Good afternoon, everyone. Welcome to Citi's 2024 Global Property CEO Conference. I'm Eric Wolfe with Citi Research, and we are pleased to have with us Tom Toomey of UDR. This session is for Citi clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast and at the AV desk. For those in the room or the webcast, you can go to liveqa.com and enter code GPC24 to submit any questions if you do not want to raise your hand. Tom, I'll turn it over to you to introduce your company and team, provide some opening remarks, tell the audience what the top reasons are to an investor should buy your stock today, and then we'll go into Q&A.
Sounds good. Eric, thanks again. Great conference. Really appreciate you hosting us and 166 other management teams. With that today, Joe Fisher is to my right, he's President and CFO, and Mike Lacy, our Senior Vice President and Head of Operations, to my left. We recently posted an updated presentation onto our website, which includes both strategic and operating updates that summarize how UDR has outperformed in the past and is positioned to continue to perform well in the years ahead, thanks to our best-in-class operations, continuous innovation, and diverse menu of capital allocation options. A brief overview of UDR for those in the room. We're now in our 51st year as a company. UDR is a $20 billion S&P 500 apartment REIT that operates a diverse portfolio in 20 markets with over 60,000 apartment homes.
Three primary attributes include our best-in-class operations, continuous innovation, and a flexible approach to capital allocation around an array of opportunities that allow us to perform well and create value in any environment. Number two, diversification across markets, submarkets, urban, suburban, A, B quality, and price points. And third, all supported by an investment-grade balance sheet with $1 billion in liquidity. To wrap up, our focus on consistently generating above-peer average cash flow growth, which translates to superior TSR. Our durable operating and capital allocation competitive advantages and execution have contributed to our status as a full-cycle investment. We've generated better than peer average FFOA per share growth in seven of the past 10 years, and over the course of my 23 years as CEO of UDR, we have delivered an average annual return of little over 11%.
I believe you asked the question, three primary reasons for owning UDR stock? First, innovative culture embraces technology and change. Why? If you have a culture that can adapt to an ever-changing world, which we all live in and operate in, that culture will ultimately win. Second, our operating strategies and execution that have, and we expect will, continue to lead relative outperformance, which you can see in the presentation on pages seven, nine and 10. If you don't have one of these presentations, please raise your hand, we'll get one to you. And third, diversification, specifically a variety of value creation mechanisms, geographic footprint, and price points that contribute to outperformance in both up and down markets. So with that, I think we'll turn it over to Q&A.
All right, thanks. Saw your update. Looks like February saw a pretty nice acceleration from January, and probably something that I think seasonally looks a little bit better than what you normally see. But just two questions on that. I guess the first, do you still think that you're gonna see the first half be weaker than the second half? Especially since it looks like a lot of the supply picks up in the second and third quarter. And then second, you know, if I think about your guidance for the year, you're already above the blend in February that you're expecting for the full year. So is it just effectively baking in some conservatism for supply and things that you might see in the back half?
Yeah.
I'll kick it off, Eric. Good question. I'd say, just to take a step back, we're really proud of the team for the results they put up last year. We came in number two in NOI, and I think part of the strategy going into this year, what you all saw with our occupancy, really driving that up. So over the last, call it 60-90 days, we've been running above 97%. We're starting to see that come down a little bit, maybe by 10 basis points the last month or so, and we're driving our rents. And you can see that in our blended rate growth. Proud to say that from 4Q to where we are today, we've grown at about 150 basis points, which is the highest in the sector.
It goes to show that driving up your occupancy in a period of time where your lease expirations are the lowest, it's the right strategy. Do that in front of supply and continue to test the market. So to your point, we are slightly ahead of expectations. We expect about 70 basis points of blends for the full year this year, and that was 60 basis points in the first half, 80 basis points in the back half. So pretty close overall, one half versus the second half. But I'd say we're on track. A little bit ahead on the West Coast, East Coast and Sun Belt, more or less on track with our expectations. The West Coast has been driving that outperformance for us.
I think, Joe, in the past, you've said that you have visibility towards 70 days and not really much more than that. So I guess if you look at sort of the leading indicators for the next 70 days, whether that's the amount of customers coming to the door, top-of-funnel demand, amount of leases being signed, acceptance rate. You know, what are those leading indicators telling you about the upcoming strength of the peak leasing season and what it might look like?
For us, it comes down to demand right now. We have a pretty good idea of what supply is in front of us, where our expectations are that it's a little bit higher than other places. Through the, call it the first, second quarter, third quarter, supply is going to be heavy. Right now, those leading indicators, though, how much traffic's coming through the door, what's that demand look like, and what's happening with the concessions? And for us, the fact that we are around 1.5 weeks in the fourth quarter, and now we're down just under one week, that's been promising. So we're gonna continue to test that, see if we can't run with lower concessions, and then when push comes to shove and supply starts to pick up, it's in a period of time where demand's picking up as well.
So can we maintain that? It's a little early to tell. We're in first week in March, but again, right now, we feel pretty good.
Mike, you might add a little bit about what you're doing innovationally that's helping push what is shown here as your blends to total revenue.
Yeah. We always talk a little bit about other income, and for us, historically speaking, we typically push about 50 basis points in those initiatives, and that's set in our guidance again this year. A lot of that's gonna come through our Wi-Fi initiative, some of it through parking initiatives, other income as it relates to amenity-area rentals, package lockers. We're on track right now to continue to drive additional other income, and for us, my team is compensated based on relative performance. So again, finishing number two in NOI last year was great for the team, really impressed with the results. We're gonna continue to lean into our innovation to try to drive that outperformance.
Probably where we're gonna see the most of it is in places like the Sun Belt, where we do have a lot of supply, we have to focus on what we can control. If you think about our portfolio as a whole, we've got about 45 basis points coming from other income. In the Sun Belt, it's double that.
Why is that?
A lot of that has to do with what the rents are down there. So when you're pushing out our Wi-Fi initiative, and you're basically doing a gig speed at $70 on $2,000 rents, you start to pick up more in your other income. That's not in my blends. So our blends are expected to be slightly negative this year. Where we're gonna make it up is in that other income, and then we compare ourselves against the peer set within those markets, and if the teams are outperforming them on a total revenue basis, that's what counts, and that's what they're doing.
Maybe taking a step back from all the sort of... I'm sure you guys will get your fill of, you know, what happened in May and June and all the little intricacies of what's happening on a month-by-month basis. But I think, Tom, I had a conversation with you, I think it was three or four years ago, where you mentioned to me, you know, you'd never seen such a improvement in sort of rental rate growth within a short period of time. And the reason why I'm bringing that up is obviously today, everyone's asking about supply, and, you know, the supply is quite predictable, what's going to happen over the next year. But as we move past that supply, it also seems somewhat predictable that the amount of supply is going to come down.
So what do you think about on the other end of this? Once we move past the supply, what type of growth could we see? Could these be some of the among the best years that we've seen in multifamily, or, you know, are we setting up for something that is gonna be stronger than we've seen in the past?
Yeah, I'll start with that, and Joe can certainly weigh in as well. Well, first, you have to look at this business. It starts with, it's a commodity, but a necessity. Second, we're not building enough, even at the elevated levels today, to keep up with the household formation, immigration, overall population growth. So, I mean, the country is in a deficit of housing. That deficit is temporarily being appeased with this big supply wave. But beyond that, it's gonna go back to a deficit, and given the building cycles, the difficulty of entitlements, I see that being the cornerstone of, we're gonna have outsized growth in demand and limited supply, and we should get better than long-term average growth going forward. Other aspects of how do you win in a business like that, that is very fragmented?
You win it by either cost of capital or operating acumen. I mean, we focus a great deal on our throughput, meaning what's our margin growth potential? And that is through innovation, ideas, great execution, and, and so I think that's the winning formula for UDR and in this business model going forward.
Yeah.
Mm-hmm.
And so should I take from that, that you think your peers are surely gonna kind of be comparable in terms of like, you know, rental rate growth? So you really got to look at the companies that are extracting more value from their properties and the initiatives because everybody else is just kind of be in this narrow band, and so you shouldn't get overly concerned about 20 basis points, 30 basis points here and there. You should look at who's extracting the most value out of their assets.
I think long- term. I mean, you have to realize there are seven very well-run companies in this space. They're all very capable management teams. They're innovative, delivering results. But collectively, we own 3% of the marketplace. The top 100 owners own 10%. It's the mom-and-pops, the small operators that don't have scale, technology, can't keep up with legal and regulatory environment, that are inefficient operators, if you will. We bought a portfolio in 2023 that was run by a respectable, capable developer. Its operating margin was 73%.... And in the span of 150 days, Mike moved that margin from 75 up to 79, with a target, the rest of our market's 84% margin.
So that type of capability on the operating is how long-term businesses create value, is they find lower margin business operators, and they deliver their value creation through that. On scale, at $20 billion, it's hard to buy enough assets, even in distress, to move the dial that great. So this is a case of who's the best operator wins the game, or those with the cheapest cost of capital. The market dictates our cost of capital.
So from your perspective, I mean, you don't really need to see, I mean, everyone's asked about, okay, is there gonna be distressed at some point because there's, you know, full development pipelines from merchant developers, their cost of capital has been raised, it's gonna be difficult for them to extend their loans. But at the same time, there's a huge amount of capital waiting in the sideline. I think your point is really that no matter what the asset is, you're gonna be able to extract value from it because you're gonna be able to operate it more efficiently. I think you've said in the past that you get 800 basis points of average upside in terms of margin. That's like 13%, I think, NOI growth, if you do the math on it.
Sort of how long does it take to achieve that, and what are some of the common things that you see from private operators that you do differently to extract that value?
Yeah, Eric, it's a great question. I was actually spending time with the team in Texas, where we took over this portfolio over the last week, and a lot of it's just in how we operate in terms of efficiencies on technology. So we went in there in the first 90 days, and we were able to install smart homes. We're installing our package lockers. We are rolling out Wi-Fi. Little things like washer and dryers. This operator, they didn't believe in doing that in unit. They wanted third- parties doing it. We went in and installed washer dryers throughout. So over the course of 90 days- 120 days, we were able to pick up about 300 basis points just in terms of being able to push out our technology. In addition, we do run a bit more efficient.
So when you think about a 300-unit property, a typical operator is going to run that with six people. You have three people in the office, three people on service. We run it with 3.5 people, and so we're able to reduce the headcount on that portfolio from about 38 people down to about 30, and we still have a little bit, ways to go. So long-winded answer, but it typically takes about 18 months to really roll out all of this and see it start to play through. We just jumped on it very quickly.
The reason why we don't see your acquisition guidance, I guess, being larger, given the fact that, I mean, if you can get 13% NOI growth at 800 basis points of margin expansion, you're almost always gonna wanna do that. But it, I guess it comes down to really not seeing enough product or just being limited on the capital cost side. So maybe just talk about sort of like what you think is a reasonable expectation, you know, with your JVs, which obviously have a better cost of capital there, in terms of acquiring assets over the next couple of years, how aggressive you're gonna look to be there. Because it does sound like a pretty good opportunity if you can get that sort of 800 basis points of upside.
Joe?
Yeah, I'll jump in here, Eric. So yeah, I think you hit on a number of factors there as it relates to deployment of capital. Number one is the availability or cost of our own capital. Obviously, with stock trading around a ±6% cap rate, not an overly compelling level to go out there and issue equity. From a debt perspective, we're seeing compression in debt cost over the last 90-120 days, down into the, call it, low to mid-fives. That said, you're still at a level that would be dilutive day one relative to where you can acquire assets.
So asset pricing today, after being perhaps a little bit higher in terms of cap rates, lower in terms of value in 4Q, you know, you've seen a pretty big tonal shift as rates have come down, and pricing has generally stabilized kind of in the ±5% range. There's a couple of big transactions out there that we think will probably get done around that level, and we've seen a lot of one-off transactions being done there. So you know, if we have to buy at a five or low fives today, you know, you have to be able to get to cash flow accretive and FFOA accretive in very short order. I think our best avenue for that, you mentioned it, being the JV. So we did that $500 million JV with LaSalle in 2Q of last year.
We got the one asset done in 4Q, and that was kind of a bread-and-butter type deal, kind of a little bit older, suburban Boston deal, you know, fairly close to an existing asset, so we had some scale there. That deal we got in the high fives, and we'll take that to a probably low sixes in short order, and then we get fees on top of that, be it, you know, property management fees, asset management, financing, construction, and redevelopment fees, and then a promote. And so that gets us into the mid- to high sixes on that deal over the next couple of years. So I think deployment on that front, that's probably where we wanna be. So it's pretty compelling when we can get that fee structure, plus ops upside on a deal down the street.
In terms of one-off acquisitions for balance sheet, pretty unlikely. I think on the development front, we've got four or five deals that are ready to go, but just not penciling to the level that we'd like to see today. So we wanna be patient on that front, either waiting for our cost of capital to improve, cap rates to improve, and/or NOI profile to improve, to get that yield up a little bit more. So we have some deals ready, and then we have the optionality, but nothing day one. And then on the DCP side, we're working through one maturity right now, that we talked about on the quarterly call, and so that's that binary outcome in our guidance of kind of $0.02 that we incorporated to ensure that we didn't have downside risk.
So if we do take that asset back upon maturity, which will be in the next 60 days, there would be $0.02 of risk. That's basically us going from a high yield, $100 million Mezz investment down to basically an acquisition yield. Right now, they've got a couple term sheets in front of them, so we're hoping that that equity partner gets the refi done at the terms and proceeds we'd like to see. And then, we'd get a little bit upside there, and then just waiting for additional proceeds to come back on that portfolio to continue redeploying.
... And so if I take that sort of high sixes that you're earning, as sort of a baseline, on your JVs in terms of acquisitions, kind of stabilized yield that you're getting there, sort of imply that if you were to be more active on stock repurchase, you'd probably need to see implied cap rate in the high sixes or, or better? Just trying to understand, 'cause we've seen a few of your peers sort of step up their repurchases recently, so trying to understand what would cause you to do that as well.
I think that having that additional avenue to pivot into with the JV somewhat negates the desire to go into the buyback, because when you start to look at the relative metrics in terms of FFO accretion, stabilized yield, you're gonna be about at parity between the two because of the fact that, you know, we have an implied cap of, let's call it six, on a plus or minus stabilized portfolio today. We can go out there and buy undermanaged asset, get the upside that Mike talked about a moment ago, and then get the fee stream on top of that. So you end up in basically the same position from an earnings perspective. The difference is that we are buying into an asset that expands the portfolio, gives us more concentration in certain markets, more scale in certain markets, versus going out and shrinking the portfolio.
So we'd prefer to stay focused on the JV side for deployment versus buyback at this time.
But obviously, I guess my question was sort of like, there's a pricing if we were to, you know, trade into high six or sevens, that would change that math, right? Obviously. Or maybe I'm missing something there.
Yeah. Correct. We're always willing to pivot. You've seen it. We have a slide in here in the presentation on page 12 that shows we're pretty consistent in our willingness to pivot, be it, you know, when we're sourcing capital or deploying capital, and then also on the following page, where we deploy that capital. And so we've done a whole series of buybacks over time, but it's when do you get it to a certain level of discount, what's the source of that capital, and then what's the alternatives? Today, I'd say it just makes sense to stay focused on JV.
And then, you mentioned the Philadelphia asset. I mean, maybe you could give an update of sort of where you are with that. I mean, I guess it sounds like a, you know... When will you know? I guess it's early May. By early May, you'll know whether you're taking that asset back and, sort of what's gonna happen along the next two months to see whether that's gonna happen or not.
Yep. Yeah, so just as a recap for everybody here, within our Developer Capital Program portfolio, we have what's now approximately $100 million exposure to an asset in Philadelphia that was developed. You know, we actually committed to that deal back in 2018-2019, so that kind of tells you how elongated this process has been, going through Philly, the COVID shutdowns, and so that dragging on obviously added to their cost and our accrual, so kinda ate into some of their economics. Then that market being one of the most penalized from a concessions perspective and supply perspective has challenged their NOI stream. And so we're working through that refi, I'd say, with a couple term sheets that they have in front of them.
Hopefully, we'll get to the right proceeds and the right spreads and terms and all that, but we should know by the time we jump on our next quarterly call in late April, we should be able to give an update to the street. So if we get that done, then we'll continue to accrue on that asset, and so that takes a couple pennies upward to our range on both the high end and low end. So one more to talk about then. Beyond that, we've gotten questions this morning, of course, of what else is out there. We talked about it on our call here last month, and so that was kinda three other deals totaling around $50 million on our watch list. That's out of almost $500 million of additional deals.
You know, 10% of our remaining portfolio is sitting on the watch list. Maturities aren't until 2025 and 2026, but those are deals as well that either higher supply in those markets, delays in those markets, and so NOI yields and debt yields a little bit lower than we'd like to see. So put them on the watch list, but we probably won't know any outcomes on those until 2025 and 2026 till they get to the refi window. That said, if they did have a negative outcome, we think it's maybe ±$0.01 of risk there across three deals and $50 million, so not a big number on our earnings stream.
And then, you talked a little bit about your customer experience project. I noticed, in your deck that you talked about low turnover. I mean, I'm sure it's hard to separate how much is, you know, from things that you're doing differently versus, what's going on in the market in terms of low turnover everywhere that you're seeing, just from the housing market being so pricing competitive. But maybe try to help us understand where you are within that, how much you think turnover has been reduced based on the actions that you've taken versus, you know, what's going on just generally in the market, and then how much is left to sort of extract there and the timeline to get there.
I'll kick it off. You guys feel free to jump in. You know, it's fully rolled out. At this point, we have dashboards in place. We've passed it out to our associates in the field, or we have individuals hired in the Denver office that help identify where we have some things that we can adjust. And when I say that, I'll give you a couple examples. We can see every resident, and we understand the trajectory they are on based on their life cycle. So when there's a bad service request, or a bad survey, or some sort of sentiment action that's either good or bad, we know what's happening.
Just to size it a little bit for you, when we go back through all this data over the last, call it seven years or so, the difference between a good experience and a bad experience can be 20% more higher retention. So we have armed the teams with it. When we have an action in place, it actually sets up a service request, so they have to go back through and they have to make sure that they're identifying it and working through it versus it going into a black hole. And so the teams are fully aware of it, they're bonused on it, and it, we believe it's made a big difference. And a couple data points I'd point to is, over the last 10 months or so, we have had better retention on a year-over-year basis.
4Q alone, our turnover was about 400 basis points better than the historical average, and so we see it really playing out.... We think it's gonna be a benefit all year, and then it's really gonna take off as we go into next year as well. And just to size it again, is every 1% reduction in turnover is equal to about $3 million to our bottom line. So a huge focus for the teams, and I can tell you the most exciting thing that we have going on right now, and it's creating a lot of buzz with everybody that's working on it.
It's come- [crosstalk]
Fill in some blanks, because I think it's worth it, it's unique, first and foremost. And if you could answer the question most companies would ask themselves: If I knew what my customer thought of me, and I could predict their behavior, what is the value? Second, we own all the data. We don't have any other one in the pipeline that owns our data, then sells it back to us and uses it. So we've built the proprietary model and then back-tested it, and the truth is, with 97% accuracy, we could pretty much predict what our customer's thinking of us and what their likely action is on renewal. So if you have that power, now what you turn your attention to is, well, how do I get out of my own way? What are my errors?
This is pretty common, pretty thoughtful, but if you actually put it into the hands of people that are interacting with the customer, whether they're our centralized teams or the people in the field, all on the same dashboard, then you get to the next level, which is you can quantify the value of each customer and what action you should take. And clearly, we have some customers that are worth $2,000 on renewal, some that are worth $30,000 on renewal. Where do we focus our energies towards optimizing our revenue service level, and then what does it cost us, ultimately, to retain them? So once you have the tool in place, the real question isn't 1%, it's: Why do you need any turnover? What's the potential? Well, Mike quantified it.
He says, "Potentially on the map, there's 20% that we think is controllable in some shape or form." And how much you'll capture over what point in the cycle of developing the product and rolling it, who knows? But what I identify it as unique, proprietary, we control it, and therefore it becomes a scalable differentiator towards margin expansion, ultimately.
Did you just say that you could predict with, like, 97% accuracy, sort of who's gonna renew and not renew, assuming that you're given a market increase? Obviously, if you're not given a market increase, that factors in. But, like, with 97% accuracy, you can say, "We think this tenant's gonna renew.
Yes.
That's a pretty incredible number. I mean, that's... I mean, that just, to me, that, that's very valuable in and of itself. So I guess the second question on that is, so now that you know who's gonna renew and not renew, you mentioned that the value of that customer, what makes someone a more valuable customer versus a less valuable? Is it just less valuable customers are a nuisance, creates a problem for other tenants? More valuable customer is more inclined to stay, doesn't create problems. Like, what's the difference between the two?
Yeah, all, all the above that you just mentioned, as well as just tenure. So how long has somebody already been at the community? Are they in a studio versus a two-bedroom, three-bedroom? What's the average rent? Are they a nuisance to the property? And then how much other income are you able to get from some of these individuals versus others, like storage units, parking, reserve parking? You name it, we're looking at all of this, and that's how we're able to quantify how much they're worth and where should we spend our efforts.
So someone is in a penthouse that's paying us $20,000 a month, and someone that's paying us a studio that's paying us $2,000 a month. How many days vacant am I exposing? What's my traffic flow around each of those products? So the $15,000, it may be something that takes 35 days to lease, versus the $2,000 a month, it's a 17-day cycle. So it gets sophisticated down to number of days vacant, turn cost, duration. But Mike said it as well, other income potentials. How much are they paying for parking? How often do they use the package locker system? So we do understand.
As turnover comes down, I mean, can you be that much more aggressive on sort of new leases and new customers? Because if you have a highly predictable base of revenue, that theoretically means that for those that are coming in, that those tenants that are leaving and those that are coming in, you can be more aggressive in pricing those. Or maybe I'm just thinking about that wrong, but if I knew that a certain percentage of my customers were going to renew and they were a higher percent of those customers, I could theoretically be more aggressive on new customers.
Well, certainly, it's no different than Mike's strategy that he executed last year. He pushed occupancy up to 97%. You're seeing the benefits of that in January and February, where he can pull back on concessions, increase his new market rent. So if I have lower turnover, can I increase the traffic? Yes. Well, therefore, I'm creating an imbalanced demand curve, just higher traffic, lower availability. You should get more pricing, both out of renew and new. So it should change how the business ultimately... I see this as the next generation model with respect to the pricing engines, that they're more of a demand driven model, meaning buyers instead of a traffic model. So we think ultimately this is a cornerstone tool towards revisiting how the product is priced.
... We have an audience question, question on reported cap rates. For your 2024 guidance, you stripped out allocated G&A. Are your quoted cap rates comparable, or are you including an allocation for G&A? What about deal costs? Are you baking those into your cap rates? So effectively saying, how are you calculating your cap rates? And if you have, like, a cost allocation that you're putting in there that's taking them down.
Yeah, so two ways. One, when you're thinking about cap rates for third- parties, you know, when we talk about the market generally trading at ±5%, that's gonna be post-prop management and post-market CapEx, which is usually $200 a unit. When we talk about our own cap rates, we factor in what the property management incremental load will be for ourselves, and there is some efficiency relative to a typical 3%+ type of revenue number. So we get a little bit more efficiency than that, obviously, when we scale up.
Then you mentioned the concession activity. I think during your call, you said that market-level concessions as you move through 2024 will be a primary driver of your ability to capitalize on your, on your rent growth forecast. So maybe just help us understand what you're seeing from that so far. Obviously, it's not concessionary, but we saw one of your Sun Belt peers sort of lower their pricing to induce occupancy in February. Are you seeing that type of stuff early on, or has it been relatively controlled so far?
Yeah, a couple points I'd make there. I think, again, driving your occupancy up in a period of time where your lease expirations are coming down sets you up, and then as you go into a period of time where demand's starting to pick up, supply is going to pick up as well, you're better positioned to try to capture some of that rent growth, and that's exactly where we've been. And so starting with 97.2% occupancy coming out of the gate to start the year, we started scaling back on concessions, and that's where you saw us go from 1.5 week all the way down to 0.9 today. My expectation, and it's early, it's only the first four days of March, continue to drive that down.
So if we can hover around one week or less through the first few months of the year, that's gonna set us up. It's driving our new lease growth today. So when you think about that rate of change again, from 4Q to where we are today, it's a 150 basis point pickup. A lot of that's being driven on the new lease side, and again, that's coming off of concessions. So we were - 5, 6 in December. We are down to - 2, 3 on new lease growth today. So that's where it's coming from.
But, I guess just generally for the audience, I mean, the big fear, right, is just that you're gonna see a lot of, you know, occupancy disruption in the Sun Belt, and you're gonna see concessions or other adjustments in pricing that are larger than you normally see. You're not seeing that as of yet. I mean, obviously, you're seeing some of it because that's been baked in your guidance, but you're not seeing anything above and beyond what you expected thus far.
Not above and beyond, no. It's, it's basically where we expected it to be, and I tell you again, the West Coast is, is a little bit stronger, led by San Francisco and Seattle for us, and that's more demand driven. We're definitely seeing people return to office, jobs picking up in those markets, and that's allowed us to drive our rents a little bit more than we thought.
That's not just reduced concessions, that's actual demand coming in that's allowing you to drive rent within some of those West Coast markets?
Correct.
What do you think that's driven by? I mean, it's tough to say, but so far this year, I guess I've seen a number of sort of small layoff announcements, but I haven't seen much material pickup in hiring among the largest employers there. What do you sort of attribute that demand to?
Yeah, so there are a few things for us, and I think it's a little different between Seattle and San Francisco. Just as an example, a place like Seattle, we don't have any downtown Seattle exposure, and that's where a lot of the supply is coming. We're located in Bellevue. There's about 200-300 units being delivered this year, so very minimal supply. We have seen demand pick up there because places like TikTok, for example, I think they have a couple hundred thousand square feet of space that they're taking out in that market. That's created more demand. I actually have seen about 3%-4% blends in that market, which, right now, that's number two in our whole portfolio. So, and it's a very seasonal market. Seattle feels good today. Feels good for us.
You move down south to San Francisco, we're a little bit more diversified here, 50% SoMa downtown and 50% along the Peninsula. We will see supply down in Santa Clara. There's going to be supply this year that will impact us to some degree, but it is more demand driven in that market where we're seeing concessions coming down. I mean, they were four weeks, about 60, 90 days ago. They're closer to 1.5, two weeks today, and a lot of this is return to office and, quite frankly, people just returning to say, "I don't want to lose my job. I want to find a place today," and traffic's picked up. So on a rate of change basis, San Francisco has probably been our strongest market.
All right, so rapid fire, very rapid. What will Same Store NOI be for the apartment sector in 2025?
I think the sell side currently has consensus of 2%-2.5%. We'll go with that.
All right, 2%-2.5%. Will there be the same, fewer, or more apartment companies at this time next year?
Fewer.
What's the best real estate decision today?
Joint venture acquisitions.
Thank you.
Thank you, Eric.