Equity Residential (EQR) Earnings Report: Q3 2015 ... · Equity Residential (EQR) Earnings Report: Q3 ... or supplement these statements that become untrue because of ... We kept

CompanyName:EquityResidentialCompanyTicker:EQRSector:FinancialIndustry:RealEstate

EventDescription:Q32015EarningsCallMarketCapasofEventDate:29.47BPriceasofEventDate:78.91

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EquityResidential(EQR)EarningsReport:Q32015ConferenceCallTranscriptThefollowingEquityResidentialconferencecalltookplaceonOctober28,2015,11:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

MartyMcKenna;EquityResidential;IRDavidNeithercut;EquityResidential;President&CEOMarkParrell;EquityResidential;EVP&CFODavidSantee;EquityResidential;EVP&COO

OtherPart icipants

DaveBragg;GreenStreetAdvisors;AnalystMichaelBilerman;Citigroup;AnalystNickJoseph;Citigroup;AnalystRossNussbaum;UBS;AnalystNickYulico;UBS;AnalystSteveSakwa;EvercoreISI;AnalystHaendelSt.Juste;MorganStanley;AnalystJanaGalan;BankofAmericaMerrillLynch;AnalystJeffSpector;BankofAmericaMerrillLynch;AnalystTonyPellow;JPMorganChase;AnalystAlexanderGoldfarb;SandlerO 'Neill;AnalystRobStevenson;JanneyMontgomeryScott;AnalystVincentChao;DeutscheBank;AnalystDanOppenheim;Zelman&Associates;AnalystRichAnderson;MizuhoSecurities;AnalystTomLesnick;CapitalOneSecurities;AnalystWesGolladay;RBCCapitalMarkets;AnalystTayoOkusanya;Jefferies&Co.;AnalystDrewBabin;RobertW.Baird;AnalystAaronHecht;JMPSecurities;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

GooddayandwelcometotheEquityResidentialthird-quarter2015earningscall.Today'sconferenceisbeingrecorded.Atthistime,Iwouldliketoturntheconferenceovertotoday'sspeakers.Pleasegoahead.

MartyMcKenna(IR):

Thanks,Joe.GoodmorningandthankyouforjoiningustodiscussEquityResidential'sthird-quarter2015resultsandourassetsaletoStarwood.DavidNeithercut,ourPresidentandCEO,willbeourfeaturedspeakerthismorning.DavidSantee,ourChiefOperatingOfficer,andMarkParrell,ourCFO,areherefor




theQ&A.

Pleasebeadvisedthatcertainmattersdiscussedduringthisconferencecallmayconstituteforward-lookingstatementswithinthemeaningoftheFederalSecuritieslaw.Theseforward-lookingstatementsaresubjecttocertaineconomicrisksanduncertainties.TheCompanyassumesnoobligationtoupdateorsupplementthesestatementsthatbecomeuntruebecauseofsubsequentevents.

AndnowIwillturnthecallovertoDavidNeithercut.

DavidNeithercut (President&CEO):

Thankyou,Marty,andgoodmorning,everyone.Andthankyouallforjoiningusonsuchshortnotice.

Becauseoftheadditionalnewswereleasedthismorning,we'regoingtobreakfromournormalearningscallroutinewherewewouldgothroughpreparedremarksonourmarkets,quarterlyacquisition,dispositionanddevelopmentactivityaswellascommentsonanycapitalmarketbalancesheetandliquiditytopics.Instead,I'mjustgoingtomakeafewbriefcommentsabout--firstabouttheearningsreleaseandthenabouttheportfoliosaletoStarwoodandasMartymentioned,afterthat,wewillopenitupforquestionswhereMarkParrellandDavidSanteewillalsobeabletojumpinwiththeirinsights.

Sofirstastoourthird-quarterearningsreleaseinthelast20years,wehaveonlyfouryearsinwhichsame-storerevenuegrowthwas5%orbetterandthreeofthesehavebeeninthelastfiveyearsincluding2015.Wehavehadonlyfiveinstancesinthelast20yearswhenannualsame-storeNOIgrowthwas6%orbetterandthreeofthesehaveoccurredinthelastfiveyears,againincludingthisyear.Andourcurrentoutlookfor2016inwhichwehavegivenaninitialrangeofsame-storerevenuegrowthwithamidpointofnearly4.9%suggeststhat2016isexpectedtobeyetanotheryearofextremelystronggrowth.

Nowyou'veheardussaynumeroustimessincetherecoverythatwefeltwewerelookingatanextendedrunwayofabovetrendperformanceandthatcontinuestobethecase.It'snosecretthatfundamentalsremainverygood.Thedemographicpictureisincrediblyfavorable.Theeconomycontinuestoimproveperhapsnotattheratemanywouldlikebutimprovenonetheless,whichisgeneratingjobgrowth.Again,lessthansomemighthopeforbuttheemploymentratehascontinuedtodropwhichcreatesnewhouseholdmillennialsthathaveahighpropensitytorenthousing,manyofwhichwishtodosoin24/7citiesacrossthecountrythathaveveryhighcostofsingle-familyhomeownership.

Andthistrendwillcontinuebecauseevenwiththeimprovementinjobsandthegrowthinnewhousehold,therestillremainsanelevatedleveloftheseyoungadultscontinuingtoliveathomewiththeirparents.AndIknowbecauseI'vegotoneofthemmyselfandwe'requiteconfidentandinmycasequitehopeful,thattheywillsometimessomedayleavehomeandcreateevenmorenewhouseholdsandthisnewhouseholdswillberenters.

Aswesitheretoday,occupancyhasheldstrongandwereat96.3%.Achievedrenewalratesaveraged7%inthethirdquarterwithOctober,NovemberandDecemberat6.7%,6.1%and6.3%respectively.Weareveryexcitedaboutdelivering5.2%same-storerevenuegrowththisyearandsame-storeNOIgrowthof6.2%.Inaddition,wecurrentlyexpectnormalizedFFOtogrownearly9%thisyearoverlastyear.

Solikeeverycallwe'vehadwithyouthelastseveralyears,we'repleasedtotellyouitremainsaverygoodtimetobeinthemultifamilybusinessandwethinkweareextraordinarilywellpositionedtobenefitfromthecontinuedstrengthindemandforhigh-qualityrentalhousinginthehighdensityurbancoastalmarkets.

Thatleadsmetotheotherreleaseweputoutthismorningregardingthesaleof23,000unitstoStarwoodfor$5.365billion.Thedecisiontoselltheseassetswastheresultofaprocessthatbeganlatelastspring




werelookingatastockpricethatwastradingatameaningfuldiscounttoNAVandwewereassessingthebestcourseofaction.Wethoughtaboutsellingcoreassets,wethoughtaboutbringingsomeJVpartnersintosomecoreassets.Wekeptcomingbackaskingourselvesaboutwhattodowithassetsinthosemarketsthatwedidnotconsiderlong-termcoremarketsandassetsincoremarketsthatmightnotfitourlonger-termstrategicvisionfortheCompany.Theseassetswouldgenerallybedescribedasoldermostlysuburbaninnaturewithlimitedaccesstopublictransportationservices,themajorityofwhicharesurfaceparks,two-tofour-storywalk-upgardenproperties,notthehighdensityurbanassetswithhighwalkscoresthatwe'vebeenfocusedonthepast10yearsorso.

Andwhilewehavehistoricallyconsideredalloftheseassetsaswarehousesofcapitalthatcouldatsometimeoranotherbesoldandreinvestedintocoreassets,overtimewebecamemoreandmoreconcernedthatrecycling$6millionofcapitalwasgoingtobearealchallengegoingforwardbecauseofthestronginstitutionaldemandforcoreassetsingatewaycoastalcitiesandthecompetitivepricingthatasaresultofthatdemandcausingverydilutivetradesbetweenwhatwewanttosellandthatwhichwouldliketobuy.YetwethoughtthatabsolutevaluationsoftheassetsweknewwerenotlongtermholdswerequitegoodandthatthosevaluationsmightbeatriskbyanyupwardmovementininterestratesaswellaswithanyfuturechangesinliquidityprovidedinthemultifamilyspacebyFannieandFreddie.

Sowebegantothinkthatmaybethebestthingtodowouldbetomonetizethevaluewehaveoftheseassetsthedayanddoaspecialdividend.Themorewethoughtaboutthat,themorewebecameconvincedthatitwasthebestcapitalallocationdecisionwecouldmakeforourshareholderswhichkindofironicallyisalsoverysimilartowhatwe'veseentakeplaceinourspaceseveraltimesrecently--associateestates,homepropertiesandcampuscrestcommunitieskindofapartialgoprivateforcashdeal.

SowetalkedtoahandfuloffolksabletoacquireaportfolioofthissizeandworkedwithStarwoodoverthelastfewweekstoputadealtogether.Thataccomplishesseveralthingsforus.

First,werealizedaverygoodpricingonassetsinmarketsnotconsideredcoreforusandonassetsinourcoremarketsthatdonotfitalong-termstrategicvision.Thesecondthingweaccomplishedisthatwecannowfocussolelyonourstrategyofowning,buildingandoperatingassetsinhigherdensityurbanlocationswithcloseproximitytopublictransportation,jobcentersandotheramenitiesthatcitieshavetooffer.

Intheinvestorpresentationcirculatedlastnight,youcanseethatoururbanconcentrationincreases13%toatotalof78%asaresultofthesetransactions.OurNOIformid-andhigh-risepropertiesincreased21%toatotalof69%andthatourtotalwalkscoresincreased9%toascoreof75.

Oneachoftheseandothermetricsweclearlyleadthemultifamilyspaceandourbeliefisthatlong-termrisk-adjustedreturnsintheurbancorewillexceedthoseinothermarkets.

Soinsummary,fundamentalscontinuetobeverystrongandtoremainstrongforquitesometime.Wefeelverygoodabouthowwearepositionedgoinginto2016andbeyond.Wearealsoverypleasedtobeabletomonetizeourinterestinalargeportfolioofassetsthatdon'tfitourlonger-termstrategicvisionoftheCompanyinasingletransactionandbelievethatreturningthiscapitaltoourshareholdersanddeliveringanunleveragedinternalrateofreturnof11.1%isagoodcapitalallocationdecision.Andbydoingsoinaleverageneutralway,weretainalotofbalancesheetflexibilitygoingforward.

Sowithallthatsaid,Joewillbehappytoopenthecalltoquestions.

QUESTIONS&ANSWERS

Operator :




(OperatorInstructions).DaveBragg,GreenStreetAdvisors.

DaveBragg (Analyst-GreenStreetAdvisors):

Thankyou,goodmorning.Thefirstquestionrelatestothe[5-5]caprate.CanIjustconfirmisthataforwardnominalcaprateorsomethingelse?


Thatourforward12withabouta$300replacementreserve,Dave.


Okay,thankyou.Canyousharealittlebitmoreabouttheprocessitselfincludinghowbig--wasitbidding10forportfolioofthissize?


Wellagain,asInoted,Dave,wejusttalkedtoahandfulofplayersthatwethoughthaddemonstratedtheabilitytodoadealofthismagnitudeaswellastheabilitytomovequicklyonadealofthismagnitude.Afterashortperiodoftime,wedecidedtomoveforwardwithStarwood.


Okay,great.AndaquestionforMark.Couldyoujustaddressthe2016debtmaturities?

MarkParrell(EVP&CFO):

Sure.SothethoughtprocessisthatAtlas,whichisournameforthisprocess,willgenerategiveortake$2billionofcashthatwewereusedtorepaydebt.Sowemayenduprepayingthevastmajorityandprobablywillofour2016maturitiesbutwearegoingtoundertakealiabilitymanagementdiscussionandprocessanditmayendupthatwealsodosomelatermaturitiesaswellandretiresomeofthatdebt.


Okay,thankyou.

Operator :

NickJoseph,Citigroup.

MichaelBilerman (Analyst-Citigroup):

Yes,goodmorning,itsMichaelBilermanherewithNick.David,Iwaswonderingifyoucantalkalittlebitaboutuseofproceedsandthedecisiononthespecial?IthinkbacktolastsummerwhenTaubmandidtheirbigsaleactuallytoStarwoodaswellandtheysortofleftthedooropenalittlebittopotentialacquisitionswhichtheysaidweregoingtobeveryunlikelygiventhemarketplace.Butalsotosharebuybacksandthenultimatelythroughaspecialdividendwhichiswhattheyendedupdoing.We'veseenalotofvolatilityjustthisyearinREITvaluationsandI'mjustcuriousareyoucompletelyweddedtodoingthefull$9to$11specialorwouldyouconsiderpotentiallyone,ifanacquisitioncameupdoinganacquisition?Ortwo,buyingbackstock?


Hey,Michael,it'sMarkParrell,IwillstartandI'msurewe'llgetsomesupplementfromDavidNeithercutaswell.




Soasyouknow,weboughtbackmaterialamountsofstockbeforeandwewoulddosoagain.Butthisparticulartransactionhadahugeamountofembeddedgaininitandinordertokeepthebalancesheet--bythat,Imeantaxembeddedgain--andtodojustaleverageneutraltransactionreallyrequiresusforeverydollarofsalestoputabout$0.35towardsourdebtmaturities.Ourgainpercentagehereapproaches75%.Soasyoucansee,therereallywasn'tanyroomtocapablyoreasilydoastockbuybackwiththeexcessproceeds.Thatsaid,thereisflexibilityonthemargin.Wecertainlycoulddo1031transactionsandtax-freeexchangesifwewantedtooriftheopportunitypresenteditself.


Justoutofcuriosity,didyoulookatStuyTownatall?Thenumberssortofshapeupprettywellfroma$5.3billionperspective.


Wedidnot,no.Notthistimenorthelasttime.NorthefirsttimeIguessIshouldsay.

NickJoseph (Analyst-Citigroup):

ThanksandthisisNickhere.Forthe2016,thesame-storerevenuegrowthguidancethatyougave,doesthatexcludetheassetsinthemarketsthatyouareselling?

DavidSantee (EVP&COO):

ThisisDavidSantee.Yes,theguidanceisbasedupon69,240unitsfornextyearwhichreallyisn'tthatdissimilarthanwhatwearedoingthisyear.


Soifwestrippedouttheassetsthatyou'replanningonselling,whatwouldsame-storerevenueguidancefor2015be?


Itwouldbeabout10basispointsless.


Okaysoaslightdecelerationfromcallit[51249]roughlyiswhatisassumed?


Roughlyyes.


Great.Justintermsofthemarketcommentary,areyouabletogointoexpectationsforDCNorthernCaliforniakindofthesixcoremarketsfor2016?


Sure.Icangoaroundthehornprettyquick.Let'sstartwithBoston.IthinkifyoulookedatourBostonresults,Iwasalittlebitbearishonourabilitytoachievea3butIthinkBostonhadagreatleaseup.Ithinkalotofthehead-to-headcompetitionhasbeenleasedupandsoI'malittlemorebullish.Definitelymorebullishonthisyearandgoingintonextyear.




NewYork,Ithinkisjust--NewYorkManhattanspecificallyisgoingtobestable.Againthisyearit'sourleadsubmarket,Ithink4.8forthequarter.ThenyoujumpovertoJerseyCity.It'sa3.8andtheneverythingelseisa2.8.SoManhattancontinuestobeastrongsteadymarketforusandwewouldn'texpectanythingdifferentnextyear.

WashingtonDC;WashingtonDCisstillIwouldsaybouncingalongthebottom.Wearegoingtoproducepositiverevenuegrowth.Wehaveinourguidancewefactoredinsomemodestimprovement,callit100,150basispointsfornextyearbutreallyit'sjustaboutwherethenewproductis,andwhatproximityitistocurrentassets.ButDCweseedeliveriesaregoingtobe10orlessnextyear.Andwithalotofthechatterinthegovernmentsector,itseemslikeDChasturnedthecornerandthelargestsectorofjobgrowthinthatsectorjobgrowthisprofessionalserviceswhichbodeswellforourportfolio.

Seattle,Seattleweareexpectinganotherstrongyear.Stillalotofcompanies'regionalheadquartersmovingintodowntown.WithAmazoncontinuingtoproduceprofitability,thatbodeswellfortheurbancore.Boeingisdoinggreatbacklogs.Sowedon'treallyseeanychangeforSeattlenextyear.Kindofexpectverysimilargrowthtowhatwe'veseenthisyear.

SanFrancisco,youknowwearealways--wekeepmoderatingwith--it'sprobablygoingtobelessnextyearbutwe'vebeenwrongthelastfouryears.SowearebackingoffalittlebitinSanFranciscobutcertainlydeliveriesarenotgoingtobeanissue.AlotofthedeliveriesaredowntownsowekindofexpectmoreofthesameoutofSanFrancisco.

AndthenallofSoCalreallyisjustit'sgoingtobeaplus5ifnotbettermarket.Allthreeofthosesubmarketscontinuetojustdeliversolidsteadygrowth.TheremightbealittlepressureindowntownwiththenewdeliveriesbutthatwillbemorethanmadeupbythecoastalcommunitieslikeMarinaDelRay.

Sotosummarizeit,WashingtonDCwillbeinitsownbucketnextyear.Seattle,alltheWestCoastmarketswillbeintheplus5bucketandthenNewYorkandBostonwillbeinthat3%to5%bucket.


Thanks.

Operator :

NickYulico,UBS.

RossNussbaum(Analyst-UBS):

Hi,itisRossNussbaumherewithNick.David,whenyouwentthroughtheprocesstoselltheseassets,didyoualsoentertainsellingthewholecompanyorwereyouexclusivelyfocusedjustonthisportfolio?


Thisprocesswasfocusedstrictlyonthisportfolio.


Didanyofthepeopleyouweretalkingtotrytomakeanofferoryoujustdidn'tgotellthemno?


Theconversationnevercameup.





AsI'msureyoumightimaginesomefolksthismorningaredrawingsomeparallelstowhenSamacceptedtheGodfatherofferbackin2007forEquityOffice.ItseemsprettyclearwhatyouaredoingheretofocusonyoururbanCBDhigh-riseassets.IsthereamessagethatyouwanttodeliveronSam'sbehalfthatshouldpeoplebereadinginsomehowthatSamisgoingtocallthemarket--topofthemarketplaceinarow?


WellIdon'tspeakforSambutIthinkmyopeningremarksIthinkprettymuchdescribedwhattheprocesswasandmyconversationswithSamonthematter.Itwasweachievedacoupleofthingswethoughtwereveryimportanthere.IthinksuggestingthatthisisSamcallinganykindofmarketcalliscrazybecauseI'mnotsellingthecompany,we'resellingaportfolioofassetsandweremainfirmlycommittedtowhatwearedoinginthehighdensityurbancoremarkets.SoIthinkthat'sabitofastretchandIthinkthiswasjustasmartportfoliomoveandasmartcapitalallocationexecution.


IthinkNickhasgotaquestionaswell.

NickYulico (Analyst-UBS):

Yesthanks.Justaquestionintermsofnextyear.Areyouusinganysortoftaxplanningstrategypullingforwardincomefromafutureyearthat'sgoingtoaffectyourspecialdividendpaymentinrelationtothesesales?


Hey,Nick,it'sMarkParrell.Wearegoingtopullforwardsomewherebetweencallit$300millionto$500millionof2017dividendsinto2016iswhatourbasecasemodelimpliesrightnow.Aswegetcloserandgetintonextyear,wewillgiveyoumoredetailsonthat.IfyourecallmypriorcommentinthiscallwhenIsaid$0.35plus$0.75,wellthatgetsyoumorethan$1ofsalesproceedsandbypullingthosedividendsfrom2017to2016,webalancethetransactionoutslightlylowerthedividendandgiveourselvesenoughcashtokeepourdebtmetricseven.


Gotit,okay.Sototheextentthatyousellmore,youareanetsellerofmoreontopofwhatyou'veannouncedtoday,itwouldlikelyrequiremorespecialdividendsnextyear?


Ishouldbecarefulthere.Thethoughtprocess,the$3.8billionprojecteddividendandthe$2billionprojecteddebtpaydownencompassallofthesales,thesaleoftheStarwoodtodayfor$5.365billionaswellastheadditional$700million.Andthereconcilingitemisbothsomecostswhichareactiveactuallyrelativelylowsalecostsandalso$200millionto$3millionof10-31exchangesthatwemustdoin2016duetoobligationswehavetowithvariousOPunitholders.


Okay,gotit.Thanks,Mark.

Operator :

SteveSakwa,EvercoreISI.




SteveSakwa(Analyst-EvercoreISI):

Thanks.AlotofmyquestionshavebeenansweredbutIguesstoo,David,justintermsofshrinkingthefootprint,doesthisdoanythingtoG&A?Shouldwebethinkingaboutanykindofcostssavings?

Andthensecondly,whereisyourthoughtprocessondevelopmenttodayaswegetlaterinthecycle?Howdoyouthinkaboutmaybepurchasinglandtoday?


Astoyourfirstquestion,Steve,welosealittlebitofefficienciesbothinpropertymanagementandinG&Aasaresultofthis.Weareabletoscaleupveryeasilyveryefficientlyanditsortofworksagainstyouwhenyougobackwards.Butwethinkit'sanoutcomethatissatisfactoryjustgiventheexecutionthatwethinkwe'regetting.

Andthenwetalkedalotaboutdevelopmentoverthelasttwoearningscallsandwesortofbeguntobackawayfromreallychasinglandatcurrentpricing.Wedidannouncetheacquisitionofacoupleofsitesthatwillbeassembledwiththethirdsitethatwehadacquiredpreviouslythisyear.Sowe'vedonealotalittlebitoflandacquisitioninSanFranciscobutgenerallywe'vetalkedaboutwe'vebeenaddinglandtoourinventoryatamuchslowerratethanwhatwe'vebeenputtingintounderconstructionandwhatwe'vecompleted.Soafterelevatedlevelsofnewdevelopmentstartslastyearandthisyear,youbegintoseethatreducegoingforward.

SteveSakwa(Analyst-EvercoreISI):

Okay,thanks.

Operator :

HaendelSt.Juste,MorganStanley.

HaendelSt.Juste (Analyst-MorganStanley):

Goodmorning.Thanksfortakingmyquestions.Someofthemhavebeenansweredalready.Gotoneortwohereinaddition.I'dliketostartonIguessaquestionontheportfolioofassetsyouaresellingandmaybesomepotentialreadthroughs.

Asyoumentionedinyourcomments,youhavebeencontemplatingthesaleoftheseassetsforoverayeargoingbacktolastspring.Sotryingtofigureoutifyou'retryingtotellusanythingorthemarketoneithersecondarymarketorsuburbanassetvaluebysellingtheseassetstoday.Doyouthinkthatsuburbanorsecondaryassetvalueshavepeakedoratleastthecaprateshavestoppedcompressing?AndthenmaybesomecoloronthedifferentialbetweentheIRforwhatyou'resellingversustheretainedcoreportfolio?


Well,Iguesslastspringisnotayearago.We'retalkingaboutmoreofasix-monthprocessasopposedtoa12-monthprocess.ButIguessthisisjustareactiontoarecognitionasIsaidinmyremarksthatweownedassetsthatwedidn'tthinkwerelong-termcoreassets.Wewerelookingatachallengingmarketinwhichtoredeploythatcapitalgoingforwardaswellaswhatwethoughtwasaprettydecentbidonthoseassetstoday.Soratherthantreattheseassetslikewehaveinthepastwheretheywerereservoirsofcapitalthatwe'dusedtosellassetsandredeploythatinourcoremarkets,wejustdidn'tfeelthatmightbeassuccessfulgoingforward.

Andthefactofthematteriswearenowverymuchfirmlyineachofourcoremarketsandhavegotgood




portfoliosandhavegotgoodallocationsinthosemarkets.Anddidn'thavetheneedtotakethatcapitalandputitinamarketssoastoachievesomekindoftoehold.

Sowhetherornotwearea$40billioncompanywithcapitaldeployedacrossthesesixcoastalmarketsor$35billionofcapitaldeployedacrossthesixmarketsdidn'treallymatterandsoaswewereseeingwhatwethoughtwouldbetheprivateequitybidforthesesortofassets,wethoughtitmadesensetogoaheadandseewhatwecouldachievefromthatsegmentandifitmeantthespecialdividend,wethoughtthatwasokay.


Okay,Iappreciatethat.Andthenafollow-upontheprocessitself.Youmentionedthattherewasdecentinterest.Youfocusedonagroupofbidderswhoyoufeltweremorecertaintocloseandquicklyclose.Curiousiftherewasanynegotiationbackandforthonthepricegivenperhapsthemorelimitedgroupofbuyersyouarediscussingandthesizeofthedealitself?


Therewassufficientnegotiationforustogetapricethatwasacceptabletousattermsthatweresatisfactorytousandagain,itcametogetherveryquickly.


Okaybuttobeclear,wasthereanytypeofdiscountgivenheretowhatyouwereexpectingmoreofthepricingcameinspotontowhatyouwereunderwriting?


Ithinkwewereverypleasedwiththepricingthatweachievedinthetransactionandintheentireprocess.


Fairenough,thankyou.

Operator :

IanWeissman,CreditSuisse.

Unidentif iedPart icipant :

Hi,guys.ThisisChrisforIan.Iwasjustwonderingifyoucouldwalkthrougheachofthedispositionmarketsandtalkalittlebitaboutthepricingonpotentiallycapratesonhowtheyrolleduptothe5.5%overallcaprate?


WellIguessthat'salevelofdetailthatI'mnotquitesurewe'repreparedtogointo.Wereallylookedatthisasaportfolio.I'mnotsurethatthereisawiderangeofcapratespreadbetweentheindividualmarketsbutwereallylookedatthisnotasacollectionofindividualassetsbutasonelargeportfolio.


Gotyou.Okay.Whenwelookattheoverallportfolio,OrangeCountyandSanDiegokindofstickoutasthesubmarketassetsthatareleftin--orthesuburbanassetsleftintheCompany.Didyougiveanythoughttosellingordownsizingthosemarkets?AndIguesssecondly,wasthereanyotherassetsthat




youweretryingto--whenyouwerenegotiatingonthesalethatyou'dliketohaveincludedinthedisposition?


Look,SouthernCaliforniaissortofbyitsnaturemostlysuburban.ImeanallofCaliforniaofourassets--we'vegotsomedowntownSanFrancisco,we'vegotsomedowntownLAbutgenerallyifyoulookatthedifferencebetweenwhatIsaidwasoururbanconcentrationandourwhatwasthatthatisnothigh-riseormidrise,that'sreallyalotofCalifornia.

Sono,wedidnotconsidersellinganythingmoreinanyofthosemarkets.Wesoldeverythinginthisportfoliothatwewantedto.Theonlythingswedidnotincludeinthisportfolioarethoseassetsthatwe'veindicatedinthereleasethismorningthatweintendtosellduringthebalanceof2016whichwethoughtwerenotnecessarilyadditivetothisportfoliobutwouldbeabetterexecutioninaone-offsmallportfoliolikeexecutionthroughout2016.


Okay,fantastic,thankyou.

Operator :

JanaGalan,BankofAmericaMerrillLynch.

JanaGalan (Analyst-BankofAmericaMerrillLynch):

Goodmorning.Thankyou.I'malsoherewithJeffSpector.David,maybefollowinguponthosecomments,I'mcuriouswhetheryouthinktheprivatemarketisgivingportfoliosapremiumoradiscountandmaybewhyyouchosetoearmarkthoseassetsforaportfolioversusthe26assetswhereyouwilllooktodoindividualorsmallportfoliosales?


Well,IguessIwouldwanttotellyouweareobviouslysatisfiedwiththeexecutionofthispricingandwehadanexpectationthatwegetgoodpricingjustbecauseoftheactivitywehadseeninthemarketplaceandwedidnotwanttogothroughalengthyprocessoftryingtoselltheseonaone-offbasis.Thismakessenseinonebigportfoliothatwecanthenthinkaboutaone-timespecialdividendandjusthavethewholethingmakesense.Thiswouldhavebeenaverydifficultprocesstoachieveinanyothermannerandwedonotbelievewehadtogiveanythingonpricinginordertogetitdoneinonefellswoopandweareverysatisfiedwiththeoverallpricing.

JanaGalan (Analyst-BankofAmericaMerrillLynch):

Thankyou.

Jef f Spector (Analyst-BankofAmericaMerrillLynch):

Great.David,thisisJeff.Justonequickquestion.Thekeyfocusforushasbeentheriseofsecondarycities.AndI'mjustcuriousifEQRismessaginghereormakingastatementthatEQRdoesnotreallybelieveinthelongevityoftheriseofthesesecondarycities,let'scallthembecoming24/7.Although,realistically,there'snotthatmany24/7citiesintheworld,butIunderstandyourstrategy,andit'sconsistentwithwhatyou'vesaid.Justontheseothermarkets,isitjustnotsomethingyoubelieveinlongterm?





Ithinkallthesemarketsarereallygoodapartmentmarkets,Jeff;wereallydo.WethinkDenverisagoodapartmentmarketandwethinkSouthFloridaisagoodapartmentmarket.We'vebeenunabletoseeourwayintoowningthesehigherdensityassetsinthosemarketsandbelievethatthesuburbangarden-likeproductwearesellingtoStarwoodarebetterownedbypeoplethathaveadifferentcapitalstructurethanwedoandthatourfocushasbeenforowningwhatweconsidertobemoreforever-likeassetsinthehighdensityurbancorearebetterassetsinourcapitalstructure.Ithinkthattheseareterrificmarkets;theydoverywell.Ithinktheyarealittlemoresusceptibletosupplyoverthelongertermandwethinkthat,withinourcapitalstructure,thelong-termrisk-adjustedreturnswillbebetterintheurbancorethaninthesuburbanproduct.

Jef f Spector (Analyst-BankofAmericaMerrillLynch):

Okay,thankyou.Congratulations.

Operator :

TonyPellow,JPMorgan.

T onyPellow(Analyst-JPMorganChase):

Thanksandgoodmorning.Canyoutalkalittleaboutwhatyouthinkthelonger-termdeltaisbetweentheNOIgrowthandyoursixkeymarketsversussaytheseassetsthatyouaresheddinghere?Becauseitseemslike,intheshortrun,it'snotthatappreciablydifferent,butwanderinglongertermwhatyouthink.


Look,asDavidindicated,sellingtheseassetswouldactuallybedilutiveto2015same-storerevenuegrowth,butwethinkabouttotalreturnoveranextendedtimeperiod.Andifyouthinkaboutwhatarealcashoncashreturnoftheseassetswouldbeasopposedtojustthecaprate,it'slessthanthislevel.WealsothinkthatthereismorerisktovalueoftheseassetsasIsaidduringmyopeningremarkswithrespecttorisinginterestratesoranychangeinliquiditythatFannieandFreddiecanprovide.Sothisisnotsimplyacallaboutlong-termrevenuegrowth.AlthoughIdobelievethathistorywouldproveoutthattheurbancorehasoveranextendedtimeperioddonebetterinlonger-termtoplineandprobablybottom-line[growth],butit'salsojustIthinkalittlebitahedgeaboutpotentialvaluationsandwejustthinkit'stherightlonger-termperspective.


Okay,gotyou.Mark,IthinkyouwentthroughthisandI'mprobablygoingtomakeyourepeatthisforasecond,butthe$2billionincashavailabletorepaydebtnextyear,that'sinclusiveoftheNortheastassetsthatyouintendtosell?


Yes,sir.


Isthatright?Okay,soshouldthinkaboutitaslike$6.1billionproducingthe$2billionofcashroughly?


Yes,sojusttoreconstructthatforyou,thesourcesanduses,socallitabout$6.1billionofsaleproceeds,callitaround$300millionthatwehavetoreinvestinassetswhereyouhavetodotax-freeexchangesfor,sothatleavesyou$5.8billion.Whenyoutryandsolvebackwardstokeepyourcreditmetricsabout




constant,thatmeans,ofthat$5.8billion,$2billionwillbeusedtorepaydebtandabout$3.8billionwillremainforthespecialdividend.Therearesomeimmaterialcostsandroundinginthereaswell,butit'snotsignificant,Tony.


Okay,gotit,thanksforclarifyingthat.Mylastquestionon4.5to5.25revenueguidefor2016,canyouputsomemaybebroadereconomicbracketsaroundthatintermsofwhatkindofjobgrowthdoweneedtoseetocomeinatthehigherendorlowerendofthatrangeandperhapsmaybewhat'sinthebagatthispointfromjusttheearn-in?Justtryingtounderstandthesensitivityaroundthatrightnow.


Wekindofthinkaboutitinverysimpleterms.Sowehaveabout2.3%embeddedgrowthinourrentroll.Andwethink,justlikethisyear,withthenewportfolio,we'llseerentgrowthinthecallit5.5.Andyoufigurethattheeasymathisyou'llgetabout45%ofthat,whichis2.5,2.75.So2.3embedded,2.5,2.75getsyouto4.95.Wearenotunderwritinganyadditionalpickupsinoccupancy.Althoughthatcertainlycouldbethecaseifthemarketscontinuetotighten,butasfarasforecastingnextyear,wearejustkindofholdingoccupancyflat.


Doesthatimplythoughthatjobgrowthinyoursixkeymarketsneedstoequatetosomethingfairlycomparableto2015tokindofhitthatsimilartop-linenumber?Isthatfairor--?


Iwouldsayaslongaswehoveraround175to200[jobs],thatwewillbejustfine.


Perfect.Gotyou.Thankyou.

Operator :

AlexanderGoldfarb,SandlerO 'Neill.

AlexanderGoldfarb(Analyst-SandlerO 'Neill):

Goodmorning.Thanksforlighteninguptheearningsweek;Iappreciateit.Quickquestionshere.Mark,thecommondividend,shouldweanticipatethatgettingresizedoryouguyswillmaintainit?


Aswesaidintherelease,justtobeclear,thedividendthatwearegoingtopayinJanuarythatwillbedeclaredinDecemberwon'tbeaffectedbythistransaction.Whateverthetrusteesdotheydo,butitwon'tbeaffectedbythistransaction.IwouldexpectustoresizetheannualrunratedividendthatwouldbethenpayableinApril2016.


Okay.YouguysinthemarketwithoneofyourapartmenttowershereinNewYorktoacondoconverter.Areyourthoughtstocontemplateothercondoconversionsales?





SoweareofferingforsaleapropertyontheeastsideofManhattan,whichwethinkisonethatlendsitselfbettertocondominium-typeownership.ThisisthekindofactivityIthinkyouwillseeusmoredogoingforward,Alexandwe'renowfocusedsolelyonourcoremarkets.Here'sanopportunitywethinktomonetizehopefullygoodvalueofthisassetandredeploythatintosomethingthatmightbeabetterlonger-termrentalplay.Soit'spossible;we'llseewhathappens,butifwedon'tgetanumberwelike,wewon'ttrade.Ifwedo,itwillbebecausewethinkit'sagoodpriceandagoodvaluerelativetohowwethinkwecanredeploythatcapitalintoanotherasseteitherinNewYorkorinoneofourothercoremarkets.


Okay.Andjustfinallythemilitaryassets,itseemslikethatonewouldbesortofnextfordisposition,butdon'tknowifthere'sanythingcontractualortaxoranythinglikethatthatwouldmakeitstaywithinEQR.Sothefutureofthemilitaryassets?


Well,wehavenocontractualobligationtocontinuetodothat.ThesaledoesrequiresomeapprovalsfromlendersintheArmy.Ifandwhenthathappens,itwouldbesubjecttotheirapproval.Wehavenocontractualobligationtocontinueforanylengthoftimeourmanagementandownershipofthatasset.


Okay,thanksalot.

Operator :

RobStevenson,Janney.

RobStevenson (Analyst-JanneyMontgomeryScott):

Goodmorning,guys.Mark,Iknowyouuse300ofCapExinthecapratecalculation,butonarealdollarbasis,what'sthemaintenanceCapExperunitonthesalesportfolioversusEQRasawholefor2015?


Wedon'thavethatlevelofdetailrighthereinfrontofus,Idon'tthink.


Icantellyouthoughthatonaforwardrunrate,the5.5caprateinthisportfoliowethinkafterCapExismorelikea5.3,soonarealsortofAFFObasis,Rob.


Okay,helpful.Andthenisthereanythingthatyousittingheretodaythatyouguysseehittingsame-storeexpensesmateriallyoverthenextfivequartersotherthanthetypicalpropertytaxandwagegrowththat'sgoingtodriveyoumuchabovethe3,3.25runrateonthesesame-storeexpensesthatyouguyshavebeenaveragingrecently?


ThisisDavidSantee.Hereishowwethinkabout2016taxes.Weknowthat--I'msorry--expenses--weknowthat2016realestatetaxesaregoingtohavea5handleprimarilybecauseofthestepupinthe421-ataxabatements.Weknowthatpayrollshouldprobablycomein3%orless.Weknowthatwe'vealreadylockedinmaterialdiscountsandsomecommoditycostsfornextyear.Sothosethreecategories




makeup70%ofourtotalexpense.Soifyoudothemathonthat,there'snoreasonwhy2016shouldn'tlookverysimilarto2015.


Okay.Andthenlastquestion,youtalkedalittlebitaboutdevelopmentearlieron,butintermsoftheshadowdevelopmentpipelineandthestuffthat'snotreadytostartyet,howbigisthattodaythatyoucouldenvisionstartingoverthe2016,2017period?


Asyouknow,it'snotasbigaswhatwe'vedoneinthepastseveralyears,Rob.In2016,wecouldstartcallit$500millionor$600million,Isuppose.Ithinkthat'saprettygoodrunrateforusgoingforward.


Okay.Thanks,guys.

Operator :

VincentChao,DeutscheBank.

VincentChao (Analyst-DeutscheBank):

JustaquickquestiongoingbacktotheassetsthatareforsaleinNewYorkCity.Thatisaboveandbeyondthe$700millionthat'scontemplatedin2016,Ibelieve.Justcuriousgivenallthecommentaryabouthowdifficultitistodeploy,whatwouldbethemostlikelyuseofproceedsthereandforanyothercondo-typeconversionorotherassetssalessimilartothat?Whatdoyouthinkthebestuseofcapitalistoday?Itsoundslikestartsaren'tcomingdown,soImeandevelopmentswillbeapartofthat,butI'mnotsureifthat'sreallygoingtobeabletoabsorballofthat.


Wellthedifficultyofredeployingcapitalwasreallyrelativetotheyieldsthatwewouldrealizeonthoseassetswewanttosell.Sothisisa5.5capratetransactiondealwithStarwood.Difficulttothinkthatwecouldredeploythatatareasonablerelativecaprateseeinghowassetsinourcoremarketstodayaregenerallytradingwitha3handle.IfwearesuccessfulingettingthebidthatwehopewecouldteaseoutofthemarketonourdealinNewYork,wemayactuallybeabletoredeploythatassetaccretivelyinoneofourcoremarkets.SoourexpectationatthecurrenttimewiththatiswhatwouldhappenwiththeproceedsifwearesuccessfulsellingthisparticularpropertyinNewYorkCity.


Gotit,thanks.Thatmakessense.Justgoingbacktothe$700millionofdispositions,6to6.25caprateonthoseRelativetothe5.5fortheStarwoodportfolio,assumingthat'sjustgeneralgeographiesthatyouaresellingbeingdifferent,aswellasmaybesomeassetquality,butjustcuriousisthereanyembeddedassumptionofjustgeneralcaprateincreasesinthat6to6.25givensomeoftheconcernsaboutthenon-corenon-urbanassetsyoumentionedbeingmoreprice-sensitive?


Thedifferenceinthosecaprateshasnothingtodowithanexpectationofachangeincapratesbetweennowandthen.It'sjustsimplyrecognitionthatit'sadifferenttypeofpropertythatwouldlikelytradeataslightlywidercaprate.





Okay,thanks.That'sallIhad.

Operator :

DanOppenheim,Zelman&Associates.

DanOppenheim(Analyst-Zelman&Associates):

Waswonderingifyoucanjusttalkaboutyourviewintermsofvolatilityasyounarrowthefocusintofewerandfewermarkets.Probably[infuse]abitmorevolatilityintotheresults,butIguessespeciallyintermsofthisareaouthereintermsofNorCal,howyouarethinkingaboutthatintermsoftheexposuregoingup?We'veseenextremelystrongrentgrowthasit'sbeen.Youaredeliveringacouplemoreprojectsinhere,plusbuyingmoreland.Itsoundsasthoughyouaremorebullish,althoughthecommentswereaboutthinkingaboutthatit'sgoingtomoderatealittlebithere.Howdoyouthinkaboutthemarketoverall?


Well,wedon'tsuggestforaminute,Dan,thatSanFranciscohasnothaditsupsanddowns.Infact,it'sprobablyhadperhapsmoredownsthanmanyothermarkets,butwedorecognizethatitisamarketplacethathasalwayscomebackandcomebackfairlyquicklyandestablishedsortof(inaudible).Sowhenwelookattheassetsweownthereandlookattheassetsthatwearebuildingandthepricesperfootperpoundthatwearebuildingthoseunits,weaskourselvesnothowdowefeelaboutthisassetassumingthesetreescontinuetogrowtothesky,buthowdowefeelaboutowningtheseassetsattheselevelsforthenext25or30years.Withthatperspective,wearequitecomfortablewithwhatweownandcomfortablewithwhatwehaveunderwayatthepresenttime.Again,thatdoesnotmeanthatthingscan'tsofteninthatmarketplace.Wehavenotunderwrittenthemagainwiththesekindsofyear-over-yearrevenuegrowththatwe'veseenoverthepasthalfadozenyearsandwejustthinkthat,overthelongerterm,thesewillbegoodassetstoown.

AndIwilljustsortofmentionthatwhenwebuiltthetowerinBrooklynhalfadozenorsoyearsago,whenthatdealwasdelivered,itwasmaybeworthwhatitcosttobuild.Butweknewlongtermitwasagreatasset,well-locatedandwedoverywellwithitandwhenthemarketstabilized,wedoverywellwithitandit'sworthaconsiderablepremiumtodayforwhatitcosttobuild.Ithinkwetakethesameapproachreallyonanythingthatwebuild.Welookatthelocation,lookatthequalityoftheproduct,ourbasisperunitpersquarefootandaskourselveshowdowefeelaboutbeinginthisproductoveranextendedtimeperiod.Notjustarewegoingto--we'renotmerchantbuilders.We'rejustnotworriedaboutwhatthespreadis24monthsafterdelivery,butisittherightassetforustoownforourshareholdersoveranextendedtimeperiod.

DanOppenheim(Analyst-Zelman&Associates):

Great,thanks.

Operator :

RichAnderson,MizuhoSecurities.

RichAnderson (Analyst-MizuhoSecurities):

Thanks.Mark,yousaid$300millionyouareobligatedtosellorbuythrougha1031exchange.Whatothertaxprotectionsarelingeringintheremaincoportfolioafterthesale,ifany?





Yes,Ishouldhavebeenalittlemoreprecise,Rich,withthat.Wearen'tobligatedorinclinedto1031that$300millionjustbecauseoftheimplicationsithastousinourOPunitprogram.Wedon'thaveto.WehaverelativelyfewassetsthatarecoveredandIthinkthatwouldprobablybesomethingbetweenaround30afterthistransactionthatmighthavesomesortofobligation,maybealittlebitlessofonekindoranotherwhereyouwouldneedtodosomesortoftax-freeexchangeoryou'dhavesomeamountyouwouldoweyourpartner.


Letmequalifythatjustalittle,Rich.Iwanttomakeitclearthattheseareunrelated,unaffiliatedOPunitholderswhowouldhavetaxesinthe100%s,verysignificanttaxandwefeelinclined,asMarksaid,withalimitedamountof--particularlyasitrelatestothesizeofthistransactiontotryand1031thosedealsandwearequiteconfidentthatwewillbeabletodosoinassetsthatwewillbereallydelightedtoownoverthelongterm.


Andjusttofinishthethought,wethinkthatprotectstheOPunitcurrency.Ifyouareabletotakecareofthesepartnersevenwhenyoudon'thaveto,wethinkaswegooutandtryanddomoreandmoredealsthatdohaveOPunitcomponentsbecausewedothinkit'sattractivetodothatincertainpointsofthecyclethatthatwillbeappreciatedbythemarketandbyoursellers.


Gotyou,thankyou.SoDavid,anothercutyoumentioned,thesearemarketsnotnecessarilygrowthiermarketsoverthelongtermthatyou'reholding,butjustbetterfromaperspectiveof25years.Soyouaresayinglike,astheenvironmentchanges,interestratesgoup,thesecoastalbarriermarketsyoujustthinkwillperformbetteror--whatisthethesisifit'snotaboutgrowth?


Iwasn'tclearIguessthen.OneisIwasthinkingaboutintermsofabsolutevaluewithrespecttointerestrates.


Okay.


Wesaidinthematerialsthatwesentoutaspartofthepressreleasethatthereisagoodbidfortheseassetstodayfromleveragedbuyerstakingadvantageoflowinterestrates.SoIthinkthattheseassets,asIhadmentionedearlier,arebetterownedIthinkbyaleveragedbuyerandthereisfavorabledebttodayatfavorablerates.Shouldthatchange,wethinkwe'dseeabiggerimpactonvalueherethanwewouldifanyinthehigherdensitycoremarketswherewehavemostofourcapitalinvestedtoday.


Perfect,thankyou.DidanyREITsgetinvolvedintheprocessfortheassetsale?


WedidnothaveanyconversationswithanyotherREITs.





Okay.Andlastquestion,youmentionedthe$700milliontogowillbekindofone-offishorsmallerportfolios.Anychancethatthatcouldactuallymorphintoasinglebuyersituation?


Isupposeitispossible.We'dprobablybedelightedifthatweretooccur,butjustgiventhenatureoftheseassetsandforthoseofyouwhohavebeenaroundtheblockforawhile,theseareprimarilyassetsthatweacquiredinagrowthtransaction,sotherearealotofsmallerassets,smallerunitcount,smallerpricepointsandwethinkwemightachievemaximumoptimalpricingonaone-offsortofbasis.Butifthereweresomeonewhowereinterestedinmeetingourexpectationsonaone-offdeal,wewouldbedelightedforthattohappen.


Great.Okay,greattransaction.Congratulations.

Operator :

TomLesnick,CapitalOneSecurities.

T omLesnick(Analyst-CapitalOneSecurities):

Thanksfortakingmyquestions.Soonthe$700millionNewEnglandportfoliofornextyear,itseemslikeyouguysareprettyconfidentonpricingandhaveaprettytightbandthereoncaprates.Iwasjustwonderinghowfaralongyouwereinthemarketingprocessforthatandifyoucouldofferanycommentaryontimingfornextyear,whetherit'sprobablymoreweightedtowardsthefirsthalforsecondhalforwhatever.


Well,Iguesswehadseveraloftheseassetsoutinthemarketplacebeforewereallygotunderwaywiththislargerprocess.Wehadagoodsenseofpricing.I'llalsojusttellyouthatweareactiveinthemarketsfollowingdealsandsowejusthavegotareallygoodhandleonwhatwethinkvaluationsare.I'llremindyouthatwhenweannouncedtheArchstonetransaction,wehadgivenourBoardsomeguidanceastowhatwethoughtwewouldachieveinsellingthe$4.5billionofassetsthatweusedinthe1031tradeonArchstoneandwesoldthoseatsomethinglike99.7%ofourexpectation.Sowe'vegotaterrificteamouttherethatareinthesemarketseverydaytakingcareoftheseassets,tryingtounderstandthemandunderstandthemarketplaceandwejusthavehighregardfortheintelligencethattheseguysgiveusandexpectationsofwhatwewillbeabletoachieveonthisportfolio.


Makessense.AndthenonthelandacquisitionsinSanFrancisco,justcuriousifyoucouldshedsomecoloronwhereinthecitythoseareexactlyandwhenyoumightexpectcommencementofthosedevelopmentstarts.


Well,thesetwositeshavebeenassembledwithathirdsitethatwe'vepreviouslydeployedearlierintheyearandtheyareadjacenttoourSoMaSquarepropertyintheSomasubmarketofSanFrancisco.Theexpectationthereisthatwecanbegintostartin,maybeinthefirstquarterof2017,thatwillbe$170millionorsoprojectandagain,welovedowntownSanFrancisco.Wethinkwewilldoverywellwiththattransaction.





Great.AndthenmostofmyquestionsontheStarwoodtransactionhavebeenansweredatthispoint,butjustahousekeepingquestion.Lookingbackatyour2Qsupplement,theassetcountandunitcountisslightlydifferentthanwhat'spresentedinthetransactiontodayexitingthemarket.Ithinkyouguyshad19assetsinDenverand35assetsinSouthFlorida.Iwasjustwonderingwhatthecoupleofassetstherewerethatwerethedifference.


Yes,well,followinguponRichAnderson'squestionandansweramomentago,thereareafewassetsthataretax-protectedorareJVassetsinDenverandinSouthFloridaandthat'sthedifferenceinthecount.Thosewillbesoldordealtwithseparatelyoverthecourseof2016.


Okay,sorryaboutthat.Thanksfortheclarification.

Operator :

WesGolladay,RBCCapitalMarkets.

WesGolladay(Analyst-RBCCapitalMarkets):

Hello,everyone.Congratulationsonthetransactionandthanksforprovidinganinitiallookinto2016.Whenyoulookat2016,whichmarketswerethehardesttoforecast?


Well,Iguess,bydefault,WashingtonDC.Wearestartingofftheyearwithprettymuchflatembeddedgrowth.Soanythingweachievewewillhavetoearnnextyeareitherthroughrateoroccupancy.


Okay.Andthenforthetransaction,theassetdispositions,isthereanydeferredCapExassociatedwiththattransactionprice?


No.


Okay,thanksalot.

Operator :

TayoOkusanya,Jefferies.

T ayoOkusanya(Analyst-Jefferies&Co.):

Justalongthosesamelineswiththe2016same-storerevenueguidance,couldyoujusttalkalittlebitaboutmarketswhereyouactuallythinkyoushouldseebettersame-storerevenuegrowthin2016versus2015andmarketswhereyouactuallyexpectittoslowandthenwhenyoukindofrolleverythingup,youcomewithaslightslowdownversusoverall2015?


Well,sothemarketsthatwethinkwoulddobetterwouldbeOrangeCounty,potentiallyLAandBoston




andpotentiallyNewYorkandDC.Seattle,Ithink,isnotless,butclosertothesameandthenSanFrancisco,wehopeitwilldothesame,butwe'rejustcautiousaboutforecastinganygainsoverthisyearintonextyear.

T ayoOkusanya(Analyst-Jefferies&Co.):

Makessense.Thankyou.

Operator :

DrewBabin,RobertW.Baird.

DrewBabin (Analyst-RobertW.Baird):

Goodmorning.Iwashopingyoucouldinmoredetailbreakdownwhatyouareseeingonthesupplysideinthemarketsthatyouareexiting.Are2016deliveriesacrosstheboardhigherthantheywerein2015orisitmoreofalong-termissue?


Onthosethatweareexiting?


Correct.


Well,Denver--thisisDavidSantee--Denverisdeliveringover12,000unitsthisyearandIwouldtellyouthatwewouldexpectthisportionofthattobleedintonextyearwithalotofconcentrationinthedowntownarea.Thenfor2016,asoftoday,ourforecastsarethatitdropsdownto6500units.Butwhenyouaretalkingaboutgardencommunities,thereisnotalotofbarrierstoentryinDenverandthis6500numbercouldgrowto7500or8000veryeasily.

SouthFloridareallyisalmostthesamepicture.10,000plusunitsbeingdeliveredagainin2015.Ithinkwhat'sdifferentinSouthFloridaisthatalotofthesenewdeliveriesareprettymuchallalongI-95,ifnotalleastofI-95,stretchingfromMiamiallthewayuptoWestPalmBeach.AndthenverysimilartoDenver,itdropsdownto5500for2016,butagainwithlowerbarrierstoentry,permitting,whathaveyou,toscrapeandbuildtwo-story,three-storygardenwalk-upcanbedoneveryquicklyinthosemarkets.


Thankyou.Secondly,justtalkingaboutthebroadercycle,Iwaswonderingifyoucouldhighlightthekeydifferencesbetweenthetimeperiodnowversusgoingbackto2005,2006.Capratesseemtobekindofinthesameplaceorevenlowerthantheywereatthatpointintime.Whatarethekeydifferencesthatyouareseeingonthesupplysideorrelationshipversusthatcost,thingslikethat?


Ithinkthedebtcostsareaboutthesame.Therecontinuestobeagreatdealofequitychasingthesedeals.Theremightbelessabsoluteleverageavailable,butthere'sstillalotofdebtavailableatveryattractiverates.Anythingtoadd?


No.





Thankyou.That'shelpful.

Operator :

AaronHecht,JMPSecurities.

AaronHecht (Analyst-JMPSecurities):

JustwonderingifyoucouldoutlineyourNOIexposurebymarketfollowingthesedispositions.


NOIexposureby[month]?Giveusasecondhere.


Okay.


Wearediggingforthatone.Holdonjustasecond.


Noproblem.


Sothisisafteralltheexpecteddispositions.


BetweentheStarwoodtransactionandthe$700millionthatwilloccurlaterintheyear.Sowewouldexpect,andIwouldsaytheseareallroundednumbersaround--NewYorktobearound20%ofNOI,maybeabitmore;WashingtonDCtobeabout19%,SanFranciscotobeabout18%,LAabout15%,Bostongiveortake11%,Seattleabout8%,andthentherest,reallySanDiegoandOrangeCountyeach4%andthatjustaboutgetsyoualittlebitlessthanInlandEmpirethatwilllikelybeincludedthenexttimewereportnextyearinourLosAngelescountbecausetheyareonthefarwestandreallyaredrivenbyOrangeCountyorLAmoresothantheInlandEmpire.


Gotit.AndthenjustweallsawthearticleintheWallStreetJournalabouttheparcelvolumesincreasingbasedonWebservicesandthereweresomequotesfromyouguysinthat,butjustwonderingwhatyourtakeisonhowthat'simpactingexpensesandNOIanddoesthisbecomeabiggerissuenowwiththedispositionsgiventhehigherexposuretomidandhighrisebuildings?


ThisisDavidSantee.Certainly,thereisamuchbiggerburdenongardencommunitiesbecausetheydon'thavedoormen,theydon'thaveconcierge,whathaveyou.Wehaveallbeenworking--mypartnerat[Camden]--wehavehadconversationswithUPSandFedExandwhathaveyou,butwe'vehadavery--webuiltaproprietarypackagenotificationsystemprobablyfourorfiveyearsago.Isitaburdenonsomeoftheproperties?Yes.Wehavetriedseveralpiecesoftechnology,whichareonlyrealpartial




answerstotheproblem,butIthinkoverthenextyearorso,wewillbeclosetoproviding100%solutioninbuildingswherewedon'thaveconciergeordoormen.Butwedobelievethatifyouliveinadoormenbuildingoraconciergebuildingthatacceptingpackagesisabasicexpectationofourresidents.


Andisthesolutioninthoseotherbuildingselectroniclockers?Isthatwhatyouarereferringto?


No,Idon'twanttosaywe'veruledthelockersout,butthere'salotofnuanceswiththelockers.Whensomeoneordersfourtires,theydon'tfitinoneofthoselockers.Andthenthere'sallthisuniquejockeyingbetweenthetimethepostalperson,FedExandUPSguysdeliverandtheyjockeyforlastpositioninhopingthelockersarefilledsothattheycanjustdumptheirpackages.Soit'saveryinterestingsubjectthatwehopetosolveoverthecourseofthenextyearorso.


Gotit.Well,congratsonthetransactionandgoodluck.


Thankyou.

Operator :

NickJoseph,Citigroup.


Yes,thisisMichaelBilermanwithaquickfollow-up.Obviously,asaseller,youaremostconcernedwiththebuyer'sabilitytocloseandfundthetransaction.I'mjustcurious,asIassumethisisgoingtobealeveragedtransaction,howmuchhaveyoualreadybeenworkingwithStarwoodintermsofthedebtfinancingandwhatcanyoutellusaboutthattoday?


AllIcantellyou,Michael,isthatwehavedonetheappropriatediligencethatwewouldneedtodoonatransactionofthismagnitudewithrespecttoequitysourcesanddebtsourcestogiveusgreatcomfortthatthey'llperformasexpected,whichwouldbeverysimilartothewaythey'veperformedoverthelastseveralweeksbetweenthetimeweagreedondoingthisdealandtoday'sannouncement.Theyhavedoneeverythingthey'vesaidtheywoulddoandwe'vedoneourdiligencetogiveuscomfortthattheywillbeabletocontinuetodothatandcloseontimeasweexpect.


Isthereanyfinancingcontingencyatallinthetransaction?


No,sir.


AndthenInoticedtherewas--thedealwasdonein10separatepurchaseandsaleagreementsandtheclosingisinsevendifferentbuckets.Canyoujusttalkaboutwhattherationale--aretheysplittingitup




tomultipleequitypartners?Istheredifferentleverageprofilesinthedifferentbuckets?Isittimingintermsofgettingadebtpackage?Whatdrovethattypeof--?


It'sreallymostlythereweresomepropertiesthatrequiresomeconsentsandapprovals.There'ssomerightsoffirstofferthatsomecountieshave.There'salsoourdesireonpropertiesthatMarksuggestedthatwewouldwantto1031tohaveourselvesbeabletogetalittleextratimeifneedbe.Sothelion'sshareofthiswillhappeninonefellswoop,butthentherewilljustbe--andeveninthosemultiplebucketscouldbeatthesametime,butitwasjustawaytofacilitatetheoveralltransactionandallowforsomeoftheseotherconsentsandapprovalstobereceived.


IsthereanyG&Asavingsatall,evenafewmilliondollarsthatweshouldbethinkingaboutaswearemodelingthroughwhattheCompanyispostthe$6billionofassetsales?


It'sMarkParrell,Michael.Atthispoint,whatIwouldtellyouiswerunaprettytightshipalreadyandIthinkDavidNeithercutspoketothescalingcomment.ItwasrelativelyeasyforustoscaleupforArchstone,whichdoesimplyit'srelativelydifficultforustojustsuddenlyscaledown.SoI,atthispoint,wouldn'thaveyouprojectanythingmeaningful.


Okay,thankyou.

Operator :

Andatthistime,wehavenofurtherquestionsinthequeue.


Allright.Thankyouallagainforyourtimetoday.WelookforwardtoseeingmanyofyouinLasVegasinjustafewweeks.Haveagreatday.

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