Please stand by. Good day and welcome to the Equity Residential 1Q2026 Earnings Conference Call and Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Good morning, and thanks for joining us to discuss Equity Residential's first quarter

2026 results. Our featured speakers today are Mark Perel, our President and CEO, and Michael Manelis, our Chief Operating Officer. Brett McLeod, our TFO, and Bob Garichana, our Chief Investment Officer, are here with us as well for the Q&A. Our earnings release is posted in the Investor 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 Perel.

Thank you, Marty. Good morning, and thank you all for joining us today to discuss our first quarter 2026 results. I will start us off, then Michael Manelis, our Chief Operating Officer, will speak to our first quarter operating performance, and then we'll go ahead and take your questions. Our first quarter operating results met our expectations with strength in San Francisco and New York, driving our same-store revenue performance. These two markets share common elements of strong demand from our target higher-earning renter demographic for our well-located apartment homes and low levels of new supply. So let me spend a few minutes now talking about why we are excited for the setup for our business in the back half of 2026 and into 2027. As I said on our last call, we expect deliveries in our markets to be down 35% in 2026 versus 2025. And the forecast for expected future deliveries continues to show substantial declines over the next few years, creating a very positive trend line for our business. Also, our higher earning customer demographic continues to demonstrate solid financial health with rising incomes, and we also see lower delinquency across our portfolio. Then there is a single-family-for-sale market that continues to be a challenge in terms of both cost and inventory, translating into customers renting for longer and leading to our record low turnover levels and strong renewal rates. With all those positives, the one missing ingredient is an accelerating job market, and current signals there remain mixed. That said, we do see some green shoots in the form of postings on the Indeed job site for tech roles and other similar high-earning jobs rising substantially across many of our markets since November of 2025. That provides us cautious optimism, even in the face of recent job cut announcements at big tech firms. But with a portfolio that is more than 96% occupied, with much lower levels of new apartment supply for the foreseeable future and limited owned housing choices. It will not take a lot of new jobs to drive more widespread, strong operating performance in the future. On the transactions front, we did not acquire or sell any assets in the first quarter. We did update our transaction guidance for the rest of the year to reflect the likely sale of a couple of properties. This is a continuation of our process of improving the portfolio by selling older capital-intensive assets or assets in places where we have heavy concentrations. As we previously disclosed, we repurchased $220 million of our common shares during the first quarter, bringing total repurchase activity to $500 million since August of 2025. And with that,

I'll turn the call over to Michael Manelis. Thanks, Mark, and thanks to everybody for joining us today. I'm going to provide a quick update on our operating performance, including some high-level market commentary, and then we'll begin the Q&A session. So overall, we had a good first quarter with our results reflecting the continuation of our disciplined operation execution with both same-store reported revenue and expenses generally in line with our expectations. On the expense side of the house, pressure from northeast snow removal costs and utilities were offset by a very low 20 basis point growth in payroll. On the revenue side, we are starting the spring leasing season in a good position, with solid demand and strong physical occupancy of 96.3%. During the quarter, we also saw improvements in bad debt, and the financial health of our resident base remains very supportive. Household incomes for new move-ins have increased, and rent-to-income ratios have fallen to 19%. Sitting here today, net effective prices have increased just over 4% since January 1st, which is in line with normal trends, and our occupancy and current demand levels are providing continued momentum into the second quarter. On a cash basis, concession use continues to decrease across most of our markets and is down about 21% across the portfolio as compared to the first quarter of last year. As we have said in the past, an improving supply and demand balance leads first to increasing occupancy levels, next to reduced concessions, then to absolute rental rate increases, all of which ultimately drives growing blended rates from leasing activity and future same-store revenue growth. We already see San Francisco and New York, where we are posting strong same-store revenue results as far along in this market performance continuum and expect most of our other markets to make progress to varying degrees as the year progresses. In the first quarter, we reported blended rate growth of one and a half percent, which mirrored the blended rate growth from the first quarter of last year on this same set and demonstrates 130 basis point sequential improvement from the fourth quarter of 2025. This sequential improvement included a 260 basis point lift in new lease change and a 30 basis point improvement in the achieved renewal rate increases. Retention continues to be a key driver of our performance. Our centralized renewal strategy is performing well as evidenced by 61% of our residents renewing with a 4.7% achieved renewal rate increase which was slightly better than what we expected. Looking across our footprint, performance continues to vary by market which was expected. The strength and key gateway markets like San Francisco and New York which both exceeded our already high expectations for the quarter are offsetting a slower than expected start in Boston and Seattle. Together, New York and San Francisco constitute about 30% of our NOI and have the best supply and demand outlooks in the country. Our urban exposure in these two markets is particularly unique to equity residential and should be a relative strength for us versus our peers this year. San Francisco continues to be the best performing market in our portfolio. The tremendous growth in AI is making San Francisco particularly the downtown, the place to be. Despite a few headline-grabbing layoff announcements, the market continues to have good job postings and strong office leasing activity. Looking at migration patterns, we are seeing more residents come to us from out of state and outside the MSA, which is a good sign for continued pricing power. Concession use in the downtown submarket, where we derive 22 percent of our NOI here, is virtually non-existent. The overall catalyst here is that strong demand is meeting a market that will deliver almost no new competitive supply in 2026. New York also continues to post excellent performance with demand outpacing supply and has almost no new competitive deliveries coming online in 2026. The large financial institutions continue to produce record profits, and employment in the market is very stable. This sets us up for another year of strong results. Boston started the year with challenging weather conditions and is also still feeling the impact in Cambridge around life science funding. Our overall outlook for Boston is moderated as a result, but this is a very seasonal market and it's still early. Overall, we still think that the city will outperform the suburbs based on the location of the 2026 new deliveries. And while D.C. is performing in line with our modest expectations, pricing power is less than normal, although we expect that to improve as the year progresses given the dramatic decline in new deliveries. With only 4,000 units being delivered this year, a decline of over 65%, the real question here is whether we will see any improvement in consumer confidence in this market. The current levels of uncertainty are clearly holding back the potential for this market. Any positive shift should allow us to recover from what has been a slower start to the year. Heading back to the West Coast, Seattle is not experiencing the AI driven demand boom that we're seeing in San Francisco and is currently trending below our expectations due to a slower start to the year. Historically, Seattle has followed cyclical trends from San Francisco, both good and bad, by about a year. And while it's still too early to call, given some of the headline risks regarding layoffs, we still see the potential for this market to tighten up. Today, the market is still working to absorb the new deliveries from 2025. Concession use is down 22% in the quarter, but demand is still price sensitive, causing this market to lag normal seasonal improvements. On a positive note, we've seen some good traction in the Bellevue-Bredman sub-market with recent office leasing activity announcements and having more residents during the quarter come to us from outside the MSA. Right now, rents are trending positive year over year, and concession use is very limited in the Bellevue-Redmond sub-market. In Southern California, Los Angeles is performing in line with our tempered expectations. While the downtown is starting to feel a little better as the city prepares for the events like the World Cup and Olympics, continued uncertainty in the entertainment business is an overhang on the market, and we have still not yet seen any catalyst on the job front that will drive growth in the near term. In our newer markets, we continue to see improving conditions in both Atlanta and Dallas with concession use coming down, which again is an early indicator that the overall market is improving. Atlanta is performing the best, and if the current trends continue, this market should deliver slightly positive same-store revenue growth for the year, which is better than what we thought 90 days ago. Turning to Denver, we are seeing some strength in occupancy and initial signs that the market may have bottomed out. With a sizable decline in new starts, improving operating conditions, and current competitive pressure easing, our newer markets, excluding Austin, Texas, all have the right setup for recovery through the balance of this year. On the innovation front, we're about six months into our full deployment of the AI-assisted application process, which includes screening. As I mentioned, delinquency from new residents is trending down, resulting in improvements in our bad debt net performance. We're also continuing with the successful rollout of our bulk internet program, and we'll have about 60% of the portfolio live by year end. We believe that offering a superior connectivity at pricing that is better than our residents can get on their own is supportive of our goal of delivering a value-add customer experience. As we look ahead, our priorities remain unchanged. We are focused on driving disciplined pricing, reinforcing retention, and maintaining tight control over expenses. As we head into our primary leasing season, the environment at a high level is stable and in many areas improving. Portfolio-wide, occupancy remains at strong levels, so our focus naturally shifts from a reliance on occupancy gains to optimizing pricing. In the second quarter, we expect to see a sequential build in new lease change and strong, stable performance in terms of retention and achieved renewal rate increases. Overall, we are well positioned that we'll maintain our operational agility and strategic focus to deliver sustained value with the best operating platform and people in the industry that combine automation, centralization, and a passion to deliver a seamless customer experience to our residents. At this time, I will turn the call over to the

operator to begin the Q&A session. I would like to ask a question. Please signal by pressing

star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Again, please press star 1 to ask a question. Again, that is star one to ask a question. We'll pause for just a moment.

We'll go first to Eric Wolf with Citi. Hey, good morning. I think last year in May,

we started to see a few signs of an earlier peak in pricing. As you look forward 30 to 60 days, are you seeing anything that would suggest something similar to last year? Or does the the seasonality at this point look more normal to you? Hey, Eric, this is Michael. You know,

I think relative to last year, I look at this and say our setup was pretty good at this time last year as well, and we feel good about the positioning that we have. You know, the strength that we see on the retention side of the business right now gives us a lot of confidence that, you know, heading through the spring into the peak that we're going to maintain this position that we have you know so i i think what we have is a setup that is a little different than last year with the weakening that we really started to feel i would say more in the late second quarter third quarter we are heading into a place of unprecedented times with such low levels of new supply that i think if we can maintain this velocity and get over the peak leasing season that back half of the year with the setup of such limited new competitive supply coming online really does position this portfolio well. Makes sense. And then you mentioned that

rent incomes were at 19% now. Can you just remind me what the sort of lowest that has ever gone? And I don't know if you have an opinion about sort of why, you know, rent growth has become a bit more disconnected from wage growth than it's typical. Yeah, I mean, I think the range

is historic. We have always been somewhere between 17% to 23% across our markets. And I think at any given time, you've seen this portfolio be 19% to 20%. So it feels like we're kind of right in line with the norms. I think what we saw in this quarter is you just saw a place where, you know, incomes have grown and you can see kind of the demand coming in that just have some higher income levels. I guess rents that are in line with kind of normal seasonality, but I think that increase in the incomes is what kind of caused us to tick down a little bit. Got it. Thank you.

We'll go next to Steve Sopwa with Evercore ISI. Yeah, thanks. Good morning, Michael. I don't know

if I missed it, but did you talk about where renewals were going out for May and June? And I guess, you know, what are you achieving on those versus sending out? And just remind us what your

blended spread expectations are for the year. Yeah. So, hey, Steve, this is Michael. So right now, I would say the renewal quotes that are out there are really for the next kind of three months already at this point. And we're sitting somewhere just over 6% kind of with the quotes and kind of have a lot of confidence in our centralized renewal process. You know, our centralized renewal team handles all the negotiations that allows us to kind of execute various strategies across markets and sub markets. This is the time of the year where we tighten up negotiations. So we got a pretty high degree of confidence that we're going to maintain and achieve renewal rate increase somewhere right around that 5% range, kind of in the in the months to come. So in terms of the blended rates right now, you know, we're not changing our full year expectations. We had about a one and a half to three percent kind of growth rate. And embedded in that was implied, you know, new lease change roughly flat, renewals somewhere around that four and a half to four and three quarter range. And right now renewals are doing a little bit better than what we thought. New lease is a little bit lighter than what we thought. So we love the setup heading into the peak leasing season. We love the supply picture in the back half of the year. But at this point, it's still probably too early in the year for us to change that full year outlook for the blends.

Okay, thanks. And then maybe just on capital allocation for other Brett or Mark, you know, there's obviously been a pretty big dislocation in the public markets versus private market. You know, have you guys thought about leaning even heavier into the disposition program and kind of taking advantage of kind of what the private market's offering, either to build up the balance sheet or, you know, kind of take advantage of buybacks?

Yeah, thanks, Steve. It's Mark. I'm going to start, and then Bob will kind of give you a feel for the disposition market. So we are open. We've done a fair amount of net disposition activity. You saw last year $500 million. We took third, fourth, and into the first quarter of this year to deploy those proceeds into the buyback. we're open to doing more buybacks. We like the match of selling these lower growth assets and buying the stock. So we're very open to that. It's just, you know, it kind of comes and goes a little bit. So I'll let Bob talk about some of the assets that are embedded in the increased disposition guidance you saw and some of the other stuff we might expose to the market. And we are open to using the balance sheet, meaning using debt to buy stock back. But you just have to remember that's a very different decision because you're affecting the capital structure of the company. And you can only do that a certain number of times before, obviously, you've used that capacity up. So our preferred means is dispositions. But of course, we are aware that at 4.3 times, we're, you know, relatively under levered and have that opportunity

as well. So Bob, you want to? Yeah. Hey, Steve, it's Bob. And as Mark mentioned, you know, we did introduce disposition guidance for the quarter for the first time. So you have 165 million. And these are assets that we're pretty confident that we're going to execute on. And that's why we introduced them into the mix. I think the critical thing that Mark already mentioned about what we're looking to sell are assets that are perhaps not best suited for our portfolio today, right? So these are assets that have value add components or growth components or concentration risk. So those do take a little longer typically to execute from a disposition standpoint, because the buyer pool may not be as broad as just down the main fairway. That being said, interest is, I think, the world has seen in multifamily, in the private sector, is very robust. And so we continue to see bidding tents that are very large. We continue to see interest in our asset class, and we continue to see a lot of private capital.

So I think you'll continue to see us execute as we go. Great. Thanks a lot.

We'll go next to Jana Gallen with Bank of America.

Thank you. Good morning and congrats on a great start to the year. And Michael, thank you for all the geographic detail. Can you comment on the magnitude of the decline in concession usage by markets? Just trying to figure out where we could start to see the new leases inflect sooner versus later.

Yeah, I mean, really, the concession dollar amounts across most of the markets are down because this is a low volume of transactions in the first quarter as well. You know, as we think about the concession use going forward, my guess is right now we're going to see continued elevated cash concessions in the newer markets, along with kind of probably into the D.C. and maybe even Seattle markets for the second quarter. So for us, when we modeled the concessions out, you know, we still kept the concessions pretty heavy through the expansion markets for most of the year. You know, as we turn the corner into the second half of the year, given the decline in supply, we expect concessions to materially decline, especially relative to the increases that we saw in the second half of last year. So I think the expectations right now on a full year for concessions, I would still model somewhere about 20 percent reduction relative to what we used in 2025. In the second quarter, my guess is that the year-over-year reduction is probably going to be a little bit less than that, you know, because the cash concessions are probably going to stay about the same as what we just did in the first quarter. But then as we turn the corner into the second half of the year, we do expect them to be down considerably compared to last year. So concentrated, again, newer markets, a little bit in D.C. and Seattle, but outside of that, the majority of the markets are going to continue to see reductions.

Thank you. Our next question comes from the line of John Kim with BMO Capital Markets.

Thank you. Looking at your prior years, it looks like the April new leases tend to be fairly representative of what you end up in the second quarter. So I'm wondering if you feel that dynamic is going to occur again this year at minus 1.1 percent, or do you think there's a chance it inflects positively?

Hey, John, it's Michael. No, you know, look, I think you're going to continue to see a sequential build. You know, our net effective pricing is continuing to grow across this portfolio. So my guess is we should expect to see some continuation momentum of improving new lease change. I don't think it's going to be like materially different than what you can see we just posted. But, you know, I don't expect us to end a quarter at minus, you know, negative one for the quarter. My guess is you'll see each month sequentially build and put us closer to kind of flat.

And then New York, it's been several quarters where you've been saying it's been one of your stronger performing markets. Recently, there have been some high end multifamily assets that have traded hands to another public REIT. So I'm just wondering, are those assets that you looked at, is that is this a market where you would allocate more capital or are you still really focused on some of the expansion markets?

Yeah, thanks for that question, John. I'm going to just start about New York in general, and I'm going to let Bob talk about the deal that stuff that traded in our interest or relative lack of interest. So we're about 14% allocated to New York Metro, mostly Brooklyn, Manhattan, and a little bit of the Jersey Coast. One asset in suburban New York, pretty unique portfolio. It's performing really well. We're benefiting from all the banks doing so well. We're benefiting from financing of the AI boom, all those things, and from pretty limited supply in that market. I feel like we're more kind of in a trading mindset in New York. 14% feels about right to us. So you may see us sell, you may see us buy, but by and large, 14% feels like a really good weighting. And our urban portfolio feels like a uniquely positive thing for us compared to

our peer group. And then Bob, if you want to comment on what's sold. Yeah. I would say that we underwrite everything, whether or not we look at something and bid on something is different. And we did not bid or look at these specifically, but we certainly underwrote them. One of the benefits of our Manhattan portfolio that's also kind of a nuanced approach is it's pretty straightforward and pretty simple in that we don't have a lot of 421A burn off. We don't have an extensive amount of retail exposure. And so they're pretty straightforward. And that's one of the benefits that you see flowing through to the underlying NOI. The assets that ended up trading were a little more complicated than our likings. So they had more retail components. They had more tax abatement, burn-off components, and just frankly weren't of interest. So we didn't

bid or look at them. That's helpful. Thank you. We'll go next to Handel St. Joost with Mizuho.

Hey there. Great to see the continued strength in San Francisco and New York. Seems like the slowdown, as you mentioned, DC and LA was in line with expectations. Boston, and Seattle a bit weaker. But I guess I'm curious, kind of beyond the next few months, New York and San Francisco clearly have momentum. What are you expecting for your coastal markets? The other group I mentioned, the L.A., Seattle, D.C., Boston. How do you expect them to trend over the next year? Which of those markets are you most excited about? It seems as though there's tougher costs in some cases, weaker demand drivers. So I'm curious what data you're looking at, which of those markets perhaps you're more encouraged about over the next 12, 18 months.

Yeah. Hey, I know it's Michael. You know, look, looking, sitting here today, you have to focus on DC with such a tremendous drop off in the supply. I mean, it's 65% less new units coming online. That will equate to some level of pricing power in that market. So we didn't have, you know, we have pretty modest expectations for the full year. But I think as you fast forward and go out 12 to 18 months, that market with such little new competitive supply, such a few starts actually in the market as well, sets up for another strong year next year. We need a little bit of confidence on the demand side of the equation for us to really see that thing take hold. You know, outside of that, I've said, you know, for LA, we had muted expectations. I don't know that we've seen anything yet to suggest that we'll model differently, you know, for the balance of this year. And we'll kind of see where the entertainment industry is kind of closer to the end of the year before we talk about next year on those. You know, the Boston and the Seattle markets right now, I think they're off to a slow start. You know, Boston had a really terrific winter, cold, a lot of snow, kind of probably impacted a little bit that the start that we're seeing. I like the setup in both of these markets, and I like the recovery potential of Seattle. You know, the history has shown it follows San Francisco, good or bad, by about a year. So my guess is we'll start talking positively about Seattle sometime here this year or into the early part of next year.

That's great, Collar. Appreciate that. Perhaps on the Sun Belt or the expansion market, I think you said, and forgive me, I'm misquoting, that they have the right setup for recovery into next year. We know the supply is falling, but maybe some color on where you're seeing some improving demand, pricing power, where concessions are probably coming off the most. So maybe some color on that comment and which markets perhaps are standing out beyond the maybe the Atlantas of the world.

So let me just clip. I can't speak about the sumbile. I can only talk about the few markets that we own and operate in those. So really, Atlanta, Dallas, and Austin, you know, right now we have three properties in Austin. we don't expect any material change in performance this year because there's still a lot of overhang of supply and there's still some new supply being delivered this year. You know, between Atlanta and Dallas, you know, Atlanta really ticked up a lot for us this last quarter and is now kind of set up to potentially eke out some positive revenue growth this year, which is better than what we thought. So we have seen concessions pull back. We do see kind of good occupancy. We do have kind of that momentum right now heading into the peak that is outperforming what we're seeing in Dallas. But Dallas still sitting here today feels pretty good. You know, it's got it's doing a little bit better than what you thought.

But Atlanta feels like it's got more momentum right now.

We'll go next to Brad Heffern with RBC Capital Markets.

Yeah, everybody. Thanks. So the Bay Area continues to be very strong, and you talked about AI driving that. I think there's a lot of investor debate about whether this is going to be a multi-year trend or whether AI ultimately pushes employment the other way. Obviously, nobody knows, but I'm just curious to get your take on how sustainable you see the strength in the Bay Area as being.

Yeah, Mark, that's obviously a bit of a speculative question, and I know you probably feel that too. To us, it feels like the AI boom, and to be honest, the affordability boom in San Francisco is likely to continue. I mean, rents downtown, we have a significant portfolio of just recently moved above rent levels just before COVID. So our resident can certainly reflect back on getting a 30% increase in nominal wages since 2019 and have their rent about flat. So there's room to run there. We see all the office leasing activity, everything around AI. It isn't just the actual creators of AI. It's all the systems that sit on top of it. A lot of this employment is small groups of people building on top of AI systems, various helpful applications of sorts. So I think there's room to run here. I think this technology, you know, there'll be ebbs and flows and valuation, things will But I think there's a lot to come here. And I think the resident can afford it because I think their nominal, you know, their nominal wages have gone up quite considerably in the San Francisco area. So this feels pretty persistent to us. And again, the ecosystem of great universities and all the venture capital money in the area and all that is also supportive of this continuing to be a kind of innovation center for everything AI and everything else technology related, which does seem to me to be the future, even if there are kind of fits and starts.

Okay, I appreciate that. I know it's a difficult question. In the prepared remarks, you talked about residents coming to the Bay Area from outside the market. I was wondering if there are any stats or additional color you can give on that dynamic. Yeah, so I mean, every quarter,

we're looking at where are new move-ins coming to us, what percent come from within the MSA, And then, obviously, I've said over the last several years, right, for us to really start seeing sustained pricing power momentum, we'd like to see in some of these markets a bigger draw from outside the MSA, a bigger draw from outside of the state. And we saw that both in San Francisco and in Seattle, specific to the Bellevue-Redmond submarket. So they're not huge percentages. It's like 5% more move-ins. But it's the trend lines that we've seen in San Francisco now where we have multiple quarters of seeing kind of that pattern hold, which is really giving us that confidence that we're in a position of pricing power for the next several quarters.

Okay. Appreciate it.

Our next question comes from Alexander Goldfarb with Piper Sandler.

Hey, good morning out there. Mark, just following up on as you guys think about dispositions, the markets are certainly interesting, if you will. New York rebounded strong after the pandemic. San Francisco has been a dream case on the other side. You've got the contrast between Seattle and the east side, L.A. versus like Orange County and San Diego. So as you guys assess your portfolio and assets to sell, how are you making the decision which markets sort of may have deeper, longer challenges, and therefore it's worth really downsizing versus which are sort of like a New York or San Francisco, which is it's a moment in time and you just have to wait for the pendulum to come back. I'm just trying to think as you're assessing asset sales and buyback, how you're thinking about the market.

Yeah, great question. I'm going to take the market focus, and maybe I'll have you, Bob, speak to asset challenges, because some of these decisions, Alex, we like the market or submarket, but we just have an asset that maybe we don't believe in the capital story or the micro location. So again, just generally our exposure pre-COVID to California was 45%. Now it's around 40. Getting that number down over time, probably mostly with a reduction in Los Angeles, is, I would say, more of a strategic goal of ours. Right now, that's not a terribly saleable market, so we can wait that out a little bit. So that's a spot where we maybe have a little less conviction is Los Angeles. And that isn't just the regulation, of course, that's pervasive in California. It's just that employment stuff. And Bob talked about that on the last call, and Michael has too. It's the entertainment industry really feeling like there's been a paradigm shift away from Southern California, and just not feeling like those employment drivers are what we thought they were when we made those investments initially. And a little bit of downtown Seattle. That, again, is an area that has some advantages and has been, you know, kind of recovering in fits and starts. But we do have a fair bit of exposure there and probably is another strategic reduction. Other than that, it's a little bit more tactical. And I guess I'll give it to Bob to talk about that.

Yeah, I mean, it really is an overall portfolio strategy approach and really taking an integrated approach to that at the asset level. So we integrate our capital planning with our disposition and acquisition kind of mindset. So we underwrite every single asset. I just actually went through this exercise with the team, because if you're not selling, you're buying. And so we integrate that into our capital plans. we look at what the asset, we make an assessment of what we think the asset performance is going to be going forward. We compare that against our cost of capital and we decide what can we do about that? What levers do we have? So in some instances that can mean on a specific asset, we're going to invest that value added renovation capital. We're doing 90 million of that this year and we'll get a return that will compensate the shareholders. And in other cases, we see that that's not an option. And so therefore, we look to sell that in the market when the market allows and redeploy that in something that's more creative. Okay. And then the second question is,

regarding the stock buybacks, you guys before have done developer equity programs where you fund a third-party deal, you get fees along the way, et cetera. How is that looking as an opportunity to put capital out, especially if you think about de-risking wholly owned development? How is that looking today versus just straight buying back your stock?

Yeah, I want to draw a distinction. It's been pretty uncommon, Alex, for us to do any kind of investment in development where we don't have a clear path to ownership. Like all our deals, the two new ones we did, they do have partners in them. But I mean, we have the right and expect to own those assets. And so it's been pretty infrequent in my career here where we funded, like some of our peers do, a program where it's just funding a development, but we don't have an expectation or a legal right to own it somewhere in the process. So I guess I'd say we don't do that sort of mes lending or preferred equity or whatever you want to call it in development very much. When we do it, whatever the structure is, whether it's called debt or equity, it's intended for us to own the property and there's a path to ownership.

But I mean, as far as the path to ownership, how does that look versus buyback? You know, as you judge the math of doing a third party development deal where you're going to own it versus buying back your stock.

Yeah, I think that's a great question. Let's use the two development deals we started this quarter as an example. Obviously, the stocks thankfully run up a little the last few days, but we are comparing the stock and our acquisition opportunities and development all the time.

So why don't you talk about those? Yeah. And so I think what you're highlighting, Alex, is that like in the in the menu choice, I think the stock is obviously a really compelling choice. It's probably, you know, oftentimes the most compelling choice. The next decision or the next most compelling choice is probably the development side today. Now, you got to risk adjust it, right, because the risk in the development is different than the risk in the stabilized portfolio implied in the stock price. But like the two deals that we did, that we announced or started this quarter, you know, those deals generally on a current yield basis are closer, may not be exactly perfect with the implied cap rate of the stock. But then we're also looking at the IRR, right? And so we're looking at the IRR and the aggregate over time and comparing that to our WAC. And in the instance of the Atlanta deals, you're looking at delivering into, in the one case, an asset that is in a very supply constrained area that does exist even in Atlanta. And you're looking when you look at reasonable rent growth, we can generate a nice spread on an IRR basis without kind of making too crazy of assumptions on rent growth or cap rate compression. We don't have any cap rate compression in our math. That is a premium to our whack. And so I think you're hitting on a point, which is that, you know, the development side is probably right now the best other alternative outside of of of stock. because your third choice, which is acquisitions are really tough on a relative to what private capital is underwriting. We're seeing private capital underwrite deals, you know, still in that 475 to five and a quarter kind of spot rate. And then IRRs that are probably, you know, in the seven handles, if that. I just want to add, Alex, because we don't primarily underwrite

based on forward rent growth. We're looking at spot construction costs against spot rents. And when we looked at the deal that's in Canton, Georgia, which is north of ways from downtown, and Alpharetta, which is more of a close-in suburb, our perspective was that based on the rents we see and the construction costs we see, the deal made sense on a risk-adjusted basis compared to the stock. It's tough. It's still below the yield the stock was trading at at the time. So we acknowledge that. But you also got to look for places to have some growth capital and put some money to work that you think can grow over time. And we just felt like the Alpharetta deal really underwrote extremely well on a basis level. We just saw a deal trade in that sub market at a four and a half cap rate, you know, and we're building to around a six. So it's a little bit of triangulation, but the primary dependent thing is how the current construction costs

compared to current ramps. Thank you. Thank you. I'll go next to Julian Blauen with Goldman Sachs.

Yeah, thank you for taking my question. I guess as we think about the rampant blends we saw from 1.5% in the first quarter of 26 to 3% in April, was that improvement relatively similar in the established in the expansion markets? Or was it definitely stronger and established because of

New York and San Francisco? Hey, Julian, it's Michael. I think when I look at the quarter, I would tell you on a sequential basis, almost all of the markets showed around like a 200 basis point kind of improvement relative to the fourth quarter. I haven't really done that analysis for the April numbers. But, you know, I'm looking at it and just saying most of the markets have shown that kind of sequential improvement. Obviously, San Francisco and New York are more like 400, 500 basis point sequential improvement on the new lease side. Renewals have been pretty consistent, where almost all of the markets were equal to slightly better outside of like a DC and Boston, which were marginally kind of lower on a sequential basis. So I look at that kind of growth to the April number and say it's kind of in line with what you would expect from a normal kind of pricing trend seasonal curve. And like I said earlier on the call, right now, given our positioning, given where the occupancy is, our pricing trend has continued momentum, right? We're going to continue to see that accelerate through the second quarter. That's going to drive continual kind of improvements in new lease change and a lot of consistency on the renewal part of the equation. So I don't know that I would kind of look at this across the different markets and say the momentum feels like materially different than my comments from, you know, prepared remarks about which markets are performing in line with normal seasonal trends and which ones aren't. Yeah, I

think it's a difference between absolute numbers, which are certainly better in the established markets than they are in the newer markets for us. But I think what Michael's signaling to you is just a momentum or trend line in the case of the established markets is becoming very positive and it's becoming less negative in these other markets, but the momentum track is the same, just the absolute numbers are still different, right? Yeah, got it. That makes sense. And then

And maybe moving over to Seattle, are there any forward indicators you're looking at in Seattle that would indicate that it could follow San Francisco? I mean, just so far, it seems like that market has a disproportionate amount of tech layoffs and sort of corporate roles without as much of the AI boost from company creation and job creation. And the real time rent data just continues to deteriorate in Seattle.

Yeah, I mean, this is Michael. I think one of the positives that I guess I would point to is really the momentum that we see in Bellevue Redmond. I mean, if you look at some of the headlines around the office leasing activity, you see that kind of momentum kind of taking hold. You look at the migration patterns that I kind of mentioned earlier, where more folks are coming back into the market. Now, some of that could be from the Microsoft, you know, returned office kind of policy change early in the first quarter that we saw. But the setup feels right for that market to kind of show some of that momentum. And I think what we're feeling right now is we still have a little bit of overhang from the supply that was delivered in 2025 that we're working through in the city. We also saw a reduction of inbound migration from foreign countries. So typically, Seattle is one of those markets that has a higher concentration of move-ins from kind of outside the U.S., so call it 4% or 5% of our move-ins during that quarter. We're running like 50% of that mark. So I look at this stuff and say kind of longer term, I see the setup and I can see this kind of the recovery indicators kind of taking hold. We probably just need a couple more quarters to get through for it to really kind of follow that trend that we're seeing in San Francisco. Got it. Awesome. Thank you.

We'll go next to John Pawlowski with Green Streets.

Hey, thanks for the time. Michael, I have a follow-up question on the new lease conversation. So you mentioned the expectation for the full year is flat, maybe slightly negative now for the portfolio. Can you give us a sense for the goalposts, what kind of range new lease growth rates will be for the best sloth of the portfolio and the weakest?

Yeah, you know, I don't really have that in front of me, John, for the whole portfolio. I guess what I would look at and say, the newer markets are going to continue to still have negative new lease change, right? As Mark just alluded to a second ago off of my comments, we are seeing momentum, we are seeing improvement, but the absolute numbers are still negative. And then you get into markets like San Francisco, right, where we're putting up kind of near 10% kind of change. So I think that's going to be a pretty widespread when we end the year and looking at some of the newer markets as compared to like a San Francisco. Okay. And then Bob, second question

about just a disposition pool that you have sold or you potentially brought to market and pulled off the last six to nine months. Really, the topic is perhaps widening cap rates for more capex intensive, lower quality assets. So I guess over the last, call it six to nine months, have you had to change the types of assets you're actually selling? Has there been more retrading when you bring properties to market and you're not getting a bid? Is there more churn in that kind of disposition pipeline to still hit a reasonable cap rate on the dispos?

Yeah, I wouldn't say that there's any more churn than what we expected or certainly anything different than kind of what we saw last fall versus what we're seeing today. You know, some of these assets that we're taking to market are unique and they have, you know, different opportunities. So those opportunities may not, we didn't like, we didn't expect, you know, 20 people to show up under the tent. And we didn't get 20 people showing up under the tent because they have kind of the capital components or the value add components, or they may have retail, they may have ground leases or other things. But I don't feel a difference in sentiment like six months ago relative to what we sit here today. Certainly, I think what has been consistent is that the smaller the size of the deal, meaning if it's in that $75 million to $150 million range, you get a lot more people showing up, right? If you have a deal that is individually $150 or more, it just gets smaller, right? I think that hasn't changed, but it feels the same. Again, I haven't been doing this for that long, but it feels the same to me right now, this spring, as it has last fall.

And I might add, John, too, I think from a capital standpoint, right, I think the secure debt markets are still very supportive of these types of interactions and multifamily. There's lots of capital available. So certainly no change from that end.

So you haven't got the sense that pricing, like market pricing really hasn't deteriorated at all for maybe larger CapEx intensive older properties?

I think that six or eight months ago, I think larger CapEx-intensive assets were very hard to sell, and I think they continue to be hard to sell today.

Okay. Thank you.

We'll go next to Nicholas Yelico with Scotiabank.

Oh, thanks. I know you guys got rid of the blended and new lease pricing by market, which I was sorry to see go. But I wanted to see if you could maybe just give some commentary on, you know, Southern California, how that's trending year to date on, you know, new and renewal leasing versus last year, if you've seen any improvement there.

Hey, Nick, this is Michael. So relative to Southern California for the first quarter, you know, we're still seeing kind of negative new lease change. And it's kind of most pronounced, I would say, in Los Angeles. And again, very consistent performance on the renewals. So, you know, I think for us, the SoCal portfolio continues to be the story around the Los Angeles kind of market. And, you know, sitting here today, right, I've got stable occupancy. I've got a pricing trend curve. It's flat year over year. I've got less concessions right now in downtown and Koreatown, where we had some of that supply kind of pressure last year. So, you know, blends are, you know, starting to show some kind of positive momentum here, but it's less than what you normally would have expected. And I think last year, you know, we started to feel some more of this pressure, kind of more second quarter, third and fourth quarter. So relative to the first quarter, you know, clearly we see still some softening soak out compared to last year. But as we work our way through the balance of the year, we just expect kind of moderate performance this year out of L.A. We're not really seeing anything that's going to point to kind of robust recovery and pricing power.

OK, thanks, Michael. And then a second question is, Mark, you know, if we look at the multifamily sector, there's kind of a clustering of, you know, valuation for the stocks that are in your peer group. What I'm wondering is, you know, are you thinking about and I know you have there is a differentiated strategy here that, you know maybe people don't sort of pay attention to but are you and the board you know there are conversations to sort of uh go even more in terms of um you know differentiation and strategy whether it's investments platforms or how you're managing the balance sheet that you guys are sort of focused on to sort of differentiate yourself uh versus the peer group thanks yeah thanks for that

question. We are, the board, the management team is always engaged on strategy. It's a topic every meeting. It's a topic between meetings. I think real estate expert investors, of which there used to be more than there are now, understood the differences between the big six or seven apartment companies. I mean, we do have a different strategy. We're more urban-focused, we're less development-focused, we're more operationally focused on our excellence and investment in our operations. So I think people that, you know, are experts in the area know the difference between us and others. I think the generalist investors and, of course, the index funds don't. And I think, you know, it's a little bit hard to know how you can break through that, except, I don't know, by some really more dramatic step. But I do think dedicated investors know the difference between us and our peers. And I think more generalist investors probably don't.

Okay, thanks, Mark.

Our next question comes from the line of Jamie Feldman with Wells Fargo.

Great, thank you. I guess here's an opportunity to talk about your operations. So, you know, we haven't really talked about the expense side of things. Can you talk about a couple things here? Number one, the insurance renewal that I think was in March, how that played out and how that looks versus your guidance. And then just energy costs. Is there anything that changed your outlook on the expense side, given where energy costs are going, or is there anything you're doing to mitigate expenses? Maybe just talk through that, or if there's any other expense line items that are, you know, meaningfully different than your initial outlook, or that you want people to focus on, on how you're managing

them. Yeah, thanks for the question. So I'd say maybe to start with the insurance, you're right, we did see actually we had our property insurance premiums, they have come down, which we actually viewed as an opportunity to buy some additional coverage. So I think that hedges us against, kind of what we've been seeing in annual casualty loss expenses over the last few years. And so I think while property premiums were coming down, we also have seen the offset being general liability premiums have increased, as well as some of the general liability expenses that run through our same store-ops. So I think putting that all together, the 4.5% quarter-over-quarter increase we had in the first quarter, that's not unexpected, and was anticipated in our guidance. As far as energy, I would say utilities were up a little bit higher than we probably thought for the year a little bit. A lot of that results, I think, from, one, the number of storms we had early in the year in the Northeast in particular. Obviously, there's a lot of noise in energy costs just generally across the board, and electricity and gas were certainly impacted for us in the quarter. We tend to hedge as much as we can, so there's only a small amount that we can hedge in the market, but to the extent we can, we are hedging energy prices. But I'd also say the flip side of, you know, higher utility costs being up is on the, on the revenue side, we were able to have higher fees and you noticed our other income was up about 60 basis points contribution in the quarter. So that offset a little bit of a higher increases in expenses. Oh, sorry. The one thing I

was going to add, Jamie, is on the capital side. So we have a number of capital sustainability driven capital projects focused on reducing consumption because that's really the lever that you can manage the best, right, because it's, you know, macroeconomic drivers will drive the utility costs. We have a number of projects underway. But to be honest with you, the rise in prices also led us to re-underwrite other projects that may not have otherwise hurtled in terms of what our capital returns would have been, but now do. And so we have looked at, we did a big exercise at looking at accelerating those to manage that both for our own P&L, but also for our residents overall. So we're applying the operational excellence that you've seen in Michael's world just to across the platform in order to keep those costs down as much as we can. Yeah, and Jamie, this is Michael. The only thing I would add there

is we do have an energy conservation checklist. So our onsite teams have done a tremendous job every day showing up, going through that checklist and looking for areas of opportunity to reduce the overall consumption. We measure the consumption. We kind of share and highlight and spotlight, you know, where we're seeing those successes. And it doesn't take much, right? That little bit of focus of turning down, you know, the temperatures in the hallways or common areas by one or two degrees starts to show up in some of the bills. It has a lag effect, but clearly we have the right mindset in place to mitigate as much of the consumption risk as we can.

Okay, that's a very helpful caller. And then we noticed your leasing and advertising is up pretty meaningfully year over year. I think it's over 20% higher use of interactive marketing. Can you just talk about something? Is there anything changing on the AI side? Are you using more resources to optimize your appearance in AI searches? Is there anything to read into that data? And if there is, how's it going?

Yeah, maybe I'll start. Sure. I'll start, Jamie, just on the cost. I'd say it's nothing that we didn't expect. I mean, as Michael's talked about, we've got some of our technology innovations that are rolling through that. I would also say specifically to that line item in the quarter, we did have an outsized increase from a write-off of a broker commission we took in the first quarter related to our non-resi portfolio. So when a tenant vacates early, we write off the full amount remaining on the amortized brokerage fees, which we did at three retail properties in the quarter. So that was contributing a little bit to the higher number, but otherwise was kind of in line with what we

were thinking. Yeah. And then I think just specific to AI, I mean, I do think the industry is changing very quickly. And the way that consumers or prospects are finding people by leveraging some of the LLM models that are out there is going to change kind of the ILS environment. Our team is very focused right now on, you know, trying to figure out ways to become relevant in that kind of search optimization. Haven't really seen anything take hold and clearly not a driver to the expense that, you know, Brett just alluded to. But it's something that the team is very focused on. And we do think over time is actually going to reduce kind of the dependency and overall reduce the L&A expense.

Okay. Do you think it can become a strategic advantage or does it level the playing field?

Uh, no, I think there's absolutely ways to become more relevant in that environment. And I think, you know, the folks that are focused on it and put the right resources to it will have a strategic

advantage. Okay. All right. Thanks. We'll certainly follow that. We'll go next to Michael Goldsmith

with UBS. Hi, this is Amy. I'm with Michael. I was curious, how much of an impact does burning off of concessions have on your blended rent spread? So are your blended rent spreads artificially boosted by concession burn-off? They were always reported on the same basis. So they're always

net. So they don't, it's marked. They don't change from, it's not like one quarter we reported it with concessions and the next quarter without. So obviously getting rid of concessions is the beginning of that continuum of improvement, right? You get occupancy, you get confident, then you take concessions away, then you move up base rents and then it finally leaks through the rents or to a same store revenue. So I guess I'd say it's on the continuum, but because we didn't change the basis of calculation, I don't see how that could be true.

Okay, so not a material impact. And then I guess just to touch on the rent that you're monitoring, we know Massachusetts is up, are there any others that you're monitoring closely?

Well, Massachusetts is the area of primary focus for us. It's likely to go to the voters and I think the industry is mobilized just like it was in California to make the same arguments about the industry being more useful, creating supply and that this rent control activity is a disincentive. There were a couple of deals we were looking at in Massachusetts to start building that we stopped. And I'll tell you that the two deals we are almost done building right now, you know, we might have thought about them differently as well. So it's a very negative proposal for housing supply and long-term affordability. There is a measure in D.C. we're watching closely as well that would freeze rents for two years. A lot of our DC portfolio is already rent controlled. So it's a little bit of a different and less meaningful impact directly on us. But again, it's a hard place to do business. The market already knows about this. It's already harder to sell assets in the District of Columbia. So again, I guess the theme I'd give you is capital is sensitive to regulation. And when you do this and deny returns, you're going to have less investment and worse affordability, and I think a lot of smart policymakers like Governor Healy in Massachusetts already know that. So, you know, we're going to be hopeful, but Massachusetts

is the main show this year. Great. Thank you. We'll take our next question from Adam Kramer

with Morgan Stanley. Great. Thanks for the time here. Maybe a little bit more of a philosophical question, but, you know, just with turnover rates sort of as low as they are and, you know, even with all of the supply that we've had the last few years seeming to stay really low, wondering sort of how you view that, right, sort of recognize that from a same store NOI perspective is benefit from, you know, reduced R&M costs, but just from our sort of renewals versus new lease growth perspective, wondering sort of how you see the sort of lack of mobility sort of within the housing ecosystem currently, you know, sort of benefit bit on the renewal, but maybe hurts you a little bit on the new lease side? Or am I thinking about

it incorrectly there? Adam, it's Mark. I'm going to try to answer. We've been reading articles, various bank research shops about less labor mobility, and that's been a trend in the U.S. People are moving less frequently. Interestingly, it does look like Gen Z, not surprisingly, younger people move more often and that higher wage folks move more often. That describes our demographic pretty well. I think for the country overall, growth is benefited by people moving to where the jobs are. So I think less labor mobility, less geographic mobility is less positive for the U.S. growth rate overall. But our group of folks will move around the country at their age to find opportunity and maybe aren't quite as tied down as older generations are by a family or other considerations. So I think overall, less geographic mobility is bad for the country. But I think for our demographic, we just haven't seen it. And you heard Michael talk about San Francisco. We see the influx. And, you know, at our investor day last year, we talked about New York, which has lost people for a while. But yet Manhattan's doing great for our demographic. And you see that in our occupancy numbers. So I think there's a big overall theme of it being a little bit of a negative. But for us, it's generally been either neutral or a bit of a positive because our demographic is more mobile still. That's great, Collar. And then

maybe just a little bit of a different question, just wondering about sort of the Sunbelt recovery. So, you know, a little bit of a crystal ball question. I know it's difficult, but I guess when you sort of sit here, you know, look at what the supply forecast is for the Sunbelt for your expansion markets, you know, sort of how do you think about sort of the pace of recovery there. There's new lease growth, you know, could it get positive later this year? Is that more of a 2027 story? I recognize, you know, there's nuance by market as well. Austin probably being the softest fundamentals, but just, yeah, wondering sort of recovering the sum bells

and sort of latest thoughts on timing there. Yeah, it's Mark again, and if there's something Michael wants to add, he can jump in here. But I think we need to see concessions go down. That's what we are seeing, in fact, in Atlanta and, you know, just occupancy firming and concessions and And that'll be the indicator that, you know, rents will recover the setup in all those markets, our markets, which, again, are just Dallas, Denver and Atlanta with Austin, a laggard. Those all have decent forward setups. We just need more job growth there than anywhere else because we have more supply there than anywhere else. So I think they are more sensitive to jobs. And we've said that a few times. I don't know how many jobs you need in the market like D.C., new jobs where there's just going to be so much less supply. So I think those are higher beta markets and they do have upside. And I think in some maybe a year or so, we'll be talking about that second derivative really inflecting up in those markets more than at this point. But what we really see is a bit of a slow recovery with Atlanta in the pole position for us and Austin at the rear.

Great. Thanks for the time.

We'll go next to Amoteo Akosanya with Deutsche Bank.

Yes, good afternoon, everyone. The other income line item this quarter, kind of some strong results coming out of that. Just curious if that's just really being driven more by just expense reimbursement because you have higher occupancy, whether there's kind of other ancillary income sources there that are more sustainable, If there's anything one time in there, just kind of curious about that line item and kind of what we can expect from it going forward.

Yeah, sure. This is Brad. I said, as I mentioned earlier, I think we saw, as you noted, the higher rubs income a little bit. We obviously had bad debt was better this quarter by 10 basis points. And then the last thing I'd say is we did see some positive trends in storage and some of the on-site ancillary charges that we've been generating and we're working on as well as the continued rollout of the bulk Wi-Fi program from last year.

Thank you.

This concludes the question and answer portion of today's call. I would like to turn the call over to Mark Perel for any additional or closing comments.

Thank you all for your time today and for your interest in equity residential.