Equity Residential

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

Good morning, and thanks for joining us to discuss Equity Residential's Third Quarter 2024 results. Our featured speakers today are Mark Perel, our President and CEO, Alec Brackenridge, our chief investment officer, and Michael Manelis, our chief operating officer. Bob Gartana, our CFO, is here with us as well for the Q&A. Our earnings release and management presentation are posted in the investor section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now, I will turn the call over to Mark Burrell.

Thank you, Marty. Good morning, and thank you all for joining us today to discuss our third quarter 2024 results and outlook for the year. I will start us off, then Alec Brackenridge, our Chief Investment Officer, will discuss our recent acquisition from Blackstone and the overall transaction market. And then Michael Minelis, our Chief Operating Officer, will speak to our operating performance. Then we'll go ahead and take your questions. We posted solid performance in the third quarter, driven by continued good demand and little competitive new supply in our established markets, which constitute 90% of our portfolio. Big picture, we continue to see a stable economic environment and a healthy consumer. Unemployment is low and wage growth is steady, both of which bode well for our customers. In a moment, Michael will speak to the various puts and takes we saw in our operations during the quarter. As is usually the case, we saw some items like occupancy and retention exceed our expectations, while others like blended rate came in lower in terms of our expectations. As you can see on page five of the management presentation that we posted to our website last night, this type of variability in pricing is not uncommon. In fact, pricing so far in the fourth quarter has normalized consistent with seasonal patterns and with our expectations. In sum, we remain on track with our same-store revenue guidance, and we expect to end the year in a good position for 2025. On the expense side, the machine continues to churn out terrific results, with same-store expense growth of 3.2% for the quarter and our expectation for full-year same-store expense growth of 3%. I want to thank the team across our organization for their continuing focus on innovation, cost control, and our customer. Turning to 2025, while there remains a considerable amount of economic and geopolitical uncertainty that could impact our business and the economy generally, we like our setup. We are too early to give 2025 guidance at this point, but we have given you some insight into our preliminary thinking on some of the inputs for 2025 same store revenue, on pages seven through nine of the management presentation. In sum, we think 2025 should produce solid same-store revenue results for equity residential. We see steady demand from a well-employed affluent renter base, a favorable supply picture in the 90% of our NOI in the less-supplied established markets, and continuing cost and lifestyle preferences favoring rental housing. In terms of our expansion markets, we expect that a recovery in same-store revenue will not occur until 2026, given continuing high supply levels, but we do hope to see some improvement in currently highly negative new lease rates and to see lower concessions during next year's leasing season. Now switching over to capital allocation, we accelerated our acquisitions of newer, well-located assets in our expansion markets of Atlanta, Dallas, and Denver in the third quarter. We are excited to acquire these properties at a basis that we see as highly favorable and add properties with strong cash flow growth prospects as supply levels decline substantially over the next few years. The entire equity team also looks forward to demonstrating our core competencies of smartly acquiring and efficiently integrating new acquisitions. We now have approximately 10% of our net operating income in our expansion markets, assuming stabilization of our assets under development. In a moment, Alec will give you more detail on our transaction activity. We are funding our expected $1.6 billion in acquisitions this year with a mix of fixed rate debt, dispositions, and the use of commercial paper supported by our unsecured line of credit. In a moment, Alec will give you detail on the disposition activity funding these acquisitions, but one source I did want to highlight is the $600 million in fixed rate debt we raised in September. These 10-year notes were issued at a coupon of 4.65%, which is the lowest 10-year coupon issued in the REIT space since 2022 and would be hard to replicate today. So nice job by Bob and his team on this. Before I close, a quick note on where these acquisitions fit into our overall capital allocation strategy. Our goal remains to own an apartment portfolio that has the highest long-term total return in the sector. with a focus on cash flow growth and taking into account risk and with the least amount of volatility possible. We intend to achieve this goal by catering to well-earning renters in the 12 or so metro areas that we think have the most desirable lifestyles for this demographic and present the best balance of long-term supply, demand, regulatory, and resiliency opportunities and risks, and where we can efficiently operate our properties with our industry-leading people and systems. As the last few years have shown, there is no riskless apartment market. The volatility and negative rental growth we see in the expansion markets and the strong results we are seeing in our northeastern markets, many of which were recently left for dead by investors, reinforces our commitment to our strategy of better balancing our portfolio between coastal markets and select Sunbelt markets, as well as urban and suburban locations. We expect the benefits of this balanced strategy to play out in 2025. Seattle and San Francisco, particularly our uniquely urban portfolios in those markets, should generate better same-store revenue results, which, along with the continued strength in the Northeast and the favorable 2025 supply picture across almost all of our established markets, should more than offset continued supply-driven weakness in our expansion markets. In later years, as supply wanes in our expansion markets, those markets will be more of a same-store revenue growth engine for our company. We are confident this balanced geographical strategy coupled with our efficient operating platform will create value over the long term for our investors and are eager to demonstrate this over the next several years. And with that, I'll turn the call over to Alec Brackenridge.