Mid-America Apartment Communities, Inc. (MAA) Earnings Call Transcript & Summary

Very excited. This is our last panel of the day on the second day. I hope everyone had a really good conference. I'm really excited to be joined by MAA. With that, I'll pass it over to Al for introductions, and he can introduce his team here.

Thank you, Josh. We appreciate that. Thank you all for staying around the last meeting. As Josh mentioned, we're glad to be here. We always like to have to continue to tell the story of MAA. So we brought the full team today, Al Campbell, CFO. To my right, you have Brad Hill, who is our Chief Investment Officer. To his right, we have Andrew Schaeffer, who is our Head of our Capital Markets and Investor Relations. To my left, we have Clay Holder, who is the Chief Accounting Officer, also taking on responsibility for the company over the next couple of quarters. So we're glad to be here. We thought what we would do is start with a few comments upfront before I answer questions, talk maybe a little bit of who we are, our strategic focus for the people who don't know us as well, very briefly. The current environment that we're working in today, a big topic, I'm sure our theme of the conference. And then how we're positioned as a company really to execute through this environment. And so we're going to share that across this panel today. So I'll start with talking about really who we are, and our strategic focus for those who are new to the company, just briefly of Page 6 of the presentation that we -- that was on our website. I think you have [indiscernible] today is a good starting point, tells a little bit about us. I think the one thing that I would say it's a bit unique about MAA is really just our geographic footprint. It is a bit unique in the space, Sunbelt Southeast region only. You can see there that we have a portfolio that is very well diversified across the space. I think one key point is not only in a number of markets, as we're in about 35 markets across the space, but also very importantly, is locations within the market. We're in the urban areas, in our loop areas, in the suburban areas almost every market. We have very good coverage of the markets also in terms of product type and pricing point. And so I think that diversification is really key to understanding our story, who we are at the core about building a strong growing cash flow through the full cycle as a company. We also have grown significantly over the last several years. We have very high level of acquisition and development capabilities with a company that -- it allows us to continue adding high-quality product to our portfolio through the full cycle. Brad will talk about that in just a moment. Certainly, very proud of our balance sheet that Andrew will tell us about in just a moment that we've really worked hard over the last several years to do what we think is -- we believe is somewhat of a blue-chip balance sheet that really provides [indiscernible], but strong opportunity in the current environment we're at today. And so -- and then I think, finally, talk about just a track record. Now you can see on slide number, the very first one, at the very beginning, Slide 3, not to be lost before we get into the comments is just really the track record that we have as a company now. Now we have 25 -- more than 25 years of experience in this region, operating in strong markets, tough markets, but through the cycle. You can see that the consistency of our business, we're a very disciplined company and just have really shown that you can go well in this region and show the prospects. The dividend presentations volume just shows we have many years of continuing growth in earnings, cash flow, supporting that strong dividend that has never been [indiscernible] with people in the entire industry, certainly in multi-managed space has never cut our dividend. And so we're very proud of that as a company, and we're positioned better today than ever to make that more certain. So that's a little bit about who we are. Just touch on briefly the current environment before I turn it over to Brad. Page -- I think a good place to do that would be Page 14. Just quickly, one of the focus is currently the pricing trends that we're seeing in our portfolio today. I think we bank drunk to this system as we went into this year, we outlined [indiscernible] as part of guidance was based on blended pricing performance, which is new lease, new leases put it together, about 3% on average. And we expected this year to be a year coming off of a very strong performance the last couple of years, a more normalized period, that were normalized and certainly one you're hearing a lot in the conference, I'm sure this week. But certainly, that's what we expected. And we did -- we are seeing that as we entered the year. First half of the year was strong. We actually outperformed that with 3.8%, you see blended price through the second quarter. On average, you see on the middle of the page there. As we move into July and we're seeing in August, we did see the moderation in that again. I would say that it was a little bit sooner than we had expected in our expectations, but there are several reasons for that I wanted to outline. One is we made somewhat of a choice in that. If you look at the bottom of that page, I think we mentioned -- one of us, maybe I mean Tim Argo mentioned on the call, that we had at the second quarter that we -- in July, our occupancy was about 95.3%. And so we sort of made a choice as it -- given that we're moving into a more normal winter lease leasing this year, we haven't seen that in several years, we felt it was prudent to begin to protect occupancy to build occupancy to move into that. So we did that -- made that choice. We probably built -- in essence, we built about 40 basis points of occupancy there that did cost us something in pricing in July and August. I think also, not to be lost, as you look at last year and very strong performance we had for a couple of years. Last year, the very peak performance of the pricing was in July of last year. So a bit of that as you're looking at the toughest comp in the July period, maybe the early August period. And then finally, certainly, supply in our region has been high for several years, several quarters, continues to be so. And so we're seeing [indiscernible] impact on that a bit. But the good news behind all of that, I want to -- one message you hear probably, I hope you hear from everybody on the stage in some way today is set behind that, all this -- the supply and all the pictures that we're talking about, demand is strong. I mean no matter how you look at our business today, we're seeing prospects of demand being good, whether you're talking about the traffic levels in our portfolio, the leads that we're producing, the leads per exposed units we're producing. I mean, if you look at last year, we're a bit down from those levels. But if you look at a normal last year, that's a strong year, and we would point to 2018 and '19, just pre-COVID being a good picture of that, well, we're at or well above those factors [indiscernible]. And in fact, lead purchase units were up 30% and so -- from 2000 today versus 2018, '19. So we feel good about the demand levels we're seeing today. And that's one thing about our overall regional, and we have had historically good demand. We do -- we continue to have that today, and we continue to expect that into the future. And so I think that is the core of the business. Supply will come and go in our business. But the key factor is, are you positioned well with demand to work through it? I think the answer to that still is yes. And as we look into next year, we would expect the supply that's coming. I mean many pictures have been outlined this week, but our expectation is hard to put a finer point on it, but we'd expect the peak of the supply deliveries to be sometime mid on average next year, could be a little later, it could be a little earlier, but just on average, probably somewhere in the midyear. But there's a very strong case to be building that following that, you're going to see a meaningful decline in deliveries. The permitting today, may not show that and Brad will talk about that in a minute, but certainly, what we're seeing and feeling and expect there's a significant decline in that, which starts to build a pretty strong case for '25 and '26 to be outperformance years. And so I think that's -- there's one message you hear from us today, probably that's the message that I expect it to be. So with that, I hope that gives you a good feel for who we are in the current environment. I'll turn it over now to Brad to talk about the opportunities we have.

Yes. All right. Thanks, Al. Yes, one thing I wanted to just reiterate that Al talked about is really just the demand and really what our strategy is for some of you who have been familiar with our story, you really know that our strategy is built on really the thesis of going where the demand is. And and really building a portfolio that is maximizing our exposure to high-demand markets and areas, and that's really what we have. If you take a look at Slide 8, and you look kind of more broadly at really the demand drivers, whether it's population growth, household formation, job growth, all of those in our region of the country are extremely strong. And we feel really good about those long-term. Kind of supplementing that are the migration trends. It's certainly a trend that was occurring before COVID. We saw people moving into our region of the country before COVID started. The migration trends ticked up a bit during COVID. And then today, still 13% of our leases are coming from outside of our region. So the migration trends continue to be pretty strong. We really have not seen folks reverting back to where they came from. About 4% to 5% of our folks that are leaving us are going outside of our region, but that's pretty consistent with what we saw before COVID. So again, that's just a little bit about our portfolio. We want to be located where the demand drivers are. Slide 9 just indicates some of the big job announcements that have been announced for our region of the country, just indicative of the types of jobs that are coming. These are jobs and facilities that are being built that will drive job growth for a number of years. So some of this -- we're on the early stages of some of this job growth coming to our region of the country. So in terms of external growth, really, we have a couple of different avenues that we're focused on for external growth, and that's through development predominantly in acquisitions. If you take a look at Slide 18, gives a little bit of an indication of where we are as a company. We have about $730 million under construction right now. You compare that with where we ended 2021 at about $420-or-so million. So significant growth has occurred over the last couple of years. We think there's an opportunity for us to continue to grow that platform to about $1 billion, $1.2 billion in terms of size of the platform. That will be about a $400 million to $500 million annual spend number. Our team has made great progress in that. Today, we own and control 12 sites for future development. About 3,400 units are in that pipeline. The great thing about that is we control when we start those, so we can slow that process down if we need to, we could speed it up if we need to. So we're very patient in that, and we have a lot of optionality about when we start that program. Additionally, we are looking to deploy capital through acquisitions. It's been slow the last couple of years for sure. We're still waiting for the transaction market to pick up a bit. We're starting to see early signs of that process starting. The number of projects that are coming to market starting in the third quarter has increased. And as we've been saying for a few quarters now, we -- as that volume picks up, we do expect cap rates to come up as the capital is spread out a little bit more, and I think we're starting to get to that point. So here, the back half of this year, we do expect that we'll be a little bit more active in that area than we have been historically. Our goal on an annual basis is about $400 million or so of acquisitions, and you pair that with where we are on the development side. So we have a significant amount of external growth that we're really focused on, on a long-term basis. So with that, I'll turn it over to Andrew to give you a little bit of information about how we look to fund that.

Thanks, Brad. The balance sheet continues to be in great shape with sector-leading metrics and A minus rated. Right now, we have 100% fixed rate and thus have full availability on our commercial paper program in line of credit. We also had $150 million in cash, that's of 6/30. On our metrics, debt to gross assets was 27.5% versus a sector of 30%. Net debt to EBITDA is 3.41x versus a sector of 4.73%. So frankly, we're underlevered right now. It is where we want to be in a cycle to support Brad and all this acquisition development opportunities. The weighted average maturity of our debt is 7.5 years with an average interest rate of 3.4%, and we have very manageable maturities over the next few years.

Yes. I appreciate those opening remarks, guys. Maybe just going back to something you said early on, Al, about just how you thought the occupancy was a little bit weaker, so you started pulling back on rate. Just like what got -- like what was not -- I guess before August, just thinking about the occupancy levels, like what wasn't -- did you just weren't getting the traffic? Because I'm just trying to tie that comment about the occupancy being below expectations versus like demand is really good.

I think it goes back to what you've heard us talk about over the last several quarters, probably the last couple of years really is that we have really focused on pushing price through this strength in the cycle and have been effective to that and really haven't -- in the last couple of years, really haven't had to do with a normal seasonal environment that we typically have. Typically, you have -- your first quarter and your fourth quarters are more seasonally challenged than your second and third ones where you have stronger pricing growth, particularly in new lease pricing. Your renewals tend to be stable through the year, but new lease is the most competitive point. So I think we continue that through the first half of this year. I think what we saw in the -- as we get into July and August was that I guess the combination of all those things we talked about earlier, was, one, the prior year comps began to be a challenge. The combination of accumulation and supply. Just -- we began to see the typical moderation begin that we've seen in the past. And so we had continued to focus on price. Our occupancy got down about 95.3%, still not a bad place to be. But I think as we -- we're comfortable with being in that 95% range. We thought we'd continue to keep the foot on the gas for pricing, but feeling that we're approaching a leasing season, it's more normal with more challenging. In the winter, we chose to build occupancy up to that 96% range. And I think you'll see us somewhat protect that as we move through the back part of the year and as we look into early next year.

Okay. And then just thinking about like what's built into guide from [indiscernible] out, what was assumed as far as new lease rate growth?

We had -- for the full year, we wanted [indiscernible] about 3% on average. We outperformed that in the first half. So I think -- and we still believe that's the right level for the full year at this point. So I think that would put the second half a little bit below 3%, call it, 2.5% range, something like that, 2% and 2.5% range. But I think in terms of overall revenue, what you're seeing is that we're giving up a little bit of price and have some expectation that we're gaining in that occupancy that we've built. And so in terms of our revenue position and our earnings position, we're in really good shape in the back half of what our expectations were.

Sorry, was that on blended or new?

That was blended. Did you say new?

Yes. I just want to -- yes, what's the expectation on the new?

I think from the expectation in front of the 2 components is we would expect renewals to be pretty stable in the 4.5% to 5.5% band for the back half of the year and the new lease be the most competitive point, call it, 1.5% maybe from 0 to negative 2% down as the most competitive point for the remainder of the year. That's our expectation at this point.

Okay. Any questions from the field on the operating update? Maybe just congrats on your announced retirement, Al. Just curious, just what drove the decision? And how do you feel like the transition is going to go? Like any -- are you going to stay on -- I think it's through year-end?

Staying on the CFO through March 31, and then I'll be around through the end of the year and capacity -- just to support the capacity. And so I think the story there is, I mean, first of all, I appreciate that. I'm very excited about my future, just personal things that I want to pursue. But I'm very excited about the company. I mean, I think, hopefully, you see today, we've got tremendous talent. We have -- over the last few years, really built a lot of talent. So Clay is going to be taking on that role at the end of March. He is well prepared for his background and preparation from what he's been doing the last couple of years preparing well. So I think we feel very, very blessed to have that as a company, that deep bench.

Awesome. And congrats, Clay, I guess, when you think about your new role as CFO going forward, just like what are the new responsibilities for -- like that you hadn't been working on before as you take on that position?

Yes, sure. I mean primarily, It's working with Andrew and his team and getting more involved in the capital markets, also working with our tax team and working with those guys is from a dividend planning standpoint, those sorts of things. But two, I think it's even more than that. It's just helping kind of set that strategic vision for the company and continue to execute, do the things that we've been doing all along. And you're not going to see us change our momentum or how we're addressing these things. It's going to be just rolling right along where we've been.

Okay. And then Al, maybe -- sorry, one more question on just like the operating update. Was there a wide variance across markets as far as like how the quarter has been trending? Just kind of curious where these many things have been doing better and where things a little bit worse? And if there's any thoughts on like what's driving and if it's supply or something else?

Yes. I'll give -- on Slide 12, there's a good picture of that, and I'll [indiscernible] with that investment so it shows by market there. And really, the point of that slide is to show that diversification of our portfolio that we talked about has been a really important part of our strategy. And it does mitigate the supply and helps our ability to work through that as it comes. We're going to -- we're certainly going to feel that supply like you know us, but this really helps us. You can see there, it shows the number of markets that -- in markets -- some markets that we're in, in each market, the number -- the percentage of exposure that we have on the supply coming in. But I think also the third really important part is the price capital on that third column there shows that the amount of price that the new product that's coming in is above our average in that market. And so the point of all that to show that is just because the overall market has a high level of supply, you've got to get able to understand the submarket dynamics, understand your competitive position, and then the outcome of all that is the far right column, the pricing growth. So -- and I think that we should be making one of the most challenged markets, and today, probably see they're Atlanta, Austin and Nashville pop out really for different reasons. And Atlanta is a market where we've had late last year or this year, we had some storms. It took some units offline. We repaid those units put them back on early this year, took 100 units more had a fire early in the year as well. And so that as we took those units back on at one time that caused a little bit of an occupancy issue in for -- not significant, but ones we need to work through. And then one of the things at Atlanta as a market you probably heard is there's a little bit of a fraud issue in some of the markets in Atlanta. So that's something that had in the first half of year. We really changed our procedures to help us also some move in occupancy in the first, maybe in second quarter, but really allowed us to get the right residents in there so that when they got it, we knew we were comfortable with that their quality residents and they could pay the rents. So we've come beyond that. I mean, we think the future in those markets will be better than it is -- causes some performance right now. I think Austin is just more a pure supply issue, and that is where it's a great demand market, but it's got -- as overall portfolio is pointing at 4%, 4.5% supply to the stock. This 8% in Austin, and so just a significant level of supply there. And so that's really a pure story there. Though we're in a good competitive position here, I mean the new product coming in is $600, $660 higher than our product. It's just the absolute volume, which is causing some of that. And then -- and so those are the main ones, I think are going out. The one that's not on that chart is Phoenix, which is -- it's a bit challenged. I think Phoenix has been a great market for many quarters and probably not only the start because of the size in our portfolio, but it's probably feeling a little bit of price fatigue just because it's been so good for so long and has got some support. So those are the ones that I think -- and for me overpinned strong performance. Brad, do you want to talk about...

Yes. I was just going to indicate on the strong performer markets, the Carolina is -- really throughout the Carolina is doing better than our portfolio average on -- just generally, there are -- there is some supply, especially if you look at Charlotte, but the demand is really exceeding the supply in that market. And then you look at a market like Orlando, there is a little bit of supply there, but just that's -- that and Austin are probably the 2 markets with the strongest demand across our portfolio, so they could -- Orlando continues to perform better than our portfolio average as well.

So if the price gap, is that after concessions from like the new supply?

Yes. Net effect, yes, so we were a net pricing shop, so that's after [indiscernible].

Okay. Like if they start increasing concessions, like how many more weeks would kind of maybe equalize it or make it comparable?

Yes. I mean if you think 2 months is 16% or so and our average rent is $1,600, so you start to get into -- you need about 3 months. The average gap here is $352 at the top of that. So you need to be getting to 2.5, 3 months to start equalizing the 2 before it makes sense to -- from a pricing perspective. But what you have to take into account there is certainly the friction of moving. Because you think of the dynamics of how these properties are concessed. The concessions are upfront concessions. So if they concess $352 on effective basis, and give 2 to 3 months free rent, the rent is going to be $352 higher at the month they start paying, which means when they get to the end of that lease, they're going to renew off of that rate. So the renter has to be convinced that they're going to be willing to move again in a year if they make that move. So there's just a -- there's a lot of friction that we believe, and we see with our residents in terms of relocating that really causes us to -- and the differential between us and new supply needs to be material before folks are willing to relocate. And we find that. You look at our renewal stats. The rates -- both the rates we're getting, as Al mentioned earlier, and then the retention that we have right now is at record highs. Folks are wanting to stay where they are at the moment. And certainly, the single-family housing market is a little bit of a tailwind for us there and help support residents wanting to stay with us a little bit longer.

Okay. And then I guess trying to think about like the cadence like more supply is coming, like do you think the concessions can build to that level? Or...

We're certainly not seeing it right now. Where we see supply more acutely is through our lease-up deals, and we're just not seeing that. Really across the board, the most we see in markets right now, call it, 6 weeks, but we're not seeing it broadly. We generally underwrite in our new developments about a month free, and we haven't had to use that. We're still not using that right now. We have a project in Austin that's in lease-up right now. Windmill Hill has 2 competing projects just within a mile or so from the property. And selectively, we're using concessions on select units that maybe aren't in the right location of the building, but we're not having to use them broadly to compete. Really, we want to use price as the last point of competition with our competitors, and we really want our folks to focus on the product, to focus on the selling of the asset before they're focused on price.

Okay. Any questions from the field?

Yes. Question about [indiscernible] yes, supply is coming to your markets here. It's going to be in the order and that's going to -- just the price to be able to get management. Is that correct? First of all[indiscernible]. Second of all, do you have any sense of where this supply is coming? Your peer group and some other provider [indiscernible] it's some other type. What do you see or have any insight into how potential [indiscernible], say, for transitioning [indiscernible] given the change in base rates [indiscernible].

You can jump in on that, yes.

Yes. Our strategy in the acquisition space for the last few years has really been focused on properties that are in lease-up, late in the lease-up, which is targeting exactly what you're talking about. Normally, the maximum pressure that our property faces is when it gets to 70% or 80% occupancy when the back door opens up, and it's really more difficult to get the property stabilized. That's where the maximum pressure builds. And I think in an environment where interest rates went from what a developer underwrote at 3% to now 7%, 8% that math begins to be a little bit more difficult for those. And that's really what we've targeted in terms of our acquisitions plan. And in terms of really what is driving the development in our market, it's merchant developers. And if you think about what their business model is built on, it's develop, lease it up and sell it because their capital, at some time, has to be refinanced. They have a construction loan that they've got to get out of. And so if you look back to the construction that's taken place in our region since 2020, 2021, supply has definitely been higher. The last year transaction market has been shut down. And that's part of our -- the reasoning why we've been saying the transaction market is going to open up, cap rates are going to have to move up because the merchant developers have to trade at some point. And as we get later into this year and into next year, we continue to believe that, that pressure builds. You throw into that the stress that you have in the banking sector right now, these assets need to trade at some point. I think there's enough capital out there to really complete the transactions on this side. You mentioned that the properties are kind of the left. I think that transactions get completed on these. There's not distress in the market. I mean the operating fundamentals are strong enough to where there's still cash flowing. And then I think if you look back to construction costs when they started, even though folks aren't going to get a home run on the deal, they may get a single out of it. There's still profit margin built into these even at lower cap rates. The truth is, as part of our joint venture development platform where we partner with developers, and we develop assets with them with a clear path for us to own it 100%, generally, what we underwrote in 2020 and 2021 was a 5.25% cap rate. And so we're just kind of getting back to really what the expectations were at the time these deals were started. So I think transactions will continue to build from this point. We're starting to see more brokers, BOVs come out, projects hitting the market. So I think as you get to the back half of this year and you get to the first half of next year, the transaction market continues to pick up from here.

[indiscernible], is that correct?

It would absolutely be beneficial to us.

Are those [indiscernible]?

I think our guidance is built on the -- if you're talking about acquisition volume and you're talking about built on what we've got in there now. So you can see what we've got for external growth. If those opportunities [indiscernible], it will be adaptive. I think in terms of the point of the slide, it really was just to say that though supply is high, and it will be for several quarters that our specific portfolio, the diversification, it doesn't totally eliminate that risk, but it certainly helps mitigate that some. It puts us in a pretty competitive position in terms of operating, working through that supply. And then so the opportunities come from -- on the access side of the business that just comes from this disruption as other people have pressure, no more such pressure and Brad can take opportunities on that. But what we -- our earnings guidance is based on what you're seeing in our release now. And so if we -- and hope we do have more opportunities, it will upside on that.

Any other questions from the field? Maybe just, Brad, since you are the CIO, just thinking about the balance sheet, Al left very low leverage in place for Clay to take over with, when I met with you guys a few weeks ago talking about using that as a potential asset. Like how do you feel like the opportunity set is out there? And just also like where do you -- what do you think the best opportunities are going to come? Is it going to be redevelopments? Is it going to be developments, external growth?

I mean I think it's going to be really all of the above. Those are redevelopment, certainly in repositioning some of our products or projects are the best use of our capital. So first and foremost, we'll continue to work through that angle. And then from there, I think it is development and acquisitions and at different points in the cycle, we will lean into those 2 methods at different degrees. The great thing about our development pipeline, as I was mentioning earlier, is we have flexibility of when we start those. There's nothing that says that we have to start those projects by a specific point in time. Generally, our entitlements are there for a long period of time. So it's not like those are burning off anytime soon. And I think as we get into a market where cap rates are increasing, certainly, the acquisitions become more compelling. And so we'll lean into acquisitions when it makes sense to do that. What we want to do on our development is to continue to be -- and on acquisitions to be disciplined in how we underwrite things to be realistic with what the returns are given where cost of capital is. And if you look back over the years, we have been quiet in the acquisition arena because we felt like cap rates were too aggressive. And now that we're starting to see those move up a bit more, we think it's time to start finding opportunities to put our balance sheet at work. And on the development side, the same thing. If we find opportunities that the returns make sense, we think it makes sense to start those as well, especially in the backdrop that Al talked about a little bit earlier, where we believe that the supply pipeline, delivery pipeline as you get into late '25 and 2026 is materially lower than what it is now. I know if you look at certainly the permit data and the starts data, it's a little bit confusing because it's hard to see where those numbers are coming from, given the developers we're talking to indicate their pipelines are off 50%, 60%, 70% this year. We believe you get late into '25 and '26, the delivery pipeline looks considerably lower than it does today, and the operating fundamentals looks really good at that point, which lines up really well with anything that we're able to start on the development side.

So one of the questions I've been getting a lot from investors is on the operating expense side. Could we go through kind of like the pain points that -- pain points or maybe better than expected kind of about line items in there. Insurance is probably the first one. Just kind of any early indication of what might be happening for your renewal next year? Just any color would be great.

Yes. I mean our insurance is a rather small part of our same-store operating expense is roughly 5%. We renewed on July 1 of this year, and we'll have a 20% growth over last year's renewal. And so that will be something we'll manage through. But again, we've got such a small part of our overall expense structure that we should be able to handle that just fine. As we look forward to next year, I mean, insurers are still probably going to be looking to try to recoup some of the losses that they've had over the past several years. And so that could continue to be a challenge for us. But again, that's such a small part of our overall expense structure that we believe that we'll be able to manage through that. When you look at the rest of our operating expenses, you got personnel, parent maintenance and real estate taxes, that makes up a much larger share of our expense structure. So that's roughly 75% of it. Personnel and repair and maintenance, we expect that to moderate from where it's sitting today, and it's been moderating over the first half of the year, and we expect that to continue over the latter half of the year. And we expect also that to, going into next year as well, we'll have more to say about that in the coming months. Real estate taxes, on the other hand, something that we're still monitoring very closely. The taxes legislation should give us some relief there. And so we're looking at -- continue to look into that. But then as you see cap rates move up and some of our properties out there kind of stable off from a revenue growth standpoint, we expect those property valuations to slow down, and that will benefit us from the real estate tax standpoint as well.

Okay. Any last questions? If not, I have 3 rapid fire questions that I've been asking all the management teams. The first one is, it's a 2-parter. Do you believe the Fed has done hiking, yes or no? And do you expect the Fed to cut rates in 2024, yes or no?

Not done hiking. And likely shortly '24.

Do you believe real estate transactions will meaningfully pick up by; a, the fourth quarter of 2023; b, the first half of 2024; or c, the second half of 2024?

Well, without defining meaningful, I'm going to say, first quarter of next year.

Are you using AI today to help you run your business, yes or no? And do you plan to ramp up spending on AI initiatives over the next year, yes or no?

Certainly use it today in certain areas, particularly in our marketing solutions and areas of the business and lead traffic generation, and I'm sure it will grow in the future.

Awesome. Well, thank you, guys, and congrats again.

Thank you.

Thank you. Appreciate it.