Camden Property Trust (CPT) Earnings Call Transcript & Summary

Welcome to Bank of America's 2024 Global Real Estate Conference. For those of you who don't know me, I'm Josh Dennerlein, and I cover the residential REITs at BofA. We're pleased to have with us Camden's President and CFO, Alex Jessett. Alex will start with a few opening remarks, and then we'll jump into Q&A. As always, I encourage audience questions, but I have plenty if you guys are feeling shy with it. Alex, I pass it over to you.

Thanks, Josh. Good afternoon, and thank you for joining us today. Since we only have about 30 minutes for our discussion, I'll keep my prepared remarks brief to allow as much time as possible for Q&A. For those of you are not familiar with Camden, we are a multifamily REIT with over 58,000 apartment homes located in 15 major markets across the U.S. We are an S&P 500 company with a total market cap of approximately $17 billion and we've been operating as a public company for over 30 years. Approximately 75% of our portfolio is located in high-growth Sunbelt markets with the remainder located in Washington, D.C., Southern California and Denver. And within our markets, roughly 60% of our assets are located in suburban submarkets and just over 60% would be considered Class B versus Class A and price point. Our strategy is to focus on high-growth markets measured by projected employment, population and migration growth to operate a diverse portfolio of assets in terms of geography, A versus B and urban versus suburban. Recycle capital and create value for our shareholders through acquisitions, dispositions, development and redevelopment, repositioning and repurpose programs, maintain a strong balance sheet with low leverage, ample liquidity and broad access to capital and deliver consistent earnings and dividend growth for our shareholders. Turning to operations. Overall, our markets are performing as expected with strength in D.C. Metro, Denver, Southeast Florida and Houston, partially offset by softer conditions in markets like Austin and Nashville. Our results quarter to date are in line with our expectations and the guidance we provided last month in conjunction with our 2Q '24 earnings release. We continue to balance occupancy levels with new lease and renewal rates across our portfolio in order to maximize revenue, and we are monitoring bad debt and delinquencies which have improved significantly since the beginning of this year. Our 2024 guidance calls for core FFO per share of $6.79 and same property growth rates of 1.5% for revenue, 2.8% for expenses and 0.75% for NOI at the midpoint of our range. Looking at fundamentals of supply and demand, demand for high-quality apartment homes is strong, given the population and employment growth in our markets, the shifting demographics of the country, the unaffordability of home buying and the lack of existing single-family home inventory. Our resident retention remains high, turnover remains low and move-outs for home purchases have been less than 10% over the past few months. New supply in our markets is peaking now which should fall dramatically in 2025 and 2026, creating a very constructive multifamily operating environment, particularly in our high-growth, high-demand Sunbelt markets. As we look at our balance sheet and capital allocations, overall, the multifamily transaction market remains muted, but a few portfolios did recently trade at cap rates around 5% and below, reinforcing the demand for high-quality apartment homes is strong, and private market cap rates remain lower than the implied cap rate of most publicly traded multifamily REITs. Our 2024 guidance calls for minimal acquisition disposition activity for the remainder of the year, but we are actively looking for opportunities to continue improving both the quality and geographic diversity of our portfolio over the next several years. We recently started 2 new suburban development communities in Charlotte with a total projected cost of $317 million and expect more development opportunities in 2025. We currently have $1.2 billion available under our unsecured line of credit with only $290 million of debt maturing later this month and no maturities in 2025. And finally, we have 1 of the best balance sheets and lowest leverage ratios in the multifamily sector. At this point, we'll open up to questions from the BoA team and our audience today. So thank you.

Thanks, Alex. Appreciate that intro. I guess the #1 question, I feel on Camden is just like the supply impact on your fundamentals and how that's going to progress. I think a lot of people in you flagged it are probably at like peak deliveries, but I guess trying to figure out how things progress in the back half of this year and into 2025. Could you kind of expand on your thoughts on how the supply is going to impact your portfolio and where that pain is going to potentially show up or not.

Yes, absolutely. So we're picking a supply right now. And a lot of folks, I think, have a tendency to hear peak supply, and they see that as a bad thing. I actually see it as a very good thing because what it means is that we've been absorbing the supply as it's been coming to us so far. And from this point on out, the supply number starts to come down. So if you think about it, things should be getting better as we go forward. Now it's obviously going to take some time to get through all of the supply. But that's why we feel very constructive on what it's going to look like in the latter part of '25 and feel very good about '26 and '27. If you think about the last time we had a situation like this was coming out of the GFC and when you look at the supply numbers, they had fallen off really dramatically in the couple of years that we had right after GFC were some of the best years in our business in terms of revenue growth. And so if you think about most folks believe that we're going to get down to around 200,000 starts annually in '25 and '26. And I will tell you that I actually have a theory, which we can go into later, but I think of that 200,000 starts. I think probably only a fraction of them, maybe half of them are market rate that would compete with us. And so if you really have 100,000 market rate starts in any given -- in a year in this country, that's a very small number, and that's going to set us up very well for the demand-supply equation.

Can we explore that more because I think that's kind of new at least to me, just like what's driving your thoughts behind that.

So it's really interesting. If you think about if you look at the starts numbers, starts numbers are down pretty dramatically. They're down about 30% to 40%. However, every merchant builder that we talk to says their starts are down 80%. And if you think about the financing aspects, if you're a merchant builder when it comes to starting a new multifamily asset, the first thing is, is that you have to get a construction loan and if you're fortune enough to get a construction loan, that construction loan is probably going to be 50% loan to cost. And it's probably going to be priced somewhere between 300 and 400 basis points over SOFR. So call it, 8.5% to 9.5% today. You're then going to have to go get a mezz loan that's going to take you from that 50% leverage point up to probably a 75% leverage point that mezz loan is going to cost you somewhere between 12% to 14%. And I have no idea what the equity component is going to cost, but it better be north of the mezz loan component, if not the equity providers need to be looking at a different type of business. So if you put all that cost of capital together, if you're a merchant builder, you have to develop something well north of a 10% to just cover your cost of capital. So if you sort of think about that situation, and you think about, as I said, that all the merchant builders that we're talking to say that their starts are down 80%. The question you have to ask yourself is why our starts only down 30% to 40%. Why are they not down something greater than that? So 1 of the things that we started to look at is we started to look very anecdotally about how many, we'll call them affordable tax credit, mission-driven starts are actually happening in the country today. And those are starts that in no way compete with us or compete with our multifamily brethren. Well, the answer is that nobody tracks what percentage of starts are made up of that particular component of multifamily housing, they do track the percentage of completion. We know that traditionally about 20% of all completions are affordable based. We know that during the GFC, that number got around 50%. My gut is today, and obviously, we need to prove this out. But my gut is, is that we probably have a very large percentage of starts today that have some affordability or mission-based component behind them. I will tell you that Camden actually owns a general contracting business we built for ourselves, but we also in Houston, will build affordable emission driven housing and I will tell you that we're having a record year in terms of starts for us. So what we're experiencing is in any way indicative of what's actually happening nationwide, and if what we're hearing from the merchant builders that their starts were down 80% is true, then that leads me to believe that there's, as I said, a large percentage of the starts you're seeing today do not in any way compete with us. We do know that regardless of whether or not they are affordable or market based, we think that starts will be 200,000 next year. As I said, you can then take that 200,000 number and then you can start to whittle it down to a much smaller number that is probably competitive with traditional market rate multifamily.

Interesting. Is there -- have you looked at like rings around your property, kind of find out what's competitive, where it is in the lease up? Like just, I guess, trying to cipher a little bit more on like the supply impact where you're seeing and kind of how it's heading?

Yes. No, that is a very good point. And if you have to remember, in the markets in which we operate geographically are very large markets. And just because you have supply in that market, does not mean that it competes directly with you. So 1 of the things that we've done is we've looked at our portfolio, and we've said, okay, for each asset we own, which 1 of them are located in proximity to new supply. And then the second thing we said is, well, if we have an asset that is an older asset, it's not going to compete with new supply regardless. So let's look at which 1 of our assets are 15 years or younger. And when we start to slice it that way, less than 20% of all of our assets are facing direct competition. So 20% is a much smaller number, obviously, in a much easier number to sort of wrap your arms around. Then when you start to say, okay, well, let's look at how is that 20% that actually see supply how is it doing compared to the 80% that's not, the 20% that is seeing supply is seeing new lease rates that are 200 basis points lower than the 80% of our portfolio that doesn't have supply. So that is exactly what we're seeing. But once again, the good news is it's only 20% of our portfolio, which is a really easy, very manageable number.

Why exclude the -- where is the 15 years or younger kind of cutoff come from.

So if you think it gets to a price point differential, right? If you ultimately, if somebody is building something new and they're expecting to get $2 a foot of rent or actually probably building something new is probably closer to $3 a foot in rent. If that's what they're anticipating, if we've got an asset that is 20 years old and it's $1.50 per square foot of rent it's never going to compete. Our $1.50 folks aren't moving up to $3. Even if the $3 goes and puts 2 months free, 3 months free. It's still never something that they're going to be able to move up to. So it is very well insulated from supply and we actually do see the proof of that when we look at the results, as I just mentioned.

In last year, like starting, I guess, kind of around now through the end of the year, supply, like we knew it was a problem, but it seemed like the merchant builders really reacted like in a big way, kind of putting more concessions in place has been cutting rent or asking rents as well. Do you -- is that a fear that, that could happen again this year or something different?

So I think the question is why is this different? And I'm going to answer about why this should be different. The reason why it should be different is think about where we all were this time last year. This time last year, there was a tremendous amount of uncertainty that was still out there, right? We had no idea whether or not we were going to have a hard landing. If you were a merchant builder, you had no idea whether or not your lenders were going to work with you. You had no idea. All you looked at, as you said, there's a tremendous amount of supply coming in and I don't know if I can absorb any of it. So now think about where we are today. Where we are today, most of us would recognize that hard landing is probably off the table. Most of us recognize that rates are about to start being cut. We also recognize that we've absorbed most of the supply and we know that the merchant builders that we talk to are saying that the lenders are all working with them. So that sets up a very different operating environment if you're a merchant builder today than a merchant builder a year ago. A merchant builder a year ago there was so much uncertainty and they reacted in a certain way. We would expect that they should not react the same way this time around. Now that being said, I can never get inside the mind of a merchant builder. So we shall see.

Questions from the field? You mentioned the second half of 2025 is when things should improve. What -- I guess, what has improved look like to you? I guess like I just kind of want to make sure we're calibrating correctly.

Yes. And obviously, I mean we're not at the point where we're giving guidance for 2025, but here's what I would tell you, if you look clearly, today, we're in a situation where we have positive renewals. By the way, I just want to address renewals for a second, even during the GFC, renewals remain positive. So you generally have a lot of strength around the renewal side, but we are in a negative new lease situation. A constructive environment to me is when you turn the corner from negative new leases to positive new leases. And I think we should save ourselves up or should be shaping it very well for that in the latter part of '25. If you think about the last time we saw anything like this, once again, was coming out of the GFC. And coming out of the GFC, we had 3 of the best revenue growth years we've ever had in the history of our company. And that was because supply went away, demand remained strong, and that was incredibly constructive. Well, we're shaping up for really a very similar situation.

And then, sorry, you mentioned something on renewals. I guess, one, where are you sending them out today? Just kind of you go over kind of the operating update on renewals? And is there any kind of strategy at this point that you're taking?

Yes, absolutely. So we're sending renewals out at least last month, last time we publicly reported, we're sending renewals out up about 4.6%. And we traditionally get them done within about 50 basis points of that.

Does that vary a lot across the markets.

I mean there's always slight variability, but it's not significant.

Interesting. Then I think a lot of your portfolio in the Sunbelt where you have DC, which I don't know if that's Sunbelt or not. And then SoCal, which I feel like is a little bit different. Just how are those 2 markets trending versus maybe the rest of your SoCal or Sunbelt portfolio.

Yes, absolutely. So both markets are doing well for us. So we'll hit D.C. Metro first and notice I always say D.C. Metro because what we're really talking about is Northern Virginia, Maryland and the District and in terms of performance, it follows that same pattern. Northern Virginia is the best market we have in D.C. Metro, followed by Maryland, followed by the district. And that's really a story of low supply and demand remains fairly strong. If you go to Southern California, Southern California is a little different. We'll sort of bifurcate and say San Diego, San Diego has low supply, demand seems pretty strong. We also have burn off of bad debt working through San Diego, which is helpful for us. When you get into L.A. County and Orange County, what you're seeing there is more of a story of we're seeing pickup from the bad debt problems working through the system.

How is the bad debt trending in those markets, like still painful.

Anybody who doesn't pay is painful. That being said, I will tell you that we have bad debt for the full year of about 80 basis points, 50 basis points is typical for us. And we would pretty much be at 50 basis points if it wasn't for California and Atlanta. The good news is, is that when I look at both of those markets, the bad debt percentage on a year-over-year basis, looking at the second quarter '23 to second quarter '24, is down about 50% in both of them. So we are we're getting there. My gut is, is that you just have to -- you have a large sort of backlog going through the court system. And once we can work ourselves through that, which is probably going to be at least another good part of '25. Once you're through that, there's potential upside to get us back to that 50 basis point traditional bad debt number.

In your prepared remarks, you mentioned the transaction market and you said you're seeing like, I guess, low 5s and even in some cases, in the 4s for trades in the market. Could you just expand more on what you're seeing? And what gets you into a 4 cap rate these days versus like a 5 just kind of.

What gets us into it?

Just like the market, like is there anything in particular.

Yes. So here's what I'm going to tell you. Cap rates are sub 5. They really are. If you want to look at in institutional quality, multifamily real estate, it's a sub 5. Now you have to sort of think about what causes somebody to buy an asset that's sub 5. Well, there's a couple of things that can go into the equation. One of the things that's quoted quite often is discount to replacement cost, you can think whatever you want about that particular metric. But some of these assets are trading at significant discounts to replacement costs. I think the second component is that people are looking at the math that I just laid out, which is if you end up with very low supply or very low starts in '25, very low supply in '26 and '27. We may have some very, very good years, looking like years that we had coming out of the GFC. So you have to believe that there's some type of supercharged rent growth in that equation somewhere I think that's all part of the math that sort of works through it. It's interesting because we were talking to a broker in 1 of our markets and we said, I don't think it was Austin. And we said, so let's talk about what are the cap rates in Austin and the broker said, I've got 100 buyers at 5.5%, and I have no sellers. And that's the reality is if you want to be a buyer today, it is a sub-5%. Now that being said, I think a company like Camden, we can buy something that's just under 5 because we know that we bring certain enhancements to operating real estate that can very quickly turn that north of 5. And then obviously, you have growth potential on a go-forward basis from there. That's the thought process that we would have. Additionally, our cost of capital is a lot lower, right? I mean we can borrow 10-year at sub 5%, which is different than a private person. But I assume when the private guys are working themselves through the math, that's what they're doing. They're looking at discounts to replacement costs. They're looking at the assumptions of supercharged rent growth in the next couple of years, and they're making that jump.

Questions from the field?

I was just going to ask how the financing costs? And how are private investors able to justify like that much of a negative gearing is the really high market of sub 5 or if you take negative gearing year or 2.

Yes, I think that's exactly right. So if you want to go to Fannie loan today, a Fannie fixed rate is probably about 5.25% to 5.5%. If you floated a Fannie today, it's 7.5%. So I assume that a lot of them are fixing it. And I assume that there is an assumption of a negative carry, but with the idea of what I just talked about, which is the belief that you're going to get supercharged rents at some point in time and then that will end up creating the value.

So your comments on the conditions that would be favorable to your markets and certainly see supply coming off as far from the down in your markets as well as across the country. The comparables withdrawing to GFC post-GFC. If you think about pre-GFC, they move out to buy Camden probably in 20s today, you cited at 10%. So I guess, how much of a tailwind was that versus as rates normalize, I don't think that 10% is rightly sustainable long term either. How do you think about that as a headwind going forward.

Yes. I mean so if you think about our move-outs to purchase home is traditionally or historically averages are up 14%. And so we're at 10% today. If we got back to 14%, that's 14% of move-outs. Move-outs are about half of your total, you have 50% turnover. Yes. And turnover is at record lows today. So theoretically, you could have another 200 basis points of pressure on your turnover number if you got back up to 14% on move-outs to purchase a home. Now it's interesting because if you think about what's going on today, and I think the stats are that 80% of everybody with a mortgage has a mortgage sub-4%. And I think it's 60% have a mortgage sub-5%. And so part of the affordability issue is there's just not -- in addition to the fact that interest rates are higher, there's just not the level of inventory that should be out there. And so that's causing pricing pressure. So I think rates have to come down quite a bit in order for people to really start moving out and buying single-family homes. I think some of the stats I saw is that it's 60% more expensive to own a home today than to rent a home. And so I think the 30-year mortgage has got to get down to somewhere around the mid-5s, and that's a long way to go before we get there. Now I will tell you that if we do get there and if people do start moving out, if we do start having a more robust single-family environment that actually would trade a tremendous amount of jobs, which actually be really good for us because jobs is 1 of the largest drivers of our business. But I think we've got a long way to go there. And then the other thing that I sort of look at, just in general, is if you think about the demographic shifts in this country, and I mentioned it in the prepared remarks, is in our markets, the reason why somebody moves out from multifamily to single family is traditionally because they had a lifestyle change, which means typically, they got married and they had their first child, and they started to think about school, districts and all those factors. If you look at our renter profile, our average renter is 31 years old and 75% of them are single. They've got a long way to go before they hit that lifestyle change, and it's interesting because if you just look at the demographics in this country, people are getting married later. People are having children later. People are having less children. All of those factors lead to people being multifamily renters for a longer period of time.

How do you think the demographics -- I get that people are starting families, getting married later. But at the same time, I believe demographics suggests like the 31-, 32-year old has kind of peaked for a little bit. And I think like demographically that becomes smaller. So it's like you got the headwind, but a tailwind too. Like how does that kind of play out over the next few years?

Yes. I mean if you look at just the percentage of young adults, it's actually fairly and this is people age is 20% to 34%. It's fairly steady right around the $68 million number, really going out through '28. So I mean I think we've got a fairly steady amount of folks that fall into that renter base. But the other thing is I've been at Camden 20, I guess, closing on 26 years. And when I sort of go back and I think about 20 years ago, the average age of our renter, we didn't track it at that point in time, but I'm fairly confident that it was probably mid-20s and today, we're up to 31 years old. So they are getting older and older, which is what that's doing is that's grabbing more people into the demographic of your traditional renter, right? We used to say our traditional renter and we still do is 20 to 34 years old that made soon if these trends continue, they may soon become 20- to 40-year olds.

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What kind of interest rate? That's a wonderful question because if you think about construction costs, construction costs, they're not as split anymore, which is great, but they're also not really coming down. And land prices are coming down a little bit, but not much. And so I mean, I think you really probably need to get I mean you've got to get your all-in cost of capital has to come in at least on the 70% that you're borrowing needs to probably be south of 6% that's got a long way to go. Either that or you really have to believe in some significantly supersized or supercharged rent growth.

Any more questions from the field? I guess where are you thinking about or how are you thinking about the external growth opportunity, I guess, attractive potentially to kind of buy stuff that maybe that like, call it, 5% mark, and you can get that uplift, development, sit tight? Just how are you guys thinking about.

Yes. I mean listen, forever and ever, merchant builders had a cost of capital advantage. They do not have a cost of capital advantage today. So we can borrow money sub-5%. We just started 2 new developments in Charlotte. If we deliver those in the 6% plus range, obviously, we create value through that component. On the acquisition side, I think we're absolutely prepared to look at acquisitions but we have to believe that they are going to be not negative leverage. And as long as we can get them above a 5 pretty quickly, which, as I said, just adding on the typical value enhancements that Camden has, we can do that and then we'll have some good growth rates and growth rates of rents that come after that point in time. And that can set us up very well to create a lot of value. So I mean, we're absolutely looking at growth.

And I guess, on many how far away do you think you are from like kind of like really accelerating external growth. And then strategically, is there areas you want to lean into on the growth front, whether it's geographic, asset type, like how do you want to kind of help position our portfolio for the next phase.

So I will tell you, we've got real estate investment professionals across the country, and they are charged today as they've always been charged of find the opportunities and bring them to us. So if our folks can start finding opportunities to -- that will create value for us than 100%, we're ready to go. What was the second question?

I might have forgot to.

Yes, that's okay.

There was a big portfolio trade in the Sunbelt, Blackstone to EQR. Was that something you looked at or interested in.

We didn't look at it. It does seem like good real estate, happy for EQR but I think what it does is it shows the multifamily value is absolutely there. Your other question was any markets or any product types you want to lean into. And so the answer to that is suburban assets are absolutely outperforming. If you look at the 2 assets that we just started construction on, they are suburban. It's interesting. If you look at our particular, if you look at our markets, 70% of the 25- to 34-year-olds in all of our markets live in the suburbs. And so that's absolutely where we are looking today. We're about 60% suburban and so you should expect to see that trend continue, if not increase.

And then you do have the build-to-rent development communities. Just any update on that front? Is that something you want to expand? Or is still like try to figure out if that makes like sense or.

Yes, absolutely. So the question was on build-to-rent. So we do have 2 build-to-rent communities that are in development today. One is in North Houston and 1 is in Southwest Houston. We really are treating these as test cases, 1 is 188 units, 1 is 189 units. So they're very, very similar. As I said, we're in lease-up on both of them. We're learning a lot we were warned early on that lease-up is very slow for this product type. They are correct. It is very slow for this product type. I sort of think about our traditional multifamily renter, our 31-year-old shows up, we give them a tour. They fall in love as they should with our real estate, and they sign a lease. What we're finding with this particular demographic is slightly older. It's more established, more children. And we're finding that they show up 1 time, take a look. They say they like it. They come back a second time. They come back a third time, they come back a fourth time, they start measuring bedrooms, et cetera. It takes them a long time to make up their mind. But when they do come in, right? My thought process is, is if it takes them this long to lease, they should be really sticky. And hopefully, they don't go anywhere. And so that's 1 of the things we've learned. The second thing that we really do need to learn, and we're not going to really know that answer until probably mid part of next year is once it really likes to operate this particular product type, right? Our hope is, is that we can operate it very similar to a traditional multifamily. We are also planning on nesting them, meaning putting them in close proximity to existing multifamily communities. We own and hope to use some efficiencies from that. And if we discover that we can operate them in an efficient manner, then we will do more of them. And if it's determined that it's not a great product fit for us, then we won't.

Any other questions from the field? So 1 thing I've been really focused on with like all REITs is just like their potential to kind of improve their platform and kind of like build out kind of some kind of like alpha on top of like the overall like beta trade for the sector, there any platform or initiatives that you are working on internally to kind of drive like outsized growth over the next few years? And maybe how could that play into like margin expansion?

Yes. So talking about what we can do to generate outsized growth. And I'm going to really -- I'm going to split it into the blocking and tackling components, we'll call it sort of basic components. And then we'll talk about sort of external factors. So the very basic is at the end of the day, if you go lease at Camden or you go lease at Mid-America or you go lease at Avalon Bay, and if you've never leased with any company like ours, your initial experience is just is going to be a leasing experience. And you're going to make up your decision, you're going to lease and that's where it's going to be, where we really all set ourselves apart and were came in particular, sets ourselves apart is the customer experience. And that customer experience is what enables you to have very high retention, very low turnover. That's really the best way that you can, in fact, drive revenue growth is by making sure that you create that exceptional customer experience. And I'm going to tell you that there's 2 ways to create that exceptional customer experience. One of them is a high-touch way, which is to make sure that every single interface, every single interaction that you have with your resident is very positive. So that's making sure that that the maintenance requests are carried out in an appropriate manner. We've rolled out new technology that enables us to track all of those components that enables us to make sure that we respond to maintenance calls in a very quick way that enables us to make sure that we create perfect customer satisfaction on that component. The other 1 is to make sure that if anybody has any issues with you and they put information out on the website on any type of new websites, that you are managing that and you are responding appropriately. We respond to every single and we use technology for this. We respond to every single review that comes out for Camden make sure that we're having that really positive perspective because we all know that nobody wants to buy anything less is at least 4 stars. So those are some of the components that we can do. But we'll talk about those are sort of basics. Now let's sort of talk about how you can use technology for some of this stuff. So AI, I really like to talk about AI. I will tell you that today, if you reach out to Camden, online, you are going to be greeted with a virtual leasing assistant, that virtual leasing assistant is named Birdie, we're the hummingbird. So you have to have a Birdie's the name for our virtual leasing assistant. And you are going to have a really fantastic experience interfacing with this virtual leasing assistant. What that's going to do is help to make sure that you actually will come in, that you actually will show up for your tour, et cetera. But it also works if you ever have any complaints or issues or anything that needs to be fixed. We make sure that we can respond to you 24 hours a day. The other factors that we look at is self-guided tours. Self-guided tours, everybody talks about self-guided tours. Let me tell you what it means for a lot of people, and let me tell you what it can mean for us. For a lot of people, self-guided tours means you show up to a leasing center, your handed a key and you handed a map, right? Well, we knew that you can never really have true self-guided tours until you solve the access issue. The access issue is how do you unlock doors, et cetera, and showing up and getting the key is not what you really want to do. So we looked out and tried to see if there's a technological solution for this, we found there wasn't 1 who actually created our own, which was called Chirp. And Chirp is a smartphone application where we can actually provision you to have access to open all the gates and to open up a particular unit for a certain period of time. So today, if you wanted to go take a self-guided tour, 1 of our units, you can actually do the entire thing online. And so you can fill out all the paperwork you need. We can provision you so that your phone will then open the gates and we'll open the leasing center will open the wait room, we'll open unit 201 for a certain period of time, and you can effectively do everything you want on your own. Why that's important is that there are people that, that's how they want to shop, right? If we've learned anything from the automobile industry, if we've learned anything from retail, people, a lot of folks do not want that high touch environment and so if we can create that, which we are creating that for folks, what that's going to do is that's going to ultimately end up driving revenue. It's so important because a lot of us, when we think about an exceptional customer experience, we have a tendency to think that, that always needs to be tied to your interface with the human. Well, think about the last time that you got sent a debit card, like the new debit card, and it says, dial this number to activate your card. You dial this number, you hit something boom, your cards activated. Most of you would say that was a really exceptional customer experience. You never ever dealt with a human. Well, the reason why that was so exceptional is because the technology works. And so you have to make sure that the technology is working in an appropriate manner. We've actually just added to our business intelligence group ahead of AI, and we've actually just added to our IT group ahead of AI because we recognize there's going to be lots of other opportunities like this along the way.

Awesome. So we are out of time. But I have 3 rapid fire questions. The first 1 is, do you expect real estate transactions to increase once the Fed starts to cut, yes or no?

Yes. .

If you ask, when do you expect them to pick up, A, 4Q '24, B first half '25 or C, second half '25?

B.

How would you characterize demand for space today, improving steady or weakening.

Steady.

Last year, the majority of companies at our conference stated they expected to ramp up spending on AI initiatives in 2024. How would you characterize your plans over the next year? Higher, flat, lower.

Higher.

With that, we'll wrap it up. Thanks, Alex.

Great. Thank you, everybody.