Hello, everyone. Thank you all for coming. Great crowd here to wrap up day one. My name is Adam Kramer. I'm a REITs analyst at Morgan Stanley. Really fortunate to be here today with EQR's management team. Just a quick word: Equity Residential is one of the largest, highest quality multifamily REITs with an exceptionally strong balance sheet, and a really experienced management team that I'm fortunate to be with today. So with that, let me turn it over to Mark Parrell, President and CEO.
Hey, good afternoon, everyone. Thanks for taking the time. Wanna thank Adam for being our guest questioner today. So to my left, I have Michael Manelis, our Chief Operating Officer. He has 25 years with the company. Bob Garechana, to my right, our Chief Financial Officer, 19 years. Marty McKenna, who runs IR, towards the back, has 34 years with the company. So again, a very experienced team. Just a quick word before we jump into Q&A. So the company, as an apartment owner, is very well positioned in terms of its supply-demand dynamics. So we are in markets that, by and large, have very little supply. So the coastal markets of Washington, D.C., Boston, New York, Seattle, which has a little bit, San Francisco Bay Area, and Southern California, and those constitute 94% of the company.
The other 6% we call our expansion markets, so two in Texas, Austin and Dallas, as well as Denver and Atlanta. Those are markets we like a lot. Good demand. We're growing in those markets. Those are markets that have a significant amount of supply. Across the whole residential housing industry, we greatly benefit from the fact that single-family owned housing is so expensive. It's very pricey. In fact, if you look at our materials, it's the highest relationship of single-family housing cost to rentership. So rentership is often a good social decision, a good decision for a family to make because people are having kids later, all of those things, but also a lot cheaper than it would be to purchase.
We also benefit from the undersupply of housing in our country generally, even though there are some areas like Dallas that do have a significant amount of supply right now. So again, we feel really good about that supply-demand dynamic. Our numbers reflect that. We're having a very good year at the company. We're 96.5% occupied today. And in a minute, I'm sure we'll talk in depth about operations. One of the merits of the company, before I turn it over to Q&A, that I do wanna highlight is that we're not a complex balance sheet. We're not a complex company. So what you have is we run very efficiently on expenses, very efficiently on overhead. So whatever you get on net operating income, you end up getting that or better 'cause we have positive leverage in our system.
We don't have a lot of other business lines like some of our competitors do, or cash drag that changes our FFO growth to be lower than what our NOI growth is, and we're proud of that. So again, well-positioned. We think the pivot into these expansion markets, again, of Denver, Atlanta, and the Texas markets will go well. There's a lot of product there for sale, we think, in the near term, and we hope to take advantage of that to just grow in those markets and have a portfolio that's very much balanced in the 12 or so best places in the U.S. to live. And we're our kind of higher-end, affluent renter. Our average renter makes about $169,000 a year, pays about 20% of their income to us in rent.
So these are people in the technology sector, financial services, and the like. Excuse me. Those are folks that we think can, you know, handle any inflationary pressures and that'll live with us and be able to accept, you know, rent increases for the excellent service and product we provide. So I'll turn it back to you.
Great. So in your update last week, you noted that normalized FFO per share and same-store revenue and NOI are trending towards the top of the guidance range that you had provided earlier this year. So maybe just at a high level, what's driven this kind of better performance this year so far, and what would you need to see, in terms of having further upside relative to guidance in the second half of the year?
Yeah. So I guess to start, I would just say, you know, seeing strong operating fundamentals was part of our original guidance expectations. But really, what we're seeing to date is an outperformance with occupancy gains that we've been able to achieve, as well as the achieved renewal rate increases that we've been posting year to date for basically the entire year has been greater than what we would have anticipated, which is putting up blended rate growth for the first quarter and even year to date through the second quarter, stronger than what we anticipated initially. When you think about outperformance above the high end of our range for the balance of the year, the real driver right now is, as Mark said, we're 96.5% occupied. We're in the sweet spot. We got the foot on the gas with some rates.
So to see further rate acceleration and really go kind of longer into late third quarter, fourth quarter, defies some of what we would see as normal rent seasonality or declines in occupancy towards the later part of the year. If we actually do any of that, we'll be achieving revenue growth above the high end of the range. And on the expense side, the reason why we're pointed to the low end is really, we're getting some favorable commodity pricing that's helping our utility rate growth on a year-over-year basis. And we have several initiatives, as well as, just an extreme focus on our repair and maintenance expense growth, and those two beats are basically putting us to the low end of the range.
Great. There's been a lot of focus on supply in this industry, and I think understandably so. But if we think about what's happened in the multifamily sector, year to date, I think even more notable than the supply, perhaps, is kind of stronger-than-anticipated demand, right? You had record 1Q absorptions, you know, just a really strong kind of absorption and occupancy in light of kind of the record supply. So what are the factors that drove the strong 1Q and year-to-date absorptions and demand?
Yeah. So, you know, again, you got to speculate a little bit on this, but it certainly seems like the higher job growth we've all seen year to date has been, you know, a big positive driver. We talked about that a little bit on our first quarter call. I do think the apartment sector is taking market share from owned housing. I just think it's hard to purchase a home now for all the reasons we're aware of relating to just aggregate costs, financing costs, insurance costs, repair costs, all of that. So I think we're taking market share. I think people want to live in apartments if they're taken care of well, and the kind of product we own, the higher-end stuff, is very, I think, very popular. And then I think you sort of add to that, just the job growth has been very good.
So household formation and job growth drive our business, and I think both of those have been better. Immigration is good for urban owners like us. So we've seen immigration be higher than expected. That's both illegal immigration, but frankly, legal immigration as well. And a lot of those legal immigrants can end up in our buildings as engineers and stuff on visas. So all of those things have been, to this date, I think, positives that we would not, and maybe many of the people in this room, would not have expected.
Great. And I think, Michael, you touched on this a little bit, but maybe just diving a little bit deeper into kind of expectations for the second half of the year. You know, when it comes to second half of the year, do you kind of expect this to be a typical seasonal year, better than that, worse than that? Maybe what are some of the puts and takes with regards to kind of normal seasonality? And then I think just as a part two to that, you know, I think you guys have described in your presentations, having pricing power in your markets. Help us kind of understand pricing power relative to the new lease spreads and the occupancy that we see in kind of the reported KPIs.
Sure. So I think first and foremost, right now, we do expect kind of normal rent and demand seasonality in our guidance expectations, even when we say we're pointed to the high end of revenue growth. We do expect rent deceleration to occur late Q3 through the fourth quarter, as well as kind of that occupancy trade-off as well in the full fourth quarter. So, I think that's one of the reasons why I said we'll exceed expectations if we kind of defy any of that or do better than normal kind of rent and demand seasonality. When we think about pricing power, there's really a lot of factors that go into it, but it does start with, like, what is our asking rents? What's our net effective pricing that we have for available units to sell?
Today, our prices are up 5.5% from the beginning of the year, from January first. A typical rent seasonality curve would suggest 5%-6% growth, so we're right in the middle of that. Our original expectations were that we were going to see a little bit of a muted growth just because of the job growth numbers being reported a little bit lower on a year-over-year basis. So the fact that we're smack dab in the middle of that right now gives us a lot of confidence. But more importantly, we're 96.5% occupied.
You heard me say before, we've had the foot on the gas for the rate, and really, the corresponding last several weeks, we see application volumes that are not only like the highest application volumes of any given week in 2024, but really, when you look back across all of 2023, the numbers that we're putting up in the later part of May is just right on top, if not stronger than any given week that we saw in 2024. So to us, that's like the implications that we have strong demand, good pricing power, as rates are accelerating sequentially to keep that volume going is a big positive.
Awesome. So maybe double-clicking on, you know, one of the markets that's been most kind of in focus the last year or two, and that's kind of your broader West Coast markets. How are they trending with regards to bad debt and delinquency and kind of achieving the 30 basis points of improvement that you're expecting to have this year? And what is your ability to push pricing on the West Coast, given rents there haven't grown nearly as much as they have in the Sun Belt and other parts of the country relative to pre-COVID?
Yeah. So I'll start with bad debt. Our bad debt, as many of you may know, was elevated during the pandemic, and we've been working through that process. And we do expect to see a 30 basis point improvement year-over-year as we go from 2023 to 2024. In the first quarter, it performed as expected, which is relatively flat to the fourth quarter. And since that period of time, we've started to see improvement as we work through the process of dealing with delinquency, which is, again, regionally mostly focused in Southern California and on the West Coast, as you noted. And then Michael will talk about some of the demand drivers on the West Coast.
Yeah, I mean, the ability to push price right now on the West Coast, it is different when you think about the Northwest versus Southern California markets. Clearly, Seattle and San Francisco both are outperforming our expectations, giving us the opportunity to pull back some of the concessions and increase rate. Seattle, we feel really good about. It's still cautious optimism for the back half of the year, where we do have supply coming at us, but we do see an opportunity right now to recapture some of that rate growth from pre-pandemic levels. San Francisco, right now, we feel much better than what we originally thought, but we're seeing the signs of what we would say is normal rent seasonality, normal demand seasonality. So we're not really seeing this outsized opportunity to go recapture any rent, but we are seeing rent growth.
We are seeing rents accelerate, which is a positive for that market and better than what we would have expected. When we work our way down into Southern California right now, we are introducing a few concessions and doing some things in Los Angeles, where we do have some opportunities to grow occupancy and get residents into units that have otherwise been vacant or haven't been paid for through the expirations of the eviction moratorium. So pricing power there is a little bit more muted than a normal curve, but we feel really good because we're seeing the demand, and we're able to fill these units with paying residents.
If I can just add, just on the macro sort of thematic side on the West Coast markets, all three of the markets, downtown Seattle, the city of San Francisco, and downtown Los Angeles, the quality of life is improving dramatically. I walked around downtown LA, fortunate enough to do that with our team, about 2.5 miles between our properties, and it, it's just very nice. It, it's really improved. The mayor's really focused on public safety, quality of life on the streets, so those were big positives. Our teams in both the other more northern markets, San Francisco and Seattle, are more positive. There's a lot of good things going on. There's been changes in the composition of city council in, in, Seattle. We see the same on its way to happening in San Francisco. So those are all positives.
This is what the citizens want, is an orderly city and good, you know, quality of life, and they're getting that, and that'll make those cities much more exciting and interesting to our demographic, who loved those cities before the pandemic. I think I want to just point out, we've said on the calls, is income. So nominal income growth in Seattle since 2019 has been about 40% for our demographic, yet rents in our portfolio are effectively flat, de minimis up. In San Francisco, the city of San Francisco, they're actually down at this point 10%-12%, but incomes there are nominal dollars are up 30%. So the ability to pay in those markets is significant. The lack of supply in Seattle - in San Francisco is very helpful.
There is supply in Seattle that will dissipate in, you know, over the next six months, but there will be more towards the end of this year. Those are really positive signs in our minds for those markets, and we do see it as a when, not if, story.
Great. So I think you kind of cued me up there. You talked a little bit about supply, which we haven't talked about yet, but is obviously a kind of a key discussion in the multifamily sector for the last couple of years. Your markets are more insulated from new supply compared to the Sun Belt, compared to other regions. But they are still receiving kind of greater than historical supply if you were to compare markets to themselves historically. So what's your outlook for supply for the rest of this year and in 2025 in your markets?
Well, I'll start, and you may have, Michael may have something to add. You know, the markets. So for our big six coastal markets, there's some supply in Seattle, mostly around downtown and in Redmond, Washington, area, just so the eastern suburbs. It hasn't had a material effects coming a little later this year. That improvement Michael noted in Seattle is happening, and we think is, you know, pretty sustained. But then when the supply hits, you will feel that. The other market that's really interesting is Washington, D.C., where we have about 15% of the company. There is significant supply, both last year there was and this year, but the market's absorbed it very well. So I'll ask Michael to give some color on that, but D.C. has done very, very well and continues to do well.
The other markets have very negligible supply by any standard, and we feel really good about, you know, again, the dynamics in Boston, the dynamics here in the New York metro area, certainly dynamics in, you know, San Francisco and in most of Los Angeles, so.
Yeah, and I think the only thing I guess I would add to the D.C. market, it's a market right now that is running very stable occupancy above 97%, while you're seeing all these new units delivered to the market. It's also a market where you don't tend to see as much like micro submarket loyalty from the resident base, meaning new supply in another submarket can absolutely pull people around because they have such great transit. So for us to look at this absorption, to have a portfolio that's 97.5% occupied with pricing power and rates accelerating while the market's absorbing this demand, is really kind of a great positive sign for us.
Okay, let's switch gears a little bit and talk about capital allocation. So I think in prior earnings calls, Equity had been, and maybe signaled a little bit of, kind of an opposition, to share buybacks. Hopefully, I'm not putting words in your mouth on that. I think you guys did buy back a little bit of stock in Q4 2023 and Q1 2024. Maybe a little bit of a shift from the prior comments. At this point, are buybacks still a priority or a possibility? And then just more broadly, kind of what are the capital allocation priorities at a high level?
All right. Well, let's start with the buybacks. So we bought, excuse me, $88 million of our stock back at about $58 a share. So we thought a pretty good price overall. We did that using capital we had gotten from selling some older assets. So these were properties that were on average 30 years old, that we sold at a cap rate of around 5.5%, and we bought the stock back, an implied cap rate in the mid-6s. We thought that was good value. You have to be thoughtful in a REIT, because unlike a corporate, straight corporate company, we don't retain significant earnings. We dividend all our income out, so you can create important tax pressures if you aren't careful. But again, we didn't see a lot for sale, and that's the big difference. We are seeing more for sale now.
We'll see if that turns into transactions, but there is a little more offered, both in terms of portfolios and one-offs. So we're engaged in that market. We are, by definition, long apartments. Our job is to own apartments. So there's times where we'll take advantage and frankly, arbitrage the public and private markets, but our job right now is to own apartments. So if we see things to buy, we'll buy them, that are apartments. But boy, the stock looked good at that price. The ability to fund it with 30- and 35-year-old assets that, you know, from our point of view, did not have as desirable a path forward as our remaining 300 assets, felt like a great decision. So in terms of our priorities forward, you know, first and foremost, I'd say investing in our portfolio is a great way to use your money.
I mean, we have a lot of investments, whether it's solar power arrays, with all the tax credits we now are able to access, as well as renovations, where you're getting a 10%+ cash on cash return. Those are all good uses of capital, and we've been doing that and are relatively low risk. We understand those markets. A renovation can be stopped and started. The tax credits are statutory, so all that feels good, but it's a relatively small use. But we'll keep doing that. Acquisitions are next. We do hope to buy more. We have guidance of $1 billion of acquisitions. We've bought $60 million year to date, so we'll have to pick that pace up to hit our number. And it's certainly possible to do that in a larger portfolio fashion, and we'll remain open to that.
We think the acquisition market is coalescing around a 5-5.25 cap rate for our kind of assets. This is a forward cap rate, so looking at the higher end product, we want to buy either in the suburbs of some of our coastal markets or in the expansion markets, again, Denver, Dallas, Austin, and Atlanta. To buy those assets at that cap rate is a little challenging because our cost of capital, which is mostly defined as the cost of debt for us, is a little bit higher than that right now. I'd say to you that that dilution is not significant and that the discount we can acquire them at to replacement cost.
So costs have gone up so much to build apartments, that a lot of the buildings that are out there being offered, we'd be acquiring at a 15%-20% discount to what it would cost to replicate that building. All of our experience over 30 years of public company tells us that's the most important indicator that you're making a good investment. I s if you're buying at a good basis at the beginning, the odds of it turning out well are high. With those kind of numbers, it's unlikely much will be built in the next few years, and we can put it on our super efficient operating platform, and off to the races we go. So we're not worried about de minimis dilution at the beginning of the process. We think we can perform very well.
We think a lot of the people running these assets that are developers are not as good of managers, frankly, as we are, and that we can run the properties a little better on our platform, and that in the long run, this discount to replacement costs will be very meaningful.
Great. So maybe let's double-click a little bit more on the transactions market, and maybe just the kind of the bifurcation or, or the distinction between the established markets, and then these expansion markets that you've identified, too. What are the kind of the opportunity sets in each of these markets? And just broadly, you know, obviously, it's been a pretty limited transaction market. Do you think market participants are waiting for more certainty on rate cuts, just certainty on rates in general, not necessarily cuts, the supply cycle to pass, something else? What's kind of going to get that transaction market restarted again?
Yeah. I loved, Adam, that you used the word "certainty." The market would love some certainty on the rate climate. So what you have now is just constant volatility in the rate climate and expectations of rate. So there's a lot of people that want to be sellers. We think more than half the product built in Dallas last year, this year, and next, that will deliver next year, are owned by short-term owners, developers who generally own for, you know, a year or so after the property's complete, maybe two years. So but they've been stuck. They're stuck in these assets. They're capital stuck. They are natural sellers into the market, but the banks who made them loans are looking at it and going, "You know what?
I made a loan at a pretty low advance rate." So that's a big difference from the Great Financial Crisis, where Equity Residential bought a lot of things at half their cost. I don't think you're going to see that this time because the financial institutions didn't advance at that rate. The banks are not impaired; the equity is impaired. And what the equity is doing, and the banks have other problems, as you might guess, office and otherwise, they're working through. So you see the banks kind of extending these loans. Maybe there's a small payoff, an increase in rate, a fee, some accommodation made, and there's sort of an option that these owners have, and they're going to hold on to that option.
So if there was some certainty that they could transact at a cap rate they liked, that the market was really open, I think they're going to transact. And I think there's some fear now that if the Fed was to raise rates or stay higher for longer, that would affect cap rates in a way adverse to their interests. So that may be what's motivating a little bit more selling activity into the market, because I think there are developers who would have thought, "You know what? Jerome Powell will bail me out. Cap rates will be, you know, 3.50 again, and off to the races." And I think that as that, they're disabused of that notion, there'll be a little bit more volume for us to get out there. And I also remind everyone, till recently, rents in the U.S. weren't going down.
So people did pretty well. So if you were a developer, you were leasing up okay, you were doing—your interest rate went up a lot, but you weren't in a business where your, your profits were declining, your net income was declining. And now, when you're in those highly supplied markets, it is. So I think that's another pressure point. But so far, the amount of capital interest in the apartment sector is very supportive of our values, so it makes it harder, though, for us to find things to buy at good prices.
Great. And maybe just one more on capital allocation, but switching away from transaction market, focusing a little bit more on development. And look, I think all indications are that permits and starts activity has really fallen off. I think it's fair to say it should remain depressed in the coming years, given the rate environment, given construction costs. And look, you guys have a really, really strong balance sheet. You're in a really good spot in terms of kind of the opportunity set there. And so what would it kind of take, or what are the puts and takes to kind of using development as a way to potentially deliver assets into 2026, 2027, 2028, when there should be very little delivering at that point? Would you prioritize development in established markets versus expansion markets?
How do you kind of think about that?
So right now, our sense is a lot of development deals. Again, remember that cost inflation I referred to? It's very hard to do a development deal, we think, at a premium that's sufficient to U.S. capital to justify the risk. So if we can buy something for a 5.25-ish cap rate, that's good, new, existing product that has market risk but doesn't have construction risk, what does the cap rate need to be? What does the initial yield need to be on that development? And a lot of that stuff we're seeing is below 6, and that just doesn't feel like enough headroom to us to lean in at this point. So one of two things needs to change. There has to be higher rents, lower costs, or a combination. We are seeing construction costs moderate a little, but it's more about materials costs.
Labor isn't going down, so we're not feeling like costs are declining. So I think what you'll see us do this year is we're likely to start three deals we've been working on for a while. They're all suburban deals, one in Seattle, in eastern suburbs of Seattle, two in suburban Boston. Those are all terrific transactions. And the way they distinguish themselves, though, and why we are starting them, is you can't buy there. We can't find things to buy in Bellevue and Kirkland area. We can't find things to buy in suburban Boston we like. There's just nothing available, and historically, there's been very little. In Dallas, I'd prefer to wait because I think there'll be a lot for sale from all those developers I mentioned prior.
Our thought process is to wait, and our small but mighty development team is looking for options and opportunities to turn the switch later this year and early next, and maybe start some more things. But the stuff we're starting now is super tactical to particular opportunities in those two markets where it's hard to buy.
Great. In terms of innovation, I think you guys have disclosed roughly $35 million of 2023 and, and prior contribution to NOI from different innovation. I think you have a $10 million target this year, and then I think there's a further $25 million target over the next number of years. So maybe just talk about kind of, the, the timing around that, that incremental $25 million, and, you know, kind of what are the opportunities in there? And, and over the long term, you know, is there kind of a further opportunity set even beyond those - the $25 million?
Yeah. So first off, to start, so this year, for 2024, we have about $10 million in incremental NOI coming from the innovation initiatives that we have teed up. It's about $7.5 million of that is coming in the form of other income, so it's contributing about 30 basis points of growth for revenue this year. The $25 million that we've laid out, we have clear line of sight. These are initiatives teed up, ready to roll out. Some of them just take time to work our way through the rent roll, meaning we need new leases and renewals to start achieving some of that. About 75% of that is also based on the revenue side.
So I would say the early stages of our company's innovation was very focused on operating efficiencies, expense savings, and what you're seeing now for 2024, 2025, and 2026 is really this shift more towards revenue enhancing. Some of this is coming from just better abilities to leverage data and analytics into our pricing process, into our amenity pricing, our parking, our storage optimization. So there's a whole laundry list of initiatives, but it really comes back to the transparency and leveraging data and analytics. As a company, we're really excited that the $25 million is line of sight, but we're not done. We're never done, and we're about to introduce artificial intelligence into our company. We've done it before on the sales side of the engine. Now we're about to do it for our resident base and then turn it into delinquency and collections.
So we're going to create additional operating efficiencies and probably wind up improving those results as well, and none of that is kind of baked into these numbers.
Great. One final one from me, and then we're going to turn to the audience for a couple of questions and answers at the end. It's an election year, and so I'd be remiss not to ask a little bit about just kind of the regulatory environment. Are there any specific states or markets where you're keeping a closer eye, either because there's something already on the ballot there, or because there's maybe a policy proposal or certain rhetoric from a certain candidate? You know, something basically, what are you guys kind of keeping an eye on more closely this year?
Yeah. So regulatory risk in the apartment industry really started to go up in 2017 with the advent of a ballot measure in California that failed on rent control. So that was sort of the advent of it, and for the last few years, we've been organizing and making the argument about housing supply. We really have a crisis of housing supply, and what I'm excited about, Adam, is the policymakers have heard us. So here in New York, about a month or so ago, there was a law passed, a housing law here, and a lot of what the legislature did related to trying to create more supply. That's the same thing Governor DeSantis did in Florida. That's the same thing the governor's up to in Massachusetts. That's the same thing that went on in California.
So rent control, which is the idea of price controls, creating more supply, more housing, people now understand is a, you know, economically bankrupt idea and doesn't work, and we, we have a lot of receptivity for that argument across the entire political spectrum. What they want to see is a lot more housing supply. So the industry is really well organized in that. We have really good conversations, so I'm really happy about that. The risk in California is significant, we would say, though, 'cause there is a third time that a rent control ballot measure will be on the ballot in California. Again, the industry is very organized. We beat it by 20 percentage points twice before, and again, I feel like our arguments are as good or better.
But again, it is an argument we have to make to the citizens of the state again, and, you know, we're out there doing that right now.
Great. So I think we have time for one or two questions here from the audience. There's a microphone in the back here on my right. So audience questions?
Please.
One here.
Maybe I have to yell it out.
Yeah, we can repeat it.
We'll repeat it.
Sure.
Mark, you mentioned legislation in New York. Were you talking about 485-x?
Among-
421-a replacement? That seems to be weak in terms of driving any new, unless you had a different view on it.
Yeah. So the question was in reference to my comment about the new housing law on 485-x, which is the replacement for 421-a. I agree. The question was whether that really is going to create much supply. Probably not yet, but they'll tinker with it. I think, I mean, the union wage scales, all of those, the increased affordability. So you saw one of the prominent private local developers say they're not going to build, that kind of feedback. But they're on the right track now, right? They're trying. Remember, they got rid of that thing, and they thought 421-a was a giveaway to the real estate industry. They've changed their view on it. They're willing to reauthorize it, and now they're going to need to adjust, and I bet you that you'll see those adjustments.
But I agree, it's not adequate currently to create a lot of supply. It will be beneficial to our business in the near term, as a big owner in Manhattan and Brooklyn, but in the long haul, there'll need to be more supply here, and I bet you they'll tinker with it.
Great. One final one. Yeah, go ahead.
What's your expectation around, like, carbon regulation, like, overall, like you said, will it affect the business?
So the question was on what's our view of the Local Law 97 and carbon decarbonization in real estate. So we've been very active on sustainability. Buildings are big creators of carbon and big users of energy. A lot of the issues are engineering-related, and as you get closer to deadlines where there's fines and issues, and you saw this here in New York, you see the legislature or the city council think about it again. Because one of the things is it's very much a physics and engineering problem to make buildings more efficient, and until we get the grid cleaner, it's hard to get all these old buildings that much more efficient to make up that difference.
So I think it's a goal we have, but it'll be a little bit of a lengthy journey, and in places like New York and in Colorado, the industry is super engaged in the education campaign. We're not resisting the end goal, but the speed at which it occurs has to be discussed, 'cause it's not yet. I don't know how to make a 100-year-old building very energy efficient yet, but I'm guessing the technology will come.
Great. That's it for today, guys. Thanks, everyone, for coming.
Thank you.
Appreciate it.