Equity Residential

Equity Residential Fourth Quarter 2023 Earnings Conference Column Webcast. Today's conference is being recorded. At this time, I would like to turn the conference over to Marty McKenna. Please go ahead, sir.

Good morning, and thanks for joining us to discuss Equity Residential's Fourth Quarter 2023 results and outlook for 2024. Our featured speakers today are Mark Perel, our President and CEO, Michael Manelis, our Chief Operating Officer, Alec Brackenridge, our Chief Investment Officer, and Bob Kerchan, our CFO. Our earnings release is posted in the investor section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now we'll turn the call over to Mark Perel.

Thank you, Marty. Good morning, and thank you all for joining us today to discuss our fourth quarter 2023 results and the outlook for 2024. I will start us off, then Michael Manelis, our COO, will speak to our operating performance in 2024 operating expectations, and followed by Alec Brackenridge, our Chief Investment Officer, will give some color on our capital allocation activities in the transactions markets. And then finally, Bob Garachana, our CFO, will review our 2024 guidance and our balance sheet, and then we'll take your questions. We are pleased with our fourth quarter performance, which was in line with our October expectations. Our performance in 2023 was supported by a strong employment situation, more than 2.7 million new jobs created. And while the 2024 outlook for overall jobs is more muted, we should benefit from a continued low unemployment rate for the college educated, which currently sits around 2.1%, as well as continued good real wage growth. We will also benefit in 2024 from having low exposure to new supply in the vast majority of our markets, particularly when compared to the Sunbelt markets, as well as a customer comfortably able to pay our rents with current rent to income levels at about 20%. Overall, with low unemployment and rising real wages, our target renter demographic remains in good shape. They are likely to rent with us longer as the prospect of home ownership in the near term seems less likely with scarce inventory and relatively high mortgage rates. Less than 8% of our residents who moved out gave bought home as a reason to depart in 2023, which is the lowest we have seen since we started tracking the number. And over the next decade, the significant net deficit of housing across our country sets us up for good long-term demand. Drilling down on the West Coast, we do see clear signs of improvement in quality of life and energy on the street in the urban centers of Seattle and San Francisco. We continue to believe a recovery in rental rates in the downtown submarkets of these metros is coming and expect our shareholders will benefit from catch-up rental growth in these places where rents are still at or a fair bit below 2019 levels and where incomes, both on a nominal and real basis, have risen substantially since 2019. So, while we have not baked the material improvement in Seattle and San Francisco performance in our 2024 guidance expectations, we do note that other urban centers damaged by the pandemic and other negative trends, for example, New York City, reignited quickly and sharply off of depressed rent levels once quality of life and employment conditions improved. Switching to the cost side of the equation, our consistent ability to grow expenses and overhead more slowly than our competitors, We'll preserve cash flow for our shareholders as rent growth slows across the country and positions us well once growth picks back up. As it relates to capital allocation, before Alec goes through the details of our recent transaction activities and our view of forward market conditions, I do want to highlight that we bought back some of our stock in the fourth quarter for the first time in many years. We bought back a little more than 864,000 EQR common shares, for a total of about $49 million spent at about $57 per share. We funded this repurchase activity with proceeds from sales during January of less desirable assets that were on average 40 years old and were sold at a 5.6% disposition yield and believe that at this stock price and funded with these disposition proceeds, buying our shares makes a very good investment, especially given the lack of available assets to acquire at reasonable prices. Before I turn the call over, I want to thank our teams across the company for their continued hard work and dedication to serving our customers and producing strong results for our shareholders. Now I'll turn the call over to Michael Manelis.