronger than it used to be, especially with a notable presence from the defense sector, which may not follow the same staffing restrictions. This could mean that while the federal workforce may shrink, the total number of jobs in D.C. could stabilize or even increase.

Okay, thanks for your time.

Thank you.

We'll now take our next question from Michael Goldsmith with UBS.

Good morning. Thanks for taking my questions. My first question is on seasonality. It seems like for the second year in a row, there was a weaker fourth quarter, but with expectations of a stronger first quarter. Can you talk a little bit about the factors influencing that? And within those comments, it seems like momentum should be sustained throughout this year into the fourth quarter of 2025. What gives you confidence that this momentum can hold as opposed to trends we've seen the last two years?

Yes. Michael, this is Michael speaking. The fourth quarter has played out as we expected. You typically see some deceleration; clearly, markets like Boston experience this where you see that decline. Once we turn the corner in January, we start building momentum into the spring with pricing and activity increasing. The seasonal curve this year isn't materially different; the strength in our portfolio provides us confidence for stronger pricing power this year compared to last year. However, we do anticipate some deceleration in the fourth quarter of 2025, in line with seasonal trends.

Got it. Helpful. Second question, regarding the 421-a expense component being clear, but how should we think about the potential benefits to these buildings in terms of revenue as restrictions unwind? Also, how much in the Sunbelt is entering the same-store pool this year?

It's challenging to project, as they only turn to market once they’re vacated. If residents stay, we won't see those units enter the market quickly. However, when they do, the upside could be significant—many of these rents are at $1 to $1.50 per square foot and could increase to $6 or $7, representing a dramatic increase.

On the same-store component in the Sunbelt, the 2025 same-store set doesn't materially differ from 2024. A few assets will come into play from the Sunbelt, though the majority of our transactional activity won't impact the full year same-store set until 2026, as many acquisitions occurred in the latter half of 2024.

Adding some color to that, Michael, a good question. In 2026, many of those units will be suburban. It just coincidentally works this way, as we initially acquired more in urban areas like Denver when we moved to same-store. So, you'll see our numbers suffer disproportionately there, while our non-same-store pool, primarily suburban in Atlanta, Dallas, and Denver, when that rolls into same store in 2026, we believe that will significantly benefit us. This will validate the advantages of maintaining a balanced portfolio across both urban and suburban markets.

Well, thank you very much.

Thank you.

We'll now take our next question from Anthony Paolone with JPMorgan.

Yes, thanks. I'd like to shift focus to the acquisition market. Can you provide a sense of where the private market stands regarding IRRs and anticipated NOI growth over the next few years and how you perceive the liquidity out there?

Hi, it's Alec. There's considerable interest in the multifamily sector, as I observed at NMHC. However, the market is fairly stagnant now; people wish to buy at around 5%, which projects about a 7.5% IRR on their estimates. However, the uncertainty around rates means not many are ready to commit just yet. There's a lot of capital looking for deals, and we expect more supply to enter the market as lenders choose to halt extensions on undercapitalized deals.

Okay, thanks. And then a question for Bob. You talked about the JV FFO drag due to the development stabilizing there. Can you provide a sense of the FFO difference when those projects stabilize versus what you’re projecting in your 2025 guidance?

Yes, let me explain how to think about that rather than providing a specific year-over-year comparison for 2026. There are two main drivers—the drag from the lease-up process and the NOI. When leasing up, you generally incur operating expenses before you see revenue from growing occupancy. By the end of this year, from an NOI perspective, these assets will be accretive, as they'll have turned positive. They will continue to ramp up, but they may not contribute to FFO growth due to the construction loans placed on them. Therefore, while we will see stabilization in 2026, we're also likely to exercise options with our JV partners to refinance the debt in a favorable manner, thus making them more accretive.

We'll now take a question from Jamie Feldman with Wells Fargo.

Great, thank you. I just want to start with the same-store revenue build. Can you discuss the non-residential piece in guidance? What's included there? Additionally, what do you think impacts your guidance the most? I recognize your midpoint is about 2% below estimates from the street; where do you see the most upside or downside in your guidance for FFO?

Sure. Just to remind everyone, non-residential is about 4% of the total portfolio from a revenue standpoint, so it's not a huge part of the business. It mainly consists of third-party parking and street-level retail that acts as an amenity. The 20-basis point drag is due to a one-time item from Q1 2024 where we reinstated straight-line leases. This is not expected to happen again. Other than that, the business is performing in line with expectations. In terms of guidance, the same-store portfolio is the largest driver of NFFO and provides the core changes in values. All other items are largely minor variances.

Okay, thank you for that. With the headlines changing rapidly since the inauguration, what is your team discussing in terms of potential impacts on the business over the next few years?

It's Mark here. I want to note that the new administration is still in the early stages. While there are lots of changes happening, we've got a fair amount of uncertainty around economic growth. We focus more on our internal dashboards, keeping our emphasis there rather than on headlines. Our dashboards across properties are showing healthy green indicators, which reflects the optimism we have. On capital allocation, we're being cautious during this period of uncertainty due to the impact of the federal government and the broader economy. We're prepared for whatever changes could arise, as we operate in a cash flow business. With no foreign operations, we feel better positioned amidst uncertainty, and we believe companies like ours will be valued higher in uncertain times compared to more speculative firms.

Thank you.

We'll now take a question from Julien Blouin with Goldman Sachs.

Hi, thank you. In LA, how are you thinking about the profitability of the rent freezes and eviction moratorium proposals that may pass? Is there any insight from your team on the ground?

Thanks for your question. It’s important to emphasize our empathy for those affected by the fires in LA and our support for the community. While we believe measures like eviction moratoriums are misguided, we've been very responsible with our pricing, even before government actions began. We believe such measures deter investment in housing and only exacerbate issues of availability. We advocate for effective solutions to housing demand and anticipate our L.A. market will thrive with funds available and more effective practices enforced, but these anti-housing measures are likely to push investments away from the market.

Thank you. Sorry if I missed it, but did you provide January new lease rate growth, and where did they land relative to the 1.4% to 2.2% range for the first quarter blends?

Hey Julien, it's Michael. These metrics are most effectively used over a longer period rather than for stand-alone months, especially given the small quantity involved. The metrics have not yet been formally released. I will tell you, however, that we are seeing sequential improvement this January, as expected. We remain optimistic about our range of 2% to 3% blended rate growth, anticipating the first quarter will likely fall between 1.4% and 2.2%. Keep in mind, we do have variability which affects blended rates.

Okay, great. Thank you so much.

We'll now move to John Kim with BMO Capital Markets.

Thank you. That's LA, and I know you want to be conservative and there's maybe it's too early to come out with any guidance impact. But could you share the same-store revenue growth expectation for your LA portfolio this year? Would be useful for us to know what's in there, given the moving pieces.

Hey Daniel, it's Michael. I think in the prepared remarks, I mentioned that we expect LA right now in our base case to deliver approximately 3% revenue growth. This is based on the momentum we saw in the fourth quarter and an expectation of some marginal improvement throughout 2025, but nothing indicates an outsized recovery.

Great. Thanks; that's all from me.

And we'll now take our next question from Rich Anderson with Wedbush.

Thanks. About four hours ago, Mark, you said your target for expansion markets is 20%. I remember the number, 25%. I just want to check if you're just short handing it there, or are you walking back your ultimate landing point for expansion markets?

Rich, thanks for staying for the call. No, it's 20% to 25%, as I've mentioned before. I may have shorthand it. Reaching 20% may change our approach, potentially having more flexibility to engage in acquisitions outside these parameters. But we target somewhere in that range, as neither number is a hard cap, and we've discussed that with our Board.

Fair enough. To my next question, in August, you did a $1 billion deal with Blackstone that added 2 percentage points to your exposure. If this year is $2.5 billion, assuming every acquisition is in an expansion market and all disposals are in coastal areas, do you expect a 500 basis point increase? Do you think we will be around 15% by this time next year?

Yes, your restatement is accurate. If all goes according to plan, every $350 to $400 million in acquisitions could translate to a 1% increase, allowing us to aim for that 15% target. We would like to see this completed within a couple of years but recognizing the need for prudence concerning value and dilutive acquisitions is paramount.

Awesome. Okay, thanks very much.

Thank you.

And that concludes today's question-and-answer session. I'd like to turn the conference back to our presenters for any additional or closing comments.

Yes. Thanks, everyone, for sticking around for the call. I want to put a quick plug in for our upcoming Investor Day that Jeff Spector mentioned earlier. We're hosting this on Tuesday, February 25. We look forward to spending time with you discussing our high-level strategy and long-term outlook for the business. It promises to be very interesting and exciting. We look forward to seeing you all in a few weeks.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.