Equity Residential (NYSE:EQR) Q4 2019 Earnings Conference Call January 29, 2020 11:00 AM ET

Company Participants

Marty McKenna - Investor Relations
Mark Parrell - President & Chief Executive Officer
Michael Manelis - Chief Operating Officer
Bob Garechana - Chief Financial Officer

Conference Call Participants

Jeff Spector - Bank of America
Nick Joseph - Citigroup
Nick Yulico - Scotiabank
John Pawlowski - Green Street Advisors
Steve Sakwa - Evercore ISI
Richard Hill - Morgan Stanley
Hardik Goel - Zelman & Associates
Haendel St. Juste - Mizuho
Alexander Goldfarb - Piper Sandler
Rob Stevenson - Janney
John Guinee - Stifel

Operator

Good day and welcome to the Equity Residential 4Q 2019 Earnings Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Marty McKenna. Please go ahead.

Marty McKenna

Good morning and thanks for joining us to discuss Equity Residential's fourth quarter and full year 2019 results and outlook for 2020. Our featured speakers today are Mark Parrell, our President and CEO; Michael Manelis, our Chief Operating Officer; and Bob Garechana, our Chief Financial Officer.

Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.

Now, I will turn the call over to Mark Parrell.

Mark Parrell

Thank you, Marty. Good morning and thank you for joining us today. I'm going to start by giving a quick overview of our business and investment activities. And then I will turn the call over to Michael Manelis, our Chief Operating Officer for a discussion of our 2019 operating results, and 2020 revenue guidance, as well as giving you some detail on the exciting operational initiatives that we are pursuing. Then we'll pass the call over to Bob Garechana, our Chief Financial Officer who will give you color on 2020 expense and normalized funds from operations guidance and a bit about our balance sheet activities.

2019 was a very good year for Equity Residential. We saw continued strong demand delivering our well-located urban and dense suburban properties in the nine metros in which we do business. And our excellent customer service led to record levels of customer satisfaction and resident retention. A big thank you to all my colleagues at Equity Residential for delighting our customers every day and for working together as one team.

As we predicted the fourth quarter 2019 reverted to the normal lower seasonal demand that is common at the end of each year. Slightly weaker conditions than projected led us to slightly underperform on same-store revenue versus our October guidance, but still perform at the top end of our expectations from the beginning of 2019. And we saw our normalized funds from operations increase in 2019 by an impressive 7.4% exceeding our expectations as we continue to produce strong reliable growth.

2020 looks to us to be more of the same, a slow but consistently growing economy and continuing positive demographics leading to good demand and to steady revenue growth albeit at a somewhat lower overall level than in 2019.

We expect the East Coast markets to continue to improve on a relative basis and overall, we expect the average revenue performance difference between the East Coast and West Coast markets to be only about 25 basis points in 2020.

Except for New York, we see supply is similar to or slightly higher in our markets in 2020 versus 2019. In New York, supply across the area in which we operate has been declining in the last two years and we would expect it to fall by a further 40% in 2020.

In fact in Manhattan, where we have 70% of our New York metro revenue, we see fewer than 1,000 market rate units being delivered in 2020. Also as we discussed on prior calls, we will be facing a headwind of 20 basis points or so from new rent control regulations in California and in New York.

On the innovation front, we're very excited about the benefits to revenue and expense as well as the customer satisfaction that can be gained from the continued rollout of the various initiatives that Michael will discuss. These benefits will be modest in 2020 but we believe will accelerate and compound over time.

Switching to investments, we had a busy 2019. As we have stated previously, increased demand for our apartment assets has led to cap rate compression between newer and older properties. This led us in turn to accelerate the sale of some of our older lower return properties and to reinvest that capital in newer properties that we think will provide considerably better long-term returns.

We were particularly successful at doing this in 2019. We have reallocated $1.1 billion of capital from assets that were on average 35 years old to assets that were on average two years old and incurred no cap rate dilution in doing so.

We think owning these newer higher growth assets will benefit our NFFO growth and because we expect much lower capital spending at these newer assets the level of our capitalized expenditures which is already much lower as a percentage of revenues compared to most of our peers should be lower and our unlevered IRRs higher going forward.

The fourth quarter was a microcosm of this as we sold two older suburban Washington D.C. assets that averaged 41 years old for total proceeds of $374 million at a 4.8% cap rate and acquired $370 million in newer assets one in Central Seattle one in suburban Seattle and one in suburban Washington D.C. that were on average one-year-old at a 4.8% cap rate.

We also acquired more than we sold in 2019 and have guided for the same outcome in 2020. While cap rates and IRRs are certainly lower than historical averages so is our cost of capital. The spread between the unlevered IRR we can achieve on new deals we see for sale versus our weighted average cost of capital is relatively high.

We intend to finance this increase in our assets with a combination of new debt and net cash flow. Our strong balance sheet gives us ample capacity to do so, but as always, we'll be prudent in managing our balance sheet.

Switching to new development, the equity capital availability story since early 2019 has somewhat improved for large established developers while smaller, local, and regional developers continue to work hard to put their equity capital stacks together.

We have been pursuing a few of these opportunities with smaller developers as joint ventures. And believe that investing our capital in shovel-ready deals with sound deal structures that provide some protection to our capital is a good way to source new properties while managing the risk inherent in development.

You should expect us to announce new joint venture development activity in 2020, as well as new wholly owned development deals including some lucrative density plays, where we are taking down a low density portion of an existing property and replacing it with higher density housing.

We expect 2020 development starts of $500 million, $650 million, depending on construction timing and development spending in 2020 of about $300 million. We continue to believe that development makes sense in selective locations in our markets where acquiring new properties is difficult and where our existing properties trade materially over replacement cost.

We have no imperative to start a certain amount of development per year. And we will always compare development opportunities to the market to acquire existing assets. And look for the best risk-adjusted return opportunity for our capital.

We will also seek to keep the amount of capital we expect to spend on development in any one year, roughly equal to our annual net cash flow and expected new debt capacity.

Finally, let me finish by talking about our dividend. We believe one good way to use our growing cash flow to reward our shareholders. In 2020, we plan to increase our common share dividend by 6.2%.

Now I'll hand the call over to Michael Manelis.

Michael Manelis

Thanks Mark. So today I'm going to provide a quick recap of 2019 performance, share insights into our 2020 same-store revenue guidance, discuss what we are seeing today across our markets. And end with updates on our current operating initiative.

Let me start by acknowledging the dedication and hard work of our employees in 2019. For the full year, we reported 3.2% same-store revenue growth. Highlights for the year include 96.4% occupancy, which was 20 basis points higher than 2018.

Every market except for San Francisco was able to grow occupancy, on a year-over-year basis. Strong achieved renewal rate increases of 4.9% for the year, which was the same as 2018.

Turnover declined by nearly 200 basis points to 49.5% for the year, which is the lowest full year reported turnover in the history of our company. Strong absorption of elevated supply in many of our markets delivered slightly more pricing power than we originally expected at the beginning of 2019 and resulted in 0.3% new lease change for the year, which was a 50 basis point improvement from 2018.

And finally, in addition to the areas just mentioned, the company continued its trend of record-breaking customer satisfaction and online reputation scores. This strong positive feedback from our customer and the progress being made on innovation, we shared in the release, demonstrates that we have some of the best employees in the industry, who are passionate about meeting the ever-changing needs of our prospects and residents.

Looking back, it is clear that the fourth quarter of 2019 reflected a return to seasonal softness, which in some markets was greater than expected. And this was very different than the upward acceleration felt in the fourth quarter of 2018.

The good news is that the portfolio demonstrated resilience. And we are starting 2020, well positioned to achieve our revenue expectation. Moving into 2020, our same-store revenue growth guidance range is between 2.3% and 3.3%. At the midpoint of 2.8%, we are 40 basis points lower than our 2019 actual results.

This guidance assumes a similar occupancy of 96.4%, an improvement in new lease change of 30 basis points to a positive 0.6% for the year. And anticipated renewal rates achieved of 4.7%, which is 20 basis points less than 2019. Recall that these renewal rates will be impacted by recent rent regulations that we have discussed on prior calls.

In 2020 supply will be down considerably in New York, up in Boston and L.A. and mostly comparable in our other market, year-over-year. We expect consistent demand that should aid in the absorption of this new supply.

By market, New York, D.C. and Seattle are expected to deliver better revenue growth this year, while Boston, San Francisco and Southern California markets will be worse. So let me take a minute to reconcile the 40 basis point decline at the midpoint and the expected same-store revenue growth for 2020.

As stated in our last call, rent control in both the California and New York markets is expected to negatively impact our overall same-store revenue results, by approximately 20 basis points this year.

The remaining 20 basis points comes mostly from the incremental impact from competitive supply in our market and a view that it will be difficult in 2020 to replicate the occupancy gains we had in 2019, given the current high occupancy of the portfolio.

Attaining the upper end of our guidance range of 3.3% will be mostly dependent on rate, meaning that in order to achieve this outcome we will need to have strong pricing power on new leases early in the year and through the peak leasing season.

The bottom end of our revenue guidance range of 2.3% would likely result from declines in occupancy, due to softening in overall demand. Sitting here today the portfolio is 96.3% occupied the same as what it was at this time last year.

Achieved renewal increases for January and February are expected to be around 4.2%.

So now, let's move on to the individual markets beginning with Boston. So Boston continues to be a power center of the knowledge economy. Overall demand drivers are strong and the long-term outlook for this market remains positive. Our 2019 results of 4.0% revenue growth, includes gains in occupancy of 30 basis points, and strong growth from other income, mainly parking that will be difficult to repeat this year.

Boston is expected to deliver more units as we are tracking close to 6,000 new units in 2020 compared to 1,700 in 2019. These new units will be concentrated in the CBD and Seaport and are likely to have more of a direct impact on our portfolio performance. Our expectations for the market is about 3% revenue growth, and assume occupancy remains flat at 96.2%. We anticipate less growth from renewals and new leases given the increased levels of competitive new supply. And we expect the first half of the year performance to be stronger than the second half given the strong embedded growth that we have entering the year.

New York had a busy year-end with plenty of press surrounding growing tech expansion in the market and significant office leasing. This activity is fueling continued diversification of the local economy, which we view as a long-term positive. As 2019 progressed, operating fundamentals continued to improve in this market. We finished the fourth quarter with seasonal softness that resulted in a concessionary environment that was greater than we expected. However, during the month of January, operating fundamentals have improved each consecutive week, reducing concession use and improving occupants.

For 2020, we are forecasting better revenue growth, which should be a little north of 2.5%. Our guidance assumes slight improvements in occupancy and renewal rates achieved, but the majority of growth is expected to come from gains in new leases as pricing power returns to the market given the almost complete lack of new supply that Mark mentioned earlier.

Overall, demand for our product remained strong with foot traffic or tours in January being up year-over-year. The portfolio is 96.7% occupied today, and we are well positioned to seize improving market condition.

Washington D.C. continued to demonstrate strength in operating performance despite the 12,000 plus deliveries that we have become accustomed to in this market. Last year, at this time, we were discussing the longest government shutdown on record. But today both Congress and the President have signed a spending bill, which includes over $50 billion in new spending. This budget clarity and increased spending is expected to positively impact the region and continue to aid the absorption of 12,000 plus additional units expected in 2020.

Northern Virginia continues to be the economic driver for the region, having captured seven out of every 10 jobs created in the last 12 months in the area. Our portfolio results in D.C. validate this as same-store revenue growth in the district, which was near 1% while the Northern Virginia submarkets with approximately 50% of our revenue averaged above 3% growth in the year.

Overall, the market delivered 2.3% revenue growth in 2019. Our forecast for 2020 is a little better than 2.5% revenue growth with improved results mostly driven by stronger embedded growth starting the year as operating assumptions for occupancy, new lease change and achieved renewal increases are expected to be relatively flat year-over-year.

Moving over to the West Coast. Seattle finished 2019 strong with 3.4% full year revenue growth driven by 70 basis point gain in occupancy and consistent improvement in pricing power and revenue results throughout the year. We did experience concentrated supply pressure on the east side that we expect to continue into the first half of this year.

Supply in the CBD, which was not particularly impactful in 2019 will return in 2020 during the back half of the year. This provides an opportunity to establish rate growth early in the year and through the peak leasing season. It's also possible that some of these units get pushed into 2021. If this were to happen, it could strengthen our anticipated results this year.

Overall, we expect 2020 to deliver better revenue growth of around 4% and with similar occupancy, slight improvements to achieved renewal rates, and the majority of growth coming from gains in new leases as we capitalize on the current and near-term pricing power in the portfolio.

San Francisco delivered 3.7% revenue growth in 2019, which was driven by gains made early in the year offset by declining occupancy in the second half of the year that resulted in a full year occupancy of 95.9%. As we discussed on the last call, we saw a deceleration in this market as the year progressed and that trend continued through the fourth quarter.

The East Bay with approximately 40% of our 2019 new supply and approximately 20% of our San Francisco revenue was our lowest performing submarket in both the quarter and full year with revenue growth below 2%. All of our other submarkets produced growth above 3% for both the quarter and full year.

New supply in 2020 will be relatively flat year-over-year with the concentration of competitive supply impacting the downtown San Francisco SoMa and South Bay submarkets the most. Overall, we expect 2020 to have lower revenue growth of around 3% as we continue to work through the impact of supply and the impact of new rent regulation. Our guidance begins with around 50 basis points of lower embedded growth than last year; occupancy at 96.4%, which is a 50 basis point improvement over 2019; similar new lease change; and a decline in achieved renewal increase.

As we sit here today, leasing velocity in San Francisco is good. Rates are growing, foot traffic is up and occupancy has recovered to 96.4%, which is the same place we were at last year at this time. This market has the critical mass of tech talent. And while we expect some softness when supply is concentrated around us, the long-term drivers for this market remain very strong.

Los Angeles finished the year with 3.7% revenue growth, which was driven by strong performance in the first half of the year. As noted on our prior call, deceleration occurred in the second half of the year as deliveries came online and put pricing pressure on a number of our core submarkets.

For 2020, we expect Los Angeles to be our most challenged market as we continue to deal with the elevated new supply, implementations of new rent regulation and restrictions on short-term lease pricing put in place as a result of the wildfires. We expect to deliver lower same-store revenue growth in 2020 of around 2.5% with slightly lower occupancy, modest gains in new lease change that are back half-loaded and a decline in achieved renewal rate growth.

As we sit here today, we are 96.2% occupied in L.A. And while our foot traffic is on par with last year, we feel pricing pressure. One of the bright spots continues to be West L.A., which is home to the changing dynamics of Los Angeles as Silicon Beach flourishes and online media content takes hold in the entertainment sector, leading to good absorption of the new product in this submarket.

Our other Southern California markets, both Orange County and San Diego, are expected to deliver strong but lower same-store revenue growth in 2020, averaging around 3% with similar occupancy, slight gains in new lease change that are back half-loaded given the anticipated pricing pressure early in the year and a decline in overall renewal rate growth based on the impact of new rent regulation.

In both Irvine and Downtown San Diego, we expect to feel the impacts from new supply delivered in areas that will be very competitive to our community. With both markets sitting at 97% occupancy, we are well positioned heading into a competitive environment.

Moving on to operating initiatives, as you know, we have long been focused on running a best-in-class operating platform, which included development of some of the original, pricing, renewal and online leasing tool widely used in the business today.

As our industry undergoes another phase of significant change, we continue to identify opportunities to utilize new technology that will shape how we interact with our customers and manage our day-to-day operations going forward. Our focus is to harvest technology that best serves our customers, provides enhanced career opportunities for our employees and creates efficiencies in our platform.

We are currently in the process of executing a number of initiatives that fall into three primary areas: smart home technology, sales-focused improvements, and service enhancement. And while there are many opportunities in the industry to roll out new system, we are taking a methodical approach to implement only the tools and processes that we believe will create the best long-term benefit and value in our portfolio.

So let's review some of the initiatives in these three areas. So, first smart home technology. We have already installed over 2,100 units, and thus far have had success in generating a rent premium of $30 per month on these units. During 2020, we plan to install smart home technology in an additional 10,000 apartment units at an average cost of approximately $1,000 per unit.

We are focusing on properties where we think this technology will yield the greatest immediate result. This technology includes smart lock, a thermostat, a light switch, water leak sensors, and a hub that connects it all.

Moving to sales, our focus continues to be on improving the customer experience by leveraging technology, automation and centralization to meet their ever changing needs. We currently have deployed Ella, our AI-enabled sales tool to over 200 communities and we will be fully deployed by the end of March.

We have over 60 communities offering self-guided tours and have been receiving very positive feedback from both our customers and our employees on this new process. During 2020, we will continue to roll out the self-guided tour option for the majority of our communities, and we will be deploying a new mobile customer relationship management platform to improve efficiencies in the sales process and provide flexibility to our sales team.

Finally on the service side of the business, we are now fully deployed on our new mobile service platform, which means our service teams now use a mobile app to manage all of their work in real time. This allows us to use shared resources across assets and improve service personnel utilization by having specialists become focused on being subject matter experts.

This will deliver operating expense savings through less dependence on overtime and contractor use as well as improve the customer experience through real-time notification and resolution of maintenance requests.

Overall, the impact of these initiatives, are expected to deliver approximately $15 million in annual NOI contribution once fully deployed. It will take into 2021 to fully realize that contribution, but we have included approximately $5 million of net NOI benefit in our 2020 guidance. We believe these early stage initiatives will provide a foundation upon, which to continue to build our platform.

Thank you. I will now turn the call over to Bob Garechana, our Chief Financial Officer.

Bob Garechana

Thanks Michael. This morning I'll discuss our 2020 guidance assumptions for same-store expenses and normalized FFO along with a couple of brief remarks on our balance sheet and capital markets activities.

First a couple of quick highlights on 2019. Our same-store revenue grew 3.2%, expenses grew 3.7% and NOI grew 3%, which is mostly in line with our expectations from the third quarter call. For normalized FFO, we delivered $0.91 per share in the quarter, which is $0.03 higher than the midpoint of our expectation. This outperformance was primarily driven by higher than anticipated NOI from higher than expected acquisition activity during the quarter, lower than anticipated overhead stemming from lower than expected employee benefit costs that also impacted same-store payroll expenses described on page 16 of the release and better than forecasted interest expense.

Michael provided color on 2019 same-store revenues, so let me briefly touch upon 2019 same-store expenses. Full year same-store expenses grew 3.7% in 2019 compared to our forecast of 3.8%. Notably, real estate taxes ended the year higher than anticipated at 4.3% as we had fewer successful deals conclude during the fourth quarter than we had expected. This was offset by lower anticipated payroll expense, which grew only 80 basis points for the full year. This outperformance was due to the significant improvements in employee benefit costs like the ones impacting overhead that I just discussed.

Now moving to 2020 guidance. For the full year 2020, we expect same-store expense growth between 3% and 4%. This forecast incorporates the anticipated 2020 savings from the initiatives that Michael outlined earlier.

Let me walk you through the major categories and drivers of our forecasted growth. At a little over 40% of overall same-store expenses, property taxes drive a significant portion of expense growth. We currently anticipate growth between 3.75% and 4.75%, driven by the continued burn-off of the 421a tax abatements in some of our New York properties, a slight decline in forecasted year-over-year appeals activity and a relatively healthy increase anticipated in Seattle.

For the full year 2019, same-store property taxes declined in Seattle as the state legislature took on more of the educational funding burden from local municipality. We've not incorporated this recurring in 2020 for our guidance.

In on-site payroll, our next largest category we anticipate growth between 2.25% and 3.25% for 2020. This expense really consists of two key drivers; direct salaries, bonus and commissions for our on-site staff and employee benefit costs like medical insurance. We expect to see a benefit in this first driver from the operating efficiencies that Michael and his team are working on. This will mute total payroll growth for the year. As a result, nearly all of the 2.75% expected growth in payroll is coming from anticipated increases in medical insurance and other employee benefits.

Finally, our last two major categories, utilities and repairs and maintenance. Each of these line items individually contributes about 13% to total expense. Each is also expected to grow between 2.5% and 3.5% in 2020. Drivers of utility growth are expected to remain the same in 2020 as they were in 2019. While we continue to benefit from relatively low commodity prices and efficient usage given our sustainability investments, we see price pressure in the service-related categories like trash and sewer particularly on the West Coast, which we expect to continue.

On repairs and maintenance, we expect to see another relatively modest growth year. This line item has seen significant pressure from increases in minimum wages across nearly all the states we operate in driving up costs for contract labor.

However, improvements in the utilization of our workforce, stemming from service mobility and other initiatives Michael discussed are offsetting this growth. Our guidance range for normalized FFO in 2020 is $3.59 per share to $3.69 per share. Major drivers for the change between our 2019 normalized FFO of $3.49 per share and the midpoint of $3.64 from our 2020 guidance include an $0.11 contribution from same-store NOI and our same-store properties based on the revenue and expense assumptions that Michael and I just outlined; a $0.01 year-over-year contribution from lease-up NOI with our lease-up properties generating $10 million in NOI for 2020; a $0.07 contribution from lower anticipated interest expense predominantly driven by the favorable refinancing activity we undertook in 2019 that I'll discuss in a moment; offset by $0.01 per share related to higher anticipated overhead, which we define as G&A and property management expense; and finally an additional $0.03 offset related to other items net, which mostly consists of other individually immaterial items like interest and other income.

A final note on the balance sheet. Our financial position remains the strongest in the company's history and one of the strongest in the REIT industry. 2019 was a busy year on the balance sheet front having issued nearly $1.5 billion in debt including the lowest yielding 10-year unsecured bond in REIT's history; upsized and extended our revolving credit facility with incredible support from our banking partners and with market-leading terms; and finally increased the size of our commercial paper program to $1 billion.

We also paid off approximately $1.8 billion in debt during the year including the early redemption of the 2020 maturity described in last night's release. These favorable financing activities are the drivers in year-over-year interest savings I discussed earlier.

For 2020, we anticipate issuing between $600 million and $1 billion in debt capital terming out debt that is currently on our commercial paper program or revolving line of credit. These outstandings are mostly the results of our net investment activity in 2019 and our early retirement of 2020 maturity. We have very manageable development spend that we would anticipate being funded from free cash flow.

With that I'll turn it back to the operator for the Q&A.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from Jeff Spector with Bank of America.

Jeff Spector

Good morning. Congratulations on a great 2019. Just one or two questions on 2020 and 2020 comments. Can you talk about the latest concession environment, I guess, in markets like San Francisco or other markets where you described some heavier supply in the first half of the year? Because I'm trying to connect -- I heard a comment that the first half should be better than the second half, but I didn't know if that was just in general. But it seems like at the same time there were some comments that supply is currently pressuring or there's some heavy supply pressure in select markets in the first half?

Michael Manelis

Yes, sure. Jeff, good morning. This is Michael. So I guess first I'll just say at the top of the house so concessions for us in our portfolio we tend to be more of a net effective shop. So even though I described the concessionary environment and it did cause us to use a little bit more concessions than we expected, on the quarter we were talking about $500,000 -- $600,000 in total concession used across the portfolio with the large majority of that kind of still centered in the New York market.

So I think when we think about markets like San Francisco or anywhere that we have this concentration of new supply we expect to see concessions in the new supply typically offering between anywhere between four and six weeks. And we monitor those concessions that they're offering in the marketplace as an indicator of their own velocity. So when we see concessions on new supply in San Francisco start picking up to eight weeks or they start going longer that's an indication that overall their velocity is kind of feeling some pressure. And that's what we're kind of -- we're responding to in the fourth quarter.

As I think about the first half of the year what we've seen is a lot of the concessions that we saw in pockets of New York and some pockets of San Francisco on the East Bay start to abate, meaning it's still present at those lease-up properties, but the stabilized assets around them are starting to use less and less concessions. And I've seen this now for the last four weeks we've been monitoring this as we progress through 2020.

So I think what you're going to see as demand continues to grow throughout the year like it normally does in a seasonal year, you should expect to see less and less concessions. And our portfolio for the full year we would expect concession use to be very comparable to 2019. And I think just given what we just saw in fourth quarter probably will be more front half-loaded than back half-loaded.

Jeff Spector

Okay great. That's helpful. It sounds like some positive news on the concessions at least so far this year. Can you talked about strength in foot traffic demand remained strong. Can you talk a little bit more about move-outs and anything new move-outs to home buying?

Michael Manelis

Sure. So I would just -- I guess I would say with turnover being down almost 200 basis points for the year the absolute number of move-outs is less on a year-over-year basis. But when you start to look at those that did move out and the reasons they cite for move out we really saw no change across any of the reasons. Home buying runs roughly about 12.5% of the reasons cited for those people that are moving out to buy home. And we saw no change across any of the markets that we're operating in.

Jeff Spector

Okay great. Because we noticed that some of the homebuilders have cited success with entry-level homes. And just confirm if you're seeing any change? It sounds like not. Great. Thanks for your comments today.

Michael Manelis

Thank you.

Operator

[Operator Instructions] Our next question comes from Nick Joseph with Citigroup.

Nick Joseph

Thanks. How does the $5 million net benefit to same-store NOI in 2020 from the operating initiatives break down between the revenue benefit and the expense savings? And then what's the impact on both same-store growth rates this year?

Bob Garechana

Joe, I guess, I would tell you it's about probably a 50-50 split when you look at the $5 million between revenue and expense. And on the revenue side it's probably going to equate to roughly 10 basis points of improvement across the various markets that we're doing those operating initiatives in.

Nick Joseph

Thanks. And then Mark you talked about the cap rate compression between older and younger assets. What percentage of your portfolio or GAV would you consider older and that you could ultimately trade for newer assets if the opportunity exists?

Mark Parrell

Yes, Nick, thanks for that question. We don't have any more in the portfolio a lot of must-sell, if any must-sell assets. And some of the older assets are some of our best assets in places like New York and Boston. So it isn't always age but I did use that in my remarks as an indicator of quality to some extent.

I don't think there's a grand reservoir we have of capital. There are a few assets in every market when you have a $40 billion portfolio that have become less competitive and we'll look to sell those, especially when cap rates are this close between value-add and brand new product and we'll look to trade out to the new products.

So I don't have an exact percentage but it's a low single-digit sort of number. And then it's – for us it's just opportunistic. When we see cap rates like this so close together we're going to take advantage.

Nick Joseph

Excellent. Thank you.

Mark Parrell

Thank you.

Operator

Our next question comes from Nick Yulico with Scotiabank.

Nick Yulico

Thanks. So just going back to the guidance, appreciate all the building blocks you gave on – to explain why there's a modest slowdown in same-store revenue growth. Yes, I think you said, you're assuming better new lease pricing and stable occupancy. So to me that seems like a kind of bullish indicator for the business that would suggest you guys could even push pricing even more.

So I guess what I'm wondering is, are you just being conservative in how you're forecasting your pricing this year? Or is there something else that's creating this dynamic that's not allowing you to push pricing even more?

Michael Manelis

Well, I guess – this is Michael. So I guess I would just start by saying I think the 30 basis point expectation in growth and new lease change is demonstrating that we're experiencing or we expect to experience growth. It's really just coming off of the deceleration in the back half of 2019 and the fact that now we're expecting kind of to recover and looking at where the supply is on us we think some of that recovery is going to be more back half-loaded.

So I think when you think about our guidance you've got to look at the full range that we have out there and understand that. Sure in markets like New York, if we continue to see pricing power return to us quickly and in front of the leasing season, we'll outperform that expectation. But I don't think it's prudent for us to sit here and think about all of the markets with all of the supply that we have coming at us to think that we're going to outperform those expectations early in the year.

Nick Yulico

Okay. That's helpful. I guess just following up on that. I mean, if I look at the track record of the company in the last three years you gave initial guidance on the same-store revenue that you ended up hitting pretty much close to the top end for three years in a row.

And so I guess what I'm wondering is what dynamic is different this year, as we think about the starting point versus prior years? I think last year you got – you and a lot of the industry got an occupancy benefit. This year it sounds like it's more of a better pricing dynamic? And I guess I'm just wondering what's – is one more difficult than the other to achieve?

Mark Parrell

Well, Nick it's Mark. Each year it's kind of a different year and stands alone. I mean our process this year in 2020 wasn't very different than 2019 or 2018. We asked the field for specific feedback on what they see maybe there's a lease-up right next door or they have renovations in the property and we'll get a little boost there. We also look at the top and think about macroeconomic conditions.

As Michael said, this year again we feel well positioned going into the year. We worry about the supply, particularly in some of our bigger markets. We did see some weakness as we've said in New York, late in 2019. So that positions us where we ended up going out with guidance. Could we do better? We certainly hope so. But looking at it, we try to balance things out and don't assume that everything will go perfectly well.

Nick Yulico

All right. Thanks, Mark.

Mark Parrell

Thanks, Nick.

Operator

Our next question comes from John Pawlowski with Green Street Advisors.

John Pawlowski

Thank you. Maybe just a quick follow-up to the first question. Michael, did I hear it right that concessions in the Bay Area on lease-ups pushed to eight weeks free in the fourth quarter. I'm curious, if they've gotten any better or worse in January?

Michael Manelis

Yes. So I mean, I think they've stayed pretty consistent and stable. When I say weeks that's on longer-term leases. So we saw them kind of move around with the four to six on just conventional terms. And then they started offering some longer terms. And kind of we're just monitoring that.

I mean, primarily now you got Oakland where you've got more assets coming online. So it's a great kind of pocket of assets for us to watch the concessionary environment and it's been fairly stable. They have not been volatile in what they've been doing but they clearly started going long and offering a little bit higher concession rates for those longer term leases and that's what we've been watching.

John Pawlowski

Okay. And then turning to New York. Curious from your lens, how the kind of organic operating backdrop is going to be different these next few years after the rent control package was implemented or the rent control laws change. I'm curious if you're seeing anything right now in terms of market turnover your game plan on marketing expenses kind of vacancy and any early indicators that could play out in the next two or three years in New York that you're seeing happen today?

Mark Parrell

John before I let Michael launch into giving you that detail which is very important I think the overall comment about New York and what we've all read about just increased demand that's coming all of these tech relocations into New York, particularly in the west side of New York, where we have a lot of assets is very encouraging to us.

Now when they announce something it doesn't happen right that moment that they hire. But we see that. And in fact, our research is indicating research, we've seen is indicating there's actually more tech jobs in the New York metro area than there is in the Bay Area now. So, we're excited to be involved in that. And again, you're right we have to adjust to these rules. But the overall demand drivers in New York in the next few years feel really good to us.

Michael Manelis

Yes. And I'd say, right now, we have not noticed any material change from the -- looking at the rent stay properties versus kind of the market rate units or market rate buildings. So, we're not seeing any differentiation on turnover. We're not seeing kind of from an operation standpoint, anything yet that has manifested itself where we're going to be running those buildings differently.

Mark Parrell

Yes, and I was suggesting John I think on prior calls and our meetings that, we thought turnover might start to decline in New York because, with lower renewal increases, there'd be more reason for people to stay. Obviously, we only have a couple of quarter's sample size. We really haven't seen that yet. We're looking more carefully at our capital spending in New York, but we have a high-end clientele, so continue to maintain those assets well. So, I don't have anything to add there in terms of -- again it seems to us intuitive that turnover should get even lower and the term of our residents should get even longer, but we haven't quite seen that yet.

John Pawlowski

Okay. Thank you.

Operator

Our next question comes from Steve Sakwa with Evercore ISI.

Steve Sakwa

Thanks. I guess two questions. When you sort of think about New York, how does sort of the Jersey kind of Gold Coast play into sort of your outlook in terms of the rent growth that you've got in that part of the region versus maybe the city?

Mark Parrell

Yes. So, I mean for '19, it was pretty comparable, right, when you just think about the various submarkets between Manhattan, Brooklyn as well as the Hudson Waterfront. And I think going forward, we would expect kind of hopefully start to see pricing power return to Manhattan and see some market rate growth that could accelerate that beyond what we're going to see kind of from the Hudson Waterfront. But right now, they're pretty packed like really close together from a result standpoint and our expectations. But I think, you will see Manhattan start to differentiate itself over time.

Steve Sakwa

Okay. And then I guess second question. Maybe Mark, as you think about new development, it looked like you were able to buy some relatively new assets and call it the high 4s. And you're thinking about some new development starts. Where are those yields on the new starts? And how has that spread contracted and how narrow would it need to be for you sort of not to pursue new developments?

Mark Parrell

Yes, that's a great question. So, we are just constantly Steve comparing -- because, we are not committed to being either a developer or an acquirer. We can do either or both. And we constantly compare the two to see if it's sort of on a risk-adjusted basis, you'd rather just buy the asset. Even if it's at a slight premium to replacement cost because there's a fair amount of risk in development.

As we look at our development pipe now, you heard me say, we're going to refill it. Some of those are special events like we own the land already and we have an apartment building on it. We're doing a density play and so those sorts of things especially because on a GAAP basis, you have a very low basis in the land. You bought it many years ago. Those returns look great. And even when you market to market, they look really good. So, I'd tell you, in some cases for us, we're building all the way down the yields in the middle 4s.

There's a tower we're thinking of building on the West Coast that's more in that range. And our thought process is its just terrific product. We like the per unit cost. We like the location and because we're not a merchant builder where we have to hit the cycle perfect. And if we don't hit it when we get the CFO in a year or two, we can get pushed out of the deal. I mean, we can kind of build for the long run. So, I think I'd tell you, I don't worry about spreads altogether. I worry about just are we getting the right location, do we have exposure in that submarket, can I buy in that submarket, those sorts of things and then do I like the propound kind of cost and how are we funding it?

Steve Sakwa

Well, maybe to be a little more specific on the -- I think you said, you were going to start a couple of hundred million dollars in 2020?

Mark Parrell

Sure. So we've got about 500 or 600 maybe 650 will start, Steve. And so, I would say, when you talk about these JV deals that we've spoken about, those deals tend to have yields around 5% on current rents, so current construction costs and current rents. The tower I'm talking about is, call it a 4.6% yield on current. And again, we're still in the underwriting process, so that may change a little bit. But we feel again that we like the location and we like how that feels. And then you've got a few of these other density plays that we're doing that I would say, when you mark the land to market, feel like 5% plays or so on current rents. So that gives you a general feel.

Steve Sakwa

Okay. Great. Thanks.

Mark Parrell

Thank you.

Operator

Our next question comes from Richard Hill with Morgan Stanley.

Richard Hill

Hey guys. Thanks for taking my call. A quick question. Look, it resonates with me about maybe occupancy being stable. And so, I think that new and renewal leases and the disclosure that you gave on leasing pricing statistics are increasingly important in 2020. So, I'm wondering if you can maybe give us a little bit of color. Do you -- as revenue growth maybe decelerates a little bit compared to last year, do you think that's equally from new and renewal leases? Are you seeing more strength in new or -- and/or renewal leases or vice versa?

Michael Manelis

Well, I guess I would say we gave the top level guidance that would suggest that renewals are going to grow 20 basis points lower than the industry down to 4.7% versus the 4.9% and we're improving new lease change in the overall guidance.

So it's our expectation that you're going to continue to see this kind of convergence between new lease rate and renewal, so our expectation is we should start to demonstrate better new lease rate growth and kind of take the impact on the renewal mostly from the rent regulation.

Richard Hill

Got it. Understood. That's helpful. And look 4Q 2019 seemed weak relative to the other quarters. You obviously noted that that was a return to seasonality. We had also heard some color that that was a broad trend. Do you expect 4Q is going forward to be equally as weak? Or I guess what really drove that weakness compared to the strength that you saw in 2018?

Michael Manelis

Yeah. I guess, I don't know if I would say that it is weak. I look back almost like in 2017, we've gone back over multiple years to understand just rent seasonality, demand seasonality. And really what we saw in 2019 is it kind of just returned back to the norm.

And 2018 was the anomaly where you just had that strengthening of demand in that kind of later part of the year that allowed you to accelerate when otherwise you wouldn't expect to. So I think embedded in our normal guidance process right now for 2019 is normal seasonal declines in the fourth quarter -- for 2020 normal seasonal declines for that quarter.

Richard Hill

Got it. Okay. That's helpful guys. That's it for me.

Operator

Our next question comes from Hardik Goel with Zelman & Associates.

Hardik Goel

Hey, guys. Thanks for taking my question today. Bob, if you could talk about a little bit the expense guidance, how those ranges work and maybe talk about the big components like real estate taxes, and what you guys are underwriting in your guidance for that?

Bob Garechana

Yeah. So I mentioned in my prepared remarks there's really four large categories and real estate taxes is by far the largest. So that's at 40%. At the moment we're expecting 3.75% growth to 4.75% growth, so very similar year at the midpoint relative to 2019. The drivers of that continue to be a lot of the same conversation.

So that's the 421a tax abatement growth that we're experiencing in New York. But also what's unique in 2020 relative to 2019 and you've heard other companies talk about this in 2019 is that we saw a good meaningful benefit in Seattle, wherein Seattle absolute real estate tax growth was actually negative in 2019, and we're not expecting that or forecasting that to be the case in 2020.

On payroll, it's -- which is the next largest category, it's 2.25% to 3.25%. I talked in the prepared remarks about some of the drivers there. It really is mostly the medical benefit piece. The initiatives that Michael is putting in place is really helping us curtail some of that salary growth that we would otherwise have expected.

And then finally on the third piece, which is really -- or the third and fourth piece, which is utilities and repairs and maintenance we're expecting normal growth 2.5% to 3.5%.

Hardik Goel

Got it. And just one quick follow-up. If you could share kind of the blended rent growth you're getting in early in the first quarter relative to last year that would be really helpful.

Bob Garechana

So I don't have that. I have for the renewals that we're kind of expecting to be around 4.2%. I'd tell you from a new lease change standpoint, we kind of wait until quarter-end is to really look at that. But just based on where rents are moving each and every week in our asking rents, I could tell that we're seeing improvement in those stats as well.

Hardik Goel

Well, I guess, how about just January-over-January the new lease rate, because I know you mentioned every week was improving. So I'm just trying to get a sense for how much the improvement is?

Bob Garechana

Sure. Just from a base rent or amenitized rent standpoint, our rents today are up 2.5% over the exact same time -- exact same week last year. And they've been improving each and every week.

Hardik Goel

That's great.

Bob Garechana

Yeah.

Hardik Goel

Okay. That's really helpful.

Operator

Our next question comes from Haendel St. Juste with Mizuho.

Haendel St. Juste

Hey, good morning. So, I guess, the call wouldn't be complete if there weren't any questions on the regulatory environment. So I guess I could help on that front. My question specifically is on SB 50, the California law that would allow for denser apartment buildup around public transportation areas in the state. I guess, I'm curious first of all if you expect that to be ratified on January 31. And if so how might that impact your viewer plans for California development?

Mark Parrell

Hey, Haendel, it's Mark. Thanks for continuing the tradition. We appreciate that. Comment on SB 50, I think you described it pretty accurately. We're not sure of its prospects. We certainly are a big supporters of it both the company and the industry. I think having additional density near transit hubs and having that state-mandated is a good idea. I know the sponsor that measures made some changes to try and get support.

And having talked just recently to our experts on this, I can tell you we hope it passes. We aren't sure it will get through the state House. And we're sort of waiting to see what will happen in the next few days as you said, but certainly think it's a good idea. We don't think it will add to the road traffic much by putting it near transit hubs.

And if you want to make an impact, and you want to have three million or 3.5 million more housing units in New York as a lot of policymakers have said in that state, you need to start somewhere and starting with putting more density near transit hubs is a good idea.

Haendel St. Juste

Appreciate that. Thank you.

Bob Garechana

Thank you.

Haendel St. Juste

One more. I appreciate the comments earlier on your portfolio recycling plans selling older and buying younger. But curious perhaps where you're looking at -- and I know it might be a bit unfair on you, but just curious about the opportunity set in front of you and how much of the volume that you're contemplating this year that could come from new markets. You talked about perhaps Austin a quarter or so ago? And then maybe some comments on how the underwriting in some of those newer non-coastal markets would compare from an initial cap rate and IRR perspective versus your coastal markets? Thanks.

Bob Garechana

All right. A lot of questions bundled up into there. But -- so our average age of our assets is about 18 years old. So the portfolio is relatively young. And then again there is some SKU in some of our markets like Boston, New York where we own some great assets, but they're older properties. So I would -- like I said to the prior question say there's always a handful of assets that probably should be sold and we do have a handful of those. And especially when you get the opportunity to do that in a non-diluted basis, you should do that. And we hit the gas on that and we hope to do more of the same.

Based on what we heard coming out of National Multi Housing conference last week there seems to be a lot of demand. Some of the deals we're talking about are deals where the buyer may have a value-add thought process so we'll push that. In terms of just moving capital around a little, which I'll take is the middle part of your question we've talked in prior calls about having a little bit less exposure in Washington D.C. maybe shifting some of that capital to Denver. That's really a reaction to what has been consistent high levels of supply in Washington D.C.

That said, we're both a buyer and developer in that market and have announced both in 2019 and expect to do the same next year. We'll keep freshening up the portfolio there. But it is an area where we think the supply is pretty continuous. We'd like to own more in Boston and Seattle and we've said that on the call and maybe you'll see us lighten our load a little in California that fund those. In terms of new markets, we do like Austin. There has to be an entry point that makes sense.

Obviously when you do an investment pro forma, you start with your price at the beginning. And the price at the beginning for Austin is quite dear. There are assets that are we understand to be trading inside a four cap rate on current rents. That's pretty tight for us to buy into a new market. So there's a lot of markets, several markets that we're monitoring. And I guess I'd say in terms of how the underwriting will differ, well there's probably if you're being really honest some additional property management costs and running an asset away from your main platform. And we often take that into account.

And then the rest of it's market specific, how do you feel about cap rates, how do you feel about values, how do you feel about growth rates. We had an advantage with Denver because we knew it so well from being in the market for most of our existence. But these other markets Austin included we were in as well and have a recollection of how that market cycles. So I'll pause there. I don't know if I addressed what you wanted to address.

Haendel St. Juste

No, it's very helpful. But I guess ultimately I'm curious what type of IRR spread would you be willing to accept understanding that some of those markets might have in the case of Austin a lower initial yield, but perhaps operating efficiencies, maybe even better growth given some of the overall in migration job growth et cetera. So just curious how you think about the acceptable IRR spread perhaps versus the coast.

Mark Parrell

Yes, great question. So in our investor materials this heat map we've had for a long time which tends to be on page 16 of our materials for some reason every year has all the factors we take into account. I don't know that a market needs to have a higher IRR or a much higher IRR just for us to move into it. Maybe it has other benefits regulatory and diversification benefits for example. So I guess I'd say you've got to underwrite your starting point. And Austin is a pretty expensive starting point.

And then maybe to your point, you make it up because you think growth there is better than some of your other markets. Then you've got to think about how is it going to feel in 10 years with the amount of supply in market like that gets. So again, I wish I could be absolutely clear about what that margin needs to be. But there are markets we go into that don't need to do a lot better on an IRR basis, they just need to provide some benefits overall in terms of diversification of risk and their IRRs can be comparable to those in our main markets.

Haendel St. Juste

Got it. Got it. All right. Thank you, Mark.

Mark Parrell

Thank you.

Operator

Our next question comes from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb

Thank you. Thank you, and good morning out there. So just following up from Haendel actually on two fronts. So first Mark, just continuing on the markets, if you look across -- I mean a lot of the markets have converged around similar NOIs and similar cap rates, you guys obviously a number of years ago made an effort to focus on certain key gateway markets. And now you're sort of going back and looking at -- you invested in Denver, you talked about Austin.

Do you feel that this convergence that we're seeing is going to sustain where your -- the idea to go to the certain gateway coastal markets may not be appropriate for the next decade? Or you think this convergence is just temporary and the markets ultimately will go back to the ones that you guys have really focused on over the past number of years?

Mark Parrell

I get -- that is just an outstanding question and something we think can talk about a lot. You should always be thoughtful about your markets, while you were there before, while you're there now. So I appreciate the question. I think one of the things we think about is you've got such a wall of money going into the apartment industry is it distorting perceptions of returns and risk? Are there markets that are frankly overvalued relative to what they normally and probably should trade for on a go-forward basis?

So we look at the nine metros we're in now and say we like our customer, we like our CapEx spending, we like in most cycles the supply picture in these markets and nothing there has changed for us. To me, it's more like are there other new markets, where we can find our customer in abundance, someone Alex who is relatively affluent, renter by choice, who wants to live in an urban-dense suburban setting with a lot of walk-to amenities. Where we find those people, we will go to them if the competition makes sense, the supply and demand picture makes sense.

So I guess that's the way I think about it is are there cities that are sort of being promoted into the ranks or the markets in which we do business as opposed to saying all markets are equal. I think some markets are definitively not equal. And what's going on is just the wall of capital is moving cap rates and stuff to a convergence point and I don't necessarily believe that's permanent.

Alexander Goldfarb

Okay. And then the next question is on the regulatory front, yes switching coasts here in New York. I'm sure you guys have seen the press that Albany wants to go back even tighten the CapEx restrictions on rent control units even more to talk of a market-wide CPI plus cap.

I think I read 1.5, I don't know where. Ultimately they have it. But given what happened lessons learned from 2018, how are you guys thinking about approaching this year's Albany session which I think expires in -- or ends in June?

Mark Parrell

Yes. Well, I think in terms of recent good news the Governor and the State of the State Address didn't mention affordable housing. Our sense from what we've heard from some of our context is that, many in the legislature would like to see these new rules play out a bit and see what the impact is, before adding even more to it. We'd hope that would be the case.

And obviously it's difficult for us whether you're in New York or you're here in Chicago to predict the action of politicians. But we're working hard through our trade association. I think they've got real new energy and focus on this issue and having the right kinds of conversations to just educate people because this is going to do and already is doing the exact opposite of what they intend, it's going to cause disinvestment in housing, less supply and make the city less of the energetic place we all want it to be.

And that's just what's going to happen and is happening. And I just would say I think the trade association is even better positioned this year than they were before. But what exactly happens, it remains to be seen.

Alexander Goldfarb

Thanks Mark.

Mark Parrell

Thanks Alex.

Operator

Our next question comes from Rob Stevenson with Janney.

Rob Stevenson

Good morning guys. So turnover was 49.5% I think in 2019. What's the expectation for 2020? And how much of the 200 or so basis point decline that you guys talked about earlier what's the benefit to earnings from that given those spread between new and renewal leases?

Michael Manelis

So this is Michael. I'll start by saying I think our expectations for the year is very similar. We're not expecting it to continue to go down. But we don't anticipate kind of some reversal in the trend and all of a sudden see a spike in turnover.

As far as the contribution goes, clearly if renewals were producing a 49% and you had some subset of your resident -- more residents renewing with you that contribution was boosting the revenue lift for the year versus replacing them and absorbing the vacancy as well as kind of the new lease change at 30 bps. I don't have a quantified number, but I do know that lower turnover at higher renewal rates is a positive.

Rob Stevenson

Okay. And then what's driving the gap between NAREIT and normalized FFO guidance? I think it's like $0.02?

Bob Garechana

Yes. So there's -- you can kind of see that on Page 30 of the release there's two items that are forecasted. There's $0.01 associated with write-off of pursuit costs. And then there's another $0.01 of other miscellaneous items that includes advocacy costs which we had in historical periods etcetera. So those are the two main drivers.

Rob Stevenson

Okay. Thanks, guys.

Bob Garechana

Okay. Thanks. Thank you.

Operator

Our next question comes from John Guinee with Stifel.

John Guinee

John Guinee. Thank you. Big picture question. It looks like at the midpoint almost half of your FFO growth is coming from interest savings $0.07 a share $27 million in interest cost reduction. Should this make us nervous, one? And two the end result is you basically are getting about 2.3% FFO growth from everything else while your midpoint of your same-store NOI growth is 2.5%, which seems a little unusual -- that 2.5% same-store NOI growth translates to a 2.3% FFO growth ex the interest cost savings. Any thoughts?

Mark Parrell

Yes. John, I'm going to start, it's Mark. What happened in the prior year 2019 influences the numbers in 2020. So in 2019 we acquired things early in the year and we sold late. This year you're going to see -- we have a number of assets lined up for disposition that are going to occur relatively early in the year. So even though we're a net buyer and that is going to fuel FFO growth in future years this year some of that -- like the math you're doing is absolutely right. There should be a bigger -- your fundamental growth on NOI is in that 2.5% right? Your numbers should be higher on NFFO, but you're getting a little dilution from transactions.

And I think we pointed that out in the release you're getting a little bit of a headwind from transactions that is going to offset some of that benefit. The interest benefit I'll tell you just -- we continue to be able to borrow cheaper. I mean that's all very real. And I'm not sure why that's concerning in any regard. I mean the company's balance sheet is really strong and the percentage fixed the float is sensible and we have great access to all forms of capital. So I'm not $0.07 to me is good money and it's something we've executed on before.

Michael Manelis

So the vast majority of that $0.07 too John just so you know is -- so we're not changing the profile of the overall credit metrics. We'd expect the credit metrics at the end of 2020 to be very similar to 2019 on kind of all regards. So very healthy very strong. And the bulk of that gain if you will is already locked in by having paid off debt that was in -- five nano coupons with new long-term debt that's in the 2.5% to 3% range.

John Guinee

No, thank you. The obvious issue is that you're benefiting a lot from paying off above market debt and borrowing at market. So my question really is how much longer can that last? Is there still a lot of -- debt that on the balance sheet?

Michael Manelis

Yes. So if you look at page 18 there -- we disclosed for you in each of the maturity buckets what our weighted average coupons are. And you can see in kind of 2021 4.64% as an example. To give you a point of reference, if we were to issue a 10-year unsecured bond today I would expect that to be at 2.5% or lower. So there is still a fair bit of runway going forward.

Certainly, a longer runway than we had anticipated a few years ago because we didn't anticipate rates continuing to be this low for this long, but there is still some favorable refinancing opportunities which we've taken advantage of in the past and we would expect to take advantage of in the future.

John Guinee

Great. Thank you very much. Thank you.

Michael Manelis

Hey. Thanks, John.

Operator

I would now like to turn the conference back over to Mark Parrell for closing remarks.

Mark Parrell

Thank you all for your time today and your interest in Equity Residential. Have a good day.

Operator

Thank you, ladies and gentlemen. This concludes today's teleconference. You may now disconnect.