Good morning, ladies and gentlemen, and welcome to the Avalon Bay Communities and Equity Residential's Merger of Equals Joint Conference Call. You may enter the question and answer queue at any time during this call by pressing star 1. If your question has been answered or you wish to remove yourself from the queue, press star 2. If you are using a speakerphone, please lift the handset before asking your question, and we will ask that you refrain from typing and have your cell phones turned off during the question and answer session. During the Q&A session, in an effort to get everyone's questions, the company asks that you limit your questions to 1 and re-enter the queue with additional questions or follow-ups. Your host for today's conference call is Marty McKenna, Senior Vice President of Investor and Public Relations at Equity Residential. You may begin your conference call.

Good morning. Thanks for joining us to discuss Equity Residential and Avalon Bay's merger regals. Our featured speakers today are Ben Schall, President and CEO of Avalon Bay, and Mark Perel, President and CEO of Equity Residential. Both the press release and investor presentation are available on both companies' investor websites. 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 companies assume no obligation to update or supplement these statements. Now I will turn the call over to Ben Schultz.

Thank you for joining us on behalf of both companies and our boards of directors and trustees. Mark and I are extremely excited to announce the merger of equals between Avalon Bay Communities. And this is a landmark combination, the largest merger in the modern REIT era, and one that we believe creates a new and fundamentally stronger company with the capabilities, scale, and balance sheet strength to redefine leadership in rental housing, structurally superior earnings growth, dividend growth, and new premier public apartment companies with 180,000 apartment homes, getting bigger, just creating a meaningfully stronger company that will draw on the foundational strengths of both organizations, but also bringing together a newly formed team, creating a new culture, and building a differentiated set of capabilities that will drive a step function change in our growth profile relative to what either company could achieve. Build industry leading platforms over many years with deep talent and associates who truly care, strong cultures, operating discipline, development expertise, and long-standing trusted relationships with residents, associates, communities, and one that leverages its exceptional people and differentiated capabilities to unlock a structurally higher by creating a durable operating advantage. NuCo will be powered by a leading operating platform that leverages technology and leading regional teams. Operational scale at a meaningfully lower cost per unit Provides greater data richness, stronger market knowledge, and deeper within market density. Decision-making across leasing, maintenance, resident services, marketing, purchasing, value creation through development. We will have a near-term tailwind and market rate and dedicated affordable apartments across 32 communities. To generate even stronger returns for shareholders, while also increasing overall housing supports local subcontractors, means combining two of the industries, one that will have robust access to capital, including over $2 billion of annual cash flow and self-funding capacity to deploy into external growth opportunities. Focus will be on allocating capital to those opportunities with the highest risk-adjusted returns. By enhancing reinvestment to acquisitions and with stronger internal and external growth, the combined company will be positioned for a more enduring cost-to-capital advantage to further facilitate future growth. It means drawing on the immense talent leadership team today, we expect the management team to include substantial representation from both companies down through the new organization. Longstanding mutual respect that exists between both companies that creates the foundation for success together. We are excited to build on that foundation by investing in our people, adopting best practices that will position us as an employer in areas of leadership to pursue new areas of growth. Recognize that a combination of this size comes with responsibility to the communities where we operate and to the broader housing market. We welcome that responsibility and our commitments. Then I'll turn the call over to Mark.

Thanks, Ben, and thanks to all of you for joining us today. On behalf of the Equity Residential Board and our entire team across the country, we are pleased to enter into this transaction to create the leading rental housing provider for 30 years innovating and creating value for shareholders and believe that this is a natural next step on that journey. We are very proud of what we have accomplished as Equity Residential and very excited for this next chapter. For me, this will be the end of my time at the company after 27 years, with the last eight as its CEO and a prior 11-year stint as CFO. I was honored to lead an outstanding equity residential team that always strived to do the right thing for our customers, our shareholders, and for each other. Thanks to all my equity residential colleagues for an amazing ride, and I am committed to working with Ben through this transition to put together two great teams that have a promise. So why merge and why do it now? We see the rental housing industry as being at an important inflection point. First, the industry landscape has evolved. From the perspective of both EQR and AVB, the status quo is not an option. The sector has matured and it is harder for large apartment leads to truly differentiate. This has been particularly true for EQR and AVB, given similar approaches and strategies, and too often, relative performance is dictated by geography, which markets are stronger in a given year or even a given quarter. This is not a sustainable way to consistently generate outsized returns. The investor landscape has also changed with the continuing shift to ownership to index funds and generalists. To compete in this new world, one needs to become more relevant, and we see our greatly enhanced scale and distinct growth profiled, is providing that relevance, and we firmly believe that the next phase of our outperformance in our sector will be driven less by simply owning assets in the right markets in that particular year or quarter, and more by having the capabilities to operate those assets better through cycles, especially by applying cutting-edge technology at scale, having the ability to invest through cycles more effectively, being able to efficiently also believe that the combined company will have a real cost of capital advantage over its public and private competitors. This should be different than the last 20 years when private sector players and the broader industry benefited from declining interest rates and declining cap rates. The real estate economy no longer has the same tailwind from declining cap rates and the combined company's scale ability to apply more technology. Superior access to capital should provide a meaningful advantage relative to players in both the public and private rental housing space that can demonstrate structurally higher growth, superior capital allocation, and a stronger balance sheet as the combined company is uniquely positioned to do, should have greater flexibility to invest when opportunities emerge, and should win the return battle. I'm also excited to see the opportunities that the combined company creates for the fantastic teams from both companies. Ben talked about the mutual respect and admiration that EQR and AVB have for each other. This has been forged through decades of competing against one another, solidified more than a decade ago when we partnered together to acquire the Archstone assets. Archstone was a large and complicated transaction. Both EQR and AVB came through it with flying colors. We expect the combination to be accretive to both equity residential and Avalon-based shareholders. On a run rate basis, and using 2026 core FFO guidance as a base, we expect similar accretion to both companies in the range of about 2%. From a governance and leadership perspective, the combined company will have a board initially composed of seven existing equity residential trustees and seven existing Avalon Bay directors. Steve Sterritt, EQR's lead independent trustee, will serve as chair of the new company. The company will be dual-headquartered in Chicago, Illinois and Arlington, Virginia, and will operate under a new name to be announced at closing. This is a combination built around shared ownership, shared governance, and a shared opportunity to create the company that is stronger than either organization on its own. Now I'll turn the call back over to Ben to take you through the presentation.

Go deeper into the combined company's areas of opportunity, referencing select pages from the investor presentation that we posted. we need the core to be strong. That means executing integration extremely well, protecting the resident experience, bringing together the best of both organizations, and building a combined operating model that becomes the launch pad. The first step in this process is to execute on an identified set of corporate and operational efficiencies, as described on slide seven. We're projecting $175 million of gross synergies from corporate overhead savings, property management, overhead efficiencies, and property expenses. Under estimated real estate tax reassessments, we are expecting net synergies of $125 million. We expect $125 million of run rate annual operating synergies to be fully in place by the end of 18 months, with more than 85% in place by the end of 2027. These synergies are the first rotation of the flywheel, the foundation from which we will invest and grow. The next rotations of the flywheel will be driven by further leveraging the combined company's differentiated capabilities. Operating scale and margin improvement, along with a larger and more diversified asset base, will drive superior internal growth. Those operational benefits also drive stronger returns on new investments, further allowing us to leverage the combined company's market presence, capabilities, and local teams to surface unique development and investment opportunities, all leading to superior external growth. NUCO's ability to consistently drive superior internal growth and superior external growth will translate into an enduring cost of capital advantage, which we can then utilize to facilitate future accretive growth, the accelerating flywheel, and action. Zooming in closer on the operating platform, Northern California provides an example of what market depth makes possible. As highlighted on slide, a annual of 84 communities and approximately 24,000 homes in the region. When you have that kind of depth, the operating model changes in very tangible. It's richer, visibility and span of control. Teams can become more specialized. More activity can be insourced or centralized. Marketing and purchasing become more efficient. Market overlap. This is how we will drive enhanced margins and drive additional NOI region by region. Platform in the future via new investments will bring them on at an even lower margin of future growth while enabling us to deliver better service to residents. a design company will have is our beginning and adoption of new technologies across a wider portfolio. DB and EQR's very successful joint history with Elise AI, which allowed us to bring conversational AI to the vast majority of our prospective AI tools to communicate across the full customer journey. The broader point is to invest in the next frontier of operations at a meaningfully lower cost per unit than competitors. We can identify emerging technologies, pilot them across a meaningful platform, scale what works, and spread the cost across a much larger investment benefits residents directly, assistant service, while also driving the operating efficiency, operating and investment. 60 million pieces of customers. Remind these data sets to better serve customers, provide our associates with higher quality data for real-time decision-making, and inform new investment decisions. Moving to slide 14, approximately $4.4 billion of development, representing roughly 10,800 homes, with projected initial stabilized yields above 6%. That creates embedded growth over the next several years. What this development pipeline also represents, NUCO will be one of the country's leading creators of new rental housing and a country with a significant and well-documented housing shortage. We are building housing supply that communities need. Meaningfully grow the development structure from a larger pipeline, improve operating margins that allow more development to underwrite favorably, and deeper relationships with third-party developers. The company has approximately $4.2 billion of development rights, representing roughly 9,800 homes. Affordable and mixed income will be a more important differentiator. With scale, balance sheet strength, and structurally higher growth, we'll have greater flexibility to invest when opportunities arise. For NUCO, capital allocation will be a core capability for deploying it to the highest risk-adjusted returns across development, acquisitions, reinvestment, and across markets, submarkets, product types. In year one, meaningful progress on synergies and a team operating as one. That is the foundation. Everything else is built. We want to be direct about what it means for our residents. They should experience no disruption. People they know, the service they expect, the communities they call home, all of that continues without interruption. Delivering margin cards meaningfully scaled and technology and earnings growth and total shareholder performance for our shareholders and the communities. We appreciate your time today.

Thank you. As a reminder, if you'd like to join the question queue, please press star 1 on your telephone keypad. We ask that you each keep to one question and rejoin the queue for additional questions. Our first question comes from the line of Eric Wolf with Citi. Please proceed with your question.

Thanks. It's Nick Joseph here with Eric. Mark, I appreciate your comments on, I guess, the apartment sector broadly and challenges for the companies in terms of differentiation and driving alpha. So can you just walk through why this merger versus different alternatives, you know, either leaning into more asset sales and buyback stock or a larger company sale?

And then did you explore other alternatives as part of this process?

Thanks for that question, Nick. We're going to save some of those details for the proxy. I want to leave you that to enjoy later. But, you know, certainly the idea of doing stock buybacks isn't something NUCO dismisses either. But the ability to create perpetual continuous earnings growth from these operational improvements, from a better cost of capital, giving us better capital allocation decisions, development and otherwise, and then all the other things that Yuko can unlock that Ben just went through, is just very attractive to our board, I think very attractive to our shareholders. So, we do see this combination as unique among the choices the company had because of its ability to accelerate earnings growth through the years. And, again, we think the integration efforts here will be relatively straightforward given the very similar cultures, a lot of similarity in systems. We're ready for the challenge. We're excited for that. And I think it's going to be, again, a growth accelerant for our show.

Avalon Bay.

Hey, it's Eric. Can you just, I guess along the same lines, can you just talk about what's in that sort of portfolio NOI synergies?

I think it goes back to what you were just saying about operating at a sort of higher level. And then you kind of gave the timeline to achieve, I think, the overall synergies. But just curious for this specific bucket, you know, when you might be able to achieve those. the breakdown of, I mean, the NUCO is going to be positioned AI, which is a company that both Equity Residential and Avalon Bay have been involved with. We sell them to the industry more broadly or keep it for its own benefit. So there are things that NUCO will be uniquely able to do and accelerate even beyond the numbers on the page Ben just narrated that I think are really special, like invest in technology at scale, that even at the size Equity Residential or Avalon Bay is right now. We just can't do. It's just not possible that I think in the future NewCo will be able to do.

Thank you.

Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed with your question.

Hey, thanks for the time. Maybe just unpacking the synergies a little bit more. I was wondering sort of if you could double click on maybe the scale benefits of what a combined company would look like, right? If I just look at you know sort of the boston or broader massachusetts exposure i think it would be you know 16 17 000 units on a combined basis or maybe that same store but you know what they're about um you know if i sort of look at what would be the efficiencies of having that sort of exposure versus 7 000 or 10 000 on the standalone basis right i think of both you guys as sort of being really good operators right having already done the potting other efficiencies over time um so what would sort of be the the added benefits the added efficiencies from a property management perspective on a combined basis?

When we think about definitely more to come over time. In terms of more specifics, as we think about what comes from this market depth, obviously more and more data helps to improve our decision-making goal for regional leaders. So we think about a regional leader being able to handle a wider portfolio of asset teams in these markets where you can have certain groups who are really good at this one. And there are for sure economies of scale. Think about marketing. Great example. An ability for NUCO, and we will have a new name for NUCO. We think about NUCO's reach. Think about NUCO's reach in the world of AI search.

All of that will be very powerful.

Thank you. Our next question comes from the line of Steve Sackwa with Evercore ISI. Please proceed with your question.

Yeah, thanks. I was wondering if you could just maybe touch on the Prop 13 impact. I know you've got a $50 million sort of placeholder here. you know, is that applicable, you know, to just one of the two companies? I mean, obviously one is the buyer and effectively one is a seller here. So I guess just how do we sort of think about that 50 million? And what do you think the timing of that is to kind of bleed into the, you know, the pro forma financials?

Put in a $50 million estimate on page seven. That is under the assumption that Avalon Bay, as we said, will merge into the equity residential legal structure. So that would be how the transfer taxes and property tax reassessment would be triggered. It's almost entirely California. There are some other states. So there is back and forth there. There is, I mean, this estimate is just that, an estimate. So I would say, Steve, once the transaction is concluded, there's going to be a back and forth with assessors. We have very capable teams that'll have those very robust conversations. So we think 50 is a good estimate, But, again, there will be some back and forth. As Ben said, it's kind of an 18-month process for the synergies. It's also, frankly, probably an 18-month to two-year process of determining the final landing point on some of these property tax reassessment issues.

Thank you. Our next question comes from the line of John Palowski with Green Street. Please proceed with your question.

Hey, good morning. Thanks for the time. I had a follow-up on Eric's question on the $60 million in NOI synergies. One, are there any revenue synergies embedded in that number? And then two, I couldn't tell from your comments whether these are costs that the current standalone companies are incurring today that are visible that you can cut, or it's more speculation on AI and other costs you would have to spend if you went alone down the line that you think will be unlocked. So if it's more speculative in terms of cost savings down the line.

Property management over tangible, making further investments or operating margin. And then the second piece of your question, about 80% of this NOI is in the service revenue component. And I'll give you one example. We have a furnished housing program that we think has opportunities to bring to the wider portfolio.

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

Thank you. I guess one of the hurdles of being a larger company is the impact of developments. So I'm wondering if you could talk about if you could grow the development pipeline to be a larger percentage of your enterprise value so that it has a more meaningful impact to earnings. And Evelyn has been focusing a lot on suburban development. I'm wondering if this changes your strategy in terms of where you developed and at what price point.

And the ambition is to find opportunities where we can grow even further to generate a larger portion of essential reasons for that, one of them being with a stronger operating model, we'll be able to deliver stronger returns. And so, inherently, there are more projects that we'll underwrite, right? We'll be best positioned to execute on more projects. Another way to put it, we'll be best positioned to get a larger portion of the share of development that's happening in these markets. You know, in terms of, you know, suburban, urban, where this capital heads, I think as both companies have been, right, we're going to focus capital on where the highest risk adjusted returns are. And that will change right over time. And that happens at the market level, sub-market level.

And that's definitely a commitment going forward.

Thank you. Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.

Hey, good morning. Congrats, Ben and Mark. Wish you best on retirement. So just Just a bigger question, and you highlighted it with the comments on housing and affordability, clearly more politicalized environment. Real estate tends to not be subject to antitrust and all that fun stuff. But just if you could provide some thoughts, given the climate, you know, if there's any concern over regulators or antitrust or anything like that that's going on currently.

So that question. So we think of this deal as very pro-housing. This has been elaborated. It's very pro-housing. So there'll certainly be people throwing rocks and such, but this deal is helpful overall to the amount of housing production in our country. In no market are we more than 2% or 3% of the competitive stock. So again, we expect this transaction to be kind of approved. There is no requirement, no filing, no concern we particularly have, but you do need to fight a PR battle, and we're very prepared for that. We think we have the high ground. This is going to be the largest or one of the very largest rental housing producers in the country. We invest together $500 million, $600 million of capital in our existing properties every year to maintain them. I mean, we are very good corporate citizens, and we're excited to make that argument over the next step.

Our next question comes from the line of Rich Hightower with Barclays. Please proceed with your question.

Hi, good morning, guys. Congrats on getting this far. And again, congrats to Mark on a great career. Obviously, we've covered a lot of ground this morning. But I guess as I look at the sort of pro forma market mix for both companies, are there markets that stick out as being overly concentrated or not? And then how does the expansion market strategy for both companies overlay onto this transaction?

You know, I do expect over time is market and market differently when you will be in and around on the collective portfolio.

Thank you. Our next question comes from the line of Nick Uliko with Scotiabank. Please proceed with your question.

Oh, thanks. Good morning. So, you know, question is, you know, clearly there's a lot of operating synergies that you laid out here, which are substantial and there's a benefit to immediate, you know, FFO accretion. And I guess my question is, you know, how the companies are thinking about, you know, driving improved FFO growth over time as a combined entity. And what I'm wondering is if there's a way to kind of use your platform here to, you know, consolidate more of the private market. Are you thinking about, you know, a third-party management business, a funds business, any other sort of opportunity to kind of use this combined best-in-breed platform to help drive sort of better, you know, earnings growth over time, which I think it sounds like was one of the, you know, the reasons for the merger, as you guys gave some significant thought to that and the board as well on driving better stock valuations.

Thanks. and use that as a supercharged level of growth opportunities. I do think about the power of expanded market presence, more relevant to the large-scale REITs, the opportunity we can consider down the road.

Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed with your question.

Good morning. Thanks a lot for taking my question. Both sides have historically talked about wanting to achieve margin expansion, but margins have been stuck kind of right around 70 percent. So do you think this gives you the scale to help push through that ceiling?

Part of the conversation about margin is about revenue growth, frankly, not being particularly good the last couple of years. You look at expense growth, especially controllable expense growth, has been better. And I think UCO is positioned to have even better controllable expense growth going forward. So I think that's part, Michael, of the margin discussion. On the revenue side, again, it isn't mostly about raising rents above market as much as it is providing other services, as Ben said, to our residents that they want. Bulk cable was a great example. Bulk internet, pardon me, of that. Ben gave another example. Certainly, we could provide property-level insurance to people. They need that service. We could provide it over scale better. Insurance is a statistical game helped by having larger numbers. So there's just so many levers to pull here on the helpful revenue side, I'll call it, and on the expense side that we expect that, you know, whatever the natural rate of revenue growth is and whatever the natural rate of expense growth is will be higher or lower, respectively, than those numbers and drive the machine that will give us better margins to do investment activity, as Ben just elaborated in the prior question.

Yeah, and Michael, my one addition to that is I do very much see this combination as this is a breakout type of moment.

Thank you. Our next question comes from the line of Handel St. Just with Mizuho Securities. Please proceed with your question.

Hey, guys. Thanks for taking the question.

I wanted to go back to Rich's earlier question about this expansion market. You each had a preexisting goal of getting to about 20%, 25% exposure there. I'm curious how this kind of stacks up amongst your near-term priorities if this deal clearly makes that a bit more challenging. And then just a question on the closing here. You know, is it – one of the important things to focus on is just the proxy. When do you expect to hold the votes? Any regulatory reviews expected to occur?

We'll follow the normal SEC review. On your first question on the expansion markets, I do expect the combined company to continue to grow in those markets. We're not at this point putting out new portfolio allocation targets for the new company to determine what we think is the optimized target.

Thank you. Our next question comes from the line of Julian Bluen with Goldman Sachs. Please proceed with your question.

Yeah, hi. Thank you for taking my question. I was wondering if you could maybe dig into a little bit more the advantage you get from a larger proprietary data set and specifically sort of like how does that maybe differ today, that advantage versus, I don't know, five, ten years ago? And how do you see that really sort of playing out?

One, this just gives us, and if you go to slide 13, you can see some of the statistics we put together over the last couple of decades, 4 million lease transactions, 9 million service requests, much points in terms of customer feedback. The way we think about it, there's a set of operational outcomes. And the operational outcomes that we've highlighted, I think about optimizing renewals and consider a more refined analytics as it relates to capital markets, sub-markets, price.

Thank you. Our next question comes from the line of Rich Anderson. with Cantor Fitzgerald. Please proceed with your question.

Hey, thanks. Good morning. Excuse me. And congratulations, everyone, particularly Mark. Job well done. So I wanted to go back. Mark, you mentioned the shared Archstone acquisition with Avalon Bay. And both of your companies are a product of past M&A activity, whether it's Maryland or Evans With and Comb or the Avalon and Bay merger in 1998. But I'm curious how that history of M&A activity informed this ultimate decision to come together. How much did it play a role in your process? Or is it just, is that history just too far back to have mattered in the decision tree that you went through in the present tense? Thanks.

I'm going to split that up. I mean, we're not doing M&A for M&A's sake. This deal had a moment and this moment is now. And we've talked about those reasons that I think rich are pretty evident here, the operational benefits, the data richness, capital allocation, efficacy, and the ability to sort of do some new and special things like third-party management and otherwise. The history does help. There's a lot of us here together doing this deal that work together on Archstone. So it just creates this sort of shared culture of directness and honesty when you're doing a complicated deal like this. So I would say that that shared history was helpful because it just allowed us to be more efficient. A lot of this process was, of course, you know, complex, but we were able to get through it because everyone here has got, you know, a sense of goodwill, knows each other well, or many of us know each other well from Archstone. And Ben and I have gotten to know each other very well over the last five years of him being in our industry. So I think that shared history helped make the process easier, but the moment wasn't driven by M&A. It was driven just the opportunity to be better, to be bigger but better is what I think really drove it as opposed to just M&A for M&A's sake.

Thank you. Our next question comes from the line of Omotayo Okusanyu with Deutsche Bank. Please proceed with your question.

Yes. Good morning, everyone. I wanted to kind of go back to this idea around the regulatory environment. Again, it's just been really noisy. The real paid settlement on the single family for rent side, a lot of those guys own less than 1% of the industry, but yet they may be barred from buying homes going forward. But yet a big part of the argument for this deal is kind of bigger will get you better but i think right now you know regulators look at that i kind of say bigger has not been better for the average consumer and they're kind of pushing back against that concept on the residential side so i just you know would love to kind of hear your thoughts a little bit more about you know from a regulatory perspective how do you kind of expect to avoid some other potential pushback that could come to the deal john we both including on the affordable

housing relationships with local governments. In our press release, we're launching a – we'll be expanding with affordable housing and nonprofit developers as we think about preserving affordable solution, create new housing, and partner with local – Thank you.

Our next question comes from the line of Alex Kim, Rizelman and Associates. Please proceed with your question.

Hey, guys. Thanks for taking my question and all the detail that you've provided on the synergies. I was curious, what are the biggest execution risks to achieving the timeline that you laid out, and which synergy category carries the most integration risk?

Synergy numbers that we've had, the teams have gone into our teams, getting our teams together, new companies together, and embarked.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Mr. Saul for any final comments.

Congratulations. Thank you for your commitment, your leadership, your dedication, journey for both of the companies, and to launch NuCo.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.