Great. Good afternoon. Welcome to Bank of America's 2025 Global Real Estate Conference. I'm Yana Gallen, and I cover the residential REITs at Bank of America. We're very pleased to have with us Equity Residential's President, Mark Parrell, EVP and CFO, Brett McLeod, and First VP Investor Relations, Marty McKenna. I'll turn it over to Mark to give a few opening remarks, and then happy to take Q&A from the room, or I have some questions prepared as well.
All right. Thanks, Yana. Thanks for including Equity Residential in this event. We appreciate that. I want to make sure everyone knows we have Brett McLeod here as our new Chief Financial Officer. He comes to us from a hospitality retail background. Really excited to have him on board. Just talking about operations year to date, then we'll talk a little bit about the shape of 2026, and then hit on capital allocation real quick, and then open it up to questions. Just in terms of how this year has gone so far, it's been a solid year for Equity Residential.
When we did our earnings about five weeks ago, we raised our revenue guidance, our NOI guidance, and our FFO guidance on the back of better than we expected and better than historical average renewal rates, retention rates, meaning the percentage of people that are renewing with us, and occupancy levels. Those are all very strong. New lease rates were more modest than we expected. We had a leasing season that plateaued earlier, did not go as high as usual. New lease through June 30 was about 0.10, 10 basis points down. Last year, when we reported at the same time, it was 10 basis points up. A comment I do want to make is there's a lot of emphasis on the street about new lease. It's not unimportant, but it's not the most important. It is the lever we pull in balancing and managing same-store revenue.
In some markets, we're more occupancy-focused, and some we're more new lease-focused. I just want to make sure people get that whole context because the street does seem to react to that number particularly. We and I think our competitors manage to a same-store revenue cash in the bank number, not to a particular input. Looking at next year, we're really well positioned. We are a uniquely urban REIT. We have a higher level of urban exposure that was tough on us during the pandemic years of 2020 and 2021, but it's going to be greatly to our advantage. So far, year to date, our urban portfolio has outperformed suburban by 60 basis points. We have a particularly high exposure here in Manhattan and Brooklyn, as well as downtown Seattle and downtown San Francisco. San Francisco and the peninsula are doing particularly well right now.
We can talk about that in a minute. Those three markets combined are 45% of our company, and that puts us in a good position next year to outperform, we think, the peer group. Looking towards supply, we expect a lot less supply, and a lot is discussed about less supply in the Sun Belt markets, and we certainly see that, and we have a few of those in our portfolio. Markets like San Francisco, by our count, are going to have only a bit more than 1,000 competitive units delivered next year in a metro of that size. In a place like Los Angeles, more like 4,000 or 5,000. Those are really low numbers, and they bode well, especially since we're occupied right now at 96.5%. You think about that setup going into a quieter time of year.
Rents will decline the rest of the year, but the setup going into next year is less supply. We're in advantaged markets that are seeing more growth and are seeing more growth for a couple of reasons. First, absolute rents compared to incomes in Seattle and San Francisco are low. Nominal incomes went up 25% - 30% since the beginning, since 2019, called the beginning of the pandemic, but our rents are just going above 2019 levels in San Francisco and Seattle as a whole. There's room to run on rents. I'd also say that there's a bit of a decoupling effect. A lot of folks that live in the Midwest and the East have already forgotten about return-to-office because you're already back in the office. I tell you, that is an ongoing thing in the West Coast.
When Brett and I were out there a month ago, San Francisco had just called all its municipal employees back to the office full time. Yesterday, Microsoft announced that they were going to bring everyone back three days a week as of January 1st for their Seattle-based workforce. Those are powerful demand drivers for us. We told you on the earnings call, we already saw in San Francisco people moving in. We see everyone's address when they leave and when they're coming to us. We see those addresses, people moving from Sacramento and further out locations back into suburban locations where we have properties and into the downtowns. We also see in San Francisco the beginning of something we're very excited about. When that market, which is a volatile market, cycles up, we typically see a fair bit of inbound traffic from outside the state. Think about MBAs from Wharton.
Think about Purdue University computer science graduates. We see those people coming to San Francisco again, following the AI boom, following all that technology. We just have a bigger presence on the peninsula and in central San Francisco, downtown San Francisco, than our competitors. Like I said, that was tough in 2020 and 2021, but it's feeling really, really good right now. Rents right now are up 8% year-over-year in San Francisco. They have not started to go down yet. We just have terrific demand in that market. Being out in Seattle, I can tell you the indications feel good. That is a higher supplied market. Next year will be even better. We feel very well positioned going into what we think will be an above-trend year.
We talked at our Investor Day about the company's positioning and our ability to recover some of the lost revenue that went through the COVID period and went away. We see that coming together for us. That is definitely manifesting itself. Like I said, we'll come together, I think, in a good way next year. A quick note on capital allocation, and I'll throw it back to Yana. Going into this conference, just looking at the stock price, management and the board are keenly aware of it. It's certainly something we're very focused on. It makes it very difficult to have acquisitions pencil when you have 4.75% prevailing cap rates and the quality of assets we want to buy. You look at the stock trading well above a 6% implied cap rate, and that seems like a better value to us. We are aware of the signal the market's sending.
I think acquisitions are a tough thing to allocate capital to. I do note you may see us, you will see us close a couple of deals this quarter. Those are deals that were already in process and under contract. New capital allocation acquisitions are challenging right now. I think development has a pretty high hurdle too. I do think it'll be interesting to deliver some product two years from now when there's a lot less being delivered, but we'll be very selective there as well. I'll stop there, Yana, and kick it back to you.
Great. Maybe just following up on that comment on where the implied cap rate is and acquisitions and development not really looking that attractive. I guess kind of what is the share buyback program currently in place and.
Sure, details. The buyback authorized by the board is 13 million shares. That's been publicly announced. That's the legal authorization of that program. I said on the call that it would be our intention, to the extent we decide to do that, to fund it with dispositions. The ability to sell some of our lesser attractive assets at numbers. Our better assets trade well into the fours, but we certainly have assets in the mid-fives that are older. We don't believe in a renovation story where we're overexposed. Those are great candidates to sell and a turnaround and buy the stock. I would expect the limiter to be more about tax gain, scaling, things of that nature, Yana. I wouldn't expect to fund it with long-term debt. I think that's a different risk play at this point, but we do have that capability. We're pretty under-levered.
Thank you. Maybe jumping back to just operations, I think you laid out a really strong trajectory and vision of demand at your Investor Day for the next three years. Also, in the markets that you are in, there's greater visibility on supply, longer permitting, and longer construction timelines. I guess what surprised everyone was the revised job reports that we got a couple of weeks ago. Just wondering how you're thinking about that news and matching it with what you heard from the team in the field during the spring and summer leasing season.
Yeah, that's a great observation. You saw the apartment companies start to report. The first quarter was more or less on track in terms of new rents and less. We just have a lot less activity the first couple of months of the year. You started to hear from us and our peers that it was weaker. That seems to have corresponded almost exactly with the job slowdown. We didn't know it at the time, but they do sort of explain each other. My theory on why our growth, intra-period growth was less, is certainly the jobs. I'll also say I think there's a lot of uncertainty and indecision in the minds of both landlords and in the minds of residents.
If you're a landlord in our position and you're in D.C. and you're hearing and reading all those headlines, you may feel really good because your occupancy for us in D.C. was over 97% for a long period of time. It's hard to move rents and not feel uncomfortable at times. What happens is you move rent a little, you lose a little occupancy, you test that, then you move. It's a hunt-and-peck method. It's not a smooth increase. You end up in a situation where you don't know if you hit an inflection point and if you're nervous, you might slow down your rent increases. In markets like D.C., that's exactly what happened. I think we probably could have increased rents more than we did. I think we felt that anxiety. I think our residents are getting good service from us. I think they like their properties.
I also think they're a little uncertain about their job prospects. They haven't lost their job, but they wonder. The world's an uncertain place. They aren't interested in buying a home for sure. You know what? EQR gave me a 4% rent increase. I like living here. I'm not going to go to the trouble of moving. I think those two combined to give us really good renewal rates and retention rates and really good physical occupancy, but relatively weak new lease rates.
Outside of the expansion markets, any markets where you kind of felt that more? I guess you're calling out D.C. as an example.
D.C. only recently felt weaker to us. We do feel that in both Northern Virginia and in D.C. proper right now. Our portfolio in Maryland is not that large, so I don't have an opinion on Maryland suburbs. Boston, we saw all the health and university-related news. That impact was not significant. That market's continued to perform well. We're mostly urban. The urban is outperforming suburban because there's just relatively little supply in the urban center of New York. We feel good about Boston. I think the market that would have disappointed us, Yana, just as much as San Francisco surprised us to the upside, is L.A. to the downside. L.A. for us is a challenged market. Job growth was hurt by all the strikes in the entertainment industry. A lot of that work moved. We're hopeful that the new tax credit program brings a lot of that back.
We're already seeing an increase. There are four times as many film permits pulled in July of this year as July of 2024. That's promising. There will be a lot less supply, particularly in the areas we have concentrations in L.A. That's Koreatown and downtown. We love the supply picture in L.A. Quality of life needs to keep improving. I'm hopeful that the focus on the Olympics in two and a half years, or three years still, I guess, and next year's World Cup focuses city leaders on that. Quality of life has improved immensely in Seattle and San Francisco, and we just haven't seen that follow-through in L.A., and that would be great. My guess is L.A. will be better than this year. Next year will be better in L.A. than this year because I'm certain supply will be lower.
I feel like the job stuff will get a little better. I'm hopeful on quality of life, but I bet you it'll be more like an average market, Yana, not an outperformance market.
Thank you. You've had a lot of success on renewals. You offer a very high-quality level of service, high-quality product. I guess, are you kind of surprised at that ability to continue pushing on those? I'm just curious, obviously, at later points in the year, there is more kind of like a gain to lease, but is there a point where you feel that that may be too outsized?
What's too outsized?
The renewals, the market, or the in-place rents are much higher than market rates.
This is going to give me a chance to have one quick comment on new lease and how it's computed. New lease is a one-to-one thing, as Yana knows. I move out and you move in, and my lease rate, I've lived there five years, and you've gotten pretty good renewal increases from EQR . If it's a weak market, you may be significantly above market. When the new person moves in to take my spot, that new lease number is going to be very negative. That may be true even if the rent is 5% higher than it was last year, just because I've had so many rent increases as a person who stayed a long time. We gave you great service. You were happy in our unit. You didn't want to move. We didn't want you to move.
We worked with you, and you ended up where you were. After you have a point in your life where you're changing jobs or you're buying a house or something else is going on, you also could have the opposite where rents have been going down in a market. We push someone to, you know, now it's time for a renewal increase. We haven't done it as much in the market, and all of a sudden they move out and we get a big increase. New lease rate, just to take your question, is like the least useful number because it really requires you to know both the person moving out and the person moving in and their tenure and where their rents stand compared to market.
Right now we are in a loss-to-lease position, Yana, to answer your question, which is pretty common, meaning that our rents, if we could reprice the whole rent roll, would be higher than what they are right now. I expect, as is usual, by the end of the year, we'll be in a gain-to-lease position. We expect next year we'll have embedded growth, which is, again, the ability for us to just kind of go through the year without changing occupancy or rate, sort of our starting point to be about 100 basis points or 1% going into next year. We would have expected it to be, you know, de minimisly higher, but it's probably going to be about 1%. On top of that, you'll add intra-period growth, maybe a little benefit in occupancy or delinquency management, other income, and I'll tell you the good supply picture.
That's why you hear your management team so optimistic about 2026.
Thank you. That's super helpful. I guess occupancy kind of at 96.5%, you think that there's room to take that, you know, a couple of basis points?
It's just 96.4% right now. Yeah, I think it's ± 10 basis points. I don't think it's going to be a lot. I think some markets like Dallas, where you may get more absorption, there's more opportunity, but we have a much smaller portfolio there.
Maybe same on kind of like the bad debt. It's come down. You think it could come down?
I think it could come down another, again, ± 10- 20 basis points over the next year or so. We're making good progress right now. I think other income is a definitive positive. You see us year-over-year, quarter-over-quarter. I should say, third quarter and fourth quarter will be better than the first quarter and second quarter were. That's partly because we've written a lot of good leases and we get that rental income, also because delinquency is getting better, and also because our other income initiatives are hitting. Those are parking. Those are some other income matters that we're working through, like Wi-Fi. Those things, Yana, are helpful to the tune of 60 - 80 basis points this year, and they'll provide some lift next year as well.
Great. Thank you. Maybe if we could kind of turn to San Francisco, it seems to be kind of the strongest market in the country right now. You could kind of share what you're seeing there because last year it had a lot of kind of starts and stops.
Sure. It feels like it started. We were there. Brett and I were there the first or second week, pardon me, of August, spent a couple of days there, walked around, visited our properties. Great occupancy, great rent growth. We're seeing people move back in from further out suburbs in Sacramento and the like. We're also seeing people move from other places. Quality of life is much better. We had some high-level government meetings. The first question they ask is, how can we get you to bring more jobs here? How can we get you to build more housing units? A very welcoming attitude towards business, and that's an incredible change of pace for San Francisco. A ton more activity on the street, a lot more activation. The people we saw and talked to had three-day a week work weeks. They were moving up the RTO scale.
To me, all arrows point up in San Francisco. Very, very little supply. Quality of life improving. Good demand for us on the peninsula and in the city from the AI boom. I think elsewhere, we just feel like the tech ecosystem still has a lot of jobs in it. We have properties very near Apple, and we were renovating some units, and they're very nice renovations. They just sell out so quick. There's just a really housing-starved market and to have a big presence there like we do is to our advantage.
Great. Anything?
It's just interesting as well. We're fixing more liberal things into somebody's bag. That's obviously a lot. I'm assuming there are spare rights in terms of the bargaining. You've got the dogs' flow at the moment. It shouldn't be deteriorating on the labor market, that's the total picture there. What is your, I mean, how would you offer the rehab? We don't have any wind droplets near this freeways.
Right. The question was what happens to our delinquency forecast and numbers if maybe the job market deteriorates further in the next few months, right? More important than that would be government policy. Local government policy matters a lot more. We have some pretty powerful tools in our underwriting toolkit to understand both fraud as well as people's earning power. For us, it's not that the number of delinquents is high. It's not. It's the cost of each delinquency. If you think about Los Angeles, maybe it took two to three months or if someone wasn't willing to pay for them to have to leave, and now that cost could be six months. Each mistake we make in underwriting or each change in a person's circumstances is a lot more expensive. During COVID, it was even more so.
If you had eviction moratoriums and things like that put into place, and again, L.A. County thought about it, and they're a tough place to do business post the fires, and there was just such a groundswell there. It's so clear that's a bad idea. I mean, why would you do that instead of a need-based relief program from the government? It makes no sense at all. I feel more optimistic that people realize those kind of moratoriums are bad public policy tools, but that would mean more than job changes. We have such a high-end clientele. They pay about 20% of their income in rent. A blip here or there is not going to matter on that side. I think our population is more insulated from that.
If government policy changes and three months goes to six or six goes to 12, that would be more of the dilemma.
Maybe talking a little bit about some of your newer markets, I think you were kind of favorable on maybe Atlanta leading a little bit of the Sun Belt recovery. In your comments, you mentioned, you know, maybe if Dallas gets a little bit stronger absorption, it could help. These are kind of the two that you think could lead us.
Sure. We said on the earnings call, our Chief Operating Officer mentioned that we do see the light at the end of the tunnel in Atlanta. What that means is our operators on the ground feel less pressure from concessions and just less challenges keeping the buildings filled. We start to, it's sort of a process where you build a little bit of occupancy, then you start to reduce concessions, then you start to raise face rents. It's a process. It doesn't happen all at once. We're at the beginning of that process in Atlanta, and it feels really good. Dallas is, I think the team really would characterize it as hand-to-hand combat. There's a lot of demand, but there's a lot of units there. It'll drop a lot next year, but right now I would say it's still a very supplied market.
Denver has both supply and to some extent demand challenges. We feel good about it long term, but it is a challenged market. Our presence in Austin is three buildings. It's too small to really speak to anything definitively. We like the long-term supply-demand dynamics in those markets. Our opinion has just been maybe contrary to others. It would take longer to manifest itself in better rent rolls and better same-store revenue growth. I think we were right about that. A lot of people said it was a 25% story, and clearly not a 25% story, and we said that a year ago. I think next year, the second derivative will turn up in a lot of those markets, but same-store revenue is more of a 27% story than a 26%. Like I said, we own those markets. We like a lot about them.
When you lease up a building and you give people one to two month concessions, the first anniversary when people come up and you say, "Hey, no more concessions," that's not been our experience. They say, "That's great." The experience that we've had is they say, "I'm going to move across the street because I get one month free still there." Our experience is it just takes a while to wring that out. It doesn't mean it doesn't happen. Like I said, we're investors in Dallas and like it. It's just the timeline in which it occurs is slower than I think people talk about deliveries being the point of a turning point in a market. It's not deliveries. It's sort of a year to year and a half after peak deliveries.
Thank you.
You just mentioned that same-store revenue growth was a [27% event] . Was that specific to the markets you were just talking about?
No, that's specific to the markets I'm talking about. Right. For us, that's specifically Dallas, Atlanta, and Denver, where we have a presence and keep building. I want to note on our, because we've been buyers in those markets. Our underwriting has been on track. We expected revenues to go down in those markets. We underwrote it to do that, and they're doing that. It's a combination of concessions and just lower face rents in those markets. We thought we'd run it with less vacancy. We thought we'd run it with less delinquency, and that's true too. We're good at that. We're really good expense managers. The people we bought from of all ilks, one-off and portfolio and whatever, all good owners and stuff, but we're particularly good operators.
We feel like year-over-year, there won't be a big increase, but there also isn't going to be a big decline in NOI because we're, like I said, particularly adept at expense management. One example I want to give is the deal that we did earlier this year, the eight properties in Atlanta. We stayed at a cap rate there of 5.1%. A 5.1% cap rate for us is a standard cap rate that includes a property management charge. That's everybody off-site: computer engineers, HR professionals, legal, all that. Some charge for the fact that you need those services. It doesn't include G&A, people like me that are purely top of the house overhead. In any event, that number in our underwriting was $1.5 million. Yet we only added $500,000 of overhead because we're already scaled in that market.
When you start to get scale like we are, it's really, really powerful. That's what I talk about, like the advantage we have buying from less organized private operators. It's our scale advantage. Just because we're professional managers, we are an integrated property management and investment company.
Maybe following up on that, comments on the overall transaction market. You kind of took down expectations a little for this year. Curious what Bob's working on now.
Oh, the Bob we're referring to is our former Chief Financial Officer. I'm sure misses this event greatly and now our Chief Investment Officer. What we're seeing is in the markets that we're interested in, so Dallas, Atlanta, Denver, the suburbs of Seattle, D.C., and Boston, there just wasn't a lot offered for sale. There just wasn't as much as we thought. I'd also say the stock price is a signal. In light of all that, we took our acquisitions down from $1.5 million of acquisitions and $1 billion of dispositions, which meant that we were incrementally financing $1 billion. We sort of looked at it and that just didn't make sense.
We lowered our guidance to $1 billion and $1 billion and just said, "Listen, we'll sell some of the lower echelon performers in the portfolio and we'll buy as we can see out there opportunistically." I'm not even sure if we'll get to the $1 billion. We were sort of, I think, at $600 million. We may not end up getting to that number because we're going to react to the capital cost signals we're getting.
On cap rates, I think they've kind of been around that 5% range, whether it was coastal or Sun Belt. Is that still the case, or are people getting fed up with negative leverage or getting excited about potential rate cuts?
Yeah, really good question. We continue to see cap rates in the 4.75% - 5% range for the kind of product we want to buy, which is B, B +, A -, A quality assets in the markets I just mentioned. There's been no real change in that. We've seen some deals in Austin where we're not buyers right now trade closer to 4.5% because people have such a high expectation of that recovery, but yet there's still a ton of supply. What we're also understanding there to be doing is a lot of the buyers that are private buyers are buying using GSE floating rate debt, so SOFR plus a spread. Right now, that number isn't lower than fixed rate financing, but everybody's playing the curve and hoping the Fed will cut big, and then they won't have negative leverage anymore.
I find that an interesting play and not one that we would take. I think that's a little bit of it too, Yana, is a little bit of hope on, as you said, on rates and on the recovery in these markets, which I think is coming just probably a little slower.
Is that helping you a little bit with dispositions coming in better than you guys were expecting?
Dispositions are a split world. If the asset's much above $100 million, it's harder to sell. The market for pricier assets is harder to sell. For cheaper, cheaper meaning $125 million, $100 million, those sell. Sold asset in D.C., really full bidding tent. Asset in the RBC corridor cleared very well. Just an area we were overexposed. Cap rates for the kind of assets we sell continue to be in the low 5% because we're selling less productive assets, and we're buying what we think are hopefully higher IRR assets and more productive assets.
Yeah, similar in the Boston, suburban Boston assets.
Yeah, Boston is, there's not a lot for sale in Boston, so it can be hard to buy in that market. That's why we're building two deals in suburban Boston. It's one of those places where having a development pipeline is helpful. We've got a deal in Kirkland, Seattle area, Metro Seattle, and two deals, one north, one south in Boston, because those are areas we find it hard to purchase exposure. We've been building it.
Question about demand. Is there any impact in your portfolio on the demand this year from slower job markets?
Yes. The question is, have we seen any impact on our portfolio from maybe slower employment of college graduates? There are two different things that could be going on, and I'm not sure which of the two it is, or maybe it's something else altogether. When you have a downturn in employment and you have a downturn in the economy, the first thing you do is stop hiring people, and the people you stop hiring are your entry-level people. Whether it is all the companies collectively as a group hiring college graduates less right now because they just are hiring less entry-level, or whether there's an impact from AI on some of those industries is not clear to me.
The conversations I have with people about AI seem to be everyone's very excited about it, and some of the easier use cases are being explored, but the ability to use it at scale in a lot of medium-sized businesses like Equity Residential and others are more a year or two from now because you just have to figure out how to deploy it. I'm not sure whether it's the general slowdown in the economy, but we're 96.5% occupied. We continue to move renewal rates. The business is healthy, and I don't think the job market has to be great for us to have a good 2026. I just think it has to be not negative.
Maybe if you could just remind us kind of average age, because we're not really getting that entry.
Yeah. Average resident makes about $160,000 and is about 34 years old. There are certainly entry-level people in that cohort, but that isn't the majority of our residents. Thank you. Yeah.
I'm just going to ask you, the 4.75%, 5% cap rate for assets that you would buy in your overall cost of capital improved, does that reflect, long and large, a higher quality of your average portfolio or improve, you know, marginally improve it?
Just to repeat the question back, is buying at a 4.75%-5% cap rate representing the quality of the—okay, the question is whether buying 4.75%-5% cap rate assets improves the quality of our portfolio going forward or not. First off, really big ship, you know, $33 billion-$35 billion. Buying $100 million is not going to make a difference. It's going to help because they are generally lower CapEx assets because they're newer. They're going to have an AFFO benefit. They're going to have less capital spending. A lot of stuff we're selling, we always quote to you when it amounts to a nominal cap rate because that's the market convention with a standard $150, $200 CapEx. A lot of stuff we're selling has a really serious CapEx load that we don't believe in. The next guy is going to do a big reno and we don't believe in the return.
I think you're going to improve the quality of the portfolio, but it's a little bit at the margin.
Yeah.
Thank you.
I'm just curious, anything that you guys are tracking or anything new on the regulatory front, whether it's at the federal level with this potential affordable housing emergency or maybe some of your markets at the local level?
Sure. We'll just talk quickly about the federal government. The housing emergency, I don't know what that means exactly because I don't know what specifically would be done. Local zoning decisions are the most impactful thing on housing supply, local regulation like the eviction moratorium we alluded to. Those are much more impactful to our business than anything the federal government does with the possible exception, I would say, of the GSEs and the potential privatization of the GSEs, which is also hard, pardon me, to comment on because I'm just not sure what that is. I haven't seen a proposal, so I don't know what it would do to funding for apartment loans. I don't know how to react to that on the federal side. I think more supply would be great.
A lot of federal land that might be loosened up here, Yana, isn't anywhere near where people want to live. I'm not sure that's helpful. I've heard that maybe LIHTC or Opportunity Zone grants would be conditioned on local government having certain rules or not having certain rules. I guess that could be good. I'm just not sure, again, how that would work and why that would be terribly impactful because those are smaller programs anyway. In terms of local government, you see a lot of governors like Governor Newsom moving supply-focused solutions forward, and we really like that. The Senate bill he's pushing along would take away local control of zoning by transit stops and places that have the ability to take a lot more residents. You could have three, four, five-storey buildings built.
That's a terrific idea in a state that's starved for housing, and he's pushing that along, and it's a really good idea. We have a mayoral campaign here in New York going on. We don't have a lot of exposure to the rent-stabilized units that a mayor would control if Mamdani won or more market rate here in the city. I would say the bigger impact would be on quality of life and things like that potentially than anything else. We feel great about the vibrancy of New York City. It's been a terrific market for us. We're 97.7% occupied. It's a strong market at the moment. Our hope is that Mr. Mamdani 's focus is on housing supply for all New Yorkers. The private sector can be part of that solution.
We produce those units, and I think having us as an ally is better than as an enemy. We'll continue to make that argument through our trade association.
I think we have time for one more question. Otherwise, I can jump into rapid fire.
Rapid fire.
Okay. These are questions we're asking all the REITs presenting at the conference. When the Fed starts to cut, do you expect rates for long-term debt to decline, stay flat, or rise?
Decline.
Last year, the majority of companies stated they're ramping up spending on AI initiatives. How would you characterize your plans over the next year? Spend more, same, or less?
More.
Do you believe same-store NOI for your sector will be higher, lower, or the same next year?
I'd like to not answer that question just because it gives such a read into the guidance numbers for our company.
I'll say the same.
Yeah.