Good afternoon, everyone. Thanks for joining us. I'm going to ask you to take your seats so we can get started. All our friends listening on the webcast can enjoy also. I'm Marty McKenna. I head investor relations for Equity Residential. I'm going to ask everyone to take their seats. We'll get started. And just a few programming notes. So we're going to have three Q&A sessions today, one each at the end of the investments and operations section, and then a bigger one with the senior management team at the end of the presentation. And for the Q&A, we're going to use the Slido platform. I don't know if people have used that before.
It'll flash a QR code and a thing, and you'll email the question, and I'll read the questions out because then we can get questions from people in the home viewing audience and people in the room. So we appreciate everyone's cooperation on that. I'm going to read our forward-looking statements to protect us legally and also, so please be advised that certain matters discussed during this event may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Before I turn it over to Mark Parrell, please enjoy this video.
At Equity Residential, we have always been about creating communities where people thrive. We are innovators and expert capital allocators in the rental housing space. From our humble beginnings in 1961 in Ann Arbor, Michigan, under the visionary leadership of our founders, Sam Zell and Robert Lurie, to our IPO in 1993 and beyond, we've dreamed big, growing to more than 300 communities in 12 strategic markets today. We acquire, develop, and manage a portfolio of high-quality apartments where higher-earning residents desire to live, work, and play. But our purpose extends beyond our properties. We create communities where people can thrive, ensuring they are built to flourish today and remain resilient for generations to come. Our strategic focus integrates long-term demand, supply, regulatory, and resilience factors with our efficient state-of-the-art operating platform to drive superior cash flow growth over time.
As stewards of capital, we pay more than $1 billion in dividends annually to our shareholders, underscoring our ability to balance growth with exceptional value creation. We have the best people, the best properties, and the best culture in the industry, and that's what we will demonstrate to you today.
Thank you, Heather. Hello, hello. What a great video. A great way to get started. I'm Mark Parrell. I'm EQR's CEO. Delighted to see so many investors and analysts with us today in person and on the web across the country. Really good to have you here. And delighted as well to have with me today the best management team in the business. And I'm very excited that you're going to get to meet them, but of course, in the next several hours, and really get to know the depth of the team that I'm fortunate enough to work with. Okay. We're bringing you here together today with us because we think there's never been a better time to be invested in Equity Residential. And we're going to spend the next few hours proving that to you. So this is our first investor day since 2010. It's been a while.
It's been a while. And back then in 2010, we saw some things that we see again now. So back in 2010, we saw a forward path that looked to us like great supply-demand dynamics coming out of the Great Financial Crisis. We felt like we had a portfolio, the team, and the system that would take full advantage of that. And we were 100% right. 2011 through 2015 were some of the best operating years in our company's history. And we feel like we're on the cusp of doing that again. Okay. So we're going to talk today about four big topics. Alec Brackenridge, our Chief Investment Officer, is going to come up here in a moment and talk about our optimized portfolio. But I want to set the stage for that with a little bit of an industry overview in a minute.
I also want to mention again where our portfolio sits right now. So 90% of our capital sits in our established markets. So here in New York, Boston, Washington, D.C., Seattle, the Bay Area, and Southern California. 10% of our capital sits in our expansion markets: Atlanta, Dallas, Fort Worth, Austin, and Denver. We expect that 10% over time to end up being around 20%. We think that portfolio mix, and Alec will go through our thinking there in detail, is going to provide for you the most consistent, highest rate of growth over time. Alec's also going to have a few of his colleagues come up and talk about how our development platform, our redevelopment asset management activities, and our ability to hunt big gains, to do large transactions, adds value to your investment in our company. Then Michael Manelis will come up and talk about operational excellence.
We've long been known as an outstanding operator, the best in the space. Today, you're going to see that demonstrated. So Michael and some of his colleagues are going to come up. They're going to talk about how customer retention, customer satisfaction leads to more efficiency and more cash flow growth for the bottom line over time. And then we're going to share with you a little bit of our special thoughts. So Catherine Carraway is our Chief Human Resources Officer here with us. Catherine's going to talk a little bit about our culture and how we do change management and performance management. So imagine for a second you're innovating at the pace Michael Manelis and his team are innovating: 300 properties, 2,000 people. You're rolling out things all the time, right?
You need to have a culture that allows for that, that allows it, pushes that change through, that accepts it. Catherine's going to go through that with you, and I think you'll find that very interesting as well. Then Robert Garechana, our Chief Financial Officer, is going to come up and talk at length about our balance sheet, which is just a fortress balance sheet, and the opportunities it presents to support our investment activities, as well as our unparalleled efficiency both on the CapEx side and on the overhead side, and then when he's done, Michael Manelis and I are going to join in.
We're going to be up here, the three of us, and we're going to put this all together for you: how what we think are really good supply and demand conditions in the industry, our platform, our portfolio, pardon me, our operating platform, our culture, our balance sheet is going to lead to outsized growth for Equity Residential in the intermediate term. Okay. These are the three main topics I'm going to go over with you today. Let's start by just grounding you a little bit in industry fundamentals, a lot of which you'll be familiar. Many people in this room, I'm sure, will understand the business pretty well. There are many factors that go into making an apartment investment a good investment. But we think the four most important are supply, demand, regulation, and resilience.
And we're going to talk about all those and how we balance those factors as we create this optimized portfolio for you. I think at the end of the day, you're going to agree with me that the industry in general and Equity Residential in particular are set up for an outsized period of growth coming up. So like the post-GFC period on supply, we see a real decline in deliveries in the next few years. Already in our East Coast markets, in New York, we're operating near 98% occupancy. We see a very favorable supply-demand dynamic. We expect that to continue and go across the expansion markets, as well as some of our West Coast markets like Seattle are going to get a lot better through 2025.
On the demand side, got some really interesting stuff to talk about with Gen Z, about Millennials, Millennials staying renters longer, this big Gen Z cohort coming into rentership, and then regulation and resilience, so regulation. EQR in particular, and the industry in general has gotten a lot better about making the case to policymakers, telling people why the answer to the lack of affordable housing is less regulation, more government incentives, and just trying to increase the amount of supply, not doing things like rent control that discourage capital formation in housing. So I think we're doing better in that category and certainly had a good election period just recently. On the resilience side, so when I talk about resilience, I want to be really specific.
For us, those are two things: the cost of property insurance, as well as the cost to repair our properties after various natural disasters. Remind people we don't have properties in Florida or the southeastern U.S. So we aren't exposed to hurricane risk. But like all property owners, there's some resilience risk in the portfolio. We have much better tools to understand the risks we're taking with your capital and to balance those out. All right. Let's start with supply. I think this is an amazing chart, okay? Just amazing. So our country, on the left side, you see 1960, and on the right, the current time period. You see that we're about twice as big in population in our country from 1960 to now, yet we're still producing about 1.4 million units of owned and rental housing.
This structural undersupply of housing in our country is a huge support to our business going forward and something we don't think is going to change in the near term. So a little bit more on supply here. You can see in this chart both apartment starts and deliveries, and I should be clear, these are national numbers. We'll talk about our markets in a minute, but both starts and deliveries nationally really plummeted, all right? We already, again, see that benefit on the East Coast markets. East Coast has got a little supply still, but so much demand, it's doing well. And then Boston, New York, has a really good few years there with a lot less supply and still really strong demand. And we see it improving greatly in 2026 in Denver, Atlanta, and in Dallas. So limited supply only matters if it meets good demand.
We see that good demand. So we see this Gen Z cohort. These are folks that are keen at 28 years old, coming into the workforce, coming into rentership, and we'll talk about that more in just a second. And we think they're going to have similar tastes, as far as we can tell, to their older Millennial brothers and sisters. They're going to want that amenitized lifestyle that they get in one of our properties, in one of our activated suburban communities, or one of our urban communities. We think millennials are going to stay with us longer, both due to lifestyle changes as well as high owned housing costs. So speaking of high owned housing costs, so this chart, the dark line is the fully loaded cost to own a home on average in the United States.
This would be your mortgage, your property insurance costs, your property taxes, and an estimate of your repair costs versus your rentership cost, okay? And you can see that gap has never been larger since the beginning of the millennium. Another significant support, just a lot cheaper to be a renter, and that's keeping more millennials in our rentership pool longer. I should also have added, particularly in our high housing costs. We'll give you some more detail on that. Okay. Let's talk a little bit more about Gen Z. I think a lot of good conversation today we're going to have with you on Gen Z. I consider myself a closet expert on Gen Z. My wife and I have two Gen Zers in the house, one who fortunately has entered the working and rentership world, and the other we're really hoping soon will.
So I feel like I know a little bit about this group. But if you look on the left, you can see them rapidly joining the workforce. That sort of straight up into the right line is the Gen Z folks joining the workforce. And on the right is a really interesting chart we've created on total kind of renter cohorts. By 2030, all Gen Zers will be at least 18 years old, and they will comprise, in our view, more than 40% or the largest single cohort of renters. So a really important group. The other thing I'd train your eye to do is you could see that total size of the rental pool getting larger. We think our higher earning renter, that pool is getting larger. Demand in our industry, we think, is growing. And there's been a lot of back and forth on that.
The supply picture, I think, is really well understood, but today, we'll drill down on the demand picture, which I think is just equally favorable, all right? Kristen Huffer, who works with Michael Manelis, we're going to come up here in a little bit and talk to you about Gen Z and how we cater to their needs. Very important group for multi-owners. These charts represent two of the most important societal trends in the United States since 1970: the deferral of marriage, the deferral of childbearing, or the election not to have kids or not to get married, so this is an important demand driver in our business, an important thing if you're a housing provider you need to be aware of, and we think our higher income residents are increasingly living alone. They're attracted to renting with us.
That's a very low effort lifestyle, low maintenance lifestyle for them. And the portfolio of things they can do in their area - oops - portfolio of things they can do in their area just more activated. Lots of things to do in the suburban and urban locations we're in. And in fact, about half of our units are occupied by one adult. So already, our portfolio is optimized to these trends. So between millennials staying renters longer because of high homeownership costs, as well as societal trends, what do we need? Gen Z folks entering the rentership period. We think our demand picture is incredibly bright, particularly in our desirable markets, submarkets, and the properties that we own. Okay. I'm going to talk a little bit about our company and our customer. Oops. Yep. There we go. So we're very fortunate at Equity Residential to have scale.
Scale does at least three really important things for us. Because of our size, we can invest in our operations. We can invest in technology, in people, and processes so we can be super efficient, take great care of our customer, and drive more cash flow to the bottom line, all right? We also can do large deals. Last year, we did a portfolio transaction that was pretty substantial. We can act when others can't because we have a great balance sheet, and that scale gives us that flexibility to act in size when we think it's in your interest. And finally, diversification. We're going to talk a lot about this. Gen Z and diversification are big themes today. So the diversification theme, there is no risk-free apartment market. If you've got great demand, you probably have tons of supply at certain points.
If maybe your demand picture is a little less rosy, you're likely to have a lot less supply as well. Regulation risk and resilience risk vary widely across the country. The portfolio we're building for you balances and optimizes those risks. And we think we're going to give you strong, consistent cash flow growth over time, all right? And with the optimized, like the excellent operating portfolio platform we have, that'll drive superior cash flow growth. I'm very proud to work at a company that has consistently delivered for its shareholders in this manner. We have the scale. We have the experience to keep doing it for you over time. And I have to say, with just the amount of uncertainty going on in our world, being in a purely domestic business with a fortress balance sheet, fundamental cash flow business feels like a really good investment right now too.
Let's talk about our customer. Again, Robert Garechana will come here in a little bit, and we'll speak at length about our high-quality, higher-earning resident. So our average resident pays about 20% of their income to us in rent. They have the ability, as we provide great service to them. If we have properties that are located where they want to live, work, and play, we can earn a rent increase. They can afford that. So we're lucky to have a rental cohort that's of that high quality. Our residents are in well-earning jobs across diverse industry sectors in a knowledge economy, and they benefit from the increasing spread of technology across our society. Again, with half the portfolio occupied by one adult, we're leveraging those lifestyle trends that are important to our customer. Okay.
So you saw this chart before. Those of you who are still awake, you saw this chart before. When you saw it before, it was general industry inputs into supply and demand and regulation and resilience. Here, we're customizing it to Equity Residential. And again, we'll drill down on these themes. The undersupply that we expect in 2026 and forward in our areas that we operate in is particularly favorable dynamic, we think. On the demand side, we think the picture in our highly desirable submarkets and properties is very good. You're going to hear we like a lot of markets that other folks maybe don't like, but we like particular parts of them. And we'll screw down on New York in a second because it demonstrates that very well.
Alec is going to go through in a minute why we think the portfolio is optimized to sort of meet this moment. Okay. Let's talk about the opportunity. We wanted to do an investor day where we were direct with you about why you should invest in Equity Residential. During the course of the day today, we'll go through all these, which we think are differentiated reasons to own our company. We'll go through that with specificity. I just went through some of those general tailwinds with you a moment ago. In a minute, I'll ask Alec to step up here. I think we're going to have a really exciting few hours with you today. I think it's going to be really interesting for you to see what I see, which is this terrific runway of growth coming our way.
All right, Alec, I invite you to come up, talk about the optimized portfolio in more detail, and let's roll. Thank you.
Thanks, Mark. Good afternoon, everyone. I'm Alec Brackenridge, and I head up our investments team. As you can see from the screen, I've been in this business for many real estate cycles, and I can tell you it's a great time to be investing in apartments. As Mark mentioned, we've got demographic tailwinds at our backs and an emerging supply environment that's really positive. Plus, we have some new tools that provide better data to help allocate capital than we've had before, and I'll share a few of those with you today. Here's what we'll cover. I'll start by explaining the factors that drive our capital allocation decisions.
During that, Robert G., who many of you know, will jump in and describe the makeup and diversity of our customer base. Then after I finish up, our team will lay out three things: our approach to development, why we set it up the way we do, and how we think about that. How we create value within our existing portfolio is number two. And number three, we're going to remind everyone that the spirit of our founder, Sam Zell, is alive and that we're always looking for the next big deal that will reward our shareholders, particularly during times that are challenging for other people. This slide shows our investment framework. What we're showing is how we take the four critical factors of demand, supply, resiliency, and regulation, and we analyze how each one impacts our ability to drive our business.
Our goal is to build a portfolio that provides investors with the optimal risk-adjusted returns. As Mark just said, no market is risk-free, but we're looking to balance these risks and opportunities and own in markets that complement each other. It all starts with demand. The map on the left side of the screen shows you what you probably know. The dark blue states are the states that have seen the most population growth since 2019, and they're mostly in the Sunbelt and mountain regions. And we expect that to continue. However, what's more interesting to us is the graph on the right showing that our coastal markets, represented by the blue line on the bottom of the screen, are now seeing positive net domestic or about to see positive net domestic migration. It's an absolutely remarkable turnaround from four years ago, so markets matter, but so does submarket selection.
Mark just alluded to this. The bars on this chart show you migration trends from 2018 to 2024 for different parts of New York City. Above the line is good. Below is not good. What you see is strong growth in Manhattan starting in 2021, while other parts of the city were seeing outmigration. Despite all the naysayers, during the start of the pandemic, Manhattan has come booming back. I have two kids in the city, and I'm here all the time. I saw it from the beginning of the pandemic to the end, and I could feel it coming, and it certainly did. We see that in our portfolio. The rents at our EQR properties now exceed pre-pandemic levels by 20%. New York City is a great example.
When we invest in a city, we're not necessarily interested in the whole metro area, but focus on where demand for apartments is the greatest. Also, what's new about this data in particular is it comes from cell phone traffic from Placer.ai, which provides much more timely and granular information on population flows than the census data we've had to rely on in the past. Where our residents work also matters. A critical driver of rent growth is, of course, the income stream of our residents. So I'll walk you through how to read this slide, which is comparing where EQR residents work to the U.S. average. The U.S. average is the dotted black line in the middle of the graph.
On the top line, you can see we have almost two times the exposure to the information sector across our portfolio because we believe that sector has strong future wage growth. We've also weighted our portfolio to other knowledge-based sectors like finance, education, and healthcare. We found that residents who work in these sectors benefit from being well-educated, tend to have durable growing incomes, resulting in strong rent growth and minimal bad debt. I'll now turn the stage over to Robert, who will give more color on our fantastic customers.
There you go, Robert. All right. So you heard a little bit from Alec about demand and how demand shapes our overall capital allocation strategy. We're going to give Alec a bit of a break because don't worry, all of you, he will be back with a number of slides.
What I want to share with you is what I've observed over the last seven years of my time on the investment committee. What we've always known is that the quality of our customer matters. But what I want to share with you today is just how dynamic that customer base is and how that makes our portfolio better. It makes our portfolio better in a number of ways. The markets that we operate in and the customer segment that we've centered upon is a renter that you've heard Mark talk about already, is a renter that has high incomes, that is employed in areas of the economy that are in high demand, and are individuals that can afford to pay for the excellent service that we provide. And you can see this on these portfolio-level stats. And many of you have probably seen these stats before.
But what I want to drill into is the fact that portfolio-level averages don't tell the whole story. So as you can see on this next slide, this next slide describes how our portfolio captures demand across a multitude of discerning customer segments in each of the markets that we operate in. And taking income as a driving attribute, you can see that what constitutes a well-earning resident varies across our markets. And it varies for a number of reasons. It's the geography itself. It's the types of jobs and industries that are in each of these markets, but it's also housing affordability. And I can see that you're all intently staring at the slide. So let's step back a second and orient ourselves on the data. The dot represents EQR's resident median income. The vertical bars are 80%-120% of area median income within the markets.
So now that we've oriented ourselves, let me walk through a couple of examples, three specifically. First, New York, where we sit today. Our deepest renter segment in New York consists of extremely well-earning individuals on an absolute basis. You can see that by the dot above the chart. And that's because in New York, there's a very deep population of high-income earners that also have a high propensity to rent. Pivot over to Dallas for a second. In Dallas, the individual that on an absolute basis makes that relative amount is more likely to own a home as opposed to rent. So the area of the market that we find most attractive from a renter cohort is an individual that is still well-earning, that can still afford our rent, but actually has an income level that is probably closer to the area median income overall.
Finally, Alec will talk about Seattle. Alec will actually talk about all three of these markets, but he'll talk about Seattle more. Seattle is a market that falls somewhere in between the Dallas and the New York. What I want you to take away is that our portfolio is constructed to be attractive to all of these residential options and that by appealing to that balance and that exposure, we reduce our risk in the portfolio and we also improve our performance overall while staying committed to that well-earning resident base. I'm going to stick with the theme of balance. You're going to hear a lot about balance today. Our portfolio is constructed in such a manner that it appeals to discerning residents across multiple stages of their life. I think this slide demonstrates that well with the four tiles.
I think a common misconception associated with the EQR resident is that they all fall in those two first tiles, the young adults and the young professional, and while those groups do make up about 60% of the portfolio, we do also attract a large number of mid-career and high-income residents into the portfolio, and as you heard Mark talk about earlier, there's some interesting trends going on within those segments. You see the millennial that is evolving from a young professional into mid-career and those individuals staying with us longer as an example of one of those trends.
While our portfolio doesn't include purpose-built communities that attract or target any one of these specific demographics, what we do monitor is each segment and each cohort, and we're constantly evaluating trends within that customer base and how those trends and opportunities might fit within our overall optimized portfolio and our capital allocation strategy, whether that's at the market level, the submarket level, or the asset level. Now I'll turn it back to Alec, who will walk you through another critical component of our capital allocation strategy, supply.
Thanks, Robert. Yeah. Supply is obviously very important, which in the apartment world right now, by any measure, is showing both deliveries and starts decreasing dramatically. The chart on the left side of the screen shows the new supply delivered and what we expect to be delivered in 2024 to 2026 as a % of inventory.
Our markets are in dark blue, and the U.S. as a whole is in light blue. As you can see, even at the height of the recent supply levels in 2024, our markets delivered just 2% of inventory. The story gets even better when you talk about starts. The chart on the right shows 2024 starts in EQR's markets in the dark blue line dropping to less than 1% of inventory. That's barely enough to keep up with the loss of units that become obsolete. The combination of strong demand and such low supply is truly a remarkable set of circumstances that I've rarely seen in all my years in the industry, and supply is low across all our markets.
This chart of supply deliveries by market shows on the left side levels of well below 2% in our established markets across the board and lower than 1% in most of them. On the right side, our expansion markets continue to see greater but also decreasing supply. With the exception of Austin, where we only own three assets, our expansion markets are expected to come into supply-demand balance in the next 12 months or so. Still, over time, supply risk is going to be higher throughout the Sunbelt, including our expansion markets, and it'll come back faster there than in our coastal markets. What we like is our complementary portfolio that balances supply and demand risks in order to optimize long-term rental income growth. So apartment supply is certainly down. Also, homes are expensive. As this chart shows, single-family homes remain extremely expensive, and they're in short supply.
The dark blue bars show the current market home price-to-income ratio, and light blue dots show that ratio in 2010. In all cases, the ratio of home prices to income continues to rise and supports our pricing power. With single-family home production so low and homeowners staying in their residences longer, in 2024, we saw that only 7.4% of our move-outs bought a home, one of the lowest rates in our history. In addition to very limited competition from home buyers, we also don't see substantial numbers of our residents moving into single-family rentals. It's just a very different product. The quality and size of the homes, pretty remote locations, and lack of amenities and services just don't generally appeal to our customer base. Furthermore, it's still expensive to build. Further supporting the value of our portfolio is the cost of construction.
The pace of increase has decreased since the pandemic, but overall has not come down. Costs have not come down. These high costs have three impacts. They limit the move-to-home purchasing, constrain competitive apartment supply, and put our estimate of replacement cost at a 30% premium to where we're trading, our stock is trading today. On this slide, you can see in the pie chart that our unit count is evenly split between urban and suburban, giving us exposure to both dynamic urban submarkets where it's almost impossible to make the numbers work on new development, and also growing suburban markets that have benefited from changing demographics and work-from-home trends. We value the diversification between the two. Also, our urban assets are not all in traditional downtowns. They include smaller neighborhoods outside of the downtown that offer a different feel and lifestyle, like Williamsburg here in New York.
As I'll show you in a bit, how we break out our suburban-urban mix very significantly by market. In addition to considering supply and demand factors, we also evaluate a market's exposure to resiliency risk. But we've found that in order to assess that risk, FEMA maps are just not adequate. They're too broad, and they're not kept up to date. Instead, we work with third parties like Arup, an international engineering firm, Munich Re, and others as needed to identify climate risks at properties we're buying, developing, or already own.
The nuances from using this better data and more up-to-date data have enabled us to make more informed decisions, including sometimes selling a property, sometimes mitigating a risk, or passing on a potential acquisition, which we just did recently when the FEMA map showed that the property was fine, but Munich Re showed that it was in a risky area that we just weren't willing to take on. The fourth factor is regulatory risk. When we think about political risk, our response is to stay involved locally. We work actively with trade groups and local officials to encourage public policies that are aligned at creating safe, vibrant work and life environments. We've also successfully defeated proposals to impose extreme rent control measures in places like California and Massachusetts.
Instead of rent control, which I think we all know has a chilling effect on the production of housing, we promote policies like building and zoning code reform, real estate tax abatements, and other measures to promote affordable housing supply. Some degree of this regulatory risk is present in virtually every market. And we've found that the most effective political change has come where the housing industry is well organized, engaged in productive dialogue with policymakers. Putting it all together, as Mark and I have mentioned, it's a great time to be in the apartment business. We have healthy demand, declining supply, better data regarding resiliency risk, and an improved regulatory environment in many places. Certainly not a riskless business, but improving in so many ways. That brings us to our portfolio. The end result of this work is the diverse mix of markets you see on the map.
The map shows the percentage of our portfolio's NOI coming from each market compared to our goal, and in those little pie charts, the mix between suburban and urban. There are two takeaways from this. One is the tremendous balance among the markets, and the second is the intentional suburban-urban mix within those markets. In Boston, for example, the strength of the Boston and Cambridge downtown job generators leads us to a preferred mix that skews about 70% urban. While in SoCal, where the jobs are much more dispersed, we're 70% suburban, so the next set of slides gives you an idea of how three of our markets have different drivers that complement each other and optimize our portfolio's performance.
I'll start in New York, and I guess full disclosure, I am a native New Yorker, so that's why I'm leading a lot with New York, but it's obviously a fantastic city that has tight supply, demand in the submarkets, and a unique quality of life, and it's driving this outperformance from our almost all-urban portfolio that appeals to young professionals, but also older high-income renters, so Manhattan has shown strong in-migration driven by all the established companies you know well, and also, like other coastal markets, is where a lot of startups are founded. A disproportionate number of these startups happen in these coastal markets compared to the rest of the country. Because of the unique performance we've seen here, we also expect that to happen in Seattle and San Francisco.
I mentioned Placer earlier, and we're starting to see signs of that, and Michael will go into much more detail on that shortly, so as the map shows, our portfolio has a unique mix of assets that are either in Manhattan or within easy reach, so we offer super walkability, subway access, and a great lifestyle and great access to jobs. Over on the West Coast, Seattle appeals to young adults and young professionals who are drawn by all the tech employers, quality of life, and who don't seem to mind the generally crappy weather. The job market is vibrant throughout the metro area. We've got Amazon downtown, Microsoft in Redmond, Meta in Bellevue, Google in Kirkland, and there are offshoots all around the area. Population growth, which you can see on the chart, is projected to grow at two times the U.S. average.
That makes it more similar to our expansion markets and sets the metro area up for strong rent growth, particularly as the downtown supply glut gets absorbed. Michael will talk more about that later. As you see on the map, a much more spread-out portfolio than New York City that is geared to capturing both urban and suburban demand. We continue to supplement our urban exposure with well-located assets in suburbs like the one we're currently building in Kirkland, a high-barrier-to-entry suburb to the northeast of downtown, and Ben will describe that project in a little bit. Finally, Dallas is an example of a city that typically sees relatively robust supply, but also presents a great job story. It also offers less regulatory and resiliency risk.
Dallas is home to a bunch of corporate headquarters and other growing companies that have helped generate an amazing 370,000 jobs over the past five years, as is reflected on the chart on the right. Supply will certainly be a challenge from time to time, but the city has shown its ability to create good-paying jobs at a much faster pace than the country as a whole and absorb many of those units. Adding exposure to a high job growth market like Dallas complements the rest of our portfolio. So this map shows both where our assets are located today and in the blank polygons where we intend to further expand in the future. Since the jobs are generally located in the suburbs north of downtown, that's where we are and plan to be.
We're excited to grow our portfolio from 12 assets today to 25 or so in the near future. So going back to our investment framework, we're constantly analyzing demand, supply, resiliency, and regulatory factors to generate a balanced portfolio that provides optimal risk-adjusted returns over time. With that, I'll hand the stage over to Ben, who will explain our approach to development. Thank you for your time. All right. Thank you, Alec. Good afternoon, everybody. As Alec said, my name is Ben Stoll. I'm a Senior Vice President and Head of Transactions and Development here at EQR. I was fortunate enough to start my career at the company a little over 16 years ago as an assistant property manager in our Washington, D.C. market. And since then, I've spent time in our revenue strategy team, procurement, acquisitions, dispositions, and development.
Today's conversation, however, is going to be focused on our development platform and how that platform creates value, helps to optimize the portfolio, but also offers a number of strategic advantages that we want to make sure we outline for you all today. So there's a lot of key takeaways on this slide, but at the top, we're really talking about the depth and the breadth of our development and construction team. This is a highly capable group of people. They average tenure in the industry of nearly 25 years, and they've helped us deliver over $4 billion of development over the last decade. Now, this group is capable of delivering direct deals and densifications, which we'll talk about in a little bit. But really, where they're focusing their time today is on our JV platform.
And what that means is we're placing capital with really qualified developers around the country and the markets that we operate in for the product that we ultimately want to own. And we think that there's four distinct advantages in leaning into that strategy. The first is that we're able to keep our overhead low. And we're doing that because we're relying on the robust platforms of our development partners around the country. Second is that despite the low overhead cost internally for us, we still see a tremendous amount of deal flow. And we see that deal flow because developers need capital. We have a great balance sheet, as Alec talked about, and we're constantly seeing their deal flow through their pursuit cycle because they'll need capital for horizontal and vertical improvements. The third distinct advantage is that we're able to keep our pursuit costs low.
We don't really participate on the front end of that deal pursuit, and the determination as to whether the deal is viable or not, we rely on partners to do that. And that at-risk pursuit capital is one of their burdens and not ours. And the fourth is that we get great cost protection. And we do that through good structuring with our development partners and our general contractors in the industry. And we think that strategy is working. We have 10 active projects around the country. It's nearly $1.3 billion in total book of business. Of those 10 projects, nine of those are joint ventures. And we have here pictured on the slide some representative partners that we work with around the country.
And this is the likes of Mill Creek Residential, Trammell Crow Residential, Toll Brothers, top 25 NMHC developers who have operated our markets for a long time and have a great deal of expertise. What isn't written on this slide, what is inherent in all of our JV relationships, is that there's generally a predetermined milestone for us to be a buyer of the asset. But we have no obligation to be the buyer. We have a right. And that right allows us to season rent rolls and understand market conditions before we approach our partner about potential long-term ownership. So this map here shows where we're active. This is our $1.3 billion book of business that's active today. I think there's two key takeaways from this slide. The first is that we're active in our established and our expansion markets.
That's really a testament to our market knowledge as well as the deep relationships we have all over the country. The second takeaway is that when a deal is determined to be viable, that fits our strategy, that is a product we want to build and own into the future, we can move really quickly. We can move really quickly because we have a great balance sheet, and we can do that. We're funding all of the equity for these deals 100% off the balance sheet, no outside sources. The second is that our development partners have oftentimes spent years approving and entitling the opportunity before they come to us to form their relationship and need capital. The average timeframe for the joint ventures that are up on the screen from conversation to construction commencement was just 12 months.
So we're moving really quickly, especially when you think about the markets that we're operating in. All right, let's talk about a couple of deals that we have active around the country today. The project on the left is called The Basin. This project is located in Wakefield, Massachusetts. It's about 20 minutes north of the city. The Boston suburbs are a hard place to build scale, both developing and buying. And so we were particularly interested in this opportunity. You can tell from the picture it's sort of an idyllic setting on the north side of Lake Quannapowitt, which is a recreational lake. This is a micro-location that's very difficult to replicate on the acquisition front or an alternative development. And so we formed this partnership with Cabot, Cabot & Forbes, and the project's been executed really well.
First units are expected later this summer and into the early fall. And based on our assumptions, we have a stabilized yield that is trending below and mid-sixes. The project on the right is a joint venture with Mill Creek Residential, which is based in Kirkland, Washington, the project that Alec mentioned. And Kirkland is north of the Bel-Red Corridor on the east side of Seattle. And the east side of Seattle is a place that we've intentionally looked to move some of our exposure. And so this is a project that allowed us to move forward with that initiative. The project is also off to a great start, effectively located in a single-family neighborhood, so a really challenging approval and entitlement process before we got involved. It's ahead of schedule right now, very much on budget.
First units are expected in 2027, and we're trending to a stabilized yield that is approaching 7%. And our third and final case study that we wanted to highlight for you all today is a tri-party relationship that we have with Trammell Crow Residential and Marcus Partners. This is in Harrison, New York, in Westchester County, about 20 miles north of where we sit today. And this was a large project, and it had some complexities to it. And so when Trammell and Marcus came to the market for capital, we had a strategic advantage. We could handle the overall check size, and because we've got this great group of development and construction efforts, we could understand the complexities. And so we put this relationship together. This project's already delivered. It's 70% leased. We've seen great demand drivers on the front end.
And even after paying a promote to our partner, we expect to deliver a profit to EQR somewhere around $20 million. So all three of these are really great examples of our ability to build where it's difficult to buy, working through complex structuring, and also showing that we have a balance sheet to fund these large projects in challenging capital market environments. So I've talked about the team out there executing on the JV platform. I think we've got some great strategic advantages in leaning into that. But this team also has the capability to develop direct deals and densifications. And you're about to see a video about one of the densifications that we just finished in Santa Clara, California. It's about a mile from Apple's headquarters. And these densifications are great for us because they're effectively covered land plays.
We get to continue operating an income-producing asset while we go through entitlements and approvals, and if market conditions warrant and it makes sense, then we move forward with the redevelopment, so in this particular instance, we demolished 42 units. We came back with 225 of higher density product, and at the same time, we renovated the units that we didn't demolish, so we totally changed the branding approach for the entire asset. We introduced operational efficiencies because it's now larger, and also cross-selling opportunities. We've created a lot of value in that process, so we hope you enjoy the video.
Densification is the process of adding housing to an existing underutilized property based on its zoning potential. Densification typically involves replacing a portion of an older garden-style property with a much denser building, with a minimum of five new units added for every unit replaced.
Given Silicon Valley's notoriety as a challenging place to build and buy attractively priced new apartments, Equity Residential decided Laguna Clara Apartments in Santa Clara, California, was a prime densification candidate. Located just over a mile from Apple Park in Cupertino, the community is in the heart of Silicon Valley's high-earning employee base. Equity Residential secured approvals to replace 42 existing central units with a four-story building featuring 225 new units and two levels of subgrade parking. Construction began in 2022 when we also renovated the remaining buildings and upgraded the landscaping, creating modern green spaces. Now rebranded as the Laurian and Laurian Ivy, the first units were delivered in January 2025. The combined property offers staffing efficiencies and cross-selling opportunities, given its diverse product offering of 447 renovated and brand new Class A units.
The new community contains amenities for all residents, including multiple co-working lounges, an expansive roof terrace, fitness center, resort-style swimming pool, and an array of spectacular outdoor courtyard amenities. Going forward, Equity Residential is pursuing a variety of densification projects across its portfolio, leveraging opportunities to modernize existing communities to enha
nce value. Equity Residential, creating communities where people thrive. Okay, a project and a transformation that we're very proud of and we're confident will continue to perform well into the future. At this point, I'd like to welcome my investment colleague, Dan Egan, up onto the stage.
All right, thank you, Ben. So I think Alec and Ben have done a great job articulating our investment strategy, particularly as it relates to portfolio management and development. And I'm now excited to take you inside of EQR and discuss how we allocate capital within our portfolio. My name is Dan Egan.
I've been with Equity for 12 years. I started my career in Boston. Since then, I've lived in three of our markets, lived at six of our properties, and worked in asset management, portfolio management, acquisitions, and development. In my current role, my team and I focus on capital allocation across our 300 assets. Before we go into how we allocate capital at EQR, I think this slide is a good place to start. Pretty simple slide. I think it highlights just how efficiently EQR spends on CapEx. As a sector, apartments require significantly less CapEx than other property types, such as office and retail. When you compare us to our apartment peers, we also stand out, right? We spend 250 basis points less on CapEx per year as a percentage of NOI compared to our peers.
At EQR, the advantages are real estate, which skews higher quality than many of our competitors. Also, keep in mind when you're thinking about apartment buildings, whether it's roofs, windows, paint, facade, or even the appliances within our apartments, right? It doesn't matter, right, what they cost. As a percentage of rent, it's kind of all the same. So this year, we expect to complete $295 million in Same-Store CapEx across our portfolio. And of that, approximately $130 million will be spent on NOI-enhancing CapEx, the largest component of which is our in-unit renovation program. So we'll start here, right? Why do we renovate apartments at EQR? We renovate apartments because EQR owns high-quality assets in great locations that we intend to own long-term. Our renovations achieve accretive returns, and we have a talented team that can renovate apartments faster and cheaper than our competitors.
On the slide here, we've broken our renos into two buckets. The first is what we call our turnkey reno, sort of self-explanatory, but generally includes kitchen, bath, and flooring done on turnover. The second is a targeted flooring replacement program, where we're simply replacing carpet or, in the case of New York City, parquet, with a luxury vinyl plank that is both more marketable and durable. Premiums for these investments, they range from $50-$125 for the flooring projects and $200-$400 per month for the turnkey reno. So today, with 20-plus properties under active renovation, we're highly focused on managing both costs and occupancy. I'm excited to report that as of this morning, the occupancy rate at our assets under renovation is 96.5%, and that's just 10 basis points lower than our Same-Store portfolio.
That is really hard to do, and it's really a testament to the collaboration that occurs every day between our investments teams, our property management teams, our operations teams, and most importantly, our folks on site. This year, we'll complete about 2,900 turnkey renos at a cost of approximately $95 million. At that run rate, we expect the renovation program to contribute an incremental $10 million to same-store revenue or approximately 35 basis points. So when you renovate apartments, you pair them with common areas, it can supercharge your returns. And that's what we've seen here at EQR. Across our portfolio, we will complete a handful of comprehensive repositioning projects each year, which we often pair with unit renovations. We typically spend $1-$3 million each on these types of projects, and they include upgrading common areas, adding new amenities, and improving the curb appeal at our assets.
The result is increased marketability with a mix of amenities and finishes that resonate with our residents, leading to longer tenures and higher rents. This slide highlights some of our recently completed projects, one of which is actually just two blocks south of us today. 777 Sixth Avenue is an example of an asset where we are pairing a common area upgrade with an in-unit renovation program to fully reposition an extremely well-located asset that we believe will benefit from the favorable supply picture in Manhattan. Shifting gears a bit to talk about ADUs. ADUs provide a cost-effective way to add density to existing assets and generate attractive returns. We are especially excited about the opportunity to introduce ADUs across our portfolio and are actively pursuing projects in states like California where regulatory support has made these initiatives possible.
Beyond ADUs, we're also focused on converting underutilized spaces within our buildings, such as retail and office suites, into residential units. Over the past decade, we've successfully converted nearly 100 of these units to apartments, and the yields on those are typically in the low to mid-teens. Right now, we have another 100 units in various stages of development, and we're targeting similar returns on those projects, and you'll hear more about those projects later in the year, so this is my favorite slide in the section, as it really provides an overview of the investment of an investment we made over 25 years ago that exemplifies EQR's investment acumen, creativity, persistence, and the ability to execute complex investments to maximize the value of our real estate. We purchased this portfolio in 1998, which we called the West End portfolio at the time, for $310 million.
At the time, the portfolio consisted of two apartment buildings, one built in the 1960s, the other in the 1970s, an aging office building, and three parking garages. Over the past 25 years, we've invested heavily in this portfolio, including developing two towers totaling nearly 800 apartments, investing $25 million in the two existing apartment towers to renovate over 1,000 units and the common areas. We sold the office building near the top of the market in 2015, and we've curated one of the most valuable parking portfolios in the city, totaling nearly 1,800 spaces walking distance from the TD Garden. This portfolio is now worth over $1.7 billion and has been an anchor of our Boston portfolio for over two decades. So before I turn the presentation over to Nizar to talk about transactions, I'm very excited to welcome my colleagues, Stacy Aguiar and Robert Parker, to the stage.
Stacy and Robert lead our property management teams in Washington, D.C., where we own over 14,000 apartments. This afternoon, we're going to have a fireside chat and add some color to how we approach the capital allocation process within our markets, and we'll use D.C. as an example. Stacy and Robert, perhaps we start with you guys introducing yourselves.
Thanks, Dan. Good afternoon, everyone. I'm Stacy Aguiar. I've been with Equity many years, as you can see, 22. I started my career in our Boston portfolio, working across many different assets on site before moving into a regional leadership role where I had the chance to work with Dan when he was just starting out with EQR. From there, I moved into a regional role, and 11 years ago, we moved to D.C.
Today, I'm leading a really talented group of regional leaders that directly oversee our on-site teams.
Hopefully, I'm one of those great leaders that you just talked about. Good afternoon, everyone. I'm Robert Parker. I'm a senior regional manager, and I help lead the DC market alongside Stacy. In my role, I directly oversee several on-site teams and the overall performance that's been across multiple communities in the market.
Thanks, guys. Stacy, I'll start with you. Can you talk about the partnerships that exist between the investments and property management teams and maybe provide some insight into how we work together to allocate capital across the portfolio?
Sure. That partnership between our investments and property management teams is really critical when we're allocating capital at the property level. We're partnering to identify and ultimately execute on those opportunities that add value.
And by working together, we're ensuring that our strategies are operationally sound. And this collaboration is really happening across the portfolio on multiple levels. Our on-site teams are sharing real-time insights onto what's happening on the ground, also sharing resident needs, property conditions. And then our centralized teams, they're sharing insights into resident sentiment. And then finally, our operations team, they're sharing data-driven insights, which we use very often in these decisions. So by utilizing all this great information and collaborating, we're ensuring that we're not having a one-size-fits-all approach. It's really targeted, market-driven, and really, some of our best ideas will come from our on-site teams.
Yeah, 100%. I think you hit the nail on the head, right? Collaboration is the foundation of this relationship.
Absolutely.
And we own assets of all shapes and sizes, and they have a very diverse set of needs.
So can you provide some detail on how we prioritize the investments across such a diverse portfolio?
Yeah. Well, as you said, we have assets of many shapes, sizes. So the approach is pretty diverse across the market. To make a decision, we're assessing asset values, of course, property performance, and future potential. And some of the assets may need just a minimal upgrade, like flooring, which you mentioned earlier, or more intense upgrades, like in-unit or common area renovations as well. And sometimes, we're doing a full repositioning, which is everything at once. And those are always a lot of fun, right, Robert? And sometimes, the best thing to do is nothing at all.
But more recently, we have been investing quite a bit in technology that's helping to really drive our centralization efforts, things like smart home technology, which has really allowed us to streamline our operations for our service teams. And, oh, sorry. That's okay. And it's really helped us to be able to flex our staffing across multiple assets as well. And then building-wide Wi-Fi, that's providing a great service for our residents at a reduced cost. And it's also been great revenue-generating opportunities as well. Those are just a couple of examples. Sorry, talking a lot here.
Yeah, no, I think you're kind of hitting it all, Stacy, right? Which is like, we are collaborating every day. Robert, you're out there, right? We're doing this every day. And Stacy, fantastic overview, right? You made it sound super easy. But Robert, I got to pull you in here, right?
Yeah.
Tell us what's really going on on site, right?
So what's really going on is the level of excitement, generally, in the beginning is like, "Okay, we're doing a renovation, and so we're going to start working with some people that we traditionally don't work with." But as Stacy highlighted, collaboration is a key part of our success. And so our on-site teams collaborate with our construction and renovation teams on any of our large-scale projects. That's number one. Then once you actually start the renovations, one crucial part of our process is to make sure that we closely manage the production timelines and balancing the right amount of inventory in the production queue so that we minimize the impact on occupancy. From there, once the renovations actually start, it's go time.
We're on our construction teams to make sure that they're meeting their target dates and that we're working with our revenue strategy teams that we make sure that we have the right price for those units when those units get ready, and then throughout the entirety of the project, what we're doing is we're laser-focused on making sure that we minimize any resident disruption, and so as far as best practices are concerned, I mean, we have a couple. We meet with our construction vendors very regularly, whether it's in a unit, in a space, catching them in the hallway. We make it intentional to meet with those individuals. Finally, I mean, one other thing that we do is we review resident satisfaction and actively seek their feedback to move quickly and make informed decisions.
And then finally, we host resident events to kind of make sure that we maintain that high level of satisfaction. So those are the couple of things that we do. But tying that all together, one thing that I'm very proud of for today, our renovated property occupancy is 97.8% versus our non-renovated property occupancy of 97.3%, which is a testament to the collaboration of our construction teams, our renovation teams, and our
on-site team. Yeah, thank you. 97.3% isn't that bad.
Not bad at all. We're doing all right.
Not bad at all. I agree. But how about post-reno? Right now, all the work's been completed. What do we typically see at our assets?
Well, now, post-renovation, it's a different level of excitement. We've gone through a lot of the challenges. We've learned from our things.
And then what we also now have is a better product for us, which typically leads to increased traffic, increased leasing velocity, which for us means higher rents. So today, our renovated units are achieving premiums of around $230 per month on average, which is meeting expectations for our expected returns. Also, in post-renovations, they help minimize some operating expenses for us, for both us and our residents, and integrate technology that's important, that's mutually beneficial to both EQR and our residents, and very important to today's residents. So for example, leak detection sensors and smart thermostats are a couple of examples. In addition to that, renovations certainly make sure that we have better resident engagement, increased resident satisfaction, and very strong retention. So good.
Yeah, thank you, Robert.
Clearly, he's one of my talented leaders. Oh, well, thank you.
Thank you. I'm glad that.
Yeah, so Stacy, why don't you bring us home and I'll set the stage a bit? So over the past five years, we've invested over $90 million in our DC portfolio. And these investments have contributed to our DC portfolio being a top performer in terms of both revenue and NOI. Can you highlight a couple of the projects?
Yeah, I'd love to. As you said, we've invested quite a bit, and we've certainly been busy in those last few years. We've completed 2,800 in-unit renovations in that time. We have another 400 scheduled to complete this year, several large-scale common area renovations, and we've repositioned a few assets entirely during that time as well. And Northern Virginia, in particular, has been a big focus for us. Many of our large-scale projects have been in Virginia. You'll see one here, Fairchase.
This is a 392-unit community class C out in our suburban Fairfax. With new supply entering the market in 2023, we kicked off a common area renovation. And then on the heels of that, this in-unit renovation, which has been really just a really great project, great execution, and this asset is a top performer within its submarket today. So really proud of this project here. And then moving on to South Arlington in Crystal City, which is now known as National Landing. This is where Amazon's HQ2 campuses really undergone a pretty dramatic transformation over the last couple of years. We have 1,100 units that sit in this area across four different assets amidst those late 1980s, early 2000s products. So here, we took a different approach at each asset. You'll see here 1401 Joyce, where we completed a full common area renovation.
We have another two deals where we are about halfway through in-unit renovations, and at our fourth asset, we are undergoing a flooring project, and I have to tell you, prior to these renovations, we were starting to feel some new supply impact here, but post-renovation, the submarket has just completely turned around. It actually is our top performer today across the entire portfolio with occupancies north of 97%, with a 6% rental income growth year to date, so just really, really proud of what we've done here, and these four projects, I think, are just great examples of how our teams collaborate and just have learned to execute on these large-scale projects. They certainly do not come without challenges, which Robert certainly has to do. But I think we've become really good at executing on these projects, and Robert, I'm sure I can speak.
I can.
addition to the fact that I've handled a ton of these. Anything that impacts hundreds of residents at a time can be a bit complicated. We make very informed decisions based on some of those complications, some of the challenges that we found. We've implemented processes that drive improvement to our product, to our customer experience, and overall created value for our assets. We're pretty good at this renovation.
Cut it down.
Yeah.
All right. That's obvious. I just want to thank you guys for joining me on stage. You did a fantastic job. We're so lucky to have great leaders like yourselves running our real estate.
Thank you so much, Dan. Appreciate the time. If anyone makes it out to D.C., we'd love to tour you through our co mmunity.
Thank you all so much.
All right.
Now I'll turn the presentation over to Nizar to talk transactions.
Good afternoon, everybody. Thank you very much for joining us today. My name is Nizar Al-Wazir. I said that's all on purpose because it can be a handful, even for myself at times. I've been with the company now for approximately 11 years, starting out as an asset manager in our South Florida office. And since I've had the opportunity to lead the investment management team for the West Coast based out of the Bay Area, my role has changed. And today, I get to leverage my engineering, investment banking, acquisitions, and asset management background to source, underwrite, and execute on large business transactions, such as the Blackstone transaction we closed in 2024.
At Equity Residential, our approach to transactions, opportunistic transactions, that is, is grounded in long-term relationship buildings and a disciplined capital allocation strategy, all guided by the core principles established by our founder, Sam Zell. We're very focused, and we're very intentional in our pursuits of opportunities. We leverage several of our key strengths. Number one, as you heard before, is our strong balance sheet that provides us dry powder to act decisively and capitalize on unique market situations where others can't. We have a highly seasoned team that are deeply entrenched in their local markets that give us unparalleled understanding of supply dynamics, demographic trends and shifts, and the overall competitive landscape. We also pride ourselves on our reputation of executing on our commitments, where we provide our sellers the confidence in a smooth and timely transaction.
We also actively seek opportunities that benefit not only us, but our counterparties as well, which foster long-term symbiotic relationships, so looking ahead, our goal is to further expand, deepen, and strengthen relationships for many of these firms that you see on the far right, so investment banks, sovereign wealth funds, commercial and real estate investment banks, and of course, multifamily owners and operators. We believe that this network, over time, will allow us to source curated, off-market, and at times non-traditional opportunities that deliver exceptional value for our investors, so in essence, we aim to be top of mind and the company of choice when opportunity arises, so Equity Residential has a long and storied history of successful transactions with many of the globally recognized partners that you see on the slide.
While many of these transactions have shaped our strategic trajectory and growth, I want to take a few seconds just to highlight two or three to demonstrate our capabilities. The first, obviously, is the most recent, 2024, Blackstone transaction at $1 billion. We did the Greystar deal in 2013 at $1.5 billion, and of course, the Archstone transaction, $9 billion, where we integrated 22,000 units into our existing platform. We are now dedicating more time, more effort, and more resources in creating future opportunities like these, so as we embark on this relationship-building journey, why would Equity Residential be top of mind and the company of choice when an opportunity arises? Well, we feel that several factors set us apart from our competition. Again, the first is a fortress-like balance sheet that allows us to transact when capital markets are constrained.
Robert Garechana, our CFO, will elaborate more on this later on in the presentation. We have a bias to action. We provide quick responses and quick feedback utilizing efficient due diligence processes. We're also a decentralized company where we can make decisions decisively and quickly. We're prudent investors who carefully evaluate each opportunity to ensure it aligns with our strategic needs and our return requirements. What is also unique to us is I think we maintain open communications with our core counterparties. We clearly articulate in a deal what our needs are, what our wants are, but we also listen to our counterparty to understand what's important to them so we can come to a deal. We also have a very scalable platform.
Our Chief Operating Officer, Michael Manelis, will speak a little bit more on this, but we have the ability to absorb a high volume of individual transactions as well as large portfolios, so a great example is the bar chart that you see on your right-hand side. In 2021, we did 16 individual deals totaling $1.6 billion, and in 2024, we did a mix. We did seven individual deals and one large portfolio, all integrating them into our platform, and again, without disruption to our current operations. We have locally entrenched teams on the asset management, operating, development, and acquisition side. All that knowledge complemented with our in-house data analytics and research capabilities, and of course, I would say the most important of all in deal-making, we have integrity. Integrity is the cornerstone of Sam Zell's business philosophy.
We operate with the highest ethical standards, and we build trust and foster long-term relationships. So I'd like to say, in a nutshell, we are in the business of return business. All right. So how does this all come together? So let's take a step back. So the Blackstone deal, as an example, was a culmination and a result of four years of intentional and focused relationship building, utilizing all the facts and levers that I mentioned in my previous slides. What this resulted in was an 11-property curated portfolio in our Atlanta, Denver, and Dallas markets: $962 million, 3,500 units at an average age of eight years. So pretty new. 15% discount to replacement cost. And get this. From the day we agreed on price to the day we closed on our first tranche of assets was only 60 days. So very compressed.
We leveraged our balance sheet, and we leveraged our platform. So this transaction really helped move the needle for our overall NOI exposure from 5% to 10%, getting us that much closer to the 20% mark. So in summary, this transaction really highlights our ability to move quickly and decisively. It shows our deep knowledge of our markets. It utilized our balance sheet, our formidable balance sheet, I would say, and also a scalable platform. But on the other side, it also underscores our commitment in creating win-win situations that generate exceptional value for both sides of the equation, for both sides of the table. At this point, we're trying to replicate this model across the board, and we're actively seeking opportunities to further enhance our portfolio and to deliver exceptional returns to our investors.
We believe that Equity Residential is uniquely positioned to capitalize on opportunistic transactions over the next coming years, and we're very excited about the future growth prospects of our company. Thank you very much for your time. I appreciate it, and at this point, I'd like to invite my investment colleagues back on stage for Q&A.
Okay, folks, so we're going to use the Slido.com that you can go to, and you can either scan this QR code or put in that number and shoot me the question, and I'll let the boys get back up here.
I think we can, while everyone's sending in their questions, we can start with one that we get on a pretty regular basis, which is, "Alec, how long is it going to take for us to get into the portfolio diversification into the expansion markets?"
Well, we feel like we're making some really good headway now. Obviously, the pandemic created a challenge. I would have thought we would have been here by now, but with some momentum from everything Nizar just talked about and a market that's kind of opening up in a weird way because rates came up and then everyone got scared. But now there's so much capital interest that people are starting to sell.
There's this kind of a momentum of people who built properties or own properties that they really didn't want to capitalize for as long as they have and maintain as long as they have. We think within the next year or two, we can really make some great progress and wrap this up. We're excited to do that.
Is there a secret sauce on 80/20? I mean, is there some other markets you'd look at, or how are you thinking about that?
We like the 80/20 mix because we like 12 markets. Seems like a good number to give us enough diversification. Adding the three that we did was a very thoughtful process. I'd say we would never add another market, but it feels really good to have those 12.
If you just do the math, it's 8% or 8.5% per market, ranging maybe from 6% to 10% to 12%, depending on how big the market is and how we're feeling about it at that time. To work within that framework feels really good to us to provide you all the balance that we've been talking about today.
Great. Here's a question that we got from the audience. What percent of your renovations and rehabs are necessary to keep up with competition versus truly additive?
Yeah, I think that's a good mix, and I'll take that one. I'll start with maybe the process, right? Every year, our investment officers in our markets with property management, they identify every property that we think could benefit from a renovation.
Now, some of those might be more asset preservation generated where we're losing ground, and the renovation is allowing us to keep up and hopefully outperform. And others are truly additive. And we're seeing a lot of those right now because of the supply picture in our markets, particularly in the urban core. So it's a mix, and it varies every year. But I would say we're rarely in a position where we can't just turn a rental off. The existing condition is probably rentable at a good rent, but we feel like, obviously, we can get a premium. But we're not in a position where we have to continue if we felt like there was a better use for that capital.
Great. It seems totally unrealistic that single-family rental would have the lowest CapEx as a percentage of NOI.
This is probably merely reflecting low turnover in the tight for-sale housing market. Do you agree?
Yes. Okay. That's the Green Street data, and we're going to trust the Green Street data there. Yeah.
Okay.
Yeah. It's clearly going to be, and you're talking not even about build-to-rent, but just the scattered-site single-family rental product, which is not easy to take care of almost by definition because it's scattered. And a lot of those buildings are older, and they've got all those roofs. They've got all the siding. They've got the percentage of rentable space. All the stuff you have to keep up with is very low compared to our business. And this tower has one roof. It's not that big. You have a tremendous number of roofs as an easy example. So yeah, that's what I would say.
Okay.
How are you thinking about incremental investments in D.C. given the current issues with government employment?
Well, I'll start, and anyone else can chime in. But D.C. has been a really good long-term market for us over time. Clearly, there's a lot of uncertainty. We can't just react immediately. We have no idea how it's all going to play out. If you do, please tell us. But we like our portfolio. Maybe it'd be a little smaller in the margins as we put some money into these expansion markets. But different pockets have done well at different times within D.C. And it is broader than just a government profile that we appeal to. I think the number we talked about yesterday was 9% of our residents directly work in the government. Obviously, many of them work in offshoots as well, but it is broad without that.
And we really like our Northern Virginia exposure. As we look to build, we'll probably build there.
When we're underwriting properties between existing and expansion markets, looking at unlevered IRRs, NOI growth, is it all compared to one corporate hurdle rate versus the IRR risk weighted by market?
Well, we were always thinking about the risk inherent in any investment we're doing. And certainly, we talked to Ben a lot if he brings it at the development deal. It has to show enough of an incremental return over an acquisition, or I'm afraid the answer is no. That makes Ben a little sad, but he understands math. And so there's always those trade-offs, and we're always considering the nature of the investment plus the return it's generating for us. And we need, in certain cases, to see more from an investment.
What's the hurdle on yields that would get you more interested in development?
Well, I'll let Ben talk to that. Sure. Yeah. I mean, when we think about capital allocation that way, as Alec said, you have to create a premium for development deals, given some of the risks that come with it, the timeframe, and the potential for market cycles to change on you a little bit. And so we're generally looking for 100 to 125, 150 basis points spread over prevailing cap rates. I think it's questionable exactly where cap rates are today, but if you call that a 5 on average in the markets that we would like to acquire in, then you're looking at development yields in the low 6s. And those are fully loaded for us. That's full property management fee, full construction management fee.
We balance that against other opportunities that we could put that capital towards.
Okay. The Blackstone portfolio shows a rent-to-income of 25%, which is higher than the EQR average of 20%. Does this mean that the rents are too high versus potential for higher-earning residents? Do you want to speak that to Nizar since we're deep in that? No. I mean, the portfolio ranged somewhere from the high teens, 19%, all the way to kind of the high 20s%. I think there's an opportunity there to add a renovation component to a handful of properties where it would change some of the demographic. But I think once the portfolio gets seasoned and integrated into the portfolio, you'll see a change in the rent-to-income ratios.
But just adding to that, it's also reflecting the diversity that we've talked a lot about already today within that portfolio.
We're really happy with how it's performing and expected to continue to grow.
Given where median income for your residents stands in the Austin portfolio and the unfavorable supply-demand dynamic, what other factors give you confidence in expanding share in that specific market?
Well, when you talk about having a higher hurdle rate, Austin's a pretty good example of where we'd have to somehow find a deal yielding a little bit more or a lot more, maybe. And frankly, we don't see that. Deals trade in Austin with sub-5 cap rates, maybe even the 4s, which doesn't make sense to us. Although long-term, we like the demand story. It just feels too early. And so we're going to wait it out a little bit and focus on the other three markets for the time being.
Can you expand on your comments around non-traditional portfolio opportunities?
What adjacent businesses are you exploring potential acquisitions in? For example, build-to-rent?
Yeah, that's a great question. I think from a build-to-rent perspective, we're kind of in a deep learning mode. A bunch of us have crisscrossed the country looking at the product. And it's really interesting. It's like the Wild Wild West, BTR. We've seen everything from vinyl boxes in the middle of nowhere with huge backyards to townhomes in infill locations. And then you have amenitized versus non-amenitized. You have attached garages versus non-attached. So where we are at this point is really trying to refine our investment thesis and where we can maximize the synergies that we see between our line of business and this potentially new line of business of BTR. So again, deep learning phase, but we're talking to a lot of people.
And I would just add to distinguish between single-family rental, which again is the scattered-site stuff, which does feel like a very distant cousin, but not as easy to fold into our operation, versus BTR, which feels like, I guess, a sibling because it's very similar. And I can certainly see it fitting into Michael's team and his platform much more seamlessly and providing an additional product to a traditional renter, kind of rounding out what Robert described to you when he was talking about the different stages of life that we appeal to in our customer base.
It seems that the New York market is one of the top performers in the portfolio. However, as the portfolio gets to 80/20, EQR's exposure to New York is still expected to be reduced. Can you walk us through that rationale?
Why not reduce other coastal markets by more and leave New York untouched or even grow it?
Well, we actually kind of like to talk about ranges. And New York's providing some really good reasons to think about the upper end of the ranges. But we also have some properties that, frankly, aren't a great fit for us, or mostly because we have an overabundance in one sub-market, or we just feel like it probably requires at some point a substantial renovation that someone else might pay us for that opportunity more than we see in the property. And Dan, I don't know what you would add to that.
I think it's really just about balance, right, and diversification for us. And our CFO reminded me last night that we used to own three properties on one block here in Manhattan, right?
That might just be a little bit too much. I think we can benefit from diversification not only in our expansion markets but also in the suburban markets where we already invest.
Could you have achieved your goal to gain scale at better pricing in expansion markets via single transactions rather than from a highly sophisticated seller like Blackstone?
Well, I'll start, and then Nizar can add. There is so much capital interest in the apartment sector right now that everything has been gravitating towards a 5% cap rate. Even when rates go up, it's 5%. When it goes down, they even go down a little bit lower. But there's a lot of capital out there. So we're focused on doing both, frankly. And as Nizar showed, we're capable of doing both.
And we feel like we played a market cap rate but got exactly what we were looking for, which is a little unusual in portfolios because usually, you get some stuff that doesn't fit very well. So we're excited to do both and keep Nizar big game hunting for us.
Yeah. I mean, like Alec said, there's a lot of capital on the sidelines. We have a lot of strengths that we're trying to utilize and leverage. We've got the relationships. We're building them. We're talking to people every day. We're underwriting opportunities every day. And I was told that big deal hunting takes time, and you need to be patient. But when it happens, it happens. So it's a matter of time. y
This is such a very New York question. But is this about the revenue?
This is not about someone's individual revenue or your lie that the pizza's better here, but the population exodus from Brooklyn and Queens stands out versus in-migration to Manhattan.
Can you comment? Is the hipster borough craze over?
No, I don't think so.
Are you the right one to answer this?
No, but I wouldn't answer from the hipster because I don't even know what that really means. Although we were the first in Williamsburg, just for the record. We were pretty early in Williamsburg, and when you look at our performance, it's broadly been very positive and contributing to that 20% recovery. It's happened all around everything with good access to the city. Brooklyn and Queens are so big that there are parts of the boroughs that obviously are very, very different than the kinds of properties we own.
That's honestly where you've seen most of the exodus from people from those outer locations. Yeah. I'd probably speculate if you zoomed in on Williamsburg, it would probably look a lot more like Manhattan than the rest of Brooklyn. So maybe the hipster instead. Dan would be as close to a hipster as we have in the investm ents. That's scary.
How do you think about risk to your coastal markets from changing immigration policies? If job or population growth slows meaningfully in coastal markets, would you accelerate the transition into your expansion markets?
I think we're just all about being balanced, and we can't react to things that are happening in the shorter term. We've really picked these markets because we see them as long-term contributors. There's so much going on in the world right now. It's hard to react and pick one thing.
There are other reasons why we're so positive about the coastal markets, and we'll counterbalance that.
Could you talk about investments in San Francisco, downtown versus San Jose, and cap rate differences? Are you planning to trim exposure in downtown San Francisco as part of the recycling towards Sunbelt?
I'll start, and Dan can follow up. Downtown San Francisco is a good example where we have a concentration of buildings, basically five high-rise buildings that compete for kind of the same customer, probably a little overexposed. We like the exposure, but we're probably a little overexposed. So to cycle out of some of that makes a lot of sense to us when the time is right and if we can find a buyer who will pay us for the improvement that we're starting to see already.
Michael will go into more detail in a bit, but we're certainly not feeling like we have to sell. We're never in a position where we have to, but having a little better balance would be better.
Yeah. No, I agree. I think the investor sentiment as it relates to investing in San Francisco and the Bay Area in general has changed a lot. I mean, we were just out at NMHC a month ago, and San Francisco is at the top of the list for many folks who are making investments and are looking to place capital today. I think from a cap rate standpoint, I wouldn't be surprised if you see some of the lowest cap rates of the year for some of the San Francisco assets. I think when Michael talks about the recovery story, you'll probably understand why that might be.
You mentioned that the next few years could look like the great years following the GFC. Are you underwriting a similar level of rent growth as post-GFC in your acquisitions?
We are. We're leaning in on that. It's been honestly kind of a weird market because everyone's kind of hiding right now just to figure out how the world's going to settle out so we don't see a whole lot of opportunities the last month or so. But I expect that will really break out, and this will be another year like last year where we're very active later in the year than earlier in the year. And honestly, every month that goes by, we get a little closer to absorbing all the supply in those markets, and I think we can lean in and be more and more aggressive.
We'll do that because we think we're really going to like the basis of the stuff we bought this year. In the future, we'll feel like that was a really good investment to have made.
Is 2% supply growth really the equilibrium for all the markets? I would think that markets with better population and job growth would have a higher threshold.
Yeah. I think that's right.
I think that's why we're interested in markets that we think will have a longer run rate. It's all about, obviously, demand and supply. 2 is just kind of probably the middle-ish number and a good one to peg as a starting point, but then consider each market individually. Certainly, more supply is going to come in these states in places like Dallas, Atlanta, and Denver than other places where we own, like New York.
But the demand's also there as well. So we like that dynamic.
Great. Have you changed your underwriting process in recent years based on lessons learned on deals and/or markets you got wrong or right over time? What specific variables or themes are you putting more or less emphasis on today when underwriting deals?
Well, I'll start, and then others can chime in. One of the things that we've learned is, and this was happening everywhere, this urban high-rise where it's being built on the backs a lot of times of the penthouse units on the very top. And this was a thing in Dallas. It was a big thing. The rest of the buildings seem kind of normal, like a normal building. The top two floors, they would call the penthouse floors, and they'd have $6,000-$10,000 units. I mean, that is a very risky unit.
And typically, it would go to an athlete on one of the professional teams who would be there until he bought a home or got traded to another city, which that was a lot, obviously. So that is an example of where a risk-adjusted return on that kind of investment seems like that should have a different hurdle rate as well. So we think very consciously and carefully about that. That's something better to probably own after the cycle through. And what they were charging for $10,000 comes back to what it really is in the market more broadly. Maybe it's $4,000, but it's not this crazy number. But we're really careful about looking for outliers like that in anything we do.
I guess, Marty, I would just add from a specific to underwriting standpoint, right? We have fantastic access to data.
And I think, go back to my 10 years ago when I started here. The access to data that our analysts have today is so vastly improved. And really, that allows them, I think, to underwrite more accurately out of the gate, which makes Ben and Nizar, I think, all of our jobs a little bit easier.
Excellent. We have a few that are more general questions that I'm going to hold till the end when Mark, Robert, and Michael and Alec are up and can answer those. So I'm going to do one last question, then we'll take a break before we get to operations. How does the math work on a suburban office teardown to convert to residential?
Yeah. I can take that one. The Alexan Harrison project that we showed you as a case study was effectively an office teardown.
And so, from our experience, there are some suburban office deals that highest and best value is land value. That has to work in the overall underwriting, but there are examples of that out there. We think those are more viable for ground-up development deals for the opportunities that we've looked at than office conversions. And the benefit of tearing down and underutilized asset is that you get to start fresh. You get to maximize operational efficiencies. You get to think about hardening the asset as it relates to resiliency. You can optimize amenities. In an asset that you're sort of stuck with some portion of the structure or core, it's much more difficult. And so we've looked at a lot of those. We don't think they make a tremendous amount of sense, but we're seeing some of those happen.
But we are looking for good suburban locations that will have headwinds to supply that you can use some underutilized assets to turn into apartments.
Terrific. So why don't we take a 10-minute break here, folks? Come back at 2:45 P.M., and we'll do the operations section. Thank you. Okay. Everyone else? Just sound? Yeah. Yeah. Disappointed by the time. Yeah. We're down here. Right. Here we are. Everyone. Hello? Why don't we take our seats again? Take our seat and get to the second half of the show. Excellent. Thanks, everybody. Okay. So we're going to hit the operations section next. But before we start that, we're going to show you a little video.
We create communities where people thrive. At the heart of our operations is a space where innovation meets the everyday life of our employees and our residents.
For decades, we've pushed the status quo on how to manage multi-family communities. We have reimagined and disrupted old ways of doing business. We've listened to our residents' feedback, using insights to inspire and shape the innovations that enhance their living experiences. We've invested in our people, processes, and technology to generate exceptional experiences and better financial results. As forward-thinking, early adopters of technology with a mindset for change, we have consistently been among the first property management organizations to embrace innovation and implement new advancements. We were early adopters of advanced revenue management tools and one of the first to embrace operational centralization, all while remaining focused on maintaining operational excellence and delivering outstanding results for our residents, our employees, and our shareholders. And that journey continues. We are redefining state-of-the-art solutions to revolutionize multi-family property management, both now and into the future.
With data-driven decision-making tools and our culture of collaboration, our teams are ensuring that we are ready for the future. This is how we achieve excellence. This is Equity Residential.
All right. So good afternoon. Welcome to the operations part of the day. Boy, I've seen that video now over a dozen times in the last week. It still gives me goosebumps. It is an absolute true reflection of who we are and just so proud to be part of this team. So I actually joined Equity Residential back in 1999 to start up the first property tax group in the company. Very soon, I found myself getting involved in what the future of the business could look like and how the company can harness emerging technologies to improve property management.
The video highlighted some of this, but our journey actually started back in 2003 by implementing a new property management software application that allowed us to see real-time performance dashboards. We were blown away by it. So I thought it was so cool. It was a time when our company was growing like crazy, and we knew that we had a very unique opportunity to leverage our size and scale and be pioneers in the industry to standardize operations, whether that was in property management, procurement, facilities, or pricing. All of these areas represented that opportunity for us. And all of these efforts, basically, the lessons learned, both good and bad, created the organization that we are today. The pursuit of operational excellence never stops with us. It is wired into our DNA. And I got to tell you, I have never been more excited about our future.
This afternoon, you're going to hear from a few of our leaders to discuss where we are on our journey and where we're going. I'm going to begin by discussing the high-level operations strategy and some of the financial goals that we've established. After that, we're going to discuss enhanced data and analytic capabilities and the framework that we follow to design and prioritize various value-creating initiatives. We're also going to share some insights about how we align analytics with practical execution, repeatable, scalable approaches across the portfolio that maximize our revenue performance. Then we're going to talk about the voice of our customer. We're going to share a few specific examples about how we leverage AI and automation to centralize on-site tasks and drive income-wide growth while creating a seamless customer experience.
And we're going to complete our prepared remarks in this section, highlighting our people and our culture. This is the secret sauce that brings everything you hear together and really does drive our competitive advantage. Like at the end of the prior session, I'm going to have the leaders, the speakers come back up here, and we'll host a brief Q&A session for operations. So let me begin by discussing how we think about creating value across the operations lifecycle. We're not just managing properties. We are leveraging technology and data to optimize every aspect of our business. At the heart of our success is a commitment to invest in people, process, and technology. We are very intentional about how and when we do this. A key component of innovation has been our ability to harness exponential growth in the PropTech industry.
We have had great success in building strategic relationships with technology and venture capital firms to discover emerging technologies and then partnering with, and in many cases, making direct investments into newly formed companies to leverage, influence, and invest in world-class solutions for our operating platform. EliseAI is a great example of this, and Kristen's going to share some more details on that in a moment. We're also passionate about upskilling our own employees or attracting first-class talent from other companies or industries. Having the best people, processes, and technology is only part of the equation. We are exceptional at leveraging information to better understand trends and opportunities. And now, with the advancement of technology, we're starting to see how powerful analytics can really be.
Heather's going to discuss our renewal process, which is a great example on how we leverage our own information to generate better insights and results. When you put all of this together, it creates a foundation for what we call operational excellence. It is truly transformative. Our cutting-edge operating platform, powered by our own data, publicly available information, and driven by our incredible team, is designed to maximize efficiency, agility, and financial performance while creating an exceptional customer experience. We are not just providing apartment homes. We are curating a personalized journey for every resident, from their initial tour to their long-term stay with us. Before my colleagues and I start going through some of the specifics, I want to emphasize one quick thing.
We're going to be discussing using cutting-edge technology to better price and run our properties and how we leverage technology to disrupt ways of doing business. At our core, we are focused on our customers and their experience. They are the ones, whether market rents are moving up or down, it is our customers that drive our purpose. This is a never-ending process. We learn what works, what doesn't, and that helps us ask better questions about what comes next. This is how we innovate, and we are really good at it. So what does all this mean to you? Well, it means that we have built an operating platform and an innovation machine that drives value to the bottom line and creates a competitive advantage.
Looking back over time, even before 2020, it is clear to us that our approach can deliver about $50 million in incremental annualized NOI improvement every four to five years. Building off the momentum of the recent performance, we believe that we have an opportunity to drive incremental NOI growth towards the $100 million target and run this business with a 72% operating margin over the long term. We've identified over $50 million of opportunity in the next five years. And through our dedication to the flywheel process, we're confident that we're going to continue to identify new opportunities to drive additional NOI longer term while staying laser-focused on delivering that seamless customer experience. We have broken the future value out into phases, and the $30-$35 million over the next three years that you see in phase two is directly tied to initiatives that are underway.
So let me take a minute to summarize the $45 million in incremental NOI delivered through phase one. I'd like to call out that our focus on centralization and automation in both the sales and service side of this business has resulted in a 15% staff reduction since 2020 and a net annual payroll savings of just over $20 million. We have also driven approximately $20 million in additional revenue by enhancing resident technology and applying the innovation framework in areas like parking, common area rentals, and amenity values. These superior results were delivered without sacrificing customer satisfaction. In fact, our overall satisfaction levels are near all-time highs, and we have just reported the lowest annual resident turnover in the history of our company. Our constant drive for improvement and speed of execution sets us apart from everybody else. So let's look closer at phases two through four.
It is clear that we have a lot going on, and the teams are always thinking about what comes next, whether it's reducing vacant days, rolling out instant-on internet connectivity for residents, leveraging data from asset tagging our own equipment, or empowering prospects and residents with more self-service functionality, or the many other cool initiatives that we have going on. Our company is exceptional at maximizing the value from each and every one of these. While many of these initiatives cross over phases, we will learn, iterate, and optimize along the way. We are also confident that technology is going to keep on advancing to create an additional set of opportunities for us in 2030 and beyond. Our determination to keep transforming this business by leveraging technology to create a seamless customer experience while creating shareholder value is what gives us the conviction behind this goal.
As you're going to see throughout the presentation today, centralization, automation, and self-service are consistent themes in our innovation strategy, and they're transforming every part of our organization. Business process automation applies to all areas of the company. To date, we have seen the biggest impact at the on-site level, where most of the opportunities and historically most of the work has been. Kristen's going to share a few specific examples shortly, but in essence, in property management, we are automating or centralizing everything that does not need to happen on-site. And we are very excited to report that two-thirds of our properties have already adopted a shared community model. And honestly, we are just scratching the surface about what automation and centralization can achieve. There is just so much more opportunity ahead.
Before I turn it over to Tim, let's talk about where you can see some of the impact. The expense results from our operating platform clearly show up in our reported numbers as compared to the multifamily REIT peers, who are all pretty good operators, but actually only represent a very small percentage of the owned apartments in our markets. The group that we compete against the most every day are smaller operators or institutional owners that utilize third-party fee managers. Our results against this group of operators is even more impressive. I'm going to share a few examples of that in a moment. A couple of quick call-outs here. Specific to 2024, we once again beat the peer average when looking at overhead, payroll, and repairs and maintenance as a % of rent per unit.
Also, we have delivered the industry-leading lowest compounded annual growth rates in both payroll and repairs and maintenance over the last five years. We are exceptional operators, and applying this innovation framework ensures that we get the best results. And while everybody has access to many of the same tools in the industry, we have some core competitive advantages. First, we are a trusted partner that service providers want to work with. Many times, we actually make their product even better. Second, we're really good at being able to identify and extract the value from these solutions, and in many cases, layer on our own business expertise on top to even maximize the value potential even further. And then finally, as you're going to hear from Catherine in a moment, our teams know how to execute change, and they are so eager to adopt new ways of doing business.
These are sustained results that we just keep adding on to. So as you saw on the previous slide, we excel at expense management. The true power of this operating platform shines well beyond that, especially when we look at where we source the majority of our deals from. And that's the local, privately held, owner, operator, or financial institutions that utilize third-party fee managers. Applying our operating discipline and innovation framework allows us to significantly boost revenues and reduce expenses compared to these types of operators. This gives us one more competitive advantage, as mentioned in our capital allocation discussion earlier today. So let me share a couple of examples here. These are assets that we purchased from two different types of private operators, private owners.
On both of these deals, we implemented many of the initiatives I just outlined, like our superior renewal pricing process, our own expense reduction and income-boosting strategy, and we were able to expand the controllable operating margin by over 1,000 basis points at each one of these deals. This value creation starts on day one of ownership, and it typically takes about 12 to 18 months of operation to realize this type of operating margin expansion. It's a very exciting time. I am going to tell you that these types of opportunities exist in any deal that we look at, whether it's in an expansion market or an established market, whether it's a one-off transaction or a portfolio deal.
This kind of margin expansion translates to about a 30 basis points average increase on the initial yield of these assets, and this excludes any value that we are creating in 2025 and beyond. This platform advantage is ever-evolving and is only going to grow bigger in the future. We are disciplined operators. We have exceptional revenue management and expense control capabilities, and we know how to leverage our size and scale to create a competitive advantage. And with that in mind, I want to introduce you to Tim Gohl, who's going to walk you through how we leverage our size and scale with enhanced data and analytics capabilities and apply our innovation framework that is repeatable across so many areas of our business. Tim?
All right. Thank you, Michael. My name is Tim Gohl. I'm the Vice President of Data and Analytics.
I don't own a black blazer or a dark blue blazer, but thanks to the power of artificial intelligence, we get the headshot that we're seeing there today. So pretty remarkable stuff. That's just a flavor of the type of innovation we're using at this company. It's remarkable. All right. So I've spent my entire career in analytics, most recently 10 years at Amazon in worldwide operations. For those of you not familiar with Amazon, it is known for customer obsession, innovation, and operating at scale. If you think about it, not too dissimilar to the characteristics of Equity Residential. And this is what attracted me to the role. I wanted to bring the best of analytics from the tech world to real estate.
And that's why today I'm excited to share with you our overarching analytics strategy and dive into why our proprietary data positions us for success, how we think about developing scalable analytics capabilities, what our process is to leverage those capabilities to deliver NOI growth, and finally, evidence that all these things together are delivering real measurable impact. And then I'll hand it off to my business partners, Heather and Kristen, who will provide a deeper dive into how analytics capabilities have improved revenue and expense performance so far. So, as Michael mentioned, innovation is the key to creating lasting value. And we create lasting value with a successful analytics strategy, one that enables us to adapt, scale, and unlock new opportunities that drive impact to the business. And our approach is built on three key pillars. First, invest in analytic talent. Next, modernize data infrastructure.
Finally, optimize the business. Analytics talent is all about hiring the right person for the right role at the right time. We want to hire and develop the best analytical talent in real estate. These just aren't technologists. These are owners, people that work side by side with employees at every level of the organization. This is how we create a data-driven culture. Next, we modernize infrastructure. This is to enable speed, flexibility, and scale. The world is moving fast, and we need to be able to move at the pace of the innovation around us. That is why we are transitioning to a modern cloud-based platform-agnostic system. This allows us to quickly integrate new technologies, ingest real-time data, and ensure insights are accurate, timely, and trusted. Then a final step, we optimize business decisions. This is where things get a little cool.
We're introducing things like artificial intelligence, machine learning, predictive analytics. But it's not just the science. We want to tap into the centuries of experience we've heard from on the stage today. Because time and time again, what we found is that the best results come from solutions that leverage science and expertise in harmony. And so we are currently in the optimization phase, and I am confident that we have the right analytical capabilities to deliver the incremental NOI growth that Michael had mentioned. So why am I so confident? I think it all starts with the data. Think about this. We've been operating at scale for years. And over this time, we have captured over a billion data points. A billion, B. Every aspect of the business, we are collecting data points around. And behind me, you'll see some examples of where we're collecting that data.
But that's just scratching the surface. And the most important thing to keep in mind is that this is not just a data set. It is the foundation for better decisions. We can connect data in ways that were never before possible. For example, how does resident experience impact the likelihood to renew? Or how do service request patterns influence resident experience? Relationships across metrics are more easily identifiable than ever before. And by connecting the dots, we can anticipate customer behavior, not just react to it. We can optimize pricing and revenue strategies with precision. We can identify operational inefficiencies before they impact financial results. And this is what sets us apart. Not just having the data, but using it in a way that shapes strategy, drives execution, and delivers tangible business impact.
So we can use the data in such an impactful way because of the capabilities we build. These aren't specialized single-use solutions. They are reusable capabilities, building blocks for continuous innovation. And with each new application of reusable capabilities, we can move faster. And so let's take a deeper look into these capabilities. Process automation. This is how we eliminate inefficiencies and reduce manual work. Artificial intelligence and generative AI. This is how we create smarter, more intuitive customer interactions. Actionable analytics is how we give decision-makers insights before even needing to ask the question. And machine learning is how we predict outcomes before they happen so we can act proactively. Later on, Heather will talk about machine learning and actionable analytics and the impact it's had on revenue. And Kristen will dive into automation and artificial intelligence and the impact of operating expense.
But the most important thing to remember, this capabilities-focused approach keeps us agile, scalable, and always ready for what's next. So how do we apply these capabilities to get that business impact? We follow a simple but powerful solution development process. Discover. We identify high-value opportunities in partnership with the business. Strategize. We develop a plan to leverage the appropriate capabilities. Implement. We deploy solutions or run controlled experiments, always with a focus on speed to market and iteration. And finally, optimize. We continuously monitor and improve to maximize long-term value. And the process is working. You'll see some of the results over on the left-hand side of this slide.
And so, working side by side with the business, we've been able to deliver 25% reduction in time spent on the end-to-end renewal process, $1 million better rent negotiation outcomes through improved insights, $5 million more revenue from improving renewal offer logic. And now we are going after day-to-days. This presents a $3 million opportunity per day saved. And as it stands today, we've identified over $10 million in opportunities that have gone all the way through the implementation and optimization phase. And we continue to add high-value initiatives to our roadmap all the time. We are just getting started. So the key takeaway is we are scaling data-driven decision-making across the entire business, and the impact is compounding over time. And that's how we're building towards that roadmap that Michael laid out for NOI growth.
So that gives you an idea of how we've enhanced our analytics capabilities and the value we expect to deliver. And now I'm going to hand it off to Heather, who's a business partner that I've been working side by side with since day one. And she'll share how new analytics capabilities are transforming the revenue space.
Oh. I got it. Okay. Thanks, Tim. Today, I'm excited to share with you how we've been transforming revenue management through this partnership. I joined Equity back in 2005 at a pivotal time in our company's history when we were just piloting the concept of a centralized, specialized pricing team that leveraged revenue management software. It was exciting back then to pioneer the use of internal data to produce streamlined operations and better revenue outcomes.
Little did I know, over the course of 20 years, how much we would grow from just setting pricing to strategically shaping revenue outcomes. And today, we're redefining and identifying things we never even thought were possible by using cutting-edge proprietary technology to drive performance with greater speed, precision, and scale than ever before. At its core, our goal is simple: deliver a seamless customer experience while maximizing the expected value of a unit by either retaining or replacing residents at the optimal price. Let me dive into the retaining side of the equation, renewal, where we fundamentally have changed the game. With renewals accounting for more than half of our lease transactions, they're one of our most controllable revenue drivers. Yet the process was historically decentralized, reactive, and highly manual.
That's why we reinvented the renewal journey, leveraging data, automation, and AI to create a faster, smarter, and more profitable approach. At the core of this transformation is Wayfinder, our proprietary renewal platform that we built by coupling our years of experience in the industry with the advanced analytics that you just heard Tim talk about. More than just a tool, Wayfinder is our co-pilot, integrating real-time internal data, predictive modeling, and automation to ensure that every renewal decision is optimized with precision. This renewal transformation is built around three core pillars. First, centralization and automation, standardizing execution and eliminating inefficiencies for a consistent data-driven process. Second, AI-powered analytics, where Tim and his team come in. Wayfinder ingests key internal inputs like replacement rent and vacancy costs, and then machine learning is leveraged to deliver the optimal renewal offer.
And then third, revenue optimization, including expanding negotiation strategies to unlock value beyond just price. By combining technology, data, and human expertise, Wayfinder elevates renewal management into a highly strategic intelligence system that enhances efficiency, agility, customer experience, and revenue performance. So let's take a deeper look at how Wayfinder is redefining renewal management. The first step in this transformation was building a solid foundation with centralization and automation. Before I jump into the dashboard that you see on the screen, let me give you a bit of historical context. Prior to 2022, renewal execution was fragmented. Pricing was set centrally, but the on-site teams handled communication and negotiation, leading to inconsistent execution. I remember being a pricing analyst back then, and my days required report refreshing, reviewing lots of statistics, and then individually reaching out to community managers to follow up on missed actions or communicate changes in strategy.
To address all of this, we centralized execution, creating a specialized team trained in customer engagement and negotiation skills. The impact? Consistency and greater agility to adjust in real time. Instead of having to shift strategy across hundreds of community managers, we now had a small core team that could react in real time. This core team also provided faster responses and a better resident experience. Then, with centralization embedded, we quickly took the next step to focus on simplification and automation. As you know, we are very focused on our dashboards, and what you see on the screen is a portion of our Wayfinder platform. This tool is what our centralized team members utilize for each renewal conversation. We built this platform with the goal of streamlining renewals by automating manual, time-consuming tasks, allowing teams to focus on customer service over admin.
Our Wayfinder platform empowers our centralized pricing team by providing embedded analytics and dynamic dashboards to easily and clearly understand their key performance indicators like occupancy and left-to-lease, all in one screen. Automated workflows to eliminate manual, time-consuming tasks such as looking up resident data, abating the common call center response of, "Can you hold, please?" It also provides standardized pricing negotiation strategies based on performance and market trends, and I have to say, the market trends are interesting. I have been watching renewal data for 20 years, and based on all the customer touchpoint data that we have, I think negotiation is clearly a sport for those that live in New York City, and which leads me finally to the inclusion of expanded negotiation levers, enabling us to maximize revenue not just through rent pricing, but also through value-added strategies like parking incentives. Wayfinder doesn't just manage renewals.
It optimizes them at scale, driving efficiency, retention, and revenue growth alongside a seamless resident experience. Following the success of centralization and simplification, we quickly turned our focus to phase two, optimization and experimentation, leveraging Wayfinder's proprietary analytics to drive smarter, data-driven renewal decisions. Before we turn to the slide, let me provide a bit more color on the real breakthrough: Wayfinder's AI-driven intelligence. This intelligence allows us to move beyond traditional pricing methods, using advanced analytics to fine-tune every aspect of the renewal journey. Wayfinder ingests a billion data points that Tim just walked through to create optimized renewal offers alongside dynamic negotiation lands, ensuring that pricing remains competitive and responsive to market conditions. Over the past year, we've piloted across our portfolio, and the results speak for themselves.
As Tim mentioned, we have delivered an additional $5 million of incremental revenue and have seen 25% faster negotiations alongside a 50 basis point increase in renewal percentage. This is just the beginning. We built a flexible and scalable platform that allows for rapid testing, measurement, and refinement of strategies. This isn't just about renewal pricing. It's a foundation for future tools that will drive even greater customer satisfaction and revenue performance. We've roadmapped our next horizon and identified another $10 million in opportunity that folds into Michael's $100 million opportunity that we are determined to capture. Now, moving beyond renewals, we're applying the same principles of data-driven decision-making, automation, and AI-powered optimization to a critical driver of our business: reducing the time between leases from move-out to move-in.
Every day a unit is empty is lost revenue, and a one-day improvement in the average across our portfolio represents a $3 million revenue opportunity. We are confident we can save five days off our average over the next several years. Our objective here is clear. We need to align supply and demand more precisely, meaning once we get a notice to vacate a unit, how do we most rapidly lease that unit before it goes empty? To do this, we are building a proprietary program that, again, couples deep industry knowledge with cutting-edge technology to revolutionize how we manage the leasing funnel. Leasing is a function impacted by many parts of our operating platform, from marketing to sales to pricing. We are focused on more tightly integrating our teams and technologies into one unified data ecosystem.
By linking data between pricing, CRM, and even our service platforms, it allows us to create prescriptive analytics that generate real-time actionable insights, automated and at scale. Think targeted alerts that flag at-risk units earlier, enabling proactive pricing interventions, or anticipating demand shifts that prompt marketing, optimizing marketing outreach. We believe the game changer is connecting all the dots, not just pricing, to create a seamless experience for both our on-site teams and our prospects while delivering strong results and as we learn more, we will continue to combine technology with human expertise. AI and automation enhance decision-making, but we believe work best along the insights of our teams on the ground. I am so excited that we now have the technology and the new skill sets to execute what we've been dreaming about for years.
As you heard from Michael, we love testing, learning, and refining, and now our platform enables us to do just that rapidly and at scale, continuously refining with a data-driven, agile approach, just as we did with renewals. We've already begun deploying these capabilities, and the early results are promising. As we scale this effort, we see a clear path to capturing the full $15 million of opportunity over the next several years, unlocking new revenue while delivering a better, faster experience for our customers. So now, I'll turn it over to Kristen to walk you through how we are leveraging technology and our expertise to create a better customer experience. Thank you.
Got a little collection going up here. Hi, I'm Kristen, and I oversee our sales and centralized operations.
But my origin story actually started in property management, where I was a regional manager right here in the New York metro area. But most recently, I have led the transformation in how our customers do business with us. So I'm really excited to be able to give you some insights about how we think about customer experience, how we utilize the voice of the customer, and I'll showcase a few of our processes where we've leveraged AI, automation, centralization, and self-service into our business. So at the heart of everything we do does lie our customer experience. It's not just one department, and it's not just an afterthought. It really is the lens that we use in order to evaluate and prioritize many of our business decisions. And as we evolve and transform our customer experience, we stay focused on three core pillars. So first is our customer goals.
We want to make sure that we equip our customers with the right tools, information, and resources at every touchpoint in their customer journey with us. We believe that when we design a new process, we start with the customer goals first to ensure that we can meet them where they are at. And this also creates value where it matters most. Make it easy to do business with us. This means being effective in reducing friction in our processes and proactively offering solutions to our customers that meet their needs. We have made significant strides in this area through self-service options, centralized support, and automation. And all of this has been done without sacrificing our customer experience. And then to truly understand our customers, we rely heavily on the voice of the customer, and I'll refer to that as VOC. So to us, it's more than just feedback.
It really is a direct line to our customers' needs, their pain points, and their values. Let's take a deeper look at how we listen. So we have built an exceptional feedback loop with multiple channels for listening to our customers, and we collect over 200,000 responses annually. So first is our internal customer survey and one of our most powerful tools. By surveying our customers at key touchpoints through their journey with us, from the initial tour to the move-out experience, we gain valuable insights that empower our on-site teams to excel. We use public reviews and online reputation. In the same way you likely use online reviews for your buying decisions, our customers are no different. So our on-site teams are actively encouraging our satisfied customers to share their positive experiences on platforms like Google. We have a renter preference survey.
This is an annual survey that we send to our own residents and receive nearly 25,000 responses. This is an exceptional response rate. It provides us with a deep understanding of what our customers value most. It validates many of our customer experience strategies while also driving innovation for new products and services, and as a matter of fact, we just wrapped up our 2025 Renter Preference Survey last week, and this year, we asked specific questions around comfort on self-service. 93% of our residents who responded shared that they feel comfortable that they can generally achieve what they need via self-service. That same percentage shared that if and when they need assistance, they know where to find it, and 87% of our customers also shared that someone is responsive when they need assistance.
This is a great testament to the design and execution of our core pillars: know the customer's goals and make sure it's easy for them to do business with us. We also have a resident relations channel, and from time to time, we conduct resident listening sessions, and lastly, we are proud to partner with leading institutions like the University of Michigan Ross School of Business and Northwestern University Medill School. These partnerships have been really instrumental in refining our understanding of customer loyalty and anticipating the needs of our future generation of renters. We are staying ahead of the curve by always understanding that need of the future renter, so let me share one of those unique projects. As Mark noted earlier, by 2030, Gen Z will represent the largest population of renters.
So to anticipate their needs and preferences, we partnered with Northwestern's Medill School to conduct a study on Gen Z. Our goal was to gain insights into their lifestyle, their purchasing, and their communication preferences. And through this study, we were able to identify both existing and emerging Gen Z preferences. One insight is that Gen Z expects a strong digital presence and self-service options. It's no surprise that self-service is second nature to them, but they still value human assistance when needed. In fact, they have an incredibly high expectation when it comes to support. It's also well known that Gen Z is highly active on social media, but they're now using it more often for their buying decisions.
In our effort to meet the customer where they're at, it really requires us to take a new look at how we use social platforms like Instagram or TikTok to attract and retain this renter base. And despite their digital fluency, Gen Z still desires a sense of community and belonging. They have grown up in a world of uncertainty, so they really value authenticity and stability. So these insights have informed us with both strategic and tactical recommendations that we're currently using to create, to test, and deploy new initiatives. And these insights have also validated that our current strategies are aligned with the needs of this emerging renter base. So Gen Z aside, by understanding and anticipating the needs of our renters through our various VOC channels, we're able to continuously improve our products and services that we believe will meet their needs.
So again, our approach to VOC helps us to validate the strategic choices we have made to our operating platform. And these changes have been well received by our customers regardless of their generation. And over the past several years, we have truly disrupted our operations and how customers work with us by leveraging AI, self-service, and centralization. But it's important to highlight the dependencies that each of these had contributing to our overall operations platform. So at each step, as we layered in AI, added more self-service features like the self-guided tour, centralizing more tasks like our application process and renewals. The combination of these efforts is what resulted in our success in efficiently staffing our communities. But this was not an easy task. And as you heard Michael say, we learn what works and what doesn't.
I actually love learning so much that I actually moved to one of our communities out in Jersey City for three months when we were launching our new CRM software and worked alongside our leasing office teams. This really allowed me to experience firsthand the power of these tools on our day-to-day operations. This, in turn, unlocked our vision for Flex, which is our shared community staffing model. These strategic imperatives have given us $22 million in payroll savings. We've improved our overall internal customer satisfaction scores and have had back-to-back years of high renewal retention. So we've seen how the strategy has delivered operational efficiencies, superior results without sacrificing the customer experience. So next up, I want to share a few of the cool tools we have when we leverage AI, automation, and self-service into our business.
As a company, we've always been on the forefront of innovation. We recognize the potential of conversational AI and the impact it could have on one of our most important tasks, which is the initial lead inquiry response. Our own internal study showed that fast and accurate responses to customer inquiries significantly increased our lead-to-lease conversion rates. Within 60 days of piloting our Elise AI-powered agent, our lead-to-lease conversions surpassed that of our human agents. With those results, we moved quickly and deployed this tool to all of our communities, now known and loved as Ela. In fact, Ela is so loved that customers often come in asking for her by name. We've received five-star reviews that have commented on her phenomenal work ethic.
With over 1.5 million customer interactions per year and 90% of our workflows for prospects now being automated, this tool has directly contributed to $14 million in payroll savings. As Michael shared, we are a trusted partner with EliseAI. It really allows us to work together to continually make the product better. And this has been instrumental in helping us unlock the future potential with conversational AI and automation in the leasing process. And we're excited to expand the use of EliseAI into other areas of our operations. We've begun testing its capabilities in the resident journey, assisting with common resident questions, account management, and we plan to do this in the renewal engagement. We are fully committed to conversational AI.
We believe it enhances the customer experience, delivers exceptional workflow efficiencies for our employees, and will be a key driver in delivering value in our phase two initiatives. The self-tour. So when we started testing self-touring back in 2018 at a very small set of communities, this idea of touring on your own created some angst for our customers, and even a little bit for me. But again, we focused on learning what worked and what didn't. And over the course of the year, we developed an agent-assisted self-guided touring process. Today, we have self-guided touring at 100% of our communities, and 90% of all tours completed are self-guided. Our prospect experience results have increased, and we've seen no negative impact to our leasing velocity. But the self-guided tour is a process that we didn't have to wait for technology to come along in order to do it.
No shock, it did not take long for technology to emerge in this space. Recently, we have begun piloting the use of a web app self-tour experience that leverages our smart home technology. This fully autonomous process allows our customers to clear an ID verification, access the community for a tour, and get centralized agent support on demand. Results so far have shown that we are seeing additional time savings for our leasing office team members. We're able to increase tour traffic due to our ability to expand our tour times outside of our normal business hours, and tour-to-lease conversion is in line with our normal closing metrics. We are still in the learning phase, though, with this technology, and we have identified that it will likely be used more in a prescriptive approach to our operations. Self-guided touring has created really exceptional efficiencies for us.
What's most exciting is that the customer of today really appreciates the authenticity of touring at their own pace as long as they have the support when needed. Our applicant screening process is centralized, but again, we identified early on that more automation would be critical for long-term success. So in just a few weeks, we're going to be piloting a brand new applicant screening process. We're really excited to test this technology out because we believe it's going to deliver some great results for us by providing a low-friction application process that takes only 15 minutes to complete. We're going to be automating the ID, the employment, and the income verifications, and we'll use AI analysis to uncover potentially fraudulent documents.
We believe these enhancements are going to yield improvements to our applicant underwriting, giving us greater assurance that our applicants are meeting our screening requirements, thereby reducing delinquency and the potential for fraud, all the while creating an easy application process for our customers. Leveraging the strategy I have shared, we have been able to directly impact $22 million in payroll savings, and we are excited about where we've been and where we are going because we hope to unlock another $15 million in the next several years. We are in the early stages. We know how to do it, and we show you we know how. We see how these tools are really creating efficiencies while maintaining positive customer interaction, and as I have been sharing, all of this transformation of how we work with our customers has been done without sacrificing customer satisfaction.
Our talented teams can now focus on issues that require human touch, ensuring that every customer receives the personalized support that they deserve. The human element in our business is still an incredibly important component. With that said, I'll now turn it over to Catherine Carraway, Chief Human Resources Officer, to talk about our amazing employees. Thank you.
Thank you, Kristen. I am Catherine Carraway, and for the next few minutes, I have the privilege of talking about our people, the driving force behind strategy and success. Buildings don't create value. People do. Our success isn't just about our assets. It's about the talent, the dedication, and the culture that bring our vision to life. When we invest in people, we create stronger teams, we elevate resident experiences, and we drive lasting growth. The right people in the right place at the right time. Don't just execute strategy. They accelerate it. This is the People Investment Advantage because when people thrive, business thrives. Apartments don't turn themselves, and service requests don't resolve on their own, and great resident experiences don't happen by chance. They happen because of people, the right people in the right place at the right time.
That's why employee retention isn't just a metric at Equity. It's a competitive advantage. Long-term employees don't just fill roles. They shape the heart of our community, and they shape our resident experiences, and they drive operational excellence. They're the difference between a place where people live and a place where people call home. And with faster hiring metrics in our key markets and employee turnover nine percentage points below the industry median, we're not just hiring quality employees. We're keeping them. And that's not luck. As Michael said, over the last five years, we've reduced our onsite workforce by 15%, and yet they still stay with us. That's not luck. It's because of intentional investments in onboarding and training and creating a culture that engenders engagement and fosters growth. In spite of everything that our people have been up against, we still have strong engagement scores year- after- year.
Because when people feel valued, they don't just stay. They thrive. Our employees are thriving because they are able to contribute and deliver the kind of exceptional service that keeps our residents renewing their leases year after year after year. Yes, when employees do leave, and they do leave Equity Residential because Equity Residential isn't for everyone. With every opportunity where someone leaves our organization, we lean in. We learn, and we adapt, and we get better. We empower our employees and our leaders to drive change. You've heard Kristen talk about customer automation. You've heard her talk about centralization, our Flex teams, and self-guided tours, and how these innovations are transforming our company and our industry. How many of you know that transformation isn't just about technology? It's about the people. Technology plus people equals transformation.
Our employees have been faced with an enormous amount of change, and yet they continue to lean in, adapt, and lead. They are adjusting to new ways of working. They're embracing change, and they're stepping up as leaders in this evolving landscape, proving time and time again that it's about knowledge, it's about a mindset, and it's about action that drives success. We focus on why change matters at Equity, helping employees understand the why behind the what, and that these advancements aren't just operational shifts. They're the foundation of the future. Our human resources team partners with our business leaders to help employees understand and receive the clarity, the training, and support they need to be confident, equipping them with the skills and behaviors to lead in this evolving landscape, and this just isn't about keeping up. It's also about owning the change.
Our employees are not just responding to the transformation. They are driving it. They're strengthening our operations. They're enhancing our customer experiences, and they're shaping the future of our business. Because at the end of the day, success isn't just about new tools and new processes. It's about the people that actually make them work. So every single day, they're proving that they are ready for what's next. At Equity, we are developing some of the best leaders in the industry. Just look at the talent, the breadth, and the depth of the leaders that you heard from today. Strong leadership doesn't happen by chance. It happens because of deliberate investment in people, sustained development, and the commitment to grow talent from within. And we have the results to prove it.
90% of our regional managers, our property leaders who oversee 8 to 10 properties, have been with the organization 6 or more years. 52% of our community managers and our maintenance managers have been with the organization for 6 or more years. Upskilling our leaders is a commitment at Equity. Last year, every last property leader went offsite for 16 hours. Think about it. Two whole days of focused leadership training. That's 470 leaders, over 7,500 hours of training. And you know what? They're doing it again this year because we've made a commitment to developing and upskilling our leaders. And this matters to us because our leadership is the engine behind our success. We invest in leaders who embrace transformation, help their employees navigate workforce dynamics, and inspire teams through change. They harness AI-driven insights to maximize efficiency and productivity. We're not just filling the leadership roles.
We're cultivating the next generation of visionaries, change makers, the people who will set our foundation for the future and fuel our company's success. And as we invest in their growth, we equip them with the tools and resources they need to lead through change. We are not ensuring success only today, but we're building a leadership legacy that drives us, inspires innovation, and sustains performance for years to come. Why are you here? It's about the People Investment Advantage, the ultimate driver of our success. We've talked about transformation, and we've talked about strategy. But at the heart of it all, it's the people that make the difference. It's the right talent in the right place at the right time. Empowered employees and bold leaders driving performance, innovation, and execution. A leadership pipeline built for resilience and strength, ensuring long-term stability and sustained growth.
This is the People Investment Advantage. It's not just a strategy. It's a commitment. It's a commitment to developing, attracting, and retaining the best employees in the industry. Because at the end of the day, you know what? Technology evolves, and markets shift, and strategies adapt. But it's the people that turn a vision into value. And that's how we win. Thank you. And with that, I'll bring our operational leaders up for Q&A.
Excellent. Thank you, Catherine. So again, we're going to use the Slido platform. So go ahead and send me your messages. Michael, get up here. Everybody, up here. Michael, I'm going to ask you one we got while you were talking. Are the days of long-term 3.5% OpEx expense growth over?
No. Definitely not. I think in a minute, we're going to talk through a little bit more about the future projection. Robert's going to walk through kind of longer-term cash flow. But look, I mean, we're in a short period of time right now where we have some expense pressures this year, but we still have a lot of opportunities in front of us. I think you just saw us talk about leveraging kind of automation and centralization. I think that's going to translate into a couple of years ahead of us where we generate, again, very low growth rates in some of repairs and maintenance and payroll accounts that will keep the overall expense growth below that 3.5% level.
Great. There's a lot of discussion on NOI enhancement, but not about the cost to achieve this. What is the ROI on these investments?
Yeah. Maybe I'll start, and the team can talk about some of their own hurdles. But first, everything we've talked about is net NOI. So Robert's going to come up. He's going to talk about cash to the bottom line in a moment of all of this stuff. But the measurement and the hurdles that we have is all based on the net opportunity that we see. Each one of these deals, I guess I would say, may have a slightly different ROI hurdle. But typically, we're not getting excited unless we see something that's given us like 2x in the first year or second year because there's just a lot of opportunity in front of us. And some of the returns that we've seen on the software enablement that we've done have been exponential kind of that rate.
Yeah. I would agree. We started so early in the conversational AI that we didn't really know what to expect, and I actually had a hard time getting it approved, believe it or not. But luckily, Michael stepped into his role at the time, and he quickly gave me the green light, so to be able to see the speed to which the AI was able to really reduce one of our top-of-the-funnel tasks, which was really difficult for our teams to be able to do in a consistent way, so we saw a very quick ability to create an ROI on that particular tool, and as we are continuing to advance with conversational AI, we believe very strongly that it will continue to produce those same results for us.
How much lower can onsite headcount be reduced via the technology?
Yeah. Do you want me to start with that one? Okay. Yeah. I mean, I think the potential is there. I think one of the things that we're seeing where we kind of, again, you started this sort of top-of-funnel approach. And as we've layered in our technology at the top, we're now sort of getting a little bit more into that middle region. So the flexing of our communities is probably where we have the most power to do that. And because of our geographical locations, it really gives us the power to take a look at how each of these buildings needs to be staffed. So we look at flexing. So I might have one core team at the larger building, maybe one property with no team at all. They're managing it through our technology in a centralized capacity.
So I think that's where we see our sort of next place we're going to go as we look at how we can effectively staff our communities in the future.
This is sort of a related question. What is the floor for onsite? What's the staff level that's the floor at a property? And what's the trade-off from having a lower-quality customer experience?
Yeah. I mean, I think our data shows our customers are liking what we're doing, and we've been reducing staff pretty significantly across the board, and 15%, and a lot of that's come primarily from the leasing office team. Our service teams are very tactical, so they have to perform onsite a little differently than the way I can centralize a team to achieve many of those leasing office activities, so I'm not sure we have a floor just yet, but we're going to continue to pressure test that, but really leverage our data and our feedback from our customers to really see where we can take it.
Great. Does Wayfinder project a 5% renewal spread for 2025? How does that compare to the market rate projections? Most importantly, which inputs for the Wayfinder are scoring positively, i.e., better occupancy, better demand?
I'm going to let Tim speak.
Yeah. So we're getting into some of the secret sauce here. We try not to give too much of that away. I would say that it's a multivariable equation, and you can tune into our future earnings calls to kind of see how that plays out. And that'll probably show you some of the results of what's happening. And hopefully, if the results are positive as we would expect, then the inputs translate to the right outputs, and you'll see the returns that we expect. So best case scenario, your earnings call is positive. That ties back to what we intended to do. But I can't give away all the secret sauce. I don't think of that one.
I think with all of these metrics, at the end of the day, it's just about maximizing revenue growth. There's trade-offs between rate and occupancy. You heard a little bit about the opportunity with vacant days. All of these kind of go together to figure out what do we need to do to maximize the revenue in the portfolio. That's really what we focus on.
Okay. What inputs do you look at for predicting the likelihood of a customer renewing their lease? And then how do you make the decision on magnitude of renewal increase?
You want to go ahead and start, and then I'll layer.
Yeah. So I can start there. The models are pretty sophisticated and complex. We basically have all those billions of data points across all those different teams. Everything kind of goes into the model. So we're kind of using statistics to identify what is most important. Again, I'm not going to kind of talk about what specifically is most important to that model. I think the most important thing is we let the science kind of dictate what is most important. I think the most important takeaway, though, is that we're always using proprietary data. I think that gives us a unique competitive advantage. And I think good accuracy of our ability to predict the likelihood to renew. So I think at the end of the day, we're happy with the results. We're happy with the methodology. And the systems are designed to evolve and change.
So it's not like a static model with constant variables. We are constantly feeding new information and trying to improve the model. But it's all proprietary. And yeah.
Yeah, and I'd add on to that too. I think that when we think about renewals, we think about the renewal journey, right, which is also the customer experience during their life cycle with us. It's how do we leverage all those customer touchpoints, right, to really make them the most satisfied that want to stay with us, right? And so we want to be thoughtful about using all the data that we have internally to craft their entire journey with us to drive renewal performance.
Okay. You've mentioned historically high retention last year. Where do you think retention can sustainably run with your innovations and customer service initiatives? And any notable differences between some of your established markets and expansion markets?
Yeah. So I mean, we've had record low turnover, and it's really almost consistent across all of these markets. The expansion markets today do run a little bit higher turnover, and that's just because there's a lot of choice. There's a little bit more of a transient nature to some of that. So I think right now, when you think about the next several years, we project that we are going to be in this point of continuing to see low resident turnover. The focus that we have on our customer, the leveraging information and understanding trends and opportunities to ensure that nothing we are doing is jeopardizing their satisfaction levels, meaning from a controllable renewal standpoint, we got it. So there could be life event changes that happen that's kind of out of our control.
But right now, what we see is when we look at this macro indicator, we think we have the next couple of years of pretty low resident turnover. And I think as you think about even in the expansion markets, with the new supply starts dropping off so dramatically, I think the choice options will start to kind of normalize there, and we'll see kind of better retention over the next couple of years.
Great. In the vacant day use case, how long was the process from identifying the problem to where we are today? And how much longer to achieve the 3 million savings per day? And in other cases, how do you discern quality of data? Are some residents just clicking through surveys?
Okay. I think I could probably start with the beginning portion of the question, and then you can all chime in. I think this is an opportunity that we have been talking about for years. Sort of jumped on right when Tim joined, the organization. And we are really big with identifying a problem statement, going through the capabilities that Tim just talked through around how do we create pilots that we can go and test different opportunities for us and learn very rapidly what's working and what's not working. So I think from a timing standpoint, we've been working on this for a little bit. We've been deploying these capabilities, and I think we're seeing early results. I think that it will take us a couple of years. We're going to iterate through that cycle.
As I mentioned, it's going to take us a couple of years to get to that full total realized amount. But I think we're excited with the things that we're learning pretty rapidly.
Yeah. I think that's a good summary. The most important thing, though, as well, is that vacant day is a core problem to the business. That is how we realize occupancy at the end of the day. So we lose occupancy to vacant days. So it's something that we're constantly looking at that we've been constantly trying to optimize over time. They're not necessarily independent of each other. And so really what we're talking about over the last couple of years is how do we apply more sophisticated math, more sophisticated science, more sophisticated processes to improve this. But last year, there was a significant improvement in occupancy and less leakage kind of throughout that process and more revenue generated. And that's been continuously improving for the company over time. And I think that's a big theme with our analytic strategy.
We are constantly continuously improving, and then we have to implement the right technology, the right processes at the right time to get that incremental value. But vacant days have been improving for the last couple of years, I would say. Now we're just kind of putting a turbocharger on it and trying to really go after it. And I would say in the last couple of months, we've made a lot of a big impact. We're on track to make a big impact.
Yeah, and I think in relation to the data clicking, I think the end question was just around people clicking through surveys.
Yeah. Quality, yeah.
We're looking at a lot of data, right? We have a lot of communities, and as Kristen mentioned, we get a lot of survey data back, and so I think that that also helps us understand. We're not looking at one data point, just surveys to drive all of this. We're really trying to understand our customer through all the different touchpoints that we have. I think that gives us a lot of insight to what we're doing.
Yeah. I mean, Kristen touched on this. We just did our annual resident survey. This goes out to every resident. We had over 25,000 responses come back. I mean, that is an outstanding kind of response rate to a survey that is multiple pages long, and I can tell you when you look through how they're answering it and some of the open text comments that they give us, they're not just clicking buttons. These are passionate people. These are the homes, right, where people live in. We're providing people these homes. They want their voice to be heard, and they want to influence the direction that we go, and we listen very clearly to them.
Great. We'll just do a couple more, a few of these of the same sort of questions about renewals. And then we'll save the rest of the questions for the end of the program. What % of renewals just don't negotiate? And somebody sort of contexted this in the New York. If people here like it as sport, does everyone else just sign the lease? So what % of renewals just do not negotiate?
I think I'm going to hold off hearing that kind of number out there. I will tell you, I think Heather alluded to this market. It's fascinating to see how many more touchpoints per resident we have in New York versus any other market in the country. Look, if you're providing the right value and the right price, I mean, part of the challenge with renewals is you're trying to understand where is the market going to be 90 days from now or 120 days. So if you're getting that market price right, you've delivered a great experience to that customer. They're very satisfied. They will accept that offer. But for us, we need to have a process in place.
We need to have a feedback loop with the onsite teams into our centralized renewal team to make sure that we're there to be responsive if, in fact, we got to negotiate.
Great. Okay. Last question. This question is directed to Tim. In what year will AI replace the executive team and run EQR on its own? Any speculation?
You're not supposed to reveal my side project.
Excellent. Okay. Great. Excellent. So we'll take the other questions for after we jump at the end of the general session. That felt very Andrew sounding.
Wonderful. These accomplished individuals are dialed in for a number of things. A number of things that drive our strategy and our initiatives and our portfolio, as well as operations.
Great. Okay. Is that better?
All right. The photo is not AI. I just aged. Thanks, Rich, for pointing that out. I've been here for 20 years, and I've had the privilege of working with all these wonderful individuals who just talked to you about capital allocation, our optimized portfolio, operational excellence. And what I want to walk you through briefly is just how all of that is supported by our core financial foundation. And that financial foundation is built on four core strengths, which I'll walk through quickly, which are the prudent capital structure, our flexible annual funding sources, our current excess debt capacity, and then I'll touch on overhead and capital efficiency. And that word efficiency is kind of like that word balance. You've heard a lot about it. You're going to hear a little bit more. All right.
So starting with our strong financial foundation and our position, that really begins with a prudent capital structure. And there's a lot of metrics on the left-hand side of this page. But what I want you to take away isn't any one of those specific metrics, but just is the discussion of how that is supportive of our overall strategy and how that financial strength and that wherewithal relates to our ability to execute, particularly on our investment strategy. Over the last 30 years, we have cultivated a balance sheet that's designed to minimize risk, to reduce our cost of capital, and to seize on opportunities. And you've heard folks talk about opportunities already. We've taken a consistent approach to leverage and liquidity, and that's allowed us to achieve these results and guarantee that we have access to capital of all kinds of all sorts.
And by the way, the operations team isn't the only one that's been innovating. The finance team has done it as well. We were one of the first. We were the first multifamily to issue commercial paper. We were one of the first REITs in general to issue commercial paper, reducing our cost of capital. And we've been very opportunistic on our financial strategies. And that discipline and innovative approach has allowed us to establish one of the strongest, most well-respected balance sheets in the REIT universe, as well as our flow of capital. The next two slides are going to illustrate some of the strengths of our balance sheet and how that delivered strategy that I just talked about are incorporated into it. On the left-hand side, you can see that we have a much longer duration debt portfolio than our multifamily peer.
And we began building this back in between 2014 and 2017 by taking advantage of what we saw was an opportunity, a very low-cost interest rate environment, and we issued significant amounts of 30-year debt paper to reduce our exposure. By doing that, we extended our debt duration, which means that today we have relatively modest near-term maturities, which you can see on the right-hand side, and less refinancing exposure to higher interest rates. And that's a relevant point as we talk about cash flows and forecasts and things going forward because as most companies, all companies effectively, are likely to have to face higher interest rate environments, but EQR is well-positioned given the work we've done over the years. And bolstering our position even further is our absolute low leverage and our strong fixed charge coverage, which are reflected in this slide here.
In 2022, we recognized that the opportunity to buy assets wasn't really there. We determined that on an absolute basis, cap rates were very low, and asset-level prices were very high, particularly relative to replacement costs. So rather than buy more assets, we actually sold assets into the market and took advantage of that environment. And we harnessed that and took those proceeds and paid down debt. And that leaves us with an extreme amount or a large amount of excess debt capacity, which allows us to be opportunistic, and I'll talk about that in a second. And these two activities, the activities that I just described, are just one of the ways that we recognize market signals, we pivot our approach, and we position ourselves to drive the business going forward. All right. Moving to the next topic.
Our solid capital structure and our resilient business delivers reliable and recurring funding sources annually. And as you can see here, we have the ability to generate approximately $1.3 billion in funding on an annual basis. And we can do that from a variety of sources. First, we can tap into what I like to call organic debt capacity. So every year this business grows, we grow EBITDA. We can leverage that EBITDA with incremental indebtedness without changing the overall risk of the firm. Second, we retain significant amounts of investable cash flow. This is cash flow that's left over after dividends that we can retain and paying for necessary recurring capital expenditures. And finally, we have significant net disposition capacity. This is selling assets like we did in 2022 and retaining those proceeds that don't require it to be distributed. All right.
So this is probably the big question, right? What do you do with all this cash? Every year is different, but we typically start by investing in ourselves. And you heard about a lot of those opportunities from the team. So we invest in the existing portfolio in the ways that Danny even described, which provides some really great opportunities to generate incremental yield, to drive revenue, and on a relatively low risk-adjusted basis. We also focus on targeted development. You heard Ben talk about our targeted development and our platform and how we target development where we can't otherwise buy. But that still leaves us with a lot of cash left over, as this slide highlights. Every year, we have approximately $1 billion of funding available where we are positioned to execute on the strategy. Next, I alluded to this earlier.
I don't know if you know, but we have a lot of current excess debt capacity. I mentioned that we have very low leverage. And honestly, this chart probably does the best job of demonstrating that. Over the years, we've done significant amounts of capital structure analysis, and we've determined that our optimal leverage for our business is a net debt-to-EBITDA ratio of somewhere between five and six times. And as you can see here, we've been operating at significantly below that level for a number of years. In 2024, we identified quality opportunities, which allowed us to put some of that capacity to work. And you heard most notably the Blackstone portfolio, and you heard Nizar talk about that a little bit. Going forward, we would intend to do more of just this. And our 2025 guidance implies that.
Right now, we have over $2 billion of incremental debt capacity that we would intend to deploy in the pursuit of our investment goals. And finally, before I ask Michael and Mark to come back on stage, let me touch briefly upon overhead and capital efficiency. You heard the team talk, particularly the operations team, talk about our property-level efficiency and how we utilize that efficiency as a competitive advantage, how our costs and expenses are lower than our peer group, and frankly, how we deploy that platform in buying assets and the incremental yield that it provides. But what I want to demonstrate is our Same-Store expense growth, which has been much better than the peer group. But what I want to point out to you is that the property-level team is not the only team that is focused on efficiency.
That efficiency is a way of being, and it permeates everything that we do within our business. This is reflected in our overhead costs, meaning our G&A and property management, which are about 70 basis points better when presented on a percentage of revenue basis than our peers. What's not shown on the slide, but I think is still relevant, is we're able to manage the rate of growth of those costs better than most. Let's take it one step further. This, to be honest with you, is probably the most important step because it ignores geographies of whether or not it's expense, whether or not it's capital, different policies, all the different things. When you combine our Same-Store operating efficiencies, our overhead advantage, and our CapEx discipline, EQR produces almost 300 basis points more cash per revenue dollar than its multifamily peers.
300 basis points, 3%. Doesn't sound like that much, right? But when you apply that to a platform of our size and of our scale, that means that every year we can generate nearly $100 million more cash to our shareholders annually. So now Michael and Mark are going to come up, and they're going to join me to discuss our expected results and some key highlights.
All right. You're in the home stretch now. Thank you all for your patience. So Michael Manelis is going to speak in a moment about the West Coast recovery, give you some great specific information I think you'll find helpful. And then Robert and I are going to get up. We're going to kind of put it all together for you on the bottom line. All right? So why don't you go ahead, Mark?
Okay. So thanks, Mark. So I'm going to start by reviewing about what we are seeing on the West Coast, which is going to come into play as how we think about this longer-term outlook that Robert's going to walk through in a moment. So as I mentioned on the earnings call three weeks ago today, we've been observing some positive signs in Seattle and San Francisco. To put this in perspective, Seattle and San Francisco represent 10% and 15% of our NOI, respectively. Both of these markets had a 30% drop in concession use last year compared to 2023. They both have strong household incomes and very favorable rent income ratios. Right now, we do expect to see some continued improvement this year, especially in the urban-centric submarkets. And longer term, we think that these markets present a significant, unique opportunity to our company.
To give you some perspective of what this potential might be, I want to examine what has happened since the pandemic and compare the recovery trajectories of New York, Seattle, and San Francisco. All right. Let's look at New York, right? This is a market that a lot of people wrote off as dead during the pandemic, right? The common narrative, everybody was leaving and moving to Texas and Florida. Nobody ever wanted to live in high-rises again, and that this market was definitely not going to recover. At Equity Residential, we never believed that for a moment, right? Our data, migration activity of new move-ins and move-outs suggested otherwise. While it was very hard for us to call the exact timing of a recovery, we knew this market would recover. Take a look at what has truly happened here, right?
We are sitting here today in a vibrant, active market where our portfolio is almost 98% occupied this morning, and if you closed your eyes right before the pandemic and then reopened them today, you would actually see a market that has delivered slightly above a 3% annual growth in rental income. And it's almost like nothing ever happened in the years between, so now let's think about Seattle and San Francisco with that same context. All right, so San Francisco is a tale of different submarkets. Highlighted here are the two affected submarkets in our portfolio, the urban-centric downtown and the peninsula, and while the recovery has been slower and not as V-like as what we just saw in New York, you can see that it is underway.
But the bigger takeaway from this is that we have about a $50 million potential just to get us back to a very reasonable 3% annual growth rate, and that's coming out of these two submarkets. Seattle is a smaller market for us, but it also has a very similar opportunity coming primarily out of the urban-centric downtown. If I put up the other submarkets here, you would see that they have already caught up to that 3% trajectory line, and as we talked about on the earnings call a few weeks ago, our 2025 guidance has some of this recovery in it for both Seattle and San Francisco, but we actually think the majority of this recovery is still to come, and there's a lot of reasons for us to think that way, so first, our experience in New York affirms the possibility.
Second, we are already seeing recovery and varying signs of green shoots in these markets. And finally, if you step back and think about the fundamentals of these cities, there's a lot to be optimistic about. These are the tech centers of the world with vibrant new and existing employment nodes, amazing educational institutions, high-earning renters who all have experienced wage growth. And both of these markets present political climates that are becoming and shifting more business-friendly. And both of these markets are also seeing significant declines in new starts, which means that the future supply-demand dynamic is going to be very strong. I think it is very reasonable to assume that these markets are going to recapture that 3% trajectory outlined here with some upcoming years of outsized growth coming from these markets.
We have amazing, unique portfolios in these markets that are clearly positioned to take advantage of the recovery strength as it emerges, and nobody else, I'm going to say that again, nobody else in our space has this type of opportunity, and our teams are absolutely ready to capture it. With that, I'm going to turn it over to Robert.
All right. Thanks, Michael. We are certainly excited, as you could hear from Michael, about Seattle and San Francisco. But it doesn't end there. The forward-looking fundamentals that you heard about today throughout the presentation are some of the strongest that we've seen in a number of years. In fact, in some ways, we believe the opportunities presented within the next few years may look a lot like some of the years we've seen in the past, the years that we saw coming out of the Great Financial Crisis. Similar to back then, we are now very competitively positioned. There's a shortage of housing in our space. Multifamily supply is in decline, and single-family homeownership is less likely to be competitive. Additionally, while current demographics are slightly different than they were coming out of the GFC, they're still really solid.
Back then, you heard about Millennials, the largest cohort coming into the renter population, and that was great. Well, guess what? Now we're keeping them longer. In addition to that, we're also capturing those Gen Zs, Mark's children.
They can't afford our rents.
We got to do a credit background check. That's where that application screening process comes in. But that Gen Z cohort is a little bit smaller than the millennials, but it is still large. And they're entering the renter market, and they're really supporting overall demand. And finally, our operating platform is as tuned up as it's ever been. I'd argue that it's more tuned up than it was coming out of the GFC. As you heard from the team, we're very innovative, and we are driving value every single day. The fundamentals that I just described have historically allowed us to drive strong, durable dividend growth with a reasonable payout ratio and strong performance overall and have contributed to a really solid total return.
And with that, I'm going to have Mark come back up, and he's going to talk to you about how we can do just the same thing we've done in the past going forward.
All right. Thanks, Robert. Now we're going to put this all together for you and kind of sum it up. We're really excited. I can tell the team really feels like we're headed into a good period. Again, we want to put a little meat in the bone and be a little specific with you. We do expect Same-Store NOI to be above trend. That's due to the strong fundamentals we've talked about, that supply-demand dynamic that both Alec and I spoke to. The West Coast recovery, I think Michael spoke very well to it, very specific, helpful to you, and we think not a stretch at all. The optimized portfolio, the work Alec and his team have done to create just a portfolio that has balance, the ability to grow at a higher rate, less volatility, less risk over time.
Finally, Michael and Alec, I think, and the team demonstrated just the efficiency and power of the platform, the ability just to operate the business really, really well. We think Same-Store NOI above trend. The investment activity of the company, so this specifically, redevelopment, development, all those asset management things you heard, we feel like that's an above-trend contributor coming forward from 2026 on. We think we can use some of that balance sheet capacity Robert spoke to and put it to good work. We do see a drag on the refinancing side. We have less debt maturing than most, but we will be refinancing at a likely higher rate. Okay. We call this where the rubber meets the road slide. Okay. We see normal FFO growth, normalized FFO growth, driven mostly, of course, by Same-Store NOI, which we see above trend.
We see an assist from accretive investment activity, a little bit of drag on the refinancing side. So we can see a path from 2026 forward to 4%-5% normalized FFO growth on a sustained basis on average, right? So 4%-5% that assumes constructive economic conditions continue. And again, it's sort of a little bit of an average. The year's better, maybe a little bit worse, and it'll kind of bounce out. With our dividend yield around 4% right now, that gives you a total return of 8%-9% for the company. That compares well with the kind of returns we gave you in that 11%-15% time period. We think are very attractive in a business that has such sound footings, is fundamental, in a world that really has a lot going on, a lot of negative things going on.
We think it's an outstanding return. We're really excited about delivering it for you. We also think we can do a little better, but Robert won't let me promise any more than this. Okay, so I'm going to recap what we've gone through. Before I go through the sort of eight distinct drivers of the value proposition for our company, just want to remind you, we started out earlier today, and I spoke about the parallels we see between this time period in 2011 through 2015. Just again, the setup on supply and demand, how good we felt about our portfolio, about our people, and how that could all come together in a way to drive outsized returns. We wanted to be very specific. Again, we talked about demographics. I think Alec and his team did a great job of talking about the portfolio.
And again, for us, leverage to that higher-earning renter over the long haul that we think is a better quality customer in the best 12 places in the United States to live, work, and play for that demographic. Within that demographic, it's going to take us places. And we think having a little bit of balance, urban-suburban, and between the expansion markets and our existing markets. Now, I want to be really clear. These established markets, we love them, okay? We want to stay very invested in them. These places are the heart of innovation in our country, very high housing costs, a lot of very supportive conditions. But again, Sam would tell me when I come in to see him about our changing our strategy and revolving and evolving it, I should say, say to me, "Mark, stop talking. All you're doing is following your higher-earning renter customer.
And they're going to more places than just the coasts now. So follow your customer and serve them well. That's all we're doing, all right? So again, we feel really good about the setup. Never a better time to own the company, we think. So Alec went through the optimized portfolio allocation. Michael and his team went through operational excellence. You know why we're so proud of him and his team. Robert went through the balance sheet. Again, really strong footings. It's both our sword for opportunity and our shield when there's difficulties in the marketplace more generally. And again, our unparalleled overhead and CapEx efficiency. We're just very thoughtful about your money as investors. And then again, Michael, I think, talked about this differentiated opportunity. You have the investment in us with these urban West Coast markets recovering. And just a note about that.
It hasn't been great to own urban West Coast markets for the last three or four years post the pandemic, okay? But I think it will be soon. And we're seeing those green shoots. We're seeing that opportunity. And we think we're unique in that opportunity in the public space. And we just put it together for you, and I think we're specific. We didn't want to have this big event every 15 years and be general. We feel really good about the forward momentum of the business. We wouldn't have gotten it in front of you. Finally, the team. You got to do what I get to do every day, which is spend time, incredibly motivated, super talented team, that wants to deliver for the customer, wants to deliver for you as investors. Just the best at the business, all right?
So let's move now to the general Q&A session. So I'm going to invite Alec to come join us. Marty's going to, again, emcee this, and we're going to do a bunch more questions right now for the moment.
Okay. So the first one. If the opportunity is so good in San Francisco and Seattle, why not buy more in these markets?
We might. We're always looking at opportunities, and I think there may be some things that look better. I also think a lot of capital is chasing this idea right now, so we're not the only ones with that idea. But we price everything that's out there. As we've said, we're really committed to finishing off Atlanta, Dallas, and Denver in particular, but we are an opportunistically driven company. So if the pricing makes sense and we like the real estate, we try and find a way to make it work.
I'll also just add, I mean, we have a lot of exposure to those submarkets already. No one in the public space is near the exposure to the urban West Coast we do. So I mean, we are pretty levered to that recovery already. We are open, acquiring here in New York and any place else we do business, and to those expansion markets. The big difference is we don't have that much exposure to those expansion markets. We do have a fair bit of exposure to those West Coast urban markets. So we're going to ride that horse up, we think, over the next couple of years.
Great. Can you talk about LA? It looks like it would be the largest source of funding to expansion regions. And what's the rationale behind that?
Sure. So I'm going to wrap this up with a question that our friend Rich Anderson has asked a couple of times and claims is a question that a great many of you have. So is the goal?
Yeah.
20%, 25%. So let's talk about the general, the map. So we showed you a map that would show Denver, Dallas, Fort Worth, Austin, and Atlanta being somewhere between 21% and 29% of the company. Like when we give guidance, it's a range. It could be anywhere in that range. Each one percentage point is, give or take, $350 million. These are significant sums of money, of capital to move around. So yeah, if you got to 18, I would tell you the sense of urgency would be a little less. And if you got to 22 and you saw something great, we'd keep going. So I would just say, again, you've got to view it as a little bit of a guidepost.
I mean, for us, we feel with our board very motivated to complete this process in a fashion that makes sense to you as our current investors, meaning not a lot of current-period dilution. But if an opportunity came along that accelerated, we'd do it. And if there were no opportunities like 2022, we'd pay down debt. I think we're very thoughtful with your capital and super disciplined. As for LA, so we like the San Diego and Orange County exposure, which is not that much. We're about 18% Los Angeles. And we're particularly heavily exposed to Koreatown and downtown. Those are probably submarkets where we're just, as Alec said, a few too many properties on the same block, and we've lightened that load over time. I wouldn't sell that now.
It's just frankly not that appealing to people at the moment because that recovery is a little more nascent than it is in San Francisco and Seattle. But I'll predict that here as they go into the World Cup next year in Los Angeles, as they go into the Olympics in three years, you're just going to see a better story on LA, and we'll sell a little bit into that and balance the portfolio. But we like Los Angeles. We like our exposure there, just a little bit more balanced.
What are some of the ways that you have been successful pushing back on rent control and other anti-housing policies? How have progressive politicians been swayed?
What was the last part?
How have progressive politicians been swayed?
Sometimes they're not, frankly, and they're unswayable. But there's been a sea change in a lot of cities where everyone's a little bit fed up with where things went. So we have different politicians to work with, for one thing. That's particularly true in Seattle and San Francisco, and people are seeing the benefits of that throughout the city. And other than that, it's day-to-day engagement with folks and working to explain the alternatives, which I mentioned, which is about zoning reform and building code reform and things that promote affordable housing development and not rent control. So it's really that engagement. And plus, over time, the right people being in office are receptive to a more moderate viewpoint.
Given your current cost of capital, if the right portfolio comes on the market, how would you fund it today?
From our perspective, that's like the second question after the price of the deal. How do you pay for it? Does it make sense? Two big levers would be dispositions. Again, we could, I think, sell some of the San Francisco stuff at a pretty good cap rate if we wanted to. I think on the debt side, certainly the Treasury rally has been impressive.
Yeah, it looks a lot better.
So there may be some possibilities there as well. But those would be our first two choices. Use some of that debt capacity up. Maybe continue to sell a little of that downtown Seattle and San Francisco stuff over time because now you're getting paid for it. As investors, you're getting paid for that upside that's coming. In the past, the kind of conversation was, "We want to buy it at a pretty high cap rate because we don't believe." People believe, we believe. So we're only going to let go of those assets on your behalf if we're getting paid for that upside.
Historically, your Sunbelt peers have traded at a discount to EQR and other coastal peers. The only more diversified public REIT has traded somewhere in the middle. What makes you believe that your diversification strategy won't have a negative impact on your multiple?
Yeah. Great question. So you earn a multiple. Time after time, you push cash flow better than the others. I think with the operating machine we have, it's superior to anybody else. I think the balance sheet's better. I think our ability to add value on the margins with this investment activity we talked about is superior. And I think being levered at that higher-earning customer is an advantage. I mean, if inflation is persistent, which it very well may be, our customer is better positioned. If you pay 20% of a larger income, you can afford having higher grocery bills than if you're paying 25% of a much lower income.
So, I think being levered to a Class A customer mostly, though we do have some B in our portfolio, I think having the diversification and the balance. I think it's going to allow us to out-earn what maybe is the average of just being 20% expansion and B. We're following our customer, as Sam told me. And I think our higher-end customer is the key to out-earning our competition.
Will growing in lower-rent Sunbelt markets erode that 300 basis point cash flow margin advantage?
Will growing? Having more property?
Will growing adding assets?
It's going to make it even stronger, right? I mean, the more assets we have in a market, the better able we are to leverage the technology size and scale and create operating efficiencies, not only in the onsite property management organization, but in all the support kind of departments as well that manage that market.
The Same-Store NOI slide for 2012 to 2015 showed over 5% Same-Store NOI growth on average, which one would think would generate over 6% Core FFO growth if repeated for the next couple of years. Wouldn't think that the drag from refinancing should be 150 basis points? Is this more of a conservative estimate of future growth?
Yeah. I think these are kind of goalposts and ranges, as Mark kind of talked about. We talked about above trend going forward, so certainly, we hope we can do better. I do think that you are going to have the drag from what's different now for everyone and worse for most than EQR as it relates to core FFO relative to coming out of the GFC is the rate environment. And so while you may not get to the 150 basis points, over time, you could see 50 to 100 basis points of potential drag. And that's just simply math. I mean, we did exceptionally well with the debt stack that we had at 3.5%, and that's going to have to roll into something new. We'll see what that looks like, right? So yeah, I guess time will tell whether it's conservative or not.
But we're really positive about the fundamentals, about everything you heard about today, and our growth trajectory.
Do fees and other income grow faster than your core apartment rents over the next three years?
No. You know what? I think that we have an opportunity in front of us with some of the other income primarily coming from the bulk internet connectivity opportunities that could drive some upside. But we've got some recovery coming our way on the course of normal kind of revenue growth. So I don't think it's going to outpace it, but I think we clearly have a couple of years in front of us where it is going to be outsized growth in both of those sections.
Michael, can you talk about the pace of the San Francisco recovery and Seattle recovery? Which do you anticipate recovering faster in 2025, and what is driving the relative pace?
Yeah. Is there any more?
Do you think the same growth dynamic will continue in 2026?
I think in 2026, they're going to accelerate. So I'll tell you right now, the way we started off the guidance for 2025, Seattle had a little bit more momentum than San Francisco when we were putting that together. So we kind of built upon that. And we right now are, as I said three weeks ago, we see the green shoot. So we expect to see some of this recovery. But the outsized recovery that I demonstrated up on the screen, that comes in 2026 and 2027 when it manifests itself into rental income. So we're excited about what we see. And I think I said on the call, Seattle is probably going to produce some of the best revenue growth this year, which is right around that 4% mark. And inside that has some of this recovery that we already see baked into it.
But we have a couple of years in front of us in that market if this trajectory plays out to really see some outsized growth coming from us. And right now, I'll tell you, we just saw some data, I think it was this morning or last night, that's looking at that cell phone, that Placer.ai data, and looking at migration patterns into SOMA, into downtown kind of San Francisco that shows kind of a positive migration pattern emerging. So I think what we're going to do, and you got to just tune into April and then the call after that to just see how is the spring leasing season, how is the peak leasing season play out, what are these migration patterns happening. But right now, I think it's clear we expect to see recovery, but the bulk of it's going to come in the future years.
Just to remind people of the tempo, a lot of you are pretty expert in modeling our business. But we showed you like concessions go down, occupancy goes up, rents go up, then Same-Store revenue, right? We've got to trade out every lease in order to get the benefit of increased rates. So even if rates are up 10% in the market, on average, you're going to get half of that, right? Because your leases are going to expire more or less evenly through the year. So just reminding people, once you get that momentum up, you're going to feel it for a while and likely more in the second year than the first. So we may talk better about it and have a 4% number.
You may see much more Same-Store revenue growth in 2026, and we would expect you would in those markets because now we've marked the whole rent roll to market, right? And that takes more than a whole year to manifest itself in our numbers.
How much of an impact on material costs do you expect to see over the next 18 months due to the Southern California housing reconstruction?
Southern California is not great at building quickly. So it's hard to say that that's going to be an explosion of construction. But there are other pressures, obviously, on costs, including tariff, and this is just another additive to that. I wouldn't even hazard a guess. But I don't really think it's going to come as much from the fire recovery because I think that's going to be a very extended time period.
What is the view on how big the development pipeline could grow to over the next year or so? $1.3 billion seems a fairly low amount of development exposure for a company of your size. Your peers seem to be ramping up faster than you are.
So let me start, and maybe you can elaborate. I mean, we're open to having a bigger development pipeline. And some of you might recall when we did the Toll deal, when we were feeling like there was an opportunity there with these guys. And we still talk to them. We're still trying to do things. Still great relationship with Toll. Just there's not deals that make sense for them or us at the moment. But we went ahead and we issued some equity about $140 million at $84 a share because back in 2021 or 2022 when we did that, that made sense. The thing, the trick on development is you got to do one of two things if you're a REIT. Since you don't retain a lot of cash, you either got to go naked.
You got to say, "I'm going to go commit myself to spending $1 billion over the next three years with uncertain economics at the end, and I'll figure out what my capital costs later." That was something a lot of people after the GFC found out was not a great idea, okay? The other way is to pre-fund it. If you do that, then your ROE is reduced because you're dragging that cash around, right? So you do have that choice. People talk about accretive development. You always got to wonder about where they're getting the money from and what risks they're taking with your capital, okay? So we're very mindful of that. We saw the Toll opportunity. It was larger than the cash flow numbers Robert gave you. We thought the equity markets were in a good spot, and so we issued.
So if he came with deals that were in the 6 and 6 and a half range, we really liked those deals. And again, it's kind of a sliding scale. We've done some deals a little lower because the risk was really low. It's like right next to a deal we already owned. We understood the development. It was really. Then other deals, like again, the development in Austin right now, I don't know what that deal would have to be for us to feel comfortable that we've got a margin of error in that deal. So that, I think, helped a little bit in framing it out. We're happy to be bigger developers. If we can find capital that makes sense relative to it, we'd go out and raise that capital. But to be a lot bigger wouldn't be just a decision about uses.
It'd be a decision about sources. And we'd have to be really thoughtful about that. And maybe either tap the equity market or, I think, tap the debt market. What we would not do is hope for the best when the bill came due.
But I think in the longer run, generally speaking, development will supplement the acquisitions activity in locations where we don't think we're able to buy. Probably a smaller number, relatively speaking, but very targeted in certain locations.
There's nothing wrong with buying a bunch of stuff in Atlanta and riding it up right now rather than waiting three years from now and seeing how it all goes. I'm okay with either. We do both. But I think you just got to have your eyes wide open in development because it can be a bit of a steel trap sometimes.
A couple of LA-related questions. Have you seen a more pronounced pickup in LA yet from the displaced population? Can you share spot occupancy on LA?
I'm just going to stand by what I said three weeks ago in LA. We've got a couple of submarkets there that we saw some initial demand increases, really at the larger unit types of two and three bedrooms coming through. That's three weeks ago, so I don't really have much more to kind of add to that.
Okay. Can you talk about DC and DOGE? We hear a lot of negative headlines on DC, but it sounded like your supply headwinds for DC are already behind you. How do you think about the risks from DOGE and your target customer in DC?
Yeah, maybe I'll start. You guys can add on. And I think I talked about this on the call as well, that our initial view was maybe this is more of an offset. So you have some cuts coming out of DOGE, but you also have the mandate to return to office. And that's exactly what we're seeing. And I think this is a great example where we talked about leveraging information, our own internal data, and actually seeing trends and opportunities. So just last Friday, we looked at it. We've had 12 lease breaks due to individuals losing their position in DC.
But at the same time, we're getting a feedback loop from our centralized renewal team that folks on the West Coast are saying they've got to move back to D.C., and they want to figure out whether they can transfer end of lease, like how do they take their renewal and apply it to one of our assets in the D.C. market. So there's this little bit of this trade-off that's happening, which is kind of what we initially thought. How deep some of the cuts go and what really happens to the overall demand? I think we're still too early to understand. But initially, right now, this feedback loop that we have is going to tell us, right? If something really is going out of whack with us, we're going to know in the moment that the trend is changing.
What's your DC occupancy now?
We are 97.5, 97.3, something like that.
Five.
Five.
Five.
So 97.5.
Once the 10-year yield stabilized at current levels for a few months, do you expect apartment transactions to start happening? Or would it require 10-year yield to come down at least 50 basis points for transactions to happen again?
I think there's enough capital out there that's eager to invest in apartments that there's reasonable sellers out there, transactions that will start. I think they're going to be closer to 5 than the math might imply because people are starting to think about recovery, and they're also seeing the durability of general rental apartment rental income stream.
You mentioned that optimal leverage is somewhere between five and six times, but you've been operating well below that in recent years. So is it fair to read that you're comfortable taking up leverage above five times if you are able to identify attractive enough opportunities?
Yep.
Yeah. That is right.
Those are backslides.
Those are good. I just need to allocate the opportunities.
Yeah. We'll bring it up.
We will provide the capital. Okay. You identified the NOI growth potential of the next three years to look similar to three years after the GFC rather than the 2016 to 2019 timeframe where NOI growth was lower in the 2%-3.5% range. What makes 2016 to 2019 so different such that the next three years won't look more like that timeframe?
Since I was the only executive lucky enough to live through that period of time, you had a lot of supply by then. The coastal markets had begun to get some supply. There was pretty significant supply in San Francisco. In 2016, we saw supply in Seattle.
Very concentrated.
Very concentrated.
New York had the.
New York.
New York issued the 421-a stuff, which fell on top of us on the west side of New York, so this is one of the lessons, and every lesson in life you seemingly learn the hard way. There is no perfect market. Even markets with supply limitations like New York can get oversupplied in a submarket for a period of time, and even places that have great demand characteristics, like some of the markets that are in the Sunbelt or Mountain States, can have less demand for a while, can have a business move out or can have something else occur, so that comes to the balance thing, so our feeling is that the conditions more closely resemble in terms of low supply across the board, the demand characteristics, the Gen Z stuff. I hope you found that worthwhile because there's not a lot of discussion about that group.
There'll need to be a lot more study. We think that group is a super powerful driver, just like we talked a ton about the millennials. I think those combined make us feel like, yeah, the demand feels like the Gen Z, millennial story. That feels very similar. The supply story feels better. To me, as an executive who's been here through all that entire time period, 2016 to 2018 felt like a time we had a decent amount of supply across the board. It doesn't feel like that's what's about to happen. We also had kind of crappy economic growth for a while for a variety of reasons. I think that was kind of it too. Only late sort of 2019 did that sort of pick up. In 2020, it was a little bit better. Great.
Mark, you want to wrap us up?
All right.
There we go. Oops. I'll go back. There he is. All right.
On behalf of the entire Equity Residential team, I want to thank you all for your time today. It's been really both of you as excited as we are. We are really excited about what the next five years or so are going to bring. We look forward to driving superior returns to you. And we think it's going to be an outstanding time for our business. And as our chairman and our founder, Sam Zell, would say, there's no reward without work, risk, and challenge. And I'll tell you, the Equity Residential team is up for the challenge and ready to deliver outsized returns for you. So again, I thank you all for your time very much. Appreciate it. Look forward to continuing the conversation. Thank you.
So we want to thank everybody. One of the unique aspects of this hotel is we own the building upstairs. And so any of you who would like to join us, we're going to have cocktails and appetizers up in the Sky Lounge. I think if you've been in this space for the last 10 years, you've been in the Sky Lounge before for a different event. So for the Cloud Lounge. Sorry. Cloud Lounge. Sorry, Heather. And so please, we've got our folks outside who will lead you up there. Please join us and a little more conversation and a drink and relax. And please take the Yetis with you so that I don't have to bring them back to Chicago. That's right. Heather and I can only carry so many on the flight tomorrow. Yeah. Thanks, everybody.