Equity Residential (EQR) Earnings Call Transcript & Summary

Good morning, everyone. Apologies for starting a little bit late. Welcome to Citi's 2021 Virtual Global Property CEO Conference. I'm Michael Bilerman here with Nick Joseph from Citi. We're extraordinarily pleased to have with us Equity Residential, and CEO, Mark Parrell. This session is for investing clients only. If media or other individuals are on the line, please disconnect now. Disclosures are available on the webcast. Up on that webcast, you can type in any questions, and they'll come to Nick and myself anonymously. And we'll work those into the conversation. Mark, I'm going to turn it over to you to introduce the company and any opening comments. And then Nick and I got a bunch of questions.

Great. Well, thanks, Michael, for including the Equity Residential team in the conference. I have with me today Michael Manelis, our Chief Operating Officer; Bob Garechana, our Chief Financial Officer; and Martin McKenna, who runs investor and Public Relations for us. So I'm going to do some quick introductory remarks, turn it over to Michael Manelis to give you the update on operations since the earnings call, which was a month ago. So everyone broadly saw the press release we put out last week. And you could see from that, that we made good, steady progress in our operations, improvements in occupancy rate, a decline in concessions, all that is very encouraging to us. And we're probably 1 to 2 months ahead of where we thought we would be when we put our guidance together at the end of January of 2021. So we're also very encouraged by the fact that last week, there were several days where 2 million people in the U.S. were vaccinated. And that now, 10% of the adult population is fully vaccinated in the United States. And that's leading to just reopening of restaurants, sports venues, all of the things that make our markets in our city's homes. So we're excited about that. Good for the country. Good for our business. And before I turn it over to Michael Manelis, I just want to add 2 little notes to this. First, we are early in our year. So our primary leasing season, when we do most of our business, is yet to come. It's a couple of months away. So we still have plenty of work to do. And also, on this thing, I think we've done a good job telegraphing is that we reported same-store NOI results will get better more in the back half of the year due to more challenging comparable periods in the first half of the year when our business just wasn't that affected by the pandemic. And with that, I'm going to give it over to Michael Manelis, our COO.

Okay. Thanks, Mark. So good morning, everybody. So listen, we have continued to see good demand for our product across all the markets. It's allowing us to continue to grow occupancy and dial back on concession use while increasing rates. The portfolio is 95.3% occupied today. As Mark said, it's a little bit stronger than we expected, primarily due to the strength in the recovery for New York and San Francisco happening about a month or 2 sooner than we thought. Pricing trends, which include the impact of concessions, continue to improve overall, are in line with our expectations, up about 5.5% since the beginning of the year. We're starting to see the improvement in the blended rate for February. We were negative 11.5%. It's important to remember, we do expect that number to continue to be negative for some time as really the impact on rates and concession use didn't happen to us until the back half of 2020. Concession use remains elevated in the portfolio. We are in the process right now, each and every week, using -- pulling back on concessions, not only in the volume of concessions being used, but also in the amount of concessions being given. To give you some context, in November, 45% of our applications received, on average, about 6 weeks. In January, we were down to about 1/3 of our applications, receiving just under 6 weeks. And for the month of February, we're at 30% of our applications receiving, on average, about 5 weeks. You can just see that gradual improvement here. About 80% of all of our concessions are being used in New York and San Francisco. And in a minute, we're happy to discuss any market or any questions you guys have. But I thought we'd give a little color on New York and San Francisco since those were the 2 markets that were most impacted by the pandemic. So first, in New York, we continue to see strong demand for our product. Occupancy has recovered just over 92%. That's a 240 basis point improvement since the beginning of the year. Pricing remains challenging. Concession use is still widespread. We're in the process of pulling back. Today, we're at about 60% of our applications receiving, on average, just under 2 months. A few months ago, we were running about 70% of our applications just over 2 months on average. Signs are definitely pointing in the right direction, but it's still very competitive. This market also tends to have less institutional ownership on yield management. And I think, right now, we're seeing that they may be wanting to hold on to that concession use a little bit longer until that occupancy recovers. You're also still seeing a little bit elevated use of the deal seekers. And by that, we're talking about applications coming to us from within the same MSA. In the month of February, we had 72% of our applications coming from within the same MSA. Normally, we'd be at about 65%. But in the first quarter now, we're starting to see the early trickle-ins from the suburban ZIP codes in Connecticut and New York -- in New Jersey. If I go over to the West Coast, san Francisco's pace of recovery is a little better than we expected. Concession use is moderating faster than anticipated. Leasing activity remains strong. Occupancy is now at 90 -- just over 94%, which is 120 basis point improvement since the beginning of the year. Downtown is over 93% occupied right now. And that's compared to 90% at the beginning of the year. So what's different here than New York is concession use is now running at about 40% of our applications are receiving just under 1 month. And just a few months ago, we were running 60%, 70% of applications receiving 6 weeks. So that's a pretty dramatic pullback in the use of concessions. And I think, for us, right now, this market tends to have more institutional ownership on yield management. And in past cycles, we've seen the concession use tends to come and go at a much faster pace than in other markets. Last week, San Francisco Chronicle published a front-page article about upgrading your neighborhoods. And if you planned on returning to the Bay, now is the time to do it because they're seeing rates are going up and deals are going away. And that's probably the best catalyst to describe what we're seeing. Whether or not that's sustainable, I don't know yet. So it's still early in the year, as Mark said, but we think the portfolio is well positioned for the leasing season. Happy to talk about any of the markets. But at this time, I'll turn it over to you, Nick, to start your questions.

Great. So we've been starting each of these sessions by asking each CEO. Coming out of the pandemic, if an investor were to choose only 1 real estate stock to own, what are the 3 reasons why they should invest in Equity Residential?

Sure. I would say our high-quality customer. We continue to have a customer who's very resilient financially. You see that in our high collection percentages. Our residents stayed employed. And I think that, in the long run, they're at less risk of automation and losing their jobs in the service sector. Second, we're strongly levered to the reopen trade. And you can see it in all the comments Michael made. As our country reopens, as these urban areas reopen, our markets will be energized. Our results should continue to strongly improve. And then I'd say just the operational excellence and efficiency of the platform, Michael, I mean, we're in a position where we will capture, we think, all of the advantage we can get out of this. We'll minimize concessions as quickly as possible. We will start raising rate as quickly as we can. We'll keep providing great customer service, keep keeping our employees safe. We'll do all those things because I think we're on a first-class operating environment.

Maybe I'll jump in there. Michael, you mentioned kind of the customer coming back in, right, and particularly for San Francisco and New York. Are you seeing any changes of who those customers reurbanizing are, maybe from an average age or demographics or income level? How does it compare to your previous customer?

Yes. So not a big change on the age front. But clearly, as we think about -- we look at rent as a percent of income. It's kind of the gauge of affordability. And we're underwriting residents when they come in based on gross rents, not taking into account the concessions. You haven't seen a lot of changes in that front, which means that the average income of those coming in is slightly lower than what it was pre pandemic. And I can use New York as a great example. So in New York, for the first quarter, we have averaged our household incomes at $220,000 for the new applicants coming in. We used to run about $234,000, $235,000 on average. So you could see that slight kind of reduction there, and that's keeping that rent as a percent of income in line. It's running at 18.5% right now, which gives us the confidence that they will be able to kind of handle the rent increases as these markets continue to recover.

And is there anything, Michael, that you find on the -- where the people are coming from? Are they just in-market moves, i.e. basically trading up perhaps in terms of quality of building, but trading perhaps down in rent, just given how much rents have fallen. So is it in-market moves? Is it coming from out of market? Are you able to identify where that person is coming from?

Yes. So we -- I mean we have great transparency on both the ins and the outs of where people are going and where they're coming. And I think, New York, as I said that when I was opening to you, it's the best example. In the height of the pandemic -- on the last call, we were talking about deal seekers. We saw 85%-plus of every application coming to us from within that same MSA. That's upgrading within the neighborhood, taking advantage of whatever price opportunity or changing their unit type. Right now, what you've seen is that number is gradually starting to come down. So for the first quarter, for February, we're at 72% in New York. Normally, we'd be at 65% pre pandemic. So you're starting to see where they're coming from. I think we've pointed out before, where did we see people going? Well, they were going to New Jersey. They were going to Connecticut. And you're just now starting to see those suburban ZIP codes start to come back into like the Manhattan area.

Thanks. You mentioned the deal seekers, how do you think that impacts turnover? Because it does sound like they're qualified from a rent-to-income perspective, but maybe they are more enticed by either existing concessions or anything else in the market. So how do you think about that as you get to a more normalized operating environment? Is that a residual impact, at least, for the next year?

Yes. Nick, that's a great question. And I think, for us, a lot depends on what are the options at the time their lease comes up for renewal. So if concessions are still widespread in the competitive landscape, they have a lot of choice to go to. We're going to be negotiating, and you're going to have to, even though they receive concessions on the way in, you're still going to be negotiating with those folks. And if they don't have a lot of optionality, and concession uses abated and rents are kind of moving up, then it's our normal process. And again, negotiations are going to be challenging. There's no doubt about it for the next year, but I think a lot depends on what is the pace of recovery in that market that we're looking at and to how those discussions go.

And when you talk about New York and San Francisco kind of leading the charge relative to expectations, are there any markets that are trailing where you thought you'd be so far?

Yes. So the rest of the markets, they're all in line with our initial modeling. I think the one market I can point to, and Mark, we've spent a lot of time talking about this, which is Seattle. Seattle, right now, and even in the past cycles, it tends to get a lot of traction or momentum, and then it's like in this period of pause. So the market's still, the occupancies improve. We're at 95.8% occupancy. We're starting to raise up rates. But right now, we're in about a 2-week pause, where we had to freeze our rent, kind of, increases and just wait for that kind of market to absorb that and wait for that velocity to pick up. So I think you could see the market pick right back up again, and you could see us stay in this pause. But that's kind of the only market right now that we're seeing as we're doing our pressure testing that we found that resistance point a little bit sooner than we thought. And now, we're just in a pause.

And as you think about getting into the spring and summer, the traditional leasing season, how do you think -- Mark, you talked about kind of the vaccination trend, certainly the reorganization. How do you think about it being a more normal peak leasing season versus past years in terms of just the pace of demand?

Michael is probably better equipped to give you the specifics there. Go ahead, Michael.

Yes. So it's interesting. I think that's the question, right, Nick, as to what is the leasing season going to look like? Is it going to be a normal bell curve that's going to start picking up this traction in April and continue to grow and then start trailing off? Or is it going to be more of this gradual kind of improvement in demand throughout the year and stay strong through the fourth quarter? I don't think we know enough yet to see that. I think, right now, what you're seeing is demand coming sooner than we otherwise would have expected, right? And that could be people trying to come back in advance of understanding what return to the office looks like. They're just coming in and they're ready. The weather is getting better, activity levels are picking up in many of these areas. So I think regardless of whether the leasing season is a regular bell-curve shape or just kind of that trajectory line up, that our portfolio is pretty well positioned. What we saw happen to us is, normally, we would run about 20% of our volume in the first quarter, in the fourth quarter, 30% of the volume coming in Q2 and Q3. What's happened to us, because of the strength in the back half of last year, is now we have about 35% of our residents' lease expiring in the third quarter and about 25% of our leases expiring in the fourth quarter. So we've shifted this expiration to a little bit of the back half of the year. And I think that's probably going to play out to our advantage right now. My guess is if a return to office happens in the middle of the year or even in kind of the fall, you're still going to see this tail -- tailwind that's going to carry the leasing season a little bit longer than normal.

And you -- obviously, it's a dynamic market. You mentioned the last institutional competition in New York, which probably makes pricing a little more challenging. How are you handling that from a on-the-ground perspective versus centralized out of Chicago?

Yes. I mean the feedback loop is critical, right? So we have a weekly process where we have the pricing calls, and the yield management system runs every night and reprices based on yesterday's activity. But everybody in that market knows that if something felt different yesterday, get on the phone with the revenue manager, let's not wait. So that feedback loop is critical. So -- and I think that's how we're starting to see some of these trends and some of the pattern. It's where data meets reality. Boots on the ground are telling us, what do the applicants look like? What are they saying? What period of time are they looking for? And what does the demand system look like the yield management? And how do those 2 meet? And what do we need to do to interject to ensure that we stay on the trajectory we want to be on.

Maybe just one final question on ops. You mentioned kind of the lag of same-store results. But obviously, the blended rate is much more of a forward indicator. Would you expect that inflection point for blended rate to actually move positive this year?

So it's a great question. My guess is we're somewhere in the later part of the year that you're going to see that blended rate kind of turn positive and cross over. I want to caution everybody, too, which is pricing trend for us, which is what we put in that management presentation, is a great indicator of what to expect. There's some noise in blended rate. It could lag that pricing trend by a couple of months. But I think, as we think about where did we have that pressure, it's somewhere in that middle of the year or into that Q3 period that, depending on the pace of recovery, you're going to cross over.

Yes. Blended rate is more a quarter-over-quarter measure and is so much more helpful when you have normal seasonality. The pricing trend we introduced because it's sequential and that's what matters in the recovery. As our [ agents ] are getting a little better every month, even if your prior comp month was tough. So we're going to start talking about -- here's on the April call, say, some of our markets are about to cross over, Nick. So Los Angeles, for example, as a whole, not every asset, but as a whole, is about to cross over on both occupancy, meaning our spot occupancy week-by-week is going to be higher than it was the same week the prior year. That will happen in the next few weeks. And the other thing that's going to occur is, very shortly, you're going to see us cross over on price as well. And again, that's just spot price. That's because the decline was so severe in 2020, and the incline is pretty good in '21, and those 2 lines will cross. And we'll talk a lot about that because to us, more than the blended rate, that will be the indicator we really have in the positive territory. We're making a ground on occupancy and on rate. Every lease is slightly better than the one that was written before, and we'll get ourselves out of this hole ever so quickly.

Mark, a couple of questions came in here from investors on the webcast. And I'm going to combine 2 of them. And it just talks about structural headwinds for the business, whether you agree or not with these, but this individual put in growing demand of housing, out-migration to the suburbs in the south and secondary cities, and then someone also put in the work-from-home anywhere could impact your business if that becomes a more permanent structure for companies. So how do you think about the normalized growth of the company in that vein with those 3 topics?

So let's talk about work from home. I want to sort of take it in reverse quickly. So work from home you -- and certainly, Michael and Nick, you've been in our properties across the country at 2:00 on a Tuesday, before the pandemic, and seen plenty of folks that were using our buildings and working in our shared workspaces. And they didn't need to be in the office, or at least didn't need to be every day. So people live in our apartments. They live in Brooklyn. They live in West L.A. because they love the lifestyle. They like the amenities, the restaurants, the culture, the diversity, the friend base they have there, not just their employee base. So I think work from home or remote work is here to stay, and it's going to exist in some form or fashion. But the idea that like people only lived in our apartments for that reason is not true. They live there because they like the neighborhood, and they found it interesting as well as the work proximity. In terms of the migration to the Sunbelt, there's no risk-free apartment market. There are markets that maybe have less, I'll say, pandemic-specific risk, but they have more supply risk, single-family is more of a challenge to them. Maybe they're in a place where hurricanes or other things are more common, and they're more resiliency risk. So we're going to try and balance that out. We've been very, I think, clear about reallocating some of our capital into markets. My first business trip of the year, first one since I went to New York in October, was last week to Denver, where I was there with our Chief Investment Officer looking at some deals. I mean you should expect that we will be more active. The transaction market is more active. And we will recycle capital and just spread out a little bit. Just to be a little more -- so maybe 40 markets was too many. It certainly was for EQR in the late '90s and early 2000s. Maybe 6.5, counting Denver, is too few, and maybe 10 or 11 is just about right. And those will include some of those markets, again, we've talked about Austin, Texas, tough entry points there. Denver, where you have affluent residents because that's the demographic we like. And you have good supply demand dynamics and maybe a little less political risk. And we'll balance that out with maybe lightening the load in California a little, lighten the load in New York a little, but still maintaining a significant presence. I mean New York has the best supply picture in any market for the next couple of years, any major market. It has the largest base of affluent renters in the country. So the reasons to stay in these markets, they're probably also good reasons not to be as concentrated. I think, Michael, that's in response to the Sunbelt thing, just being maybe a little more national than coastal would be to our benefit.

So Austin and Denver get us up to 8. What are the other 2 or 3 that look interesting?

I just have to keep it a mystery. I -- it just has to be more that. No. I think, listen, there's other markets that we do find interesting, but you got to like a lot of things about it. I mean you like Austin, but again, entry point hard, not enough volume. Can we get -- I mean Michael needs to operate 10, 12 properties for us to really have operational efficiency. We can get there over a couple of years, but if it's a smaller market, even if it's great, if we can't get to scale, we really got to give that some thought. So I think, Nick, we'll just sort of see how that unfolds, and we'll be really forthright about that when it happens.

And as you add additional markets, how scalable is the current operating platform, right? Does it involve additional regional offices? How do you think about growing the size of EQR to grow in additional markets?

Sure. So we'll talk about, for example, Denver. So Denver, we have 6 assets. So the way Denver worked is the initial properties we bought were run by an extremely capable community manager, who we knew could do more. And then as we grew out, we then -- her job -- she became sort of a regional manager, running these 6. And then over time, we'll build this thing out, and then she'll run the whole thing. So we're very good, Nick, at scaling. But it is important, when you get to 10 or 12, you have your own facilities person, you have an HR person in that market. It just runs better. Now that's when we get to maximum efficiency. Three assets or 4, that's tough for us. That's -- I want to make sure we get into a market we can get scale over a relatively quick period. And if you sell a lot in another market, you just will have a slightly smaller operation in that market. So I don't know that our overhead is going to go up. I think our overhead is going to move around a little.

And when you think about those market entries, right, is it through acquisitions? Is it through development? Is it through partnering with developers? I mean how quickly do you need to build that scale? And how do you think about actually getting there?

Yes, a great question. So we're thinking a lot about acquisitions right now. But we would do development, and particularly, JV development has become more interesting to us. We do have our own development capability. It's very good. We had some deals we're working on. But these -- in new markets, working with a partner that we trust to build it, while we're watching over the construction management and we have the ability to purchase the asset, that's a good arrangement for us. I'm not sure I want our first deal in a market to be a development deal. I rather have boots on the ground with some sense of what's going on in terms of rents firsthand. But I think you can expect that we'll do both, probably a little bit more acquisition-focused initially, but a little bit of both those things.

And as you look at those kind of expansion markets, how do you think about either the accretion or dilution of trading out of some of your core markets and into those?

I mentioned this on the call, I would have said to you 6 months ago that selling a little bit in New York and a little bit of California would be accretive. We'd sell at a lower cap rate than we buy. And now everything is trading at a forecast. This is the world of forecasts. And so you really just got to evaluate growth and risk and think on that a little. So the kind of assets you're seeing us sell, and it'll be more in the second quarter because we're in the process right now. But we've been getting terrific prices on our sales. Some stuff in California jurisdictions that have, let's just say, regulatory challenges, older assets, that our renovation plays for the buyer, but we don't believe in the renovation play. So we're selling them at a pretty low cap rate, and that feels good. And then you're buying at just about the same cap rate in markets like Denver, where Denver really was a 4.75 to 5.25 market. Everything I saw was 4 to 4.5. Well, Denver is really -- people have found it. I mean it's got a lot of powerful demographic drivers. And we drove in an area that we really liked, in a dense suburb where the town homes were all selling for $650,000, 3 bedroom, 2 bath, kind of, that's a terrific area for us to be in. And it's a pretty expensive thing relative to rents in that area. That's a good dynamic for us. And the quality of life, being able to get outside all the time, to get to the mountains is great. These are our kind of people. They've just chosen to live in a mountainous environment. Instead of in the mountain -- the canyons of New York City, they live in the canyons of the West.

And as you think about kind of the California dispositions, are those going to be clean dispositions? Or we've seen a lot of your peers do JVs for tax reasons, how do you think about that?

Yes. I mean we're open to either. The JVs do have the advantage, you just mentioned, on Prop 13. In the city of San Francisco, they also have the advantage of avoiding the 6% transfer tax, which is pretty material. Again, that's for the city, not for the whole Bay Area. So I'm open to the JVs as well. We're going to stay in those markets. We believe in San Francisco. It's still the tech driver of the United States, we think, in the long haul. But to lighten the load a little would probably be a good thing.

And how do you think about kind of -- obviously the demographics have been there for some of these markets that are exploring. How do you think about barriers of supply relative to the existing markets you're in?

Yes. I think -- so New York is an example. When you take the total number of units delivered, even when the deliveries were very large 3 years ago compared to the stock of apartments in New York, it's a very small number. But yet we had a lot of pressure from supply, and that was all about the supply being on top of us. So our conclusion, Nick, is that concentrated supply matters a lot more than market-wide supply. So when you have all the Class A apartments fall on top of you in your submarkets on the Upper West side or in West L.A. or Marina Del Ray or in Central Downtown Seattle, then you feel it. If it's spread out more, you don't. And the advantage in some of these markets is certainly, Denver is a well-supplied market. Austin is a very well-supplied market. But it does go a little bit everywhere. And so we're hopeful the demand is more important than the supply is the way I'd summarize it. And the supply only matters for a little while if it's right on top.

How are you thinking -- a lot of your peers have moved more into preferred equity and mezz funds. Certainly, benefited earnings to a certain degree, but also provided some acquisition or opportunities on the exit. How do you think about that program? Is that something that would be interesting?

Yes. We talked about it. I mean the 2 limitations in our mind is for us to do it right. You're putting just as much effort in the underwriting, say, of a development deal where you're the mezz debt or the preferred equity. You're putting just as much effort in, but you're making a $10 million investment instead of making an $80 million investment. So you might be earning a pretty good return, but you spent a lot of time underwriting and thinking about that deal and distracting your team for maybe buying an asset or buying a position that was larger. I also think you're on an assembly line now. Once you do that -- it's sort of like capitalized interest. Once you do it, you're going to be very pressed to find something, for God's sakes, to do preferred equity or mezz debt in because your earnings will be greatly impacted. I just that felt like a lower-quality way to earnings growth for us. And I'd rather just acquire the asset, and Mike will run the heck out of it, and kind of move forward. But we like -- I mean we're doing more JV development, where the developers, the expert, we're putting the capital in, we're sitting next to them. They're the market expert. So those have similarities to that, Nick. But at the end, we're very likely to end up with the asset. It's not really a financial transaction. It should end up being an asset acquisition. It's just being done in 2 steps.

Yes. As we start the recovery, how does new development and densification opportunities play into the strategy?

Yes. We have a number of terrific sites, particularly in California, where you have a lot of -- we own a lot of older, super well-located properties that are 3-story kind of garden-y product, but in areas that are terrific cities and very hard to build. And we've gotten -- I mean, the credit to the team, densification rights for -- I think it's a couple of thousand units. And we'll slowly do those deals. There was one we were going to start this year for a variety of reasons. We're going to delay it here in the Bay Area. But we have a good amount of that going on. There's a few in the East, but they're mostly in California. And again, it's a great thing because if it takes a little longer, that's okay, I've got apartments there already. I mean it's a covered land play. It's not like we own a parking lot or a vacant lot, and we're taking entitlement risk for no return. So we like those densification plays. And I bet you, our wholly owned development operation, we'll focus on densification, and the joint venture development stuff will be a little bit more of these nonowned. If someone's going out there seeking entitlements. We'll do that with someone who's the local expert and not take on that risk on our own.

Mark, is there any opportunities to exchange assets? We've seen that over time versus some REITs where each is seeking some sort of level of portfolio diversification. It's really hard to get the values to line up. But is that potentially a way for you to portfolio reposition in finding a partner that may want a little bit of what you have, and they have a little bit of what you want?

Sure. Sure. I mean you're right. We've seen it. You saw EQR cooperate with the AvalonBay on the Archstone deal. I mean we're respectful competitors, but interest have to line up. And that's just, to your point, very uncommon that they want exactly what we don't want, and I want exactly what they don't want, as that would require a pretty unusual coincidence, it seems.

Right. And is there any portfolios out there that would accelerate this move from 6.5 to 10, or 6.5 to 15, and then you would liquidate to get down to 11 markets? I was trying to think about the likelihood of different things happening, which is, here, it's onesies and twosies, maybe some development deals, and over the next 3 to 5 years, we'll be there versus something more immediate.

I mean the Board and I, we just have to constantly balance that out. There aren't portfolios that I'm aware of that are the sort of magic bullet, Michael, that solve this problem instantaneously for us. And it's got to work with the 1031 structure, I mean, there's all of those complications. We're certainly open to that. I'd love to do a 3-step process in 1 step, but that's not -- it's hard to do, frankly.

How much of this diversification is defensive versus growth-oriented, right?

I'd say it's half and half. And all of this -- and you remember these conversations, we started to have in 2018 and 2019 with the Street. The pandemic has made everything more apparent, but it didn't change our capital allocation priorities. We wanted to be more spread out. 2020 was just about operating the business. There was nothing for sale. So what really happened was, '19, we made some progress; '20, we made, frankly, none. And then you get into '21, we hope to reaccelerate. So I think it's both defensive. And I think it will improve our growth perspective. Less risk, more return. We're looking, Michael, to drive consistent cash flow growth through the system. And I think we can do that, and having a few more markets would be a better way to accomplish that.

And then last one before rapid fire. Your involvement in any mixed-use projects with others, right? So you think about every retail landlord is talking about densification and adding residential. Are there more opportunities for you perhaps to be partners in that?

Sure. We're engaged in some conversations. Sometimes it's hard. Some of the grocers, for example, in a retail, like a strip center. They want to rebuild the grocery store with their parking. So they're giving us just a portion of it, which means we're going to go vertical. So that means construction costs are a lot higher. So it's just case by case. There are things. We've looked at a bunch of hotel deals that have been really interesting, but just in price right. So that -- I guess, we'd say we're open to that, and we're looking.

And last one before rapid fire. So one other. Is there a lot of time being spent on sort of repositioning certain assets in terms of the mix of apartment units. Given the layouts, is it -- are there opportunities to break down walls to create larger units to -- for those that do want to stay in an urban environment and, conversely, creating maybe some offices or things that will lead to a work from home, but not in your own home. Just now how far along you were in sort of pursuing some of those?

That's more conversations we have, where we're redoing common space. Knocking down -- you're often changing zoning. Knocking down a wall sounds easy, but walls are filled with things like pipes and electrical conduits. So there have been a lot of chat about that. It's been more -- of the long picnic table feeling where we were all next to each other working versus maybe smaller pods like we would have sat in, in college to study. I think we're going to see more of the latter in our comments basis for a while, even when the pandemic has gone.

Okay. When we're sitting physically together in Florida a year from today, what will be the one thing that will have surprised people the most about your business over the prior 12 months?

I think the strength of the apartment growth in the cities is going to surprise people.

And what do you think your corporate travel budget will be in 2022, as a rough percentage of what it was in 2019?

75%.

What will same-store NOI growth be for the multifamily sector overall in 2022?

We will continue our long and storied history of declining to answer that question because it really is what we think our number is.

No. You are -- you're only in 6.5 markets. We're asking you about the blend of everything.

And what will I know about Memphis anyways.

I don't know, yes, no one else in -- I guess, if someone who owns a home in Memphis. I'm not going to -- I've already run the clock. 10-year treasury, a year from today, today, it's at 1.55%.

2%.

Thank you. Thanks, Bob. Is that the one...

Yes. I woke up for that one, Michael. Yes.

All right. Thank you. Thank you all. Sorry, we got a little -- it's late started, but we still got 35 minutes out of it.

Yes. We appreciate the time of being included. Thank you.

Thank you.

Thank you. Bye.