Mid-America Apartment Communities, Inc. Price & Performance (MAA)

Our earnings release and supplement are currently available on the For Investors page of our website at www.dimmjimac.com. A copy of our prepared comments and audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric. As reported in our earnings release, MAA finished calendar year 2024 in line with our expectations and is in a great position for the recovery cycle for apartment leasing that should be increasingly evident over the course of this year. While we are still working through the impact of record high levels of new supply delivered over the past year, we are encouraged with some of the early recovery trends that we are capturing with lease over lease pricing performance. While it would take some time for the recovery momentum to build, it seems clear that the tide is starting to turn and we look forward to a productive spring and summer leasing season when the improving trends will have a more obvious compounding impact on overall portfolio results late this year and into 2026. Before turning the call over to Brad, I did want to take just a few minutes to morning and tell you why I'm excited.

And confident about the prospects for MAA's earnings outlook over the emerging recovery cycle. It starts with my confidence that our leadership team As we disclosed in December, effective April 1, we plan to execute on the next step in our CEO succession planning program. And Brad, will assume the role of President and CEO I'll remain active in supporting Brad and our Board as Executive Chairman. Brad and his executive leadership team have an average tenure of [indiscernible] I know this leadership team well. And I have a lot of confidence in them. Brad and his team have a deep understanding of our strategy and our approach to executing on that strategy.

Which has delivered sector leading long term results for shareholder capital. Beyond my confidence in our leadership team, while our markets have more recently been challenged with a fifty year high that the worst of the pressure from this new supply is poised to materially moderate especially as we get into the summer leasing season. As we have discussed, we historically have seen the actual delivery and leasing pressure from competing new development peak at roughly two years after the start of construction. Based on our analysis, the volume of new construction started in calendar year 2023 or two years ago dropped 39% from the peak of starts during the [indiscernible] 2022 and then start sequentially drop another 50% in calendar year 2024. So this is expected to result in a significant decline after and 2027. Given where we are currently with interest rates, and construction costs, we continue to see challenges in the market's ability to meaningfully restart and increase in new projects. Taken together, we believe these conditions will manifest in a sharp drop in new supply delivery starting this year and continuing for several years. In addition to this supply dynamic, and the impact of leasing conditions, we believe that our portfolio is uniquely well positioned to capture the benefits from job growth, population growth and high single family housing costs.

This continues to drive a resulting growth in the demand for apartment housing across our markets that will outpace national trends over the long haul. This strong positioning for the demand side of the equation coupled with the material drop in new supply this year and beyond we believe will have a significant impact on market rent growth across the portfolio for the next few years. Furthermore, I'm excited about the various new tech initiatives we have underway aimed at driving enhanced services for our residents and more efficiencies within our operating platform. Several new initiatives that we have more recently implemented coupled with new projects that we'll launch over the coming year we expect will further increase operating margin and accelerate earnings over the next few years. And finally, our external growth pipeline is stronger and larger than at any time in our company history. We have several new projects slated to deliver over the emerging recovery cycle with other new sites already lined up and importantly, the balance sheet is strong and well positioned to So in summary, the experience and proven capabilities of our leadership team our orientation towards the strongest growth in housing demand markets in the country, the strength of our operating platform with growing efficiencies and the more robust external growth pipeline we have in place that is supported by a sector leading strong balance sheet all combined to drive much enthusiasm and confidence in my outlook for MAA over the next few years.

As this will serve as my last earnings call prior to the transition, CEO role, I'd like to extend my appreciation and thanks to our shareholders and to the analyst community for your trust in our company and our team. It's truly been an honor to serve the public health markets over the past thirty years here at MAA. Our culture at MAA is grounded and a strong belief that our stewardship of MAA assets and shareholder capital is at all times focused on creating value for the benefit of our residents, our shareholders, our associates and the communities where we operate. I'm proud of our associates at MAA.

I appreciate their hard work and support and I look forward to MAA delivering even higher value in the future for those that we serve. Turn it over to Brad now. You, Eric, and good morning, everyone. As expected, during the fourth quarter, our focus on occupancy combined with higher new supply and the typical seasonal slowdown in leasing traffic, were weighed on new resident lease pricing during the quarter. But the seasonal decline in lease over lease rates was less than we've seen in previous years. Encouragingly, this pressure has continued to moderate in January.

With blended pricing improving more from the fourth quarter's performance than in previous years, predominantly due to improvement in our new lease pricing. I share Eric's optimism for our growth prospects and momentum toward delivering strong long term earnings. As Tim will discuss in more detail, we are seeing encouraging signs that indicate leasing conditions are poised to support improvement in blended lease rates and have a compounding impact on revenue performance throughout the year. [indiscernible] occupancy and exposure improved seasonal performance and an expected more meaningful reduction in supply pressure all contribute to a favorable outlook for our existing portfolio. Additionally, we're continuing to invest in several key areas that will significantly impact future earnings, including various technology initiatives, that will support our centralization efforts and enhance efficiencies.

In 2025, we will begin to more aggressively roll out propertywide WiFi across our portfolio and we will ramp up the rollout over the next couple of years as a number of our properties transition off of our legacy We also plan to increase our investments in the interior renovation and repositioning programs both of which benefit from the higher priced new supply that has delivered into the market recently.

On the external growth front, we're committed to maintaining an development pipeline of around $1,000,000,000 In 2024, we invested in a record five projects expected to deliver average NOI yields at stabilization of 6.3%. Ending the year with seven projects under construction representing over 2,300 units at a cost of approximately $850,000,000 We expect to start construction on another three to four projects in 2025. As the transaction market begins to open later this year, we'll continue to opportunistically deploy capital and During the fourth quarter, we closed on a three eighty six unit property early in its initial lease up in the Dallas market.

This property was 44% occupied at the end of the fourth quarters and expect is expected to stabilize in early twenty twenty six. This brings our total acquisitions in 2024 to three properties, which were on average 65% occupied at closing and projected to deliver NOI yields of 5.9% upon reaching stabilization in 2025 and 2026.

During the fourth quarter, we sold two properties with an average age of 29 years.

Two sixteen unit property in Charlotte, North Carolina.

In the two seventy two unit property in Richmond, Virginia, delivering a combined investment period IRR of approximately 19%.

We have two additional properties in Columbia, South Carolina under contract and expect those to close we will continue our focus on strengthening our overall earnings quality by recycling capital out of some of our older higher CapEx properties and redeploying that capital into newer We expect to execute on the balance of our $325,000,000 disposition plan late the year. At the end of the fourth quarter, we had eight communities in lease up.

Four acquisitions and four developments. With an end of the year occupancy 69.7%.

We expect the acquisitions to average NOI yields at stabilization of 5.9% and the developments to average NOI yields of around 6.4%. Due to the high level of competition in many of our markets, and our intent to hold firm on our rent pricing expectations, we pushed the expected stabilization dates back slightly on a few of our lease up properties by one quarter. However, rents continue to exceed our pro form a are significantly above our original expectations. Our existing portfolio is well positioned to benefit from the improving demand and supply trends with our various growth initiatives providing additional earnings over the recovery cycle. Do all of our associates at the properties and our corporate and regional offices hard work and dedication that you show every day to our prospects. Residents and fellow associates. Before turning the call over to Tim, I do want to take a moment to say a few words in recognition of Eric ahead of his service to MAA, with twenty three years as our Chief Executive Officer Eric has been instrumental in so many ways to this company. His dedication to serving our various stakeholders is second to none.

We are grateful for his vision, and wisdom, his courage and his discipline in leading this company to unmatched performance. His mentorship and counsel over the years to so many in the industry, and especially to MA's executive leadership team and to me exemplify the tremendous leader that he is Eric, for all you've given to our company and to the industry, we thank you. With that, I'll turn the call over to Tim. Thanks Brad and good morning everyone. As noted by Brad, in the fourth quarter, we prioritize achieving poor portfolio level occupancy that positions us well for the improving supplydemand dynamic in 2025. We particularly focus on the higher exposure markets which came at the expense of slightly weaker new lease pricing performance but achieved the occupancy goals for which we were striving. The moderation in new lease pricing showed less seasonal deceleration than we saw in 2023 and less than we typically see from the third to fourth quarter. As a result of this strategy, new lease pricing on a lease over lease basis for the fourth quarter was down eight percent two sixty basis point decline from the third quarter but favorably comparable to a four seventy basis point decline over the same period in 2023.

Renewal rates for the quarter stayed strong growing 4.2% on a lease over lease basis which was a 10 basis point increase sequentially over the third quarter. The resulting lease over lease pricing on a blended basis was down 2% which represented 140 basis point improvement in sequential moderation as compared to the same period in 2023. Average physical occupancy was 95.6%, up 10 basis points from the third quarter. And collections continued to outperform expectations with net delinquency representing just 0.3% of billed rents.

All these factors drove the resulting same store revenue down 0.2% for the quarter and up 0.5% for the full year of 2024. As was true for most of 2024, several of our mid tier markets continue to hold up better than the broader portfolio in the fourth quarter from a blended lease over lease pricing standpoint. Richmond, Norfolk, Charleston, Greenville and our Fredericksburg and other Northern Virginia properties all stood out. Tampa and Orlando are two larger markets started to show some relative pricing recovery. Also, as was true for most of 2024, Austin, Atlanta and Jacksonville markets that continue to be more negatively impacted by the absolute level of supply being delivered into those markets. With Austin continuing to be the toughest challenge of all the markets. We continued our Marriott's redevelopment and positioning initiatives in the fourth quarter. And as Brad mentioned earlier, we expect to accelerate these programs over the course of 2025 and into 2026.

For the fourth quarter of twenty twenty four, we completed eleven thirty interior unit upgrades bringing our year to date total to 5,665 units achieving rent increases of $106 above non upgraded units.

Despite this more competitive supply environment, these units lease about ten days quicker on average for the non renovated unit when adjusted for the additional turn time.

We expect to renovate closer to 6,000 units in 2025 with an even larger increase expected in 2026.

For our repositioning program, we have two active projects that are most of the way through the repricing phase with NOI yields approaching 10%. We have an additional six projects underway with a plan to complete construction between April and June and begin repricing in what we believe will be a strengthening leasing environment. We are also now live on the four property wide WiFi retro fit projects we began in 2024 and expect to begin an additional 23 projects in 2025.

With January wrapped up, we are seeing encouraging trends that are aligned with our outlook for 2025.

New lease and blended pricing in January improved as compared to both the December and the full fourth quarter with stable occupancy of 95.6%.

Our sixty day exposure at the January was seven percent seventy basis points lower than this time last year and should serve to keep occupancy stable through the remainder of the quarter and allow for more pricing power and seasonal demand starts to increase.

The 95.6% January average daily physical occupancy was 25 basis points higher than January of twenty twenty four.

As Brad noted, absorption remains strong in our markets with the fourth quarter representing the second consecutive quarter that units absorbed exceeded units delivered. The excess absorption as compared to new supply in the fourth quarter was the largest gas since the third quarter of twenty twenty one. With new lease pricing improving, the remaining a challenge we are also encouraged by the lease over lease rates achieved on excessive renewals through April with average increases in the 4.25% range.

Improving new lease range should help support continued strong renewal performance into the busier spring and summer leasing season. New supply deliveries continue to be a headwind in many of our markets but the trends support expected improvement throughout 2025. Laying the groundwork for an even stronger 2026. Following on Eric's comments, with construction start peaking in mid to late twenty twenty two in most of our markets, we believe we have passed the maximum pricing pressure period that tends come two years or so after the peak of construction. The slowly moderating supply pressure, increasing spring and summer leasing traffic and our current occupancy exposure portfolio position have us excited about the recovery to come. That's all the way I have in prepared comments We'll now turn the call over to Clay.

Thank you, Tim, and good morning, everyone.

We reported core FFO for the quarter of $2.23 per share, was in line with our fourth quarter guidance and contributed to core FFO for the full year of $8.88 per share, in line with our original guidance for the year. Our same store revenue results for the quarter were relatively in line with expectations. As Tim mentioned, same store revenues benefited from strong occupancy Our same store expense performance was slightly unfavorable compared to our guidance due to personnel cost and other property expenses. Favorable interest expense and non operating income offset the increase in same store expenses. During the quarter, we funded approximately $64,000,000 of development costs of the current $852,000,000 pipeline leaving an expected $374,000,000 to be funded on our current pipeline over the next two to three years. We also invested approximately $18,000,000,000 of capital through our redevelopment and repositioning programs during the quarter. We expect to continue to enhance the quality of our portfolio and produce solid returns upon completion.

Our balance sheet remains in great shape. We ended the quarter with over $1,000,000,000 in combined cash and borrowing capacity under our revolving credit facility, providing significant opportunity to fund future investments.

Our leverage remains low with net debt to EBITDA at four times And at quarter end, our outstanding debt was approximately 95% fixed an effective rate of 3.8%.

During December, we issued $350,000,000 of ten year public bonds at an effective rate of just over 5% using proceeds to pay down our outstanding commercial paper. These proceeds provide an accretive use of capital given the expected stabilized NOI yield approaching 6% or greater on our recent acquisitions and current developments that Brad previously mentioned. Finally, we provided initial earnings guidance for 2025 with our release, which is detailed in the supplemental information package. Core FFO for 2025 is projected to be at $8.61 to $8.93 or $8.77 at the midpoint. As has been outlined in the prior comments, we expect the momentum in rental pricing to grow over the course of the year and to drive improving year over year performance in core FFO over the back half of the year. The proposed 2025 same store revenue growth midpoint of 0.4% results from a rental pricing earn in of negative 0.4% combined with the blended rental pricing expectation of 1.7% for the year. We expect blended rental pricing to be comprised of new lease pricing, that will continue to be impacted by elevated supply levels and renewal pricing in line with historical levels. We expect the impact of these elevated supply levels to improve over the course of the year.

For the same store portfolio, we expect effective rent growth for the year to be approximately 0.2% at the midpoint of our range. Occupancy to average between 95.395.9% for the year or 95.6% at the midpoint and other revenue items primarily reimbursement and fee income, to grow at 2.5%. Same store operating expenses projected to grow at a midpoint of 3.2% for the year.

Personnel and repair and maintenance costs are expected to grow just over 3% expect some continued pressure from marketing costs and insurance expense. These expense projections combined with the revenue growth of 0.4% results in a projected decline in same store NOI 1.15% at the midpoint. We currently have non communities actively leasing and an additional community stabilized in late twenty twenty four. Given the interest carry and leasing velocity of these recently acquired and completed developments, we anticipate our lease up pipeline being slightly diluted to core FFO in the first half of the year before turning to accretive later in the year as more projects stabilize. Contributing about $0.03 to core FFO for the year net of the interest carry. We expect continued external growth in 2025, both through acquisitions and development. We anticipate a range of $350,000,000 to $450,000,000 in acquisitions all likely to be in lease up and not yet stabilized.

And a range of $250,000,000 to $350,000,000 in development investments for the year. This growth we've partially funded by asset sales we expect dispositions of approximately $325,000,000 with the remainder to be funded by debt financing and internal cash flow. This external growth is expected to be slightly diluted to core FFO in 2025 and then turn accretive to core FFO after stabilization. We project total overhead expenses a combination of property management expenses and G and A expenses to be hundred and $34,500,000 at the midpoint a 4.5% increase over 2024 results. We also expect to refinance hundred million dollars on bonds maturing in November 2025.

These bonds have an effective rate of 4.2% and we are forecasting to refinance at 5%. This anticipated refinancing coupled with our 2024 refinancing activities will result in $0.03 of dilution to core FFO as compared to prior year. Combined with financing to support our expected growth for 2025, we project interest expense to increase by approximately 13% for the year. That is all that we have in the way of prepared comments. Eun, we will now turn the call back to you for any questions. Thank you. Once again, we will now open the call up for questions. Our first question comes from the line of Jamie Feldman Wells Fargo. [indiscernible] Great. Thanks for taking the question. I was hoping you could put a finer point on the $1,700,000,000 blend outlook 25 Can you talk exactly about what you're thinking for new versus renewal And then is there a point in the year where you think new spreads actually turn positive? Maybe talk a little bit more about the cadence throughout the year of that 1.7?

Yes, this is Tim. I'll give a little bit of detail on the guidance, the pricing guidance. So for the year, we're expecting new lease pricing at a lease over lease basis somewhere in the negative 1.5 range with that obviously playing out seasonally with the lowest point where we are right now getting slightly positive as we get into Q3 and then starting to trend back down seasonally a little bit as you get into Q4. And then renewals, pretty steady in that 4.25%, 4.5% range where we are right now. We don't expect much movement there. That tends to stay pretty consistent So it's the new lease pricing that drives the variance throughout the quarters.

Okay. I'm sorry, did you Do you think you'll see any months or quarters with positive new lease?

Yes. I would say as you get into typically what we see if you think about normal seasonality is new lease pricing sort of accelerating January through to about July and then starting to moderate as you get into August. So I would expect as we get into late Q2, early Q3, we expect to have two or three months where we'll be slightly positive on the new lease rate and then trend back down to negative as you get in the late Q3 and into Q4. Okay.

And then what are you guys thinking on turnover? How does that trend throughout the year?

Expecting pretty consistent with where we were in 2024. The major reasons people move out, obviously, home, job change, those are the buy home is down. I think 20% in Q4 compared to where it was last year with with interest rates and home prices where they are. We don't expect that to move a lot. And so we in generally, we're dialing into our forecast renewal or turnover consistent with where we were in 2024. Okay, great. Thanks for the color. And Eric, congratulations again.

Thank you. Our next question comes from the line of Eric Wolf with Citi. Line is open.

Hey, I just wanted to follow-up there. I mean, when I look at the contribution to your same store revenue from the 1.7% blend, It looks like it's sort of on the lower end, which suggests that there's probably a good back half weighting to the blended spread. So I was just curious if that's the case, if you could just maybe provide like you expect first half to be in like 0.5% range and then it's a step up to over 2.5%.

Or if the difference is really just seasonally, like you just think that seasonally the second quarter and third quarter will be sort of a very normal lift. I'm just trying to understand if this is like sort of back half type of prediction for this year?

Not necessarily a back half prediction. I mean, we expect the normal seasonality as I was talking about and certainly for new lease rates to moderate as you get late Q3 and into Q4. So it's really other thing keep in mind, obviously, when you think about mid Q2, early Q3, we also have the bulk of our leases expiring during that time. So matching up some of the the more positive new lease rates with the maximum number of leases is really what drives that weighting. But as I mentioned, we expect to get slightly positive call to the one to 1.25 range for a couple of months in the middle of the year and then start to trend back down. So it's the combination of the weighting of the lease expirations and then obviously the balance between new lease and renewals. We expect renewals will will be a heavier weighting as they were this year with consistent turnover. So that's that's really what's driving the full year number. Eric, this is Brad.

I'll just I'll add one additional item to that. Certainly, as you look at the supply and the new deliveries as we get into this year, I mean, as we look back, the new supply that was started in 2023, clearly, there was a a drop off in that new supply in the back half of twenty twenty three, which we think really informs the supply pressures we get into 2025. So we mentioned in our comments, we are in still an elevated level of supply. Today, we're off the peak of where we have been in 2024. And that supply picture will continue to get better as we go throughout this year. So to Tim's point, as you start layering on top of diminishing supply pressure environment as we go through the year with the demand that continues to pick up as we get into spring and summer leasing season that really starts to inform the trajectory of what we think new lease rates will look like through the year. Got it. That's helpful. I'm not sure if you have this data, but you look at your renewals, what percent of those renewals are also tenants that renewed the prior year?

Guess I'm trying to understand sort of what percentage of tenants are taking two years of this sort of 4% to 5% renewal increases and sort of a flattish market rate environment? And if you have any sort of limit on where renewal rate rents can be relative to market or new lease rents?

Well, another way to perhaps characterize that is our average stay is somewhere in the twenty one, twenty two month range.

That certainly has extended out a little bit over the last couple of years with the lower turnover. So typically you have a resident moves in has called a twelve month lease and then does one renewal and then on average they're moving out after that first renewal. So typically don't see renewal on top of renewal on top of renewal, which tends to be a little bit of a governor on that gap getting too wide even with lower turnover still turning a good chunk of the portfolio every year And so it tends to balance itself out a little bit. And then to Brad's point about strengthening supply demand dynamic, we expect new lease rates to accelerate throughout the year, which then should in turn help the renewal rates where it's starting to narrow that gap and it doesn't gap any wider than it has been. So I think that'll provide some stability and strength on the renewal side also. Got it.

Thank you. Our next question comes from the line of Nick Yulico with Scotiabank. Good morning, everyone. It's Dan Trocarico on with Nick.

Can you help us understand how concessions in your markets have impacted your new lease rate figures? And if you see the dissipation of concessionary activity and these are comps maybe having to use your word compounding effect on the reported numbers?

Yes. I mean to answer the last part of that, I mean the the lease over lease rates we quote are net of the impact of concessions, so that's considered in there. But I would say broadly for us, for our portfolio, concessions were down a little bit in Q4 as compared to Q3 in terms of cash concessions. I would say at a market wide portfolio level, concessions were pretty pretty typical in most markets. Now you get into some of the tougher markets with with a lot of lease up and it's some of the same submarkets I've talked about before, you think about Downtown Austin and then Round Rock, Georgetown area of Austin, you think about Midtown Atlanta, you think about Uptown Charlotte, that's where you can get more into the two, two point five even up to three in a couple of spots with a lot of lease up. So still pressure there in some of the markets we've talked about, but the concession pressure overall is steady to perhaps slightly declining.

And then I guess as a follow-up, do you have a sense on, I guess, how much competitive supply that you guys track is how much that is declining year over year in 2026 and 2027? And maybe how that compares on a like a completions as a percentage stock basis to maybe the prior years to 2020?

Yes, I mean for 2025, we think supply is probably down 15% to 20% in terms of just absolute units being delivered from 24% to '25 It's probably we think it's down closer 30% to 40% as you look out into 2026. And then you start getting pretty far out at that point. But if you look at the starts and Eric hit on this as well, I mean starts are down. Q4 of twenty twenty four starts in our market were 0.3% of inventory, which is the lowest it's been for the last several years, well below where it was even during COVID. So it speaks to a pretty long window where we think supply will be moderating.

But like on a completions as a percent of stock like in 26% is that like lower than a normal [indiscernible] Yes, I would say, in other markets, 3.5% of inventory is probably about average. If you about the long term 3.5%, we certainly been above that the last few years, but I think 25% or 2026 is is below that and I expect 2027 is even further below that. [indiscernible] Our next question comes from the line of Brad You've talked a few times about the start of the year being better than normal. I think you said in the prepared remarks that blends are improving more than normal in January on a sequential basis. Those are obviously very influenced by comps. So I'm just curious if you're seeing like a real market level fundamental inflection market rent trend being better than normal, occupancy rising, you kind of talked about sort of is sort of just comps and the abnormality of where leasing spreads are right now versus like a real fundamental change? Well, I mean, it's a combination of all of those. Certainly, the lessening supply I think is playing a part of that. Easier comps, if you will, is playing a part of that.

But when we think about the sequential trends we're seeing in January both compared to December and Q4. And not just looking back to the last year or two, but looking back to what we would call more normal periods which probably is going back to 2017, 2018, 2019, the deceleration from Q3 and Q4 was sort of less than typical and then the acceleration from from Q4 to January was more so. And so much where January New lease pricing is better than the full Q4, which is pretty atypical. We usually see it's usually a little bit lower than Q4.

And then we would expect February, March to accelerate even more. So feel like it's a good position to to where we are and showing some, I think, growth strength in the recovery. So I think that piece is probably tied to just an improving overall outlook, the higher than typical acceleration. Okay. Thanks for that. And then can you talk through whether you think changes in immigration policy could have a significant impact on the portfolio either through deportations or just through less immigration? Yes. Hey, this is Brad.

I would say from a same store perspective, we don't see a whole lot of impact coming from the change in the immigration I mean, there's nothing that we track that would indicate that we're really overly exposed to any type of the immigration issues that we see out there. So from a labor perspective in our same store portfolio, we don't see that being a big impact. And in terms of from a resident perspective, again, no matter which metric we're looking at, we don't see that we're exposed to a large degree to that. Now having said that, where I think we could see some impact associated with the immigration side would be on perhaps in the new development area where a lot of the labor in that area, there could be some labor impact associated with that. And clearly, that would have an impact on the ability of the market really to ramp up new construction for us. Obviously, that would impact our desire to continue to hold our new developments at the $1,000,000,000 level that we're talking about, but given the overall size of our existing portfolio, anything that slows down supply longer term would be a benefit to our existing portfolio.

But at this point, it's something that we'll have to continue to monitor and see how it how it plays out. We're not seeing a material impact and don't see that horizon at the moment. Okay. Thanks for the thought.

Our next question comes from the line of Jeff Spector with Bank of America. Line is open.

Great. Thank you. Just a follow-up to that. Was going to ask a similar question. But maybe even just pulling in demographics, when you think about your portfolio positioning, third A, third B plus third B and then split between urban, suburban, I guess from a high level long term standpoint five year view, does any of this change your thinking on portfolio positioning?

This is Brad. Tim, you can add some points here too, but I don't I don't think so. I mean, one of the one of the characteristics of our portfolio long term is is definitely to orient our portfolio toward the highest demand region of the country. That That generally leads to lower volatility in both earnings and dividends performance. And so we think that continues to be the right focus for us in terms of where we're located, the market we're located in, and also allocating capital mix between larger markets and mid tier markets. So So that also tends to support kind of a more affordable price point than other portfolios that are out there. And I think if you look at our return over a long period of time, I think I think that speaks to us appealing to the broader segment of the rental market. And I think ultimately that's really what we want to do. Versus skewing the portfolio to one end of the spectrum versus the other. And And so I don't see a material change in terms of our strategy in terms of how we're allocating capital or those other portfolio characteristics that we target.

Great. Thank you. And then I apologize if I missed this but can you talk a little bit more disclose more on cap rates? Between the acquisitions, dispositions and maybe what the requirement is today between what you're looking for between development and acquisitions? Thank you.

Hey, Jeff, this is Brad again. Yes, so the dispositions that we sold in the fourth quarter cap rates on those were call it low 6s.

And those I'll tell you on the two that we sold, we had one property process. So proceeds were certainly impacted a bit by that. So So but I will tell you on an after CapEx basis, those properties that were selling generally are thirty year old assets, so they have higher CapEx needs that we're recycling the capital out of And then we're redeploying that capital, as I mentioned in my my call comments, into acquisitions, generally in lease up So there's some lease up period associated with them.

And then upon reaching stabilization, those yields are close 6% in terms of what we're achieving.

Now we're able to achieve those yields because we are focusing on properties that are in lease up that are harder for the market to finance. So we're able to get better pricing. Generally, we're 15% to 20% below current replacement costs on those. So we're able to get a pretty good return on those. The market cap rates in the fourth quarter that we tracked is not a lot of data points. We only track six projects that ended up closing and the cap rate was around a [indiscernible] Our developments, the five that we invested in and 'twenty four, those were a six call it a 6.4 NOI yield. So it's 140 basis basis point spread to current market cap rates and we feel that that's Thank you. Our next question comes from the line of Austin Wurschmidt KeyBanc Capital Markets. Line is open. Great. Thanks and good morning everybody. So going back to a question earlier about lease over lease pricing, expect [indiscernible] the back half of twenty twenty three, and kind of this expectation that absorption of peak deliveries will continue through the first half of this year. Is it fair to assume that you do face easier comps in the back half of the year you could see concession pricing begin to abate more quickly, which could lead to kind of the even better spread and blended rate growth versus the prior year and that will lead to the acceleration of net year over year net effective rent growth.

Is that Is that the right way to think about it? Hey, Austin, it's Tim. Are you talking about as we get to the back part of 2025, primarily? Yes. Yes. Yes. I mean, I definitely think we could see if you want to call it less seasonality as you get into late twenty twenty five because as we talked about, we've got moderating supply pressure that will continue to [indiscernible] speak well on the demand side through the remainder of 2025 and into 2026. We did see kind of a peak of that supply pressure late 'twenty four. So yes, I think there's an easier comp component that comes with that. I swear I would expect we're talking about this less seasonal deceleration that we saw this year. I think we could definitely see that in the back part of 2025 as well. And based on the fact that you did negative 0.5% year over year net effect rent growth point positive growth this year guess when do you expect that net effective to turn positive on a year over year basis? Yes, I'll say it will probably be by towards the middle part of the year by in Q3 mid Q3 and then on into Q4 and beyond.

That's helpful. And then just last one for me. If you broke out your blended rate growth between the larger markets and your smaller secondary markets, do those stack up relative to this year versus 2024? Just curious where you're seeing the most improvement between those two buckets? I mean, I would say we've seen it Seeing that gap narrow a little bit. I mean, the secondary markets are mid tier, however you want to call it, have outperformed certainly the last couple of years. With generally lower supply having in those markets. But we we have seen a start to an era, particularly in the last 50 basis points, I'd call it a pricing difference, but it has narrowed a bit. Our next question comes from the line of Michael Goldsmith with UBS. Line is opened. Good morning. Thanks a lot for taking my question. Your question is on the return pricing power. Your occupancy levels are elevated, but not necessarily everyone in your markets are in the same position. So do you see pricing power returning to contingency contingent on occupancy to improve in competing properties and does the slowdown in supply growth that you're expecting this year support that?

Well, certainly the market level occupancy plays in into it a little bit. You're somewhat at the mercy of what some of your other immediate comps are doing. But when we look at where our current occupancy occupancy is right now, which is twenty five to 30 basis points better than it was this time last year, and really looking at exposure, which looks out further and we're at a much better position there. We're pretty confident that certainly over the next few months, in a good spot with occupancy to where we can particularly as we get into the spring, you can start to push on that pricing. But given where we are right now with the exposure compared to last year, that's a better spot to be. And then you combine that with declining supply, gives us pretty good confidence that occupancy will stay in the steady range, which is about where we want it. We don't really desire to be at 96% somewhere in this 95%, 6% range is about right and where we can start to push on price as we get into the spring and summer. Got it. And just as a follow-up, As you think about new lease rents and how they'll trend through this year, you're going from down 8% today to positive in the third quarter.

So what does that new lease rents look like from the start of the year to peak? And how does that maybe compare to historical growth through the year? Thanks.

So our January new lease rates were negative 7.1%. So that's kind of where we're starting. And as we talked about, every Every year that we've seen sort of normal seasonality, we see that accelerate pretty consistently through to about July. So So as I mentioned, as we get to the July, we're thinking slightly positive somewhere in the 1%, 1.5% range. So you can kind of do the math on the acceleration that we're assuming. But that's typical with kind of how the seasonality typically works? How does that compare to like a historical year or the historical curve?

It's certainly historical it's a historical curve, so the shape of the curve would look like normal. It's a little bit steeper as you get into the spring and summer based on seasonality combined with declining supply pressure.

Got it. Thank you very much.

Our next question comes from the line of Adam Cramer with Morgan Stanley. Your line is open. Great. Thanks for taking the Wanted to ask about the kind of job growth and wage growth assumptions and maybe even just kind of higher higher level macro assumptions that you've embedded, I guess, either formally or informally kind of in the guide here. Yes, I would say from a macroeconomic standpoint, pretty consistent with what we saw in 2024. So we're expecting, call it, 600,000 new jobs at our markets for 2025, which would be consistent with what we saw in 2024, pretty consistent in terms of the in migration that we continue to see, household formation, population growth, all the various factors that you've seen, we would expect to stay pretty consistent and certainly be above what we see at the national level with these markets being a little bit higher gross margins. And then combined with that, continued low turnover, continued to low move outs to to buy a home and some of the other reasons. So macroeconomic pretty consistent with last year, but with a better supply dynamic. Great. That's really helpful. And I think you just mentioned the January new lease number in the prior question or answer, but do you mind just giving the kind of renewal and blended number for January as well?

Yes. So January, newly negative 7.1% renewal was 4.6% and blend was negative 0.9%. Got it. Appreciate the time guys. Thank you.

Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Your line is open. Good morning down there. And Eric, mazel tov, as I say in New York, and Brad, you know that the buck now stops with you. So all the complaining and griping now comes to your desk. Two questions. First, as you guys look at cap rates, you mentioned five, five, one, I think to Jeff Spector's question. Debt costs are certainly above that. How long do you think people because not everyone could be an all cash buyer, So what is your sense for how long people are tolerating that negative leverage? And is that and do you think it's typical with what we what you've seen historically when we have periods of negative leverage or do you think people are willing to wait longer?

Yes, I mean, this is Brad.

I think historically, periods of negative leverage have been negative leverage that has occurred. And so what we're seeing couple of things. One is buyers are buying down their interest rates a bit, which helps the negative leverage some. And then two, I think I think they are underwriting an assumption of a pretty aggressive recovery in '26 and beyond. And I think that certainly helps them get more comfortable with what their negative leverage looks like and how quickly they can grow out of that position. So I think it really depends on what your outlook is and how aggressive you're going to be on the underwriting. But those are two things that we're certainly seeing in the market right now. And then as you guys underwrite projects whether they're acquisitions or developments, how much of your how much of the math is coming from other income meaning WiFi or cell service or waste or other services, meaning like years ago it was pure rent, but the industry has evolved So I'm just sort of curious how much of your yield now comes from things other than rent?

It's not much. I mean, we certainly the one piece that I think would be probably a bigger component will be with the WiFi piece, which we're just now rolling out a [indiscernible] positive implications from a resident experience perspective. And and from a demand perspective from our residents as well as supporting what we're doing on self touring and things of that nature. But we've gotten away. We have some properties with valet trash and things of that nature. But generally, those are not major items that we're focusing efforts on. It's really in areas where we're adding value to our residents, whether it's our bulk cable that we have or our Wi Fi. Certainly those are some of the larger components of the fees that we do have.

Thank you.

Our next question comes from the line of Richard Anderson with Wedbush. Your line is open.

Thanks. Good morning. And Eric, if this is an April fools joke, It will be the best one ever. Really an honor to follow your career to this point and good luck to you.

But I am going to ask you a question because I'm not letting you get off the hook.

As Executive Chairman, we've heard that title before and sometimes people have difficulty disengaging. And you said you're going to remain active, which is great. I think everybody involved. But how do you think the dynamic will play out Is Brad like on day one, his fingerprints are going to be all over Or is there going to be sort of a phase in process? I'm just wondering, when you say remain active, is that like a dimmer switch as time passes? Or a light switch? I'm just I'd just love to know. How things will go from here.

Well, like your analogy, Rich, about the switches. I would definitely lean towards the dimmer switch concept. And that's the intent here. As I've said earlier, I've got tremendous confidence in Brad and tremendous confidence in the team that he has with him. And I think just as a function of me pulling back a little bit, that the influence that Brad and the rest of the team have on performance and how things are playing out is going to grow and my influence will diminish. But I think that the intent here is for me to continue to be actively available to to Brad to help him think about whatever may be coming up in terms of challenges or opportunities. And I certainly will remain tied into the various reporting and things that are going on to be sure I have a good finger on the pulse. So that I can be helpful in that regard as well. But But it clearly is an intention here as I've seen it done successfully in other organizations. For my sort of involvement to diminish over time. And that's and that's the plan. And certainly remain active at the Board level for years to come.

I've got I've been here for thirty years and everything I have personally is tied up in the company. I I can't think of a better investment for my net worth and plan to continue to do all our Kansas support, making it worth more in the future.

Awesome. Thanks for that, Eric, and good luck.

My second question real quick is, when we seen extraordinary conditions play out, it's often followed by extraordinary snapbacks like for example, the 20 plus percent type growth we were seeing in rents when people move back to the office and on in 2022, I guess it was. So we've had extraordinary supply in the Sunbelt. You're talking about a path of [indiscernible] excited are you really for 2026? And is there a chance for significantly outsized growth starting in 2026 just because of the nature of the events that took place that preceded it. I'm just curious if that's a possibility in your eyes. I mean, I definitely think it's a possibility, Rich.

Because as you say, you and I both been around a long time and the severity of the cycle tends to define extent of the recovery. And we're coming off a fifty year high level of supply in our markets. I mean this is unprecedented. We have seen this level of supply since we've been a public company. And what's so encouraging about that fact is the fact that our NOI and our overall performance moderated certainly from where we were during COVID years, but it didn't collapse by any means and is held up actually pretty darn well in the grand scheme of things. And And I think that speaks to just the appeal of this product, the appeal of our markets, the appeal of our portfolio. And all those factors that drive the appeal and drive demand are still there and I think are growing I think the new incoming administration is more likely to have a positive impact ultimately on the economy than the negative, at least I certainly hope that.

So I'm very enthused about what I continue to believe is going to be great demand side dynamics against a backdrop of what we know is going to be incredibly dramatic falloff in the level of supply coming into the market. And so that does set up a very interesting set of demand and supply dynamics going into 'twenty late this year into 'twenty six and 'twenty seven. That we think is going to have a hugely positive impact on our performance.

Okay, great. Very much and Thank you, Rich. Appreciate it. Our next question comes from the line of Steve Sakwa with Evercore ISI.

Your line is open. Yes, thanks. Most of my questions have been asked I just wanted to maybe ask Clay one on just the refinancing of the bonds. I think you threw out a 5% rate I guess I'm really curious where do you think your spreads are today? I realize the ten year is pretty volatile. So trying to peg it to an exact way today might be hard. But where do you think a ten year issue would be for you today, with the ten year sitting around a little over $4.40?

Yes, Steve, back in December, we actually issued some bonds and actually got a record low spread of 78 basis points with that transaction. Given where the treasury has trended since that point in time, I suspect that spread has probably ticked up several basis points but I would still say it's somewhere between eighty and eighty five bps.

Okay, great. Thanks. Next question comes from the line of Michael Gorman with BTIG.

Line is open.

Yes, thanks. Just a couple of quick ones. Back to the transaction side of things, just trying to understand how we should think about the potential timing of investments over the course of the year. If I kind of marry it up to your discussions of the fundamental strengths kind of improving in the markets, your focus on lease up properties should we expect acquisition opportunities maybe to be front end loaded before maybe some of that lease up Yes, I mean, just based on what we're seeing in the market right now and what we heard last week at NMH my sense is that the market is probably going to be slower the first half of the year and will likely tick up maybe midyear and into the third quarter. And obviously, as those properties come out and hit the market, it takes ninety to one hundred and twenty days some of these to close. So my sense is it's going to be third quarter before we really start to see the volume pick up on the transaction side.

And then maybe just one last one. I apologize if I missed it, but you mentioned outperforming on the collections front. What do you have baked into the 25 guidance in terms of delinquencies?

It's pretty consistent with what we've seen this past year. So I think we've got about 30 basis points, 35 basis points assumed for delinquencies and the twenty twenty five guide.

Great.

Thanks so much.

Our next question comes from the line of Handel St. Juste Mizuho your line is open. [indiscernible] golf clap, it's been a pleasure I had a couple of quick questions I wanted to first a follow-up. I think it was Michael question earlier.

I'm curious how much actual rents would need to change over the course of this year for new lease rates to be positive, not just how much new lease spreads we need to improve, but the actual dollar per unit change from now until third quarter?

And then maybe some context on what that would perhaps look like in a more normal year?

Yes. Hannah, this is Tim. If you think about so if I look at January, for example, all of the new lease absolute rents that we put in place compared to January of last year, it's about a negative 1.5% spread and that gap has continued to narrow throughout 2024. So you call it $25 GAAP in that year over year look. So that can give you a little bit of little bit of perspective on what that gap looks like. I mean, typically would see if you think about market rents as whatever December was and then how it trends on new leases throughout the year, we would see July probably 4% or 5% above what December rates are and then trend back down So something less than that is really what we have dialed in, but that gives you a little bit of perspective.

Appreciate that. My second question is on the outlook for turnover this year. I think you guys mentioned flat relative to last year.

Last year, I think you had close to I think almost 60% risk pension one of the highest levels I can remember. But I'm curious if demand and market [indiscernible] start to show some improvement as we expect and you start pushing a bit more for for pricing power, wouldn't that cause some upward pressure on turnover? So just on how you're thinking about your expectations for turnover this year?

Yes, I mean, certainly it does, but I would argue right now with all of the options that are out there in the market and all the supply that is out there, I mean people have more options certainly than they ever have. So that's there's more incentive frankly to move right now given the concession environment and all the supply that's out there. And yet we haven't seen that turnover pick up. So I think it's more macro driven. It's biggest reason to move out is has always been to buy a house and that's extremely difficult not only with interest rates, but with where single family home price are, they continue to grow even as our rents have moderated over last year. So I think it's more of a macro picture in terms of price style changes and life events is driving it more so less so than the current pricing position.

Appreciate the thoughts.

Thanks guys.

Next question comes from the line of Rich Hightower with Barclays. Your line is open. Good morning, guys. And again, congrats to both Eric and Brad. Just one from me. I guess if we're if you're keeping a steady development pipeline, it sounds like right around $1,000,000,000 give or take. But if we see this air pocket of sorts in new supply going forward where maybe you could lean into development a little more As sort of current projects trail off What's the appetite, the capacity? Obviously, you've got a great balance sheet.

And I assume you could flex that up anytime you like. So just tell us about thoughts around maybe increasing development from here.

Thanks.

Yes. I mean, I think certainly development is one of the uses of capital that we have today, especially given what we think will be a diminished supply pipeline going forward. And it takes time to really build that pipeline. And two years ago that we had that pipeline was at about $450,000,000 and today it's close to $9,000,000 where we want to keep it. So the team has done a tremendous job of really building it to that point. And I do think said in his comments and I've mentioned the starts that we had 2024 is a record level for us. And so we have really good momentum in terms of building that and would like to really keep it elevated. Today, we expect another three to four projects start this year, which will keep us at that level where I think you could potentially see additional opportunities, could be in our JV, prepurchase, platform where we partner with other developers because we are seeing continued instances where equity capital is backing out of deals and we're able to step into potential deals that are pretty close to shovel ready. We have a couple of opportunities we're looking at like that for this year, which could allow us to quickly add additional projects to that pipeline.

So that scenario will continue to focus on. We'd like to keep our exposure there no more than about 5% of our enterprise value, which keeps us kind of in that call it, dollars 1,200,000,000.0 range, something in that area. So we'll continue to focus on to the extent that we're able to lean into that a bit more, we will.

Okay, very helpful. Thanks.

Our next question comes from the line of Rob Stevenson with Janney. Your line is open.

Rob, you appear to be muted. Okay. We're going to go ahead and move on.

Our next question comes from the line of Wes Galladay with Baird. Line is open. Hey, good morning, everyone, and congratulations to both Eric and Brad.

Quick question for you on migration to the Sunbelt Has there been any change in volume or where they're coming from?

Hey, Wes, it's Sam. Not really. I mean, it's it's It's sort of hovered in that in the 12% to 13% of our move ins coming from outside of the Sunbelt into the Sunbelt and that's continues to be in that range and generally it's obviously the larger states is where they tend to come from. It's California, New York and Chicago and some of those. So broadly, the trends are the same as they've been for the last year or so.

Okay. And then you're doing a lot of asset recycling this year.

Is there any appetite to lever up a little early in the cycle? [indiscernible] that as we look to acquire. Brian mentioned some of those acquisition will probably be in the latter part of the year. The way we're thinking about the cadence of that those is to your point, Wes, is that those dispositions will probably fall off in the [indiscernible] part of the year. And so you might see a little bit of lever up to to fund some of the development pipeline that we talked about and as well as some of the acquisitions. That we've guided towards as well.

It wouldn't be anything outside of what we've stated as far as where our leverage would go though.

Okay. Thank you.

Our next question comes from the line of Linda Tsai Jefferies. Your line is open. Hi, thanks for taking my question. Eric, congratulations again. You're really paradigm for leadership.

Your earning of $15,000,000 negative $15,000,000 to negative 50 based on pricing through October, Maybe some more color on that and how does that compare to a year ago?

Yes. So last year, our earn in was a positive 50 basis points And so as I mentioned in my comments, the earnings we have going into 2025 is negative 40 basis points. I think you're alluding to our NAREIT presentation that we had provided back in November. The difference the midpoint of that was obviously 35 basis point negative 35 basis points. So we did see a little bit of pressure in November and December in pricing that bar from that midpoint down to the negative 40 basis points.

And then the steep drop in supply pressure in markets [indiscernible] down 20% like Houston, Atlanta, Orlando, is that supply coming down at the same time collectively? Or is it sort of It's relatively consistent when you think about it across markets if you go back to the starts that we talked about, the kind of peaks and second quarter, third quarter of twenty twenty two, there's a couple of markets where that peak was a quarter earlier or a quarter later, but for the most part, it was riding that range. So I would expect a relatively steady decline. It's pretty consistent across most markets. I mean, certainly there's a few that are still seeing increasing supply, but on balance, it's pretty consistent trend.

Thank you.

Our next question comes from the line of Ann Chan with Green Street. Your line is open.

Hey, good morning, everyone. Thanks for taking my questions. So first question, going to the topic of portfolio allocation, over the next few years, do you expect to exit any markets or enter any new markets And if so, which markets are on your shortlist?

Diane, this is Brad. I mean, we we definitely have some markets where we have one or two assets that over time will continue to cycle out of and drive efficient we we like our overall portfolio allocation where we're located in the split between kind of our larger markets and our mid tier markets. So So certainly not looking to do any type of a large repositioning of the portfolio, but some of those markets where we have one or two assets will certainly look to call out of over time. And in terms of other markets, I mean, mean, we do have newer markets for us that we need to continue to grow in. Denver, we've got a a pretty big development pipeline there where we continue to add assets and grow to that market which is a newer market for us, Salt Lake City. Is another one where we need to continue to grow and fill out in. And we are looking at newer markets that have some of the same characteristics of our our high growth markets. And Columbus, Ohio is is certainly a market that we've studied and are looking at. And so we'll see.

It has a lot of the similar characteristics as our other markets. In terms of job growth and things of that nature.

Thanks.

And for second question, shifting over to developments and construction costs. Have you observed any changing trends in construction costs components like labor or material costs that are over the last few months? And to the extent that it drives development decisions, where would you need to see construction costs be at for development yields to be a more attractive pursuit than you said Yes. I mean, we have seen construction costs come down. I mean, really over the better part of 2024, it wasn't as broad based in 2024. I mean selectively we saw 4% to 5% reduction in certain markets. I would say at this point, we were seeing it in additional markets, probably in that 5% or so range. And generally, that's more in the we've seen some labor reduction We've really seen reduction in margins that expanded over the last couple of years by subs and GCs. So we've seen some improvement there. And I think for us to continue to increase our development, we need to see costs a combination of costs and rent improvement to the tune of call it 5% to 7% additionally. And we have a pipeline of sites that we own with projects that are approved and the extent we continue to see some improvement in the in the underwriting of those with construction costs in loans, more of those will begin to pencil as we progress throughout this year.

Great. Thanks so much.

Our next question comes from the line of Tayo Akosanya with Deutsche Bank. Your line is open.

Hi, yes. Good morning. Again, let me add my congratulations as well.

With the transition. Eric, maybe this gives you a little bit more time to get that next PR in a marathon.

Mike, Mike, my question has to do with, again, you guys have been very off offensive minded in the past year or so in looking for opportunities for distressed opportunities to kind of take advantage of some of the oversupply and what do you be doing to developers But it sounds like again cap rate tracking, this is a pretty tight, it doesn't sound like that much distress out there. So when we kind of think about again, this opportunity that you've described for the better part of the past one year, just how real can it actually be And how do you kind of start thinking about maybe again opportunities to kind of buy things well below replacement cost or those kind of opportunities that are really kind of value added that creates shareholder value typically in an environment of distress.

Yes, hi, it's Brad. Definitely, we haven't seen a lot of distress frankly And we'll continue to focus where we have and that's that's generally in these projects that are in lease up. I mean, we do think that those will continue to face a bit of pressure just given the amount of supply that's out there and given the strength of our operating platform. I mean, we are tooled to to really take advantage of those. And there are some some sellers out there that are interested in selling some of those properties earlier.

Before they're stabilized and still generate a very similar return for their capital But if they waited till it stabilized and they sold at a higher price. So based on our experience in our markets, our relationships, we're still able to find opportunities like that. We were able to get some of these assets in some of these high yields close to 6%. Basis at replacement well below replacement cost. So we'll continue to focus in that area. You could see some distressed perhaps in some of the older assets that sold in 2020, 2021 with refinancing that has to come due.

But for the most part, some of that most of that would not be something that we're interested generally.

Helpful. And if I could ask one other quick one. Again, thanks for the update bad debt and delinquency. Curious again about some of the fraud related issues that were kind of going on in what you're seeing in terms of that, whether it's kind of gotten worse or gotten better both in terms of just overall activity, also in terms of some of your preventive measures as well against those issues?

This is Tim. I think you were asking about fraud and that net. Is that correct? You kind of cut out there for a second.

Yes. Correct.

We've seen continued lowering pressure, I would say, Atlanta has been the market that has been talked about a lot and our delinquency there is just about consistent with where we are at the broader portfolio level. I mean, we have a lot of tools in place, both in terms of sort of AI machine learning type of stuff plus training that we do both on-site and some resources we have at at the corporate level as well to where if there's anything that looks a little bit off in terms of income documentation or ID or whatever, we've got people that are trained to really help spot that and take a look at those. So get it being very preventative, it's been helpful It probably hurt occupancy for a while there in Atlanta, but it's going to be better long term and we start to see that play out with continued lower bad debt. So honestly, not much of an issue at all for us.

Thank you.

Our next question comes from the line of [indiscernible] BMO Capital Markets. Your line is open.

Thank you. And Eric, congratulations on transforming MAA from good to great.

Brad, I had a question I had a question on in the press release you talked about some markets seeing positive lease over lease rates versus last year. I'm wondering what comp what [indiscernible] bazaar and where you feel most bullish about which markets will be driving the improvement in blended lease growth this year?

Hey, John. This is Tim. I'll answer some of the detail there. So we did see 13 market where we had positive blended in January. Which was encouraging and it was pretty widespread among some mid tier and smaller and some larger markets as well. I would point to Tampa as one that we've really seen some good traction in the last February or so and has trended above the portfolio. I think that's one where we could see some improving performance 2025. When you think about good markets, if you will, there's the ones that have been good or going to drive good revenue now, then there's the ones where the pricing is improving and more tip of the spirit and will show up in revenue till later. So the first bucket is going to be some of the ones we've talked about, it's D. C, it's Houston, it's it's Charleston. Those are we expect to continue to be strong. Then there's markets like Tampa and I would put Orlando in that bucket as well that are starting to show some improvement and we think as you get in the mid later this year, those are a couple that we expect to see some better performance from.

And then we'll Austin is still one that we expect to continue to be a laggard with the continuing supply pressure there. But Tampa and Orlando would be two that I would point out as as trending markets for us.

And then to get to your negative 1.5% new lease rate for the year, what kind of market rent growth are you assuming? And if you can comment on your current gain to lease and how much of a headwind that will be in order to get that new lease growth rate?

I mean, gain only is about 1% right now, which it always tends to gap out this time of the year when pricing is weakest. So So I would expect we saw January market rents were a little bit higher, about 0.5% higher than what December were.

So I think that'll trend up through the summer and then trend back down. But probably the best way to think about it is we talked about our new lease lease over rates for the full year expected to be kind of in that negative 1.5% range. So over the full year, it should that should correlate pretty well with market rent growth.

Great.

Thank you. [indiscernible] We have no further questions. I will return the call to MMA MAA for closing remarks. Okay. No further comments from the company. So we appreciate joining us and we will see many of you at the conference in February or March. [indiscernible] This concludes today's program. Thank you for your participation.

May now disconnect at this time.