New York City's real estate market in flux with mayoral candidate Zoran Mandami proposing a rent freeze. Interest rates also in focus as is building security following the deadly shooting at a Midtown office building this week. Joining us to talk about everything that's going on in the real estate world, Robert Refkin, Compass's CEO, and it's nice to see you.You had some great earnings. >> Good to see you, Andrew. Yes, yesterday we had uh record earnings, 10 records, record ibida, free cash flow, IBIDA marg ...

Housing Affordability - Addressing apartment affordability in New York City is a significant challenge [1] - Freezing rent increases in New York City is a relatively simple task [1]

Group 1 - Rent control is often mischaracterized as a conflict between landlords and tenants, but the reality is more complex [1] - Zohran Mamdani's campaign for NYC Mayor includes a pledge to freeze rents on rent-stabilized apartments, which could have significant implications for apartment REITs [2][3] - The board governing rental rates for rent-stabilized apartments has historically approved rent increases that match inflation, but Mamdani aims to elect members who support rent freezes [3][6] Group 2 - AvalonBay (AVB) has substantial exposure to NYC, but its average monthly rent exceeds $3,000, while rent-controlled apartments are around $1,500, indicating minimal impact from rent freezes [4][6] - Mamdani's popularity reflects a broader frustration with high living costs, which may encourage similar policies across the country [7][10] - Rent control policies can extend beyond affordable housing, as seen in California's Tenant Protection Act, which caps rent increases [10][11] Group 3 - Rent control can lower the prices landlords charge but may discourage capital expenditures (capex) and new developments, impacting overall market dynamics [12][15][17] - The ripple effects of rent control are complex, with some arguing it may benefit landlords by reducing capex while maintaining cash flow [18][24] - Historical rent control areas like NYC and California face high rents and housing shortages, complicating the relationship between rent control and market conditions [18][19] Group 4 - The impact of rent control on apartment REITs is mixed, with potential for lower rent growth, reduced capex, and limited competing development [27][30] - Texas, with its low regulations and ample land, has seen high supply and lower rental rates, contrasting with rent-controlled markets [25][26] - The performance of apartment REITs may be more influenced by individual company operations and fundamentals rather than political ideologies [31][32]

Financial Data and Key Metrics Changes - The first quarter results exceeded expectations, with same-store revenue growth driven by improved physical occupancy at 96.5% and record low resident turnover of 7.9% [10][11] - Blended rate growth for the quarter was 1.8%, aligning with the midpoint of expectations [11] - The company maintained its guidance for $1.5 billion in acquisitions and $1 billion in dispositions for 2025, with minimal transactions expected in the first quarter [8][9] Business Line Data and Key Metrics Changes - Strong performance was noted in New York and Washington DC, with continued improvement in West Coast markets like Seattle and San Francisco [11] - The average household income of residents increased from the previous year, with rent-to-income ratios remaining favorable at 20% [12] Market Data and Key Metrics Changes - The DC market is expected to deliver 12,000 new units this year, with a significant drop in supply projected for 2026 [15] - In San Francisco, occupancy is above 97%, with net effective pricing up 6% since the beginning of the year, despite ongoing concessions [108] Company Strategy and Development Direction - The company is focused on leveraging supply and demand dynamics favoring rental housing, particularly in desirable metro areas [8] - There is an emphasis on innovation and automation to enhance operational efficiency and customer experience [19][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged heightened uncertainty in the economy due to governmental actions but remains optimistic about the rental housing sector's long-term demand [7][8] - The company expects continued strong performance in the second quarter, with blended rate growth projected between 2.8% and 3.4% [20] Other Important Information - The company is not currently seeing signs of consumer weakness, with no significant increases in lease breaks or delinquencies reported [13][14] - Management expressed disappointment over new rent control measures in Washington State, viewing them as a disincentive for investment [62][63] Q&A Session Summary Question: What are the acquisition opportunities in the Sunbelt? - Management noted increased transaction activity recently, with multifamily assets remaining a favored investment despite macro uncertainties [24][26] Question: How is blended spread guidance formed? - The guidance is based on expected seasonal trends and current lease activity, with confidence in achieving around a 5% range for renewals [27][28] Question: Why are the Bay Area and Seattle markets diverging? - Both markets are on a recovery trajectory, with San Francisco showing stronger performance than Seattle, which is stabilizing [32][34] Question: What is the impact of rent control measures? - New rent control in Washington State is viewed negatively, but immediate effects on the company's ability to raise rents are not expected [62][63] Question: How is the company managing renewal processes? - The company maintains a robust renewal process without significant changes, focusing on communication with residents to confirm renewal intentions [42][44] Question: What are the expectations for expansion markets? - The company anticipates muted expectations for the first half of the year but expects stronger revenue growth as new acquisitions are integrated into the portfolio [50][52] Question: How is the company addressing construction costs impacted by tariffs? - While tariffs introduce uncertainty, contractors are becoming more competitive, which may offset potential cost increases [95][96] Question: What is the current state of demand in Washington, D.C.? - Demand remains stable, with a diversified economy reducing reliance on government jobs, and no immediate concerns regarding lease breaks [75][76]

Financial Data and Key Metrics Changes - The first quarter results exceeded expectations, with same-store revenue growth driven by improved physical occupancy at 96.5% and record low resident turnover of 7.9% [9][10] - Blended rate growth of 1.8% was achieved, aligning with the midpoint of expected ranges [10] - The company maintains guidance for $1.5 billion in acquisitions and $1 billion in dispositions for 2025, with minimal transactions expected in Q1 [6][7] Business Line Data and Key Metrics Changes - Strong performance noted in New York and Washington DC, with continued improvement in West Coast markets like Seattle and San Francisco [10] - The average household income of residents increased from the prior year, with favorable rent-to-income ratios at 20% [11] Market Data and Key Metrics Changes - The DC market is expected to deliver 12,000 new units this year, with a significant drop-off projected for 2026 [14] - In Seattle, occupancy is at 96.5%, with good rental rate growth, while San Francisco shows strong momentum with occupancy above 97% [17][18] - Expansion markets like Atlanta, Dallas, and Austin are performing as expected, though Denver showed weaker demand [18][19] Company Strategy and Development Direction - The company is focused on leveraging supply and demand dynamics favoring rental housing, with a strong cash flow business and a robust balance sheet [6] - Strategic automation initiatives are underway to enhance operational efficiency and customer experience [19][20] - The company is open to share buybacks but is cautious due to market uncertainties [38] Management's Comments on Operating Environment and Future Outlook - Management acknowledges heightened uncertainty in the economy due to governmental actions but remains optimistic about the rental housing sector's long-term demand [5][6] - The company expects blended rate growth of 2.8% to 3.4% in Q2, positioning well for the primary leasing season despite economic ambiguity [20] - Management is not currently seeing signs of consumer weakness, with strong financial health among residents [11][12] Other Important Information - The company is monitoring the impact of potential rent control measures in Washington State and Maryland, expressing disappointment over these developments [60][63] - The company is seeing a mixed performance in Los Angeles, with suburban areas performing better than urban locations [14][15] Q&A Session Summary Question: Acquisition opportunities in the Sunbelt - Management noted increased transaction activity recently, with multifamily assets remaining a favored investment despite macro uncertainties [28] Question: Blended spread guidance formulation - Guidance is based on expected seasonal trends, with less than a third of new leases signed for Q2 so far [30] Question: Divergence in Bay Area and Seattle performance - Management indicated both markets are recovering, with San Francisco outperforming expectations while Seattle is on track with prior models [35] Question: Operating side changes for leasing season - No changes in renewal processes are planned, with a strong setup heading into the leasing season [46] Question: Impact of expenses on same-store revenue guidance - Management confirmed that expenses are proceeding as expected, with no significant pressures from tariffs affecting the guidance [47][70] Question: Demand quantification in Washington, D.C. - Management is monitoring the return to office trends but noted no significant influx of demand yet [121] Question: Concessions in San Francisco - Concessions are still prevalent but are declining, with net effective pricing increasing [110] Question: Future development amidst construction costs - Management indicated that while tariffs introduce uncertainty, contractors are becoming more competitive, potentially offsetting cost increases [95]