Dallas Tanner: Hi, John, Dallas. Really good question. I think by and large, and I believe Charles would echo the same here, we’re not seeing any degradation necessarily in demand. When you have vacant product on the market, especially at year-end, Charles, I think, summed it up really well, where you do have to compete a little bit more like we did traditionally in 2017, 2018 and 2019. It feels to us, based on what we’re seeing with the customer, our average rent to income ratios right now are 5.4 times, so we’re qualifying a much more qualified customer at about an average household income of $150,000. We don’t necessarily disagree, John, that there could be some upside to those numbers throughout the year. We’re certainly not baking that into our guidance.
I think we’ve had the luxury in the last few years of thinking about massive tailwinds, putting pressure on rate. We are going to view 2024, at least sitting here in early February, to be more in line with traditional years pre-pandemic. We’re going to see seasonality in the curve. I think the positives, though, to necessarily call out your question, are we have a more full portfolio as we go into 2024. We have a customer that’s more qualified, and we’re far more sophisticated in the way that we capture that demand. So I like our chances as we head into the year. All things being equal, we do also want to be sensitive to the fact that we are in sort of a slowing growth environment macro-wise for the country, and just be sort of modestly aggressive in our approach.
And so, I like where we’re sitting with the year. I think Charles summed it up well from an occupancy perspective. Our goal is to go out and execute, manage cost controls and make sure that we deliver. And I think you’re right to sort of point out that there could be more demand in the market throughout the year. It’s just too early to tell. We’ll have a better sense as we get through peak and into the summer.
Operator: Our next question comes from Haendel St. Juste from Mizuho Securities. Please go ahead. Your line is open.
Haendel St. Juste: Hi, good morning. Thanks for taking the question. Dallas, I guess, my question is on the property management platform. So the guide for this year includes $0.02 from Starwood that many of us weren’t expecting. But I’m more curious about the opportunity — the fees you’re charging — are able to charge this business. How we should think about the sizing of the opportunity, the ability to scale it over the near term? And how you might be thinking about the risk and maybe perception for this in what is clearly a very sensitive political sector? The apartment REITs are facing class action lawsuit over revenue management sharing or allegedly sharing of information. So with political season ahead of us, I’m sure this subsector will face incremental scrutiny. So maybe, again, just the high-level opportunity, the pricing, the opportunity scale it up and how you’re thinking about some of the risks. Thanks.
Dallas Tanner: Thanks, Haendel. So first, I think what I’d sort of take a step back and if you look at multi-family, professional management has been in place for decades. There are wonderful companies, both in the public and private sector, that do a really good job managing scale and creating services and predictability of experience that I think the single-family rental space has yet to achieve, except for a couple of us larger operators. I think our goal has been over time to be methodical in our approach to would we do this and what would be the reason for doing so. One, you called out appropriately, which is I think there is an adverse ability to drive efficiencies for other professional owners of single-family rental, but to do it in a very deliberate and purposeful way on our behalf.
So I think we’ve been pretty clear from the outset, as we’ve talked about this over the last couple of quarters and conferences, that we believe the size and scale of our platform is meaningful. We believe as the sector starts to develop professional services and ancillary opportunities for our customers that you can provide that at a much better cost and help drive down the cost of living for people, but you need scale. And so, for us, I think we want to work with professional capital, professional size, and create those efficiencies that we already enjoy in our portfolio for our customers. But by and large, over time, that will also have a compounding effect for us that we can go out and price and procure opportunities that will be beneficial to our residents as well.
In terms of kind of what that scale could be over time and those factors, look, we wouldn’t do it if it wasn’t an effective way to create shareholder earnings for our company and for our shareholders. But we’re not in the business of looking at doing this in small scale. We want to work with professional capital of scale. And it ultimately becomes, I believe, a good opportunity for us as the manager of those assets to be — obviously have better market intel on what those portfolios are doing. It can inform us of better opportunities of how we can actually enhance our own businesses, and we can certainly drive efficiencies in our future pipelines for growth. The last comment I would make is, as you look at our platform today, we now have two markets that are well into the tens of thousands of units.
That in itself will allow us to get creative on services we provide residents, efficiencies and economies of scale, and how we deliver those services. And I think ultimately, we’re going to learn a whole heck of a lot more about how our platform gets more and more efficient over time to drive further margin expansion.
Operator: Our next question comes from Juan Sanabria from BMO Capital Markets. Please go ahead. Your line is open.
Juan Sanabria: Hi, good morning. Just a question on the acquisitions. You previously talked about maybe some freeing up of portfolios with some of the debt maturity issues, so for caps kind of wearing down or running out. Just curious on what you’re seeing on the portfolio acquisition opportunity set to start the year. Thanks.
Scott Eisen: Hi. It’s Scott Eisen. Thanks for the question. Look, we are in the market right now, obviously, in dialogue with various people about opportunities. I think clearly, we are seeing some owners of portfolios where what was very cheap debt a few years ago is now breakeven to negative on cash flow. And I think there are people out there that are looking to explore their opportunities, and we’re looking at options on acquisitions that is accretive to us, we think could be interesting growth opportunities for us. It is clear that there are some people out there that never fixed and were floating on it, and those opportunities, I think, could potentially come our way.
Operator: Our next question comes from Adam Kramer from Morgan Stanley. Please go ahead. Your line is open.
Adam Kramer: Hi, guys. Thanks for the time. Just wanted to ask about the $0.02 kind of benefit or tailwind to the midpoint of the guidance that you included in the bridge from the third-party management. It seems like that’s only from kind of the — kind of formal managing of the 14,000 homes and from any kind of expense savings or other synergies back to the owned portfolio. So I just wanted to ask about maybe kind of what exactly is in that $0.02. And then, again, maybe a little bit bigger picture, taking a step back, what is the opportunity for maybe kind of the rest of this year in terms of adding additional homes to the each of the managed portfolio?
Jonathan Olsen: Thanks, Adam. It’s Jon. That’s a great question. I think firstly, the $0.02 that we outlined in the bridge, just to be clear, that is the net contribution based on the property management and asset management fees that we will earn net of the incremental cost that we expect to incur to manage those additional 14,000 homes. As far as what the opportunity could be over time and distance, yes, as we talked about, we believe that this will allow us to enhance the efficiency with which we manage our owned portfolio. I would say that those efficiency gains are not factored into our guidance. I think the reality is that we are going to, over time and distance, figure out how do we adjust our gearing model, how do we take advantage of the opportunities to scale, which are going to vary by market, and how do we think about ways to drive incremental opportunity both for us and for those third-party portfolio owners.
As far as what it could be down the line, I think time will tell. I would say since we announced this transaction, there have been a number of inbounds from sizable owners of portfolios interested in exploring ways to achieve better operational and financial performance. And that’s what we’re here for. We’re here to drive value for our stakeholders and for our customers by doing what we do, which is leverage the best platform in the business.
Operator: Our next question comes from Daniel Tricarico from Scotiabank. Please go ahead. Your line is open.
Daniel Tricarico: Hi, good morning. Another guidance question, a few quick related ones. I don’t believe you’ve given this detail so far, but what was the revenue earn-in at the beginning of the year? Where is the loss to lease in the portfolio today? And if you have it, what is the embedded market rent growth for the year?
Jonathan Olsen: Yes. So the earn-in is about 2.5%, 3%. And then, loss to lease, I would say, is high-single digits.
Operator: Our next question comes from Brad Heffern from RBC Capital Markets. Please go ahead. Your line is open.
Bradley Heffern: Yes, thank you. Can you talk about how you approach the property tax guide for the year? Obviously, in the past few years, you’ve been surprised on the millage rate. So does this guide reflect any offset there? Is this purely where you would expect valuations to go?
Jonathan Olsen: Yes, great question. I would say that as we talked about on past calls, we have made some adjustments in terms of how we think about property tax. And I think ultimately, as we’ve talked about, we are not assuming any improvement in millage rates. I think we are taking a somewhat more conservative approach as I think our experience over the last couple of years warrant. And as we sort of work our way through the year, we’ll be able to report back on what we’re seeing in a variety of markets. I do think it’s important to remember that two of our three biggest markets, we don’t actually learn the final answer until fairly late in the year. So I think we want to be mindful of what our experience has been in the last couple of years. And I think that’s reflected in our current guide, and that’s going to be reflected in how we may or may not adjust that over time.
