← The Rent Roll with Jay Parsons
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Foreign welcome. It's episode number 75 of the rent Roll, your podcast on all things rental housing, apartments, SFR and btr. And you know what? I'm excited about this week's episode and to be fair, I always am. But this is a fun one.
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It's a little different.
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We're going to dive into the remarkable story of Equity Residential and its many evolutions and chapters dating back to its founding in the 1960s or at least the the predecessor companies by the late great Sam Zell. And we'll do it quickly for time's sake. But it's a super interesting story for anyone who just thinks of EQR today as this REIT with class A plus apartments predominantly in large coastal cities and urban areas. But some of you know it wasn't always that way. How many remember the days when EQR was in 36 different states, places like Kansas and Maine and West Virginia, which are places we don't have any apartment REITs with a presence today? How many remember ranch style apartments? We'll get into that too. And then we have the honor of welcoming in the current CEO of Equity Residential, Mark Perel.
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And that's going to be a super interesting conversation.
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Mark is very candid about the latest evolution and chapter of eqr and we'll have a good conversation about that. Mark's been with the company since the late 1990s 90s and he's played a critical role in several of the latest chapters of eqr. They've as they've pivoted to where they see opportunity going. So we'll take us behind the scenes into this latest chapter. Like I mentioned, pivoting back into some of the Sun Belt markets where EQR had famously exited 10 plus years ago. Also on that topic, I know a lot of you, I'm sorry I say at that time I meant a separate topic. Excuse me. On a separate topic, I know a lot of you been wondering about what's going on with single family rentals and this institute ban on institutional investment in single family rentals and the latest iterations of legislation in D.C. and it's not so good news to be honest.
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If you followed some of my postings
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on the newsletter or Twitter and LinkedIn, I've shared some of these. But the latest version of the Senate legislation that may even pass by the time you hear this podcast is, well, it's it would effectively not only ban most institutional investment in single family rentals with a some pretty some some carve outs but some, some challenges even with those. But not only that, it would effectively crush most build to rent construction as well, which is was a surprise and also pretty mind boggling to even think about just how far the crazy train has veered off course away from the reality and the data and the facts and the research etc. And even from the research that's being put out by a lot of housing economists on all sides saying hey, this is not a good idea. So but hey, we're in the era of vibe based legislation. It is what it is. We'll cover the latest happenings there during today's in the News segment of the podcast. All right, before we dive into all this going on today, let's give a big shout out to our sponsors first, first and foremost, big thank you to jpi, a leading apartment developer. The stated purpose to transform building, enhance communities and improve lives. Check them out@jpi.com JPI is the cutting edge of some really exciting innovations in apartment development and construction. So check them out. Also, big thank you to Madera Residential, a leading apartment owner and operator based in Texas. Check them out@madera residential.com also thank you to funnel check them out@funnelle leasing.com all right, so we let's kick things off with the section we call. Here's a chart and for this week's section, we got charts, we got maps, we got screenshots of of financial filings, all kinds of good stuff. So this segment is going to be presented by our newest sponsor, Hawthorne Residential Partners, a vertically integrated owner, operator and developer of Sunbelt Multifamily and build rent communities. With more than 58,000 units under management, Hawthorne has acquired or developed over 26,000 units and it's been awarded the number one property manager in the US for online reputation for the past four years by J. Turner Research. And to learn more about Hawthorne Residential and how to partner with them, visit hrpliving.com and hrpinvestments.com all right, let's dig in. Let's take a little trip down memory lane, the brief story of Equity Residential and its many chapters and evolutions before we talk about later in today's program about the current chapter of this story and the chapters ahead, of course, with EQR's current CEO Mark Perel later in the program. All right, so if you don't know the full story, we're going to do it quickly, but it's an awesome one. Okay. I'm not going to do it full justice. I can't do it. I wish I could, but I'm just going to get the high notes. So the story starts with two guys with generic names, Bob and Sam. And I got a picture here from EQR's website of Bob and Sam. They were fraternity brothers at the University of Michigan. Of course, Sam was the legendary Sam Zell, the visionary. He became, of course, the legendary Sam Zell. The other guy was Bob Lurie, the execution guy in the duo. And while a student at Michigan, Sam managed a rental property where he lived. And by the time and while also a student, he started buying properties in the Ann Arbor area, partnering with Bob. One article I read said that by the time they graduated in 1966, owned a city block of student housing, all resulting from a $1,500 down payment. Pretty crazy. And in 1969, the pair formed Equity Finance and Management Company. All right, let's fast forward a little bit. I'm going to read an excerpt from a podcast that Sam did with Peter Linman at the Wharton School before he passed away. It says following a market crash in 1973, Zam Sam Zell spent the next three, three years acquiring $3 billion in real estate assets, much of it for $1 down. He built the portfolio by going to lenders and offering to take future operating losses off their hands in return for equity. Zel was able to carry the properties long enough for them to return to and exceed prior valuations. Zel said, as it turns out, we made a fortune. That's an understatement. So then in the 1990s, I'm going to keep reading here, the cycle turned and some companies were caught in a severe credit squeeze mark, marked by the massive foreclosures and the nation's savings and loans debacle. The way out, Zell explained, was to tap the public markets through what was previously a little known financing vehicle, the REIT. I'm sorry, the Real Estate Investment Trust, aka REITs. So in 1993, EQR goes public with about 22,000 apartment units that came about via a transaction with some other household names. Some guys name another famous duo, Barry Sternlicht and Bob Faith, than at Starwood. And of course, Bob Faith later went on to start a little company we now know as greystar. So you may have heard of them, of course. And Barry has built up Starwood over the last few decades. So now it's the mid-1990s and Zell now had the advantage of the lower cost of capital being a, being a reit, and he used that to scale incredibly fast. In the 1990s, remember, they started at 22,000. When they went public, EQR bought some apartment operators who were some big names at the time. Some of you may remember Wellsford Residential in the Mountain states in the Southwest region. Evans withecomb in Arizona and Southern California Mary Land and Investment, which had about 35,000 units across the Southeast, and Lexford Residential, which had about 37,000 units in the Midwest, in the south, and focused on affordable housing. So that takes me to this chart, and this is a great chart. If you can't see the screen, I'll walk you through it. But it's a great chart if you're watching this. Okay, here is the unit count for equity residential from IPO through today.
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And by the way, for full disclosure,
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for expediency sake, I used AI to compile this data, asked it to compile the number of units owned by year by reading through the 10Ks from EQR, which are public filings they have to do as a reit.
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So it may be off here or
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there, but I did spot check it and it's directionally. Right.
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Okay.
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So anyway, Remember back in 1993, I said they had 22,000 units or give or take. Well, by 1996, three years later, they triple that total by 97, they're over 100,000 units. By 1999, they're 192,000 units. Then they peak around 2001 at around 225,000 thousand units, which is remarkable. You know, we don't, you know, we don't have. It was a different era.
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You know, we had an other REITs
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like AIMCO, which also topped 200,000 units at the time. By today, by comparison, today, there's only one publicly traded REIT that has more than 100,000 units, and that's MAA, and they're just barely over 100,000 units. And so there's been some pullback, which I'll get into in a little bit. Today, equity residential, they own about 85, 86,000 units. So of course, that decline, and by decline, I mean only by unit count, as the, the shift was very, very intentional. And we'll get into that a little bit. But I want to talk for a moment about this stage of EQR because it's so wildly different from the EQR that all of us know today. All right, so on the screen, I'm showing a part of their 10k filing from Q4, 2001. And this is such a great snapshot of how different equity residential was back then. It's basically, it was basically a whole different company. So you'll get a kick out of this. Even if you know the story, I think you'll get a kick out of this. That's pretty great. Okay, it shows. EQR broke down portfolio into three categories. One is Garden. Two is mid rise, high rise. So pretty standard, right? That's, that's something that people still do today. But what is the third? And I'm not sure if you just asked me, hey Jay, what would be third category back in 2001? I'd have to think about that. But it was a category they called ranch. EQR had 31,000 ranch style apartments. And what is a ranch style apartment, you might ask? Well, let's see. Eqr, they described it as. Ranch style properties are defined as single story properties which do not provide additional amenities for residents other than common laundry facilities and cable television access. So these ranch style properties, in 2001 for EQR, they averaged 88 units per property. They were EQRs lowest in terms of occupancy rates, just over 90, just at 92.4% despite also being its cheapest. At an average rent of just $494 per month. That compares to an average rent of $868 for garden properties at the time and 1424 for mid rise slash high rise. So there you go. Ranch is certainly not a REIT quality product type today or even institutionally for that matter either. So ranch style apartments, there you go. So I'm gonna get back to Ranch in a moment, but here's another crazy stat for you. In 2001, EQR had properties in I think 36 states. I'm showing a map on the screen here that to highlight those 36 and it includes places that are great states, basically no go zones for REITs and a lot of institutional capital today. You know, great places but you not favored by Wall Street. So I'm not trying to knock any of these states. I'm just saying it is what it is. It's not fair by Wall street, partly because of scale, not being able to scale some of these spots. So states like Maine, West Virginia, Kansas, Alabama, Oklahoma, Rhode Island, New Hampshire, again no knock on any states, great spots, but just shows how 2001 was a different era for the apartment REITs and for Equity Residential. I saw one property in this 10k from 2001 that I wanted to highlight for you. Okay, it's, it was from a town called Hurricane West Virginia. So I had to look that up on Google Maps. It's a tiny town of less than 7,000 people right between Charleston Huntington along I 64. The property was called Hickory Mills. And I looked it up and there's still a property in Hurricane West Virginia that uses this name. And they don't have a website, but there is a street view of the property and the Google street view shows it. And sure enough, it's a ranch style concept. And it's funny because as I looked at this street view and I got the picture on the screen, if you was looking at it here, it, it made me think about how trends come and go in real estate and really in culture and everything else. Because what they called ranch style apartments today, you know what we'd call this build to rent. They're basically kind of like a garden apartment property, but they're scattered one story ranch style, small duplexes and triplexes sharing a big asphalt parking lot. But if you built these things today, well, you probably do the parking lot a lot different. But you'd call it btr. Anyway, I'm hoping I'm not boring you with, I hope I'm not boring you with all this, but I find it super interesting, especially when you compare against the EQR of today. But I'm a nerd for these things. Hope you appreciate all that. All right, so let's fast forward back to the story. Sam Zell decides to shift strategies away from just having apartments everywhere. Now the strategy is going to be fewer total units, but pursuit of a higher valuation based on curating a portfolio of higher value apartments serving higher income renters in higher cost cities. And by the way, we had a past podcast guest a while back, Fred Tami, who also worked for Sam Zell and was part of this shift along with Mark and he talked a little bit about this period of time. So you want to find that. It's back in the archives. But that was a he, he talked a little about this as well. Now let me make this remind people, this shift, this shift did not happen overnight. San just woke up and just dumped a bunch of stuff. They were very strategic about it. They first started to sell out of these tertiary and secondary markets. I imagine that stay in Hurricane West Virginia very long. Then they sold off the affordable, affordable housing portfolio. Then they bought part of the, the big Archstone portfolio, which some of you may remember that famous name of course. And that gave them more of a footprint in these, in the urban coastal submarkets that we know of them being having heavy burdens today. And then the whole, the whole shift was capped off by the famous sale to Starwood, going back to that old relationship with Barry Sternlicht, which marked their exit from the Sun Belt and the Mountain states. That deal closed in 2016. $5.4 billion, 5.5% cap rate, 23,000 units. Nearly half of that, almost half of that was in South Florida, plus another 6,600 units in Denver, among other markets. And that brought the portfolio down from where it was 225,000 units in 21,001 to under 80,000 units. Focused on, I believe, seven states of highlighting this map plus the District of Columbia. Those are shaded in blue, so you can compare that to the prior map. And then more recently, as many of you know, EQR has pivoted again. They've reentered Colorado, Texas and Georgia, which they call their expansion markets. And we highlight them here in orange on the simple map and with the goal of eventually having about 25% exposure in the in these expansion markets, a Sunbelt and the mountain region. So the portfolio's kind up a little bit since then. Now around 85, 000 units. And we talk, and when we talk to Mark Perel, the new CEO, not new anymore, of course, but the current CEO, we'll ask him about the latest chapter in EQR strategy. And in particular, I'm going to ask him, you know, what, was there an event or a data point or some kind of shift that drove you back into these markets? So stay with us for that. It's going to be a great conversation. And, and Mark's really candid about his thinking and his team's thinking behind some of these things. All right, so there you have it, the short history of EQR's many chapters. More to come in today's interview. But next up, rental housing trivia. All right, today's trivia is presented by Authentic. If you've got a property that's underperforming and you can't quite figure out why, check out their multifamily leasing and marketing audit. They'll dig into your pipeline, your leasing funnel and your comps, and they'll tell you exactly where things are breaking down. Plus strategies on how to fix it. Listeners of the pod get 50 off, so head to authenticff.com, click on the banner to learn more and claim the offer. All right, so today's question in honor of Equity Residential is back in 2001, EQR owned about 225,000 apartment units. In which state did they have the largest presence in 2001, was it California, Florida, Georgia or Texas? So give that some thought and we'll revisit that in a bit. But first in the news foreign. Is going to be presented by Mason Joseph Multifamily Finance, the number one FHA construction lender in the Southwest for a reason. Since 2016, Mason Joseph has closed as many FHA construction loans in Texas and surrounding states as the second and third place lenders combined, according to my friends there. So check them out. Mason Joseph all right, so I mentioned this earlier. We're going to talk about the single family rental proposed ban here for institutional investors. And, and really it's beyond institutional investors. The cutoff was, was defined as 350 homes, which obviously is going to affect a lot of sub institutional, you know, regional players as well. And again, as mentioned earlier, I think the, the key takeaway here is the crazy train keeps getting more and more crowded. We talked about some different bills in the last few weeks, but this one we're talking about today is the bill. It's the one getting advanced the Senate floor for a vote. By the time you hear this, it may have already passed. We'll see. The proponents of the ban figured out the fastest way to get approval was to hijack some pro housing legislation that was already in advanced stages, been working on for months and months and months. And, and they're, they're tacking this ban onto that existing legislation. So the original bill was a pro supply bill with incremental wins to reduce red tape, get more housing built. The new amendments are the polar opposite. They add a ton of red tape and they would very explicitly reduce construction, particularly for build to rent single family homes. So the name of the bill is the 21st century road to Housing Act.
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And you know, those of you who
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know me and listen to my podcast, you know, I'm not the type of person to embrace a ton of hyperbole, but the Road to Housing act in its current form could mark the end of the road for most build to rent construction and even for some institutional single family rental portfolios. And so here's what it does. And by the way, this is no guarantee it'll actually, you know, has to go through the house as well and get signed by the President.
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So we'll see how well this plays out.
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This is what the Senate has, is currently bringing to the floor with bipartisan support from the leaders of both parties. So here's what it does. Number one, it bans investors with 350 plus rentals from buying single family homes. There's certain exceptions to it, but even those exceptions are not very clear cut. It's pretty murky. Number two, it forces large investors to sell rental homes after seven years. It does exempt current homes currently held by SFR groups, but this would only apply. So this ban though would apply to future acquisitions. Although again there's some few. There's a few exceptions and loopholes to this. And of course any forced sale to buy a property have to sell in seven years. That's effectively a forced eviction. And it's. That's obviously dumb and I don't know why people aren't noticing that. That's obviously what this is. Third thing, most surprisingly, it basically kills build to rent. You can build it to be fair, but you have to sell it in seven years. And that applies not only to scattered site BTR homes, but even to BTR communities as well as, at least in the way it's written. So how crazy is that? I mean, who is going to sign up to fund new BTR development that must be sold off to individual buyers in seven years, even if the market stinks in seven years? And to be technically incompliant, you'd have to convert BTR communities to condos even to be able to consider selling them to individual buyers. And a condo conversion is obviously enormously messy and complex and that's basically a deal killer. So fourth thing, the bill creates a massive new federal regulatory regime over the SFR market. They're going to police all the rules and loopholes which are, you know, many of which are open to interpretation. And if your interpretation differs from the regulators, you could be fined a million dollars or three times the value of the home, whichever is greater. And who's going to sign up for that risk? So let me give you an example.
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The bill allows large investors to continue
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buying homes needing, quote, substantial rehabilitation if the home does not, quote, meet structural or core system elements of local building codes and if the investor spends at least 15% of the purchase price on repairs.
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So it seems good, right?
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But what happens when an overeager bureaucrat later contest that claim and says the repairs are too focused on esthetics and not sufficiently structural? And given the massive potential fines and legal costs, again, I'd ask who would sign up for that risk. And the fifth and final takeaway, it's going to scare off most LP investment into SFR and potentially BTR as well. It's already having a massive chilling effect. Obviously I'm hearing this quite a bit lately. So if this passes, you know, it does create a pretty wild scenario where I think some existing institutional investors and large regional investors are probably going have to look to at least consider divesting and exiting. Because why hold on to a business that you can't really grow and that is now also that business is now also under intense regulatory risk based on pretty subjective, or I should say open ended rules and the subjective whims of regulators. And that could vary of course by whatever party is in power at the time. So what do these businesses do?
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So I think, you know, that's going to be really interesting to see play.
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Hopefully doesn't get to this, but I
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mean you can see a lot. I think that's going to lead to some interesting scenarios.
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I went on to this more detail and speculated about Speculated is the right word here.
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I obviously don't know, but my latest
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newsletter you can find jparsons.com newsletter I laid out some possible scenarios of what that could look like. Again, just total speculation. So again, this legislation is very destructive. But don't just take my word for it. A wide range of voices are saying the same thing. Can give you a bunch of them. I'm going to give you one from the great John Burns and his team co he wrote an article co authored with Chris nebenzall, Rick Palacios Jr. And Danielle Wynn. Let me read a brief excerpt here. It said we might as well call this the Rental Inflation bill. We are not policy experts, but we do understand how demand, supply, new development and underwriting work in the housing market. Their post 21st century road to Housing act, which aims to make housing more affordable, includes provisions that will make housing more expensive. And they note the bill would likely result in reduced construction, higher rents, and likely higher home prices. So it's a good read if you want to dig in more. And there's a ton of hard facts in the article, and I've covered many of these facts on the podcast before too, as well as in the newsletter. So I I hope the facts win at the end of the day. But to be honest, you know, this whole episode, you know, I mean I never, I never was too naive about politics, but this whole episode makes me feel even more cynical and discouraged about politics than I did before.
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So I I but again, I I
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hope we hope the facts reveal at the end of the day.
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Because at the again, at the end
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of the day, renters are people too. They need a place to live and nothing in this bill will materially move the needle of people who can't qualify for a mortgage. Don't have cash for a down payment and don't have can't afford the additional thousand plus dollars a month and for to cover the cost of owning versus renting a single family home. So all this bill does is reduce their housing options, not drive up inflation and also create a more challenging murky exit situation for homeowners who potentially have homes that individual home buyers can't or don't want to buy. So that's a real challenge and I hope our our hope our our country's leaders can solve for it. All right, that's some bad news. Let's get some good news. Let's go to our newest segment, Good News. We want to highlight the good news happening across the rental housing space because that deserves attention too. This is presented by my friends at Apartment Life Department. Life coordinators help apartment owners care for residents by connecting them in meaningful relationships. And this benefits everybody from the residents to the satisfaction of on site staff to the apartment community's bottom line. So if you aren't already working with Apartment Life, check them out@apartmentlife.org Today's good news comes from Denver, Colorado. It's the story of a guy named Wayne Martin who serves as an Apartment life coordinator serving three affordable housing communities in the Denver area. High needed community with some real challenges, particularly around food insecurity. So when Wayne first arrived, started working these communities, he asked residents, the property manager, he said, hey, what are the greatest needs here? And one immediate answer stood out, food. And obviously a real challenge. And that's sad to hear. So Wayne, here's a great story for okay, so back in October, this last October, Wayne was putting together Halloween activities for apartment residents. And he goes to the local Target and says, hey, can you donate some candy and get this. Target ended up donating an entire seven foot pallet of Halloween candy. How cool is that? But it didn't stop there. Since then, the Target store has kept donating for these residents. Wayne estimates at least a million and a half dollars worth of food. During Easter week. They gave a thousand dozen fresh eggs. They gave another time they gave 500 frozen pizzas. And in one delivery they gave $10,000 worth of new York strip stakes. So that's pretty wild. So for families who are choosing between rent, utilities and groceries, this is huge. So big shout out to Target and Denver as well as to Maine as well as to Wayne Martin for loving on these families. By the way, if you have a good news story to share, email them to info parsons.com and we may feature it on a future episode all right, let's get back to today's trivia question sponsored by Authentic. Again, the question was, back in 2001, EQR owned about 225,000 apartment units. In which state did they have the largest presence? Was it California, Florida, Georgia or Texas? Correct answer is. Drumroll, please. Florida. In 2001, EQR owned about 33,000 units in the Sunshine Sunshine State alone. Texas was second, California was third. And today EQR doesn't own anything in Florida. So again, that last Florida portfolio from EQR was sold to Starwood 10 years ago. All right, next up, it's going to be good. It's time for today's interview sponsored by funnel, the AI and CRM software trusted by four of the six major REITs and many more leading operators like BH and Cortland. To learn how Funnel can help your property centralize operations and automate everyday tasks, visit funnelleleasing.com and one last reminder. Hoping to see you at The Funnel forum March 23rd, 26th in Scottsdale. I'll be there. Funnelleasing.com forum all right, so our guest today is the CEO of Equity Residential. He has been there since the late 1990s. He's been a key part of many chapters in EQR's recent history and now leading EQR into its next chapter as they expand back into some of these markets that they previously exited. Please join me in welcoming in Mark Crow. Foreign.
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Welcome to the interview portion of today's podcast. And I am honored to welcome in the CEO of Equity Residential, Mark Perel.
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So Mark, thanks so much for being with us.
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Thank you, Jay. Very excited to do this. Thanks for including us.
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Oh, it's my honor. So before we get into all the fun topics, let's start with just your background. Tell us a little bit how you got into the multifamily business and to eqr.
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Sure. So I started at Equity Residential all the way back in 1999, started working in this building for Sam Zell in my prior life as a lawyer back actually in 1995. So I'd been around for a while and I'm sort of a testament to what happens at our company as a long term employee. Recently I was meeting our newest employees, which I do a few times a year at breakfast, talk about our culture and they asked me how many jobs and stuff I had had here. And I fished out all my old business cards and I had nine of them. I had nine different titles over that sort of 26 year span. So 27 year span. So I've been really lucky, Jay, to go up through the finance, accounting, tax functions, joint ventures, just do a wide variety of things in my time here. Investment side. And now very fortunate to have had this job the last a little bit more than seven years.
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Yeah, that's.
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That's fantastic. Well, you mentioned Sam Zell, obviously an icon in the industry. About a year ago, I had your former colleague Fred Tuami on the program and he shared some great stories. So I have to ask you, everybody always likes to hear these, like, what's your favorite Sam Zell story that you could actually share publicly? And I know that a lot of people, there's always some great ones that
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can't be shared publicly, so.
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Well, we'll start with the hat, because you got to have the hat, right. And got to be careful because some of the buttons may be not PG13 appropriate. But yeah, I mean, Sam, besides being an iconic guy, he was a fantastic. He always, to me, represented the investor in a super capable way. So my favorite story about Sam, so I took the job. I became our CEO January 1, 2019. And you know, I'd been mentored by a lot of great people. Sam, the time I'd spent with Sam, that was a little more limited. As a CFO for 11 years, as a CEO, you really were his partner. You talk to him all the time. And so 2019 was a pretty good year in the apartment business, by and large. And I thought, this is a hard job, but I think I can do this. And then, of course, March of 2020 came along and the world just kind of came apart. And for Equity Residential, as an urban apartment owner, in part, it was particularly challenging for our people, for our customers. It was just for our cash flow was tough all the way around. And Sam was so stalwart. Like he didn't know when it would get better, but his faith that it would. And so the story I tell is we all went home, all of us, the whole world, for a few weeks. And then there was a point. Sam never liked remote work, just didn't. But there was a point where he sort of said, we gotta all get back to the office, meaning him and Meek.
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Okay?
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And so we were back here. And so he and I would be in his giant office building in Chicago, and I'd be sitting on a couch 25ft from him yelling updates, which were all, frankly, not good through my mask. And he was hard of hearing by that time. And so he had these two men in, you know, whatever, a 400,000 square foot office building screaming at each other. But all I'll remember is just how he listened. He wasn't trite. He didn't say, it's all going to be okay, Mark. He knew it was very challenging for our company and our country, but his faith that things would get figured out was very comforting to a pretty new CEO. And I always felt like he had my back. So my story of Sam is just perseverance, grit, and he had it in abundance.
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Yeah. And he'd been through a few cycles, right. I mean, he'd. Yeah, he knew the drill. Yeah.
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Him and I were talking about New York because there was a point where everyone said New York would go away. And I said to him, you know, I don't think it's going to go away. It's been around for, you know, 400 years. It's actually been through pandemics. And he bangs on his desk, he goes, it's the smartest thing you've said in several months, Mark. You know, it's been through this and it'll come back around. And so I think that historical perspective, you know, not blind faith, but informed thinking just is. Was hugely helpful to our shareholders at a really rough time.
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Yeah, absolutely. Well, obviously one of his many impacts to the industry at large and just beyond even equity residential, I think, was the realization that there are a lot
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of different types of renters.
- [32:56]
B
And I still see this today. I think a lot of times you have the culture, broadly will think of renters as all people are kind of struggling to get by, want to be homeowners. And he really was one of the first people to identify this underserved niche of higher income renters who could afford to buy but prefer to rent, and they're willing to spend for a nice apartment in a great location. So I know you've talked about this before, but I'd love just to get more into this, like, tell us about who your customer is, the renter. And what does the broader world of investors, policymakers, media, not understand about them?
- [33:29]
C
Yeah, great question. I mean, he used to tell a story about how the world had changed since he had graduated from the University of Michigan in the 1960s. And the way it had changed is, you know, almost all his friends were married six months out of college. I mean, everyone paired up and within a year or two they had children. It was a very different life. And so owning a home quickly, your family got bigger quickly, home prices were different. Frankly, mobility and flexibility was less. That all suited the times and the chart that he relied on. And we rely on here still is people marry a lot later, if they marry at all, they have fewer children, they have them later. They want flexibility in their lives, frankly, maybe they want their capital invested in something besides a single family home. And I think all of that flexibility played into the affluent or well to do renter theme. And so that's what we talk about with our investors. I think what policymakers miss is that rentership's always been important in our country, but it's probably more important now. And, and it's not like folks that can't purchase their home, they're penalized or they're in a negative state of affairs. They may be delighted and often are delighted to be letting me fix the leaky toilet or, you know, take care of the problem in the building. So I think by and large our renters mostly are renters by choice. They could own, but they would be in less convenient spots. They like being their people that have their interests. So I think, Jay, what we're missing, pardon me, and kind of reflected in the Senate bill that's out there is this sort of we need to shove home ownership down everyone's throats. I think it certainly suits a large group of our fellow Americans. And I think for another very large group, they're delighted to rent. It suits their lifestyle. They love the flexibility and they just don't need or want the space and they got other things to do with their capital. So I think not talking about rentership like you failed, but talking about rentership as an informed choice is something that we need to just keep talking to policymakers about.
- [35:40]
B
Yeah, that's such a great point. I mean, the, not to get too far in the rabbit hole, but yeah, there's groups of people who would rather rent for various reasons or maybe they don't have the people who do want
- [35:48]
A
to buy but aren't in a position
- [35:49]
B
to be able to buy yet or not yet, maybe they do down the road. So, you know, they certainly need quality housing, too. You know, one shifting gears a little bit. You know, obviously right now there's been some shakiness in the economy. I know you've talked about this, some of the earnings calls, the uncertainty. But we've also, I think, seen a very resilient renter, at least in what let's call the institutional A and B market rate apartments.
- [36:13]
C
Right.
- [36:13]
B
Renters are paying the month, paying the rent every month. They're not turning in keys. You're seeing good rent income ratios. In fact, they're even going down and you've reported that. So what do you think's driving this story that I think is pretty undertold about the financial strength of renters right now?
- [36:27]
C
Yeah, you know, I would have started by saying we're in a low hire, low fire environment, but that last employment report was a little daunting. But yeah, we don't see that. We don't see people giving us keys, Jay. We don't see people asking, these are early indicators. People giving us keys, terminating leases early, people saying, you know what, I'm in a two bedroom, I need to go down to a one, or I want to go up to a two with a roommate, none of those things are occurring. And when the tech firms over hired, mostly on the west coast during the COVID boom and they let a lot of people go in 22 and we think to some extent that's going on again now. Companies like Block or Square probably over hired and they want to kind of grab on AI and they're blaming it or crediting it to that. But our folks, they are generally very skilled, very technical and mid sized firms like Equity Residential struggle to find these technical people. And so they get, you know, they get found quickly, they get good severance, they get rehired. So I think we're a resilient economy, we are a flexible workforce, people find other good paying jobs and we just keep on going. And I think to me that's a little bit of the story here is that, you know, we're not talking about a one, one factory town somewhere, we're talking about big metros with a lot of diverse employment drivers. And if they're not in the tech tech world, they can be in the tech department of an apartment company or the tech department of a manufacturer. And those jobs are great jobs too. And so anyway, I, I believe that there's a lot more resilience in the workforce than maybe people ascribe, particularly our customer that has this broad skill set that's attributable to many. They're not all tech people. They may be marketing experts or. But they can work. They're not working at JP Morgan, at a bank, they might work at a PE firm. They have marketable skills, they're not just narrow skilled folks.
- [38:25]
B
Yeah, that makes a lot of sense. And I wonder too, it seems like, you know, there's a lot of focus on people coming out of college having a hard time finding a job at a school. But you know, you also have this category of people who are probably in your prime apartment demographic who are you know, they're two or three jobs in. They're, they're still, they're, they've got some experience and some real skills. They're valuable, but they're not yet that expensive yet, you know, in their 50s and 60s. And it seems like just anecdotally like those types of jobs and we've seen better wage growth among younger college educated adults who are outside of the college graduate age like that. That segment seems particularly resilient for, for various reasons.
- [39:05]
A
That's, that's been a good trend as well.
- [39:06]
C
And if I could add one thing to it, I think it's an important fact. Nominal incomes have gone up a lot and rents by and large haven't. So in San Francisco, downtown, our rents, we have a decent sized portfolio in the city of San Francisco are now 4 to 6% above pre Covid. So like call it same week just before we all left when Covid hit in March of 20. But nominal incomes are up 30%.
- [39:33]
B
Yeah.
- [39:34]
C
So. And you look at a place like Austin and you demonstrate as being. Rents went like this and now they're actually, they're the mirror image of San Francisco. And that gets to this. Why do we have a diversified portfolio? Well, therein lies, I mean we feel like these demand supply regulations, there are better markets and worse. But having a little balance and frankly a little humility about knowing for sure what the right driver is is I think useful. But I think a lot of our residents have better nominal incomes and that's why that rent income ratio hasn't grown. So I think there's space for rents to go up and that's also counter to the political narrative. And I think landlords just, you know, need to provide great service and be careful about how they do that.
- [40:21]
B
Oh, I 100% agree with you. And that diversification strategy, that ties really well in my next question. So for those of you who remember long enough, you know, there was a time when equity residential, you had apartments everywhere. I think you were like in Oklahoma
- [40:35]
C
at some point we were.
- [40:36]
B
And yeah, nobody has nobody in the. I don't want to. We love Oklahoma, but I don't think any of the REITs have apartments in Oklahoma anymore. Obviously it shifted to more of a coastal class A strategy. Now in recent years you saluted this. You're leaning back into a handful of sunbelt and mountain markets with a goal of I think 25% allocation. And I know you've talked about this a lot, so I don't want to make you rehash it all, but I really just want to ask you, was there a particular moment, event or circumstance led you, led you and your team to think, hey, it's time to reconsider
- [41:08]
A
some of these places again?
- [41:10]
C
Yeah, that's such a good question because again, it speaks to our view and it isn't just our company. If you look at our other big apartment competitors, they all have pretty different portfolios. If you think where some of the Sunbelt guys were and where they are, they've narrowed, focus, gotten newer. So I think we are maybe a little more vocal and because of our size, a little more apparent. But all our competitors have changed their portfolio makeups. So, you know, we look, I remember in 2016 and 17, we had gone post GFC. We were pretty sure there would be almost no supply in the coastal markets. And that indeed was the case. And we did very well coming out of the gfc. Great demand as people move back to urban centers. Not a lot of supply, but you know what? People figured out how to build where there's demand. And even with the government slowing them down in places like New York, with the 421A program, all that construction in 2016 and 17, it became apparent to us that those markets were also subject to supply. Supply. And we also, and this is something we said a lot internally, we need to follow our higher earning renter. And our higher earning renter was starting to go to places like Atlanta. And there had always been a cohort of people in their 20s and 30s who made okay money and moved to Sunbelt locations, of course, but they were renters with us for six months and then they bought a home. Well, all of a sudden in Atlanta, homes were quite expensive. Okay, so you had a confluence of at least three trends. You had supply in the coastal markets. You had the Sun Belt becoming, I would say, a better apartment market because it had high single family costs. So it began to resemble in some regards, the coastal markets. Because we didn't like the churn when we owned a Sunbelt portfolio. Third was just the regulatory issues became significant in some of the coastal markets. So we looked at those things and we did a big project in 2018, Jay. And decided to balance the portfolio out a little around the risks and opportunities of demand supply, regulation and resilience. Just to be clear, resilience for us means insurance costs and just repair costs. And I think the fact that we've got better numbers the last few years than our competitors is a testament to that. I think having a balanced portfolio but being super efficient, we always want like 1015 assets in a market, at least. That's why going to Tulsa would be hard for us. Not because Tulsa and Oklahoma City aren't great. It's just we want scale or we're no better than any other manager. And so I think our platform now hopes to finish second every year in NOI growth, but third or first over any longer period. That's kind of the goal. Limit volatility and just keep going up this way on cash flow growth for our investors.
- [43:58]
B
Yeah, no, that makes a lot of sense. And, and certainly you had some, some, some good gains in, in making those diversification moves so far. Now, one of those, those legacy markets, the, one of the coastal markets, Los Angeles, I want to ask you about this. I was struck by some of your comments on the last earnings call because, you know, you were pretty candid and, and just for the purpose of the audience listening, I'm going to read back just a snippet of what you said. You said, I'll admit to continuing anxiety over Los Angeles, which lacks both economic drivers and quality of life drivers, but will remain hopeful. You talked about a property you sold in downtown LA and said that was partly because those regulatory conditions in that market are really hard. And then you made a comment that I want to ask about as well, that you, you mentioned the opportunity to maybe sell more over time as the market improves through the World cup and the Olympics and other things happening. And so am I. Is it, should I interpret that comment as saying that you're looking to be a net seller in Los Angeles as the market improves?
- [44:58]
C
Yeah, I think that's a fair characterization. But I also say we were 40%, 39% California, Northern and Southern California. So you have big exposure there and we'll stay exposed. We like a lot about California Prop 13, job quality, high single family housing. We think there will be more supply, but we don't think it'll be overwhelming. We like, like a lot of things about California, but the regulatory stuff is challenging for us and having a little less in particularly Los Angeles would be better, we think. But we're not a compelled seller, Jay. Like we'll take our time. We're investing like we're doing those ADUs, which I think you've commented on, accessory dwelling units. We'll do 50 new units of housing in California just this year, which is pretty good. And we're just getting the machine ginned up. I mean, we're likely to build a deal in Orange county, like inside, like a densification add several hundred. The work that Governor Newsom and the legislature have done to encourage housing production is doing its job. It's just places like the city of Los Angeles have their own regulatory schemes that are so negative that I'd be very, I'm happy to do Orange County. I'm not excited about Los Angeles. So we're going to be very specific. But again, there's a lot to like about California. But I think LA is a little challenging and probably worthy of a little less focused by us. There's guys that can run it better, that are private, can run it with more leverage. It's probably a better owner than us of some of those assets.
- [46:31]
B
Yeah, so you kind of alluded to this. I want to just expand this a little bit. Is it fair to say? I think it is. What you're saying is that it's not like Southern California still has a lot of drivers mentioned Orange County. They could also make a case for San Diego and even some other parts of Southern California, Riverside, etc. Is it more just the city of Los Angeles itself? That's the challenge.
- [46:53]
C
Mostly though the county can be really challenging.
- [46:55]
B
Yeah, that's the other county.
- [46:57]
C
So those two groups, I'm sure there's well meaning people but you know, housing is perfectly attuned to supply, demand and regulation. Like I, I always, when I get the opportunity to talk to policymakers, they should use the private sector to cover public goals. If they encourage development, you'll get more development. If they discourage it through their policies, you'll get a lot less. And you write so well on that all the time. I mean, I think developers are perfectly calibrated to all those conditions. And the city of Los Angeles and the county are creating an environment where folks like me are hesitant. And that multiplied by a thousand capital allocators just means actually going to be less housing in la. And that's the exact opposite of what they need. And so I remain hopeful. There's a really interesting series of gubernatorial races there and like that there's other opinions that get out. But I think Governor Newsom did a lot of good in his time to try and turn the story around.
- [47:56]
B
Yeah, no, that's great. Let me ask you a more follow up question. You made a comment that I thought was really interesting and just wanted to flesh that a little bit about and I may just make sure you tell me if I get this wrong, but you mentioned that you're now underwriting for potential litigation risks and other regulatory risks in certain markets. And I'm not sure that most, and I could be wrong. I imagine Most buyers haven't historically just put that into the model. And so I'm just curious to ask you how much does that change the math for investing in a place like Los Angeles and any other places get redlined when you factor in those costs?
- [48:28]
C
I'm going to be careful about using the word redline just because of the connotation that it has, but it does again, capital allocation, you can't move the building once you built it or renovated it or bought it. So you're sensitive to your perceptions of the regulatory conditions. And there's things we can live with. I mean, we expect some level of regulation, sure, in many of our markets, but so we were looking, we were very excited in Massachusetts, we have a good but not as large as I'd like suburban portfolio in Boston. And so we were looking to add to that. Jay and they've created some yimby type rules that require some of these really well amenitized suburbs to approve market more housing. So there were several deals we were looking at, there were hundreds of millions of dollars of capital we would have invested. And then we see this ballot proposal which is the most draconian one we've ever seen, and we just put our pencils down. We love Boston. We're not in the process of selling out. We're not doing that. But to add more capital in with that uncertainty is reckless with our, you know, with the capital we've been given. So I would say it's often on or off, and it can change if conditions improve. And then markets like L A, you got to say, well, if I think I can get a 6 on current rents and current costs, you know, you might build that in Texas because you believe that number, but you might need a little more in L A because you may have some uncertainty about some things there. So that just means the hurdle rates higher and less will hurdle. So to my point, there'll be less supplies. I think it's sort of this perfectly logical discussion and then people like muck it up because housing naturally, very emotional issue.
- [50:14]
B
Yeah. And for those listening, I hope people realize what you're saying, Mark, which is that that means in those places that you're going to have to have higher rents to make those projects actually work, which is counterproductive to what those states ultimately want, unfortunately.
- [50:27]
C
So, yes.
- [50:28]
B
And then also just a quick reference for those listening, Massachusetts, for those not aware, considering a ballot measure in November that would cap rents either at CPI or 5%, whichever is greater. I'm sorry, which not, not greater. It'd Be no more than 5%.
- [50:45]
A
Even if CPI was more than 5%, not means tested.
- [50:49]
C
So rich people move in, they get the benefit of it. And on top of that, which seems even nuttier, Jay Parsons moves out, Mark Perot wants to move in. And I can't set the rents to market. And that means that the unit is perpetually worth less and I won't invest in it as an owner. And that's the problem New York has with the rent stabilized regime right now. And it's just a huge dilemma. You can say all you want that it's good, that gives some comfort to people already in the units at some reasonable level. But when the unit turns, boy, you, you know, there's often a lot of capital you need to invest as an owner. And if you don't create an incentive, I just, I just won't do it.
- [51:32]
B
Yeah, which is a shame. That's a great market. Boston's a great market. Suburban Boston, great demand drivers. They need more housing. But I think you're right, I would close the spigot. All right, so let's, let's talk more positively on the flip side, obviously you're in a lot of other major coastal markets. Which ones do you, which, which ones still make a lot of sense, especially for long term.
- [51:52]
C
Yeah, we love our San Francisco exposure. We think it's the heart of AI. We never gave up on San Francisco like others, so we like that a lot. We did redevelop a big deal like a mile and a half from Apple's headquarters. So we would invest in the Bay Area, particularly in East Bay. We just happen to have a light exposure in East Bay. I do like some of the New York suburbs. I think some of them have good supply demand dynamics. Very expensive single family, good connectivity to high quality jobs. EQR is 30% New York and San Francisco NOI in its totality. I feel like we are levered to the best part of the knowledge economy and what I think is going to be the part that benefits the most from AI and is at the least risk. So we like those markets. I like the Virginia suburbs of D.C. still. I think those are still good. So, you know, there's a lot we like. I mean, you've written so much about this, but there's such lack of housing in our country. The supply bust is, I mean, just a lot fewer units. I mean, we're really set up well as an industry. It's just the digestion of the excess supply. It's one of those things where we all, you know, like little kids when you were small, you look forward to Christmas and you started doing that at Halloween. Well, I think investors, observers, we, we weren't in that category. We were always. It takes a while for supply to fully digest one whole cycle of renewals. But we do think towards the end of the year we're all going to feel better absent a real jobs recession. We're going to feel better about the industry's positioning and our company's positioning.
- [53:33]
B
Oh, absolutely, I agree. And just a quick question on New York. We just mentioned suburban New York. Is that northern New Jersey? Is it Long island, other parts of, you know, Westchester? I mean, are there particular areas of suburban New York?
- [53:43]
C
Yeah, we like Westchester. We built a deal there that's worked out. We like a lot about that. It's hard to build there, but, you know, high housing prices, but a lot of reasons to live there. A lot of good amenities, connectivity to the city. And parts of New Jersey we own in Jersey City and some of those spots have been just a little bit challenging on the regulation side, but you could see us buy a little buyer, build west of that a little bit. And they often have decent connectivity to the city, but they also have good jobs right in that area, so in good schools and it is high tax. I mean, New Jersey's a little bit of a complicated place, but, you know, maybe that dissuades some capital and we have the advantage because we're more knowledgeable.
- [54:25]
B
Yeah, yeah. And it seems, if I remember correctly, I think Jersey City just had a pro development mayor who's leaving and maybe the next one's not going to be so pro development. So we'll see. Now, let's talk about construction a little bit. I believe you mentioned you've got in the last earnings call, you've got two starts planned for 2026, I think, both in Atlanta. What's the profile of those projects and more broadly, what's working right now for construction?
- [54:49]
C
Yeah, great question. So not much hurdles. We've been buying our stock back. We bought, and this is public, $500 million of our stock, which represents one and a half percent or so of our outstanding common. We've sold older assets like the deal in LA you referenced and you know, turned around and bought the high quality portfolio at a 6, 3 or so implied cap rate. I can't buy any high quality apartments at a 6, 3 cap rate. So I think our company and the apartment, public apartment sector is where the value is. That is where there's cheap apartments, that's where it sits not by and large, asset by asset in the world. So getting to your question about development, one deal we're doing is a way out a place called Canton, Georgia, which is a fair distance, I call it almost an hour north of Atlanta. And it j is an experiment in attainable housing for us. We're building something at a little lower cost point, a little less amenitization, a relatively small deal. We recognize that there are gaps in housing and that this is a simple product, very nice product, but simple like meaning garden plus kind of housing. And you know, we usually build mid and high rise. So it's a little bit of an experiment. Not a particularly large deal, but we're excited about it. The other deal's in Alpharetta and to be honest, it's just a gem the team found that fills in the portfolio. But they're all deals that hurdle above a six on a current cost to current construction cost basis on depressed rents, current rents to current undepressed rents. So they feel like good investments, but they're not very large collectively compared to the size of the company.
- [56:31]
B
So I just had to look up Canton, Georgia. So this is north of Woodstock, which is north of Marietta. So is this. So you kind of mentioned this, but I'd love to flesh that a little bit. So do you imagine, is there a scenario where Equity Residential does more projects like that if this works?
- [56:46]
C
Well, yeah, I think being in those ex urban locations, there's a interesting trend going on in the Sun Belt markets. And it's true. And the big two markets we're in of course are Dallas and Atlanta. We're in Austin in small size and we're in Denver, so we're not everywhere. But you do hear and see and read people come to Atlanta and it's gotten expensive. You know, they feel like it's expensive and they move to Greenville, South Carolina. Well, that's a very nice town, but I can't really compete there. I can't get scale. Single family's cheap. But you know, people like being in and around Atlanta. They can go to games, they can use the city, but they need to be somewhere that meets their means that gets to their job. And we, we ident. That area is starting to develop its own little micro downtown. And we've seen these sort of suburbs become much more interesting and livable than they were when maybe I got out of college and it was the land of Applebee's. You know, like there's interesting places to eat, there's things that go on that are cool. Farmers Markets and alike and job opportunities. So Canton, for us, along with other things, because we have bought some further out properties in Georgia too, is a little bit of an experiment or a bet on attainable housing. You've got, you can go into the Atlanta Falcons game, but you also live in an area that you find pretty affordable, that meets your needs, that's got good amenities as well.
- [58:09]
B
Yeah, this is a great point, actually. I joke you all the time. It's like, I think some people still have a mindset of, you know, particularly suburbs of places like Atlanta and Dallas that are, that still are just, you know, generic, you know, stores and Applebee's whatnot. And I remember those days.
- [58:22]
A
It wasn't that long ago, but it
- [58:24]
B
sure has changed a lot.
- [58:25]
C
I mean, Alpharetta, this site we're building on, which is the one that I mentioned, was a gem. This is a very dense area with very cool stuff. And you know, you, house prices are very high, very comparable to say a metro like Chicago. And you know, like I said, a lot of cool things to do in Alpharetta.
- [58:42]
A
Yeah.
- [58:42]
C
And it's convenient, as convenient as Atlanta traffic can let it be to get to a lot of other parts of the city.
- [58:49]
B
Yeah, absolutely. Well, and too there's, there's good job
- [58:52]
A
corridors up in that direction too.
- [58:53]
B
It's not like most people are driving downtown every day.
- [58:55]
A
So that's, that helps.
- [58:58]
B
So let's go back to the economy a little bit. One of the themes in the last rounds of earnings calls from really all of the multifamily REITs was this uncertainty that's casting a cloud over the 2026 outlook. Now, obviously we all know the downside scenario. Nobody want. That's not, that's not a lot of fun. But what does the upside scenario look like in your mind? What indicators, data and trends are you looking for that could drive that rebound, particularly for new lease rents, which is where we really needs to see some improvement.
- [59:28]
C
Yeah, I think, I mean, we have, our view is sort of the life cycle of improvement in apartment markets. So first, firm up occupancy, lower concessions, increased base rents, that is new lease. And then you see the response in same store revenues. And so in a lot of our markets we talked about on the call, we're seeing places like Atlanta really firm up occupancy or removing concessions. And that process, you know, should accelerate through the leasing season. So my instinct is we're going to all feel okay about this leasing season. Okay through. And the real test, Jay, will be in September, August. Do we Have a tight, a big fall off like we've had the last few years or can we make because we have so much less supply each quarter. So I think the bull case which we didn't put in our guidance but it's certainly possible is that you get a little bit of job growth, you get a little bit affirming of the job market, single family, still really expensive and you have so much less supply that as my chief operating officer says, if you just have a normal year and you put it on top of a lot less supply, you get a decent number and a really good number. Embedded new lease going into 27. That's the sort of prescription. So it doesn't require us to be super enthusiastic. It just requires kind of normalcy of a sort in the job market.
- [60:58]
B
Yeah, that's so well said. I've been showing people some data showing that I think people think, some investors think that you have to have some crazy demand numbers to have real strength. And to your point, when supply drops off this much, you really just need to see some normalcy and that that's
- [61:13]
A
not a bad scenario at all.
- [61:15]
C
Yeah. And then the setup and by the way the stock market and investors generally discount things forward, they'll start to feel better a lot sooner than that, probably in the third quarter. And we just have to be careful as an industry not to do a head fake on people. Right. Like, because again, how the whole year goes is important. Not just feeling great in May. You should always feel pretty good in May, you know.
- [61:38]
A
Yeah, I hope so.
- [61:39]
C
It's a seasonal business. Right?
- [61:41]
B
Yeah. Now one more kind of related question around this is that, you know, one of the things I worry about a little bit as a challenge for operators is that if we don't get some new lease rent growth in the spring like we typically do, see how much can that create some challenges around, heightened challenges around gain to lease and potentially creating challenges even for renewal rent growth in some markets for, even for renters who could by the way afford the renewal. But they, but, but you have cases where the renewal may price or the in place rent may priced above new lease rents in some spots. Is that a concern in any markets?
- [62:17]
C
So part of the renewal behavior is based on people's like personal lives. They just are comfortable where they are. They feel the uncertainty. People like us are good at negotiating when we need to. We understand the market market, our residents understand the market. So I, I do have to say I understand like for example San Francisco new lease is highly positive and new lease in Atlanta is Still negative. Right. I do think it's a bit of a forward indicator, but we can be somewhat negative on new lease indefinitely. 4 or 5% on renewal and keep good occupancy and, and we can put a pretty good number still. So I would be happier if new lease was more positive nationally than it is, but it doesn't, I don't feel like it's going to drag renewals down because people are often renewing 60% of the people we send a renewal notice to sign what we send them and send it back. So it's not like everybody is negotiating with us anyway. But we're not going out with unreasonable numbers. But again, we understand the market market. So I, I think the industry's ability to be thoughtful about renewals and people being more cautious about moving in uncertain times has dampened the downside. I think the reason the Sunbelt numbers haven't been worse, they've been negative. But they could have you and I would have expected we had said this much supply 8% in the market.
- [63:44]
A
Yeah.
- [63:44]
C
You could add negative 10% or 15% NOI numbers. You didn't get close. I think the renewal dampen it and you know what? I think you're right. It'll likely dampen the upside like because it is going to be gain the lease in some cases. And I think we, our management, our better management of our tenants needs by the landlords has put us in a position where we dampened our downside on revenue declining. We probably also slowed our upside a little bit too. But markets like San Francisco, once they get going, I mean we are putting up 5, 6%, same store revenue numbers that market. So you will get there. But I do think you're right that it dampens things on both sides a little bit.
- [64:25]
B
Yeah. I guess part of it too is you're sending out renewals what, 60, 90 days in advance as well. And there's a lot of uncertainty between the time you get that renewal and what the market's going to be like in 90 days.
- [64:33]
C
Yes.
- [64:35]
A
Yeah.
- [64:36]
B
Well, Mark, I really appreciate your time and thanks for letting me pick your brain and wish you all the best through the rest of 2026.
- [64:43]
C
Yeah. Well, I want to thank you Jay, for all you do for the industry. You're a great observer. Thank you for including Equity Residential. We appreciate it.
- [64:49]
A
Thank you so much. And that'll be a wrap on episode 75 of the Rent Roll. Big thank you to Mark who being our guest today. And thank you to jpi, Madera, Funnel, Mason, Joseph Authentic and Hawthorne Residential Partners for sponsoring today's episode. And thank you to all of you for spending part of your day with us. We'll see you next time.