AvalonBay Communities, Inc. (AVB) Q4 2013 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the AvalonBay Communities Fourth Quarter 2013 Earnings Conference Call. [Operator Instructions] I would now like to introduce your host for today's conference call, Mr. Jason Reilley, Director of Investor Relations. Mr. Reilley, you may begin your conference.

Thank you, Lauren, and welcome to AvalonBay Communities Fourth Quarter 2013 Earnings Conference Call. Before we begin, please note that forward-looking statements may be made during this discussion. There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There's a discussion of these risks and uncertainties in yesterday afternoon's press release, as well as in the company's Form 10-K and Form 10-Q filed with the SEC. As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings, and we encourage you to refer to this information during the review of our operating results and financial performance. And with that, I will turn the call over to Tim Naughton, Chairman and CEO of AvalonBay Communities, for his remarks. Tim?

Well, thanks, Jason, and welcome to our fourth quarter call. As you all may have surmised, we have a new format for the call this quarter. And it's in response in part -- or in part it's in response to some feedback that we've received from you, as well as an ongoing effort by us to make these calls more helpful for you. This morning, we posted supplemental materials to our release from last night. They included a management letter, which outlined our thoughts about Q4 2013, as well as our outlook for 2014, and also a slide deck, which we'll use as a basis for our management commentary today. So there won't be any scripts today, just a slide deck. In terms of participants, the group here today is a little different than what we've had in the past. I'll be providing the commentary on the slide deck. I'm also joined here by Tom Sargeant, our CFO; Kevin O'Shea, the incoming CFO effective midyear; Sean Breslin, EVP of Investments and Asset Management; and another new participant today, Matt Birenbaum, EVP of Corporate Strategy and Chairman of our Management Investment Committee. My comments will focus largely on the 2014 outlook, but I will touch briefly on Q4 and the full year 2013 first. And then afterwards, we'll all be available for questions. So let's get started. I'm going to start on Slide 4 with the review of the fourth quarter and 2013. The fourth quarter, continuous solid OFFO growth of over 17% per share. We did see some deceleration, and same-store rental revenue decelerated throughout 3.5%, 3.8% on rate. Average same unit rent change was up about 2.3% in the seasonally slow fourth quarter, which was about 130 basis points lower than what we saw in Q4 of 2012. At the end of the year, gross potential in December of 2013 was about 4% above December of 2012. So we start the year with gross potential of about 4% above what we did at the beginning of last year. We do expect to see stabilization in the revenue growth in 2014, and I will discuss this more fully in our outlook remarks. Development yields continue to hold in the mid-7% range as we completed $220 million this past quarter. And the debt and transaction markets remained very liquid to fund the development underway with over $800 million raised in Q4. For the full year 2013, OFFO growth per share was up by almost 15%, tops in the sector, supported by healthy internal growth for the same-store portfolio, as well as external growth consisting of development that was stabilizing, as well as our investment in Archstone. OFFO per share has now grown by 57% cumulatively over the last 3 years. Development starts were up almost 50% over 2012, at about $1.3 billion. And most of it is already capitalized or match funded with attractively priced capital as we raised a significant amount of capital through dispositions at sub 5% cap rates this year and debt at sub 4% on average. And lastly, we added over $2 billion of attractive Development Rights this past year, including $700 million from the Archstone transaction, which provides future growth opportunity. Shifting to Slide 5. Concurrent with this release, we did announce a quarterly dividend increase of $0.09 per share or 8.4% for 2014. Our dividend now has grown by over 5% on a compounded basis during our 20-year history as a public company. And FFO has grown more in the 6.5% range and closer to 7.5% over the last 10 years. Just given the focus quarter-to-quarter on earnings and focus on spot NAVs, I think sometimes we lose sight of the companies that are able to consistently grow distributable cash flow, and importantly, have a strategy, the competitive position and capability to continue to do so in the future. With that in mind, our 2014 increase reflects our view of 2014, but also beyond. So let's get started and talk about 2014. And I'm shifting to Slide 6 now. Overall, we have a favorable view on 2014. We expect the U.S. economy and labor market to get stronger. We expect job, income and household formation growth, combined with strong demographics and underproduction of overall housing, we expect that to offset the impacts from increased to stabilizing levels of apartment supply. We're expecting to see solid growth in cash flows with OFFO growth per share up by almost 9%. Again, a function of healthy same-store NOI growth of -- at the midpoint of 4% and a stabilizing of development communities of over $1 billion in 2014. We have the financial flexibility to continue to fund the business, with plenty of options, and we need not rely on equity to fund our ongoing business and yet still preserve strong credit metrics, maintain ample liquidity and have minimal unfunded commitments. Let's take a closer look at some of the key drivers that form our view. And I'm now turning to Slide 7. Starting with the economy. Most of the key economic drivers are as good or improving from last year, with growing strength as the year progresses as the economy appears to be moving towards a path of sustainable expansion. All parts of the economy are contributing to potential growth that we expect to be more towards long-term trend, in the 3% range. Industry is contributing as corporate profits are expected to rise 6%. And we expect companies to continue to or begin to add capacity through hiring activity or capital investment. The consumer is much better off as well as their balance sheets are largely restored or with less debt, lower debt burdens and asset gains through the stock and housing markets. Importantly, personal income is projected to be up around 6% nationally in 2014, and we're seeing the credit starting to loosen for the consumer as well. And then lastly, the government sector is expected to be a net contributor to GDP growth in 2014 as well after having been a drag on growth over the last couple years. The federal government is no longer expected to be a drag after a couple years of stimulus withdrawal and the effects of sequestration now behind us. State and local governments are much improved, and they're now adding to payrolls, and rising home values should provide support for tax receipts at the state and local level. And we think this will particularly help many of the suburban markets. And maybe most importantly, we just see policy uncertainty starting to subside, particularly as it relates to monetary policy as the Fed tapering is now underway and better understood by the markets as to what the Fed's intentions are going forward. Moving to Slide 8 and turning to apartment fundamentals in our markets. We expect to see job growth to be up in our markets of about 30 basis points over what we saw in 2013, and over the next couple years, to be on par with that of the U.S. Turning to Slide 9. As I mentioned earlier, we do expect to see personal income growth to rebound in 2014 and our market to be over twice what we saw in 2013 and be broad-based across our regions. The labor market is beginning to tighten, and we expect more of the job growth to be in the form of full-time jobs. Personal income growth is an important driver, perhaps the most important driver, of ultimate rental demand and rental growth. So it's critical that we begin to see improvement here, particularly as we're no longer stealing share from home ownership and we need income growth from the general population to sustain strong rent growth. Turning to Slide 10. Demographics will continue to remain favorable over the next 10 years, and we'll start to see strong growth in the 35 to 44 age cohort, which is an important segment for AVB. It actually represents over 20% of our customers. But we expect to continue to see our primary segment of the 25- to 34-year-old remain strong, in particular, over the next 2 years, expect to see outsized growth in our markets, 375,000 additional folks in that age cohort. This age cohort also provides an important source of pent-up demand. As many of you know, many of these folks are still living at home or doubled up with friends in apartments. And as the economy improves, we expect to see some of that pent-up demand released to the market. Turning to Slide 11. Housing affordability is not as pronounced in favor of home ownership as it has been given the recent rise in home prices and interest rates. And we're starting to see the gap between rental and for-sale housing cost narrow. And I think importantly, too, affordability remains much, much lower in our markets than the overall U.S. Turning now to supply in Slide 12. We do expect to see deliveries grow in 2014, but we do expect them to start stabilizing early in the year. We'll see more supply in D.C. and Seattle, which represents about 20% of our same-store portfolio. And supply will be increasingly concentrated in urban locations over suburban locations than we've seen in past cycles. It should begin to level off in early 2014 and taper in late 2015. And despite this increase in supply, we do expect demand should remain strong enough to keep pace with additional supply or, in effect, demand and supply to be roughly equilibrium. Turning to Slide 13. Our belief in terms of demand supply fundamentals is further enhanced by what we're seeing in the broader housing industry as we think the housing industry will be challenged to ramp up production to meet household growth over the next few years. The country continues to under produce overall housing. Since the downturn, we saw less than 2,000 -- less than 1 million in 2013. And our market is about 130,000 housing starts in 2013. With much of the excess inventory having been essentially absorbed, that was created in the mid-2000s. In our markets alone, we'll need to see a ramp-up of about 75% over the next 2 years just to keep pace with the rate of household formation. Yet we don't see the capacity having returned to prerecession levels for the housing industry, and the lack of investments and entitlement and infrastructure constraints, we think, constrains the industry's ability to respond quickly to higher demand. So how does all this inform our view of our outlook for the company? Turning to Slide 14 now and starting with property operations. We do expect the solid demand supply fundamentals to support healthy growth across all our regions except the mid-Atlantic. Overall, we're expecting same-store revenue in the 3% to 4.25% range, with all regions being above trend, except D.C., which represents about 15% of our same-store portfolio. And Northern California and Seattle continuing to lead the way, but we see Southern California and Boston expected to actually improve over 2013 performance. Turning to Slide 15. We do expect same-store revenue to stabilize in 2014, with stronger demand matching the increased level of supply, particularly as the economy builds momentum throughout the course of the year. We expect the economic expansion in apartment cycle to be more like the '90s, which lasted 8 years, 8-plus years. It was driven by sustained productivity growth and stable monetary and fiscal policy versus the 2000s expansion, if you think about it, was driven more by excessive monetary expansion, loose credit and speculative investment behavior. So in effect, we expect the right side of this graph, as you start to look out over the next couple years, look more like the left side of this graph rather than the middle of the graph. Turning to development in Slide 16. Development is expected to peak by mid-2014 for AVB. We expect to start $1.4 billion after having started $1.3 billion in 2013 and total development underway at a peak roughly at about $3.5 billion by midyear, with some of our larger starts front loaded in 2014. Development underway should approach around 15% of enterprise value. The economics of the development portfolio remain compelling, with recent development stabilizing in the range of 250 basis points plus above prevailing cap rates. And we continue to benefit from attractive land positions and the construction starts that occurred early in the cycle. Margins on future development may compress a bit, with rising construction costs and cap rates perhaps, but we feel that we have pretty good-sized cushion here to buffer the impact from these risks. Turning to Slide 17. We feel really good about the development underway in that it's well diversified across regions, submarkets and product type and also feel good about our shadow pipeline. Currently, almost 40% of that development underway is actually on the West Coast, which is experiencing better growth in fundamentals. And it's as large it's ever been for us. About half the construction starts in 2014 are expected to be in Southern California and Boston, which are the regions where we expect to see improvement. And while about half of the current construction activity is in urban submarkets today, it represents less than 1/3 in our shadow pipeline. And moreover, in our shadow pipeline, about 85% of all construction is wood frame that generally has shorter production cycles, which reduces exposure to market risk later in the expansion. And so now let's look at how we might fund this activity. And I'm turning to Slide 18 at this point. We have, as I mentioned earlier, plenty of financial flexibility to continue to fund the business through the most attractive capital options, which currently favor unsecured debt and asset sales. We could issue 10-year unsecured debt roughly in the 4.1% range today, which has been only cheaper 10% of the time since 2001. Dispositions are trading -- or asset sales are trading in the 4.5% to 5.5% cap rate range, which by the way, that's around what it's averaged over the last 10 years for AvalonBay. We've sold over $3.5 billion of assets at an average cap rate of 4.9%. And we think that equates into forward unlevered IRRs ranging in the 6% to 7.5% range. Certainly, our dispos will focus on assets that we believe to be towards the lower end of this range where either we believe the asset may have a less attractive growth profile than the market believes or where we may be able to get auction-type pricing for attractive core assets. We can continue to fund development through a combination of debt and asset sales and cash flow without really increasing leverage or impacting credit metrics. Turning to Slide 19. We do intend to continue to match fund development. In fact, most of the $2.8 billion that's currently under construction is already funded, with plenty of additional liquidity in the form of cash on hand and an untapped line of credit of about $1.3 billion. So bringing it all together, I'm now on Slide 20. We expect -- in terms of our financial outlook, we expect FFO per share to be $6.60 to $6.90. Adjusted for non-routine items in '13 and '14, we expect that to equate into about an 8.7% growth on a year-over-year basis, this growth being driven by a combination of same-store NOI growth in the 3% to 5% range and over $1 billion of stabilizing development. So in summary, 2013 was an exceptional year for AvalonBay as we look back on it. The year began with the closing of a $6.5 billion Archstone portfolio. We delivered sector-leading OFFO growth, getting contributions from the existing portfolio, as well as a record level of development currently underway. And we raised the most capital in our company's history. We are looking forward to this year as well as solid fundamentals and a strong competitive position should result in above-trend growth. And while there are always risks associated with shifts in the macroeconomic and capital market environment, we believe AVB is well positioned to continue providing the kind of cash flow and NAV growth we have in the past with a high-quality and diverse portfolio and value-added investment platforms that have created value consistently for 20 years for shareholders. And with that, Lauren, we'll now open the call for questions.

[Operator Instructions] Your first question comes from the line of David Toti. David Toti - Cantor Fitzgerald & Co., Research Division: Just a question on the pipeline. And I know -- I think it was last quarter or the quarter before, you sort of commented that you expected the pipeline, the absolute volume to begin to decelerate. And it looks like the fourth quarter was a bit flat sequentially, and I know it's somewhat lumpy. What's your view going into the year relative to the sort of implicit deceleration of that pipeline? Or has the environment changed enough that you feel comfortable kind of going full speed at current levels?

Yes. David, I'll offer a couple comments and, Matt, you may want to jump in. To be honest, we didn't go into this year anticipating we're going to be able to grow the shadow pipeline by $1.5 billion x sort of the Archstone activity. Our expectation is that we could grow about $1 billion just based upon at least our view what the market might offer at the beginning of last year. Having said that, the opportunities that we bring in, frankly the economics are equivalent to what we have been seeing, kind of mid, high 6% projected yield with -- roughly, current development of land cost had been consistent with sort of prior generation of Development Rights. Now having said that, I would expect the development pipeline to start to contract a bit in 2014. We're certainly much more selective than we have been over the last few years. And so I think we would anticipate that, that would start to contract but particularly as we're also busy executing the pipeline we have in front of us. David Toti - Cantor Fitzgerald & Co., Research Division: Okay. And then just as a follow-up, and maybe I missed this in the call. The CapEx appears to have -- your recurring CapEx appears to have popped up in the end of the year. Was that Archstone related?

David, this is Sean Breslin. In terms of CapEx, if you look at the full year '13, it was actually a little bit lower than we would have anticipated due to a couple things, primarily the fact that some of the projects that we anticipated executing were delayed as we acquired the Archstone assets and spent the fair amount of '13 trying to evaluate those assets in terms of the fiscal needs. So it did pop up as we started to complete that process and started to execute projects in the fourth quarter, and we'd expect it to be a little more elevated in 2014 as we catch up on some of the AvalonBay projects that were delayed from '13 into '14 and start to implement the capital program that we have established for the Archstone asset.

Our next question comes from Nick Joseph at Citi.

To get to the high end of same-store revenue growth guidance, you're going to need to see a reacceleration of quarterly growth. So what gives you the confidence that you'll see that? And what do you assume in terms of occupancy and rent growth at the high end?

Yes. Nick, this is Sean. A couple of comments in terms of the acceleration. And the slide deck that we posted gave you some general ranges in terms of the markets. But essentially, what we're seeing is the softness that we're experiencing or deceleration that we're seeing in the mid-Atlantic, a little bit in Northern California and New York, we think it's going to be essentially offset by what we're seeing in terms of growth in Boston and Southern California. Just to give you some examples, when we look at Q4 renewals in the Boston market, we're in the 5% to 6% range, which is 100 to 200 basis points above where we were in Q4 of 2012. And in Southern California, the renewals were in the high 5% range, which is about 150 basis points higher than we were in Q4 2012. As we see where we are in Q1, that same trend is continuing as we look at both of those regions in terms of the trend being elevated relative to 2012. So the trend in those 2 markets, which are the 2 markets we expect to accelerate, is fitting the current business pattern. And in terms of your specific question about occupancy, for the AvalonBay same-store basket, we're essentially seeing occupancy is going to be about the same as it was in 2013. In the Archstone assets, we do expect to pick up probably about 50 or 60 basis points of occupancy, which will support revenue growth in '14 in that portfolio when it enters the same-store basket in the second quarter.

Nick, this is Tim. Just to be clear, I mean, our expectations are that we're going to perform at the midpoint. And over the last couple years, we've been within 10 basis points of the midpoint of our range. So our expectations aren't we are going to perform at the high end of the range or the low end of range, but at the midpoint of the range. And as I mentioned in my opening remarks, it's [indiscernible] 70 basis points on average over -- from 2013, and we're starting the year around 4% in terms of gross potential being above the prior year.

Tim, it's Michael Bilerman speaking. As you think about this cost of capital heat map on Slide 18 and you sort of see equity, which is not a great funding source relative to your history, I'm just curious as you think about the flip side of that in terms of buying your equity, which I know has not been a key focus of yours. But at some point, does the continued asset sales and accretive development that you're doing, can that be enhanced through some of the capital you're raising, you're underleverage by taking down some of your own equity?

Tom, you want to handle that?

Yes. Michael, this is Tom Sargeant. I think we've said in the past that when you look at AvalonBay's uses of capital and its thoughts about capital allocation, allocating capital to development, which is yielding in the 6s and stabilizing into the 7s, is a very attractive use of capital and buying back our stock in, say, the mid-5s implied cap rate. We think the trade in a 7 is a superior allocation of capital than the 5.5. And so we are unique in that we do have that alternative. If we didn't have the development pipeline, we're just looking to buy assets, it might be a different story in terms of how we would allocate capital. But as we sit here today, and for most of the company's history, the superior capital allocation choice has been to invest that capital in development as opposed to buying back our stock. We do have a stock buyback program that's available to us, and of course, it has not been active in 2013 or actually since I think 2008 was the last time we bought any shares. But that is an option we have, but it's not the best allocation of capital that we have today.

Did the Lehman Estate come to you prior to them liquidating a fair amount of their stake at all?

No.

Our next question comes from Derek Bower at ISI Group.

I just want to follow up on guidance. Can you also provide what you expect for the average new and renewal rate increases throughout '14?

Yes. Derek, this is Sean. Based on what we can tell you right now just in aggregate, we're expecting blended rent change to average in the 4% range over the course of the year. Obviously, that is cyclical as you move through the seasons throughout the year, but that would be the average for the year on a blended basis.

Okay. And then just looking at Attachment 15, is it the correct understanding that when Archstone rolls into same-store in April that it will still have no impact to same-store guidance? And maybe asked another way, if you had never purchased Archstone, would you still expect to see the same amount of acceleration that you're forecasting in your guidance?

Well, Derek, to answer the specific question, the first part of it, we are providing the same guidance in terms of the combined Archstone AvalonBay portfolio in the last 3 quarters of the year same as the AvalonBay portfolio for the entire year. And if you think about it in terms of the mix of the Archstone assets, there is a percentage that's coming in, there's about 25% coming in from D.C. that will pull the average down. But offsetting that is the performance that we're seeing in Southern California, which is about 30% of that basket, as well as even though it's decelerating and Northern California is about another 20% of the Archstone basket. So you've got about 50% of that portfolio is coming in from the West Coast, including the accelerating Southern California region, to help offset what's happening in the mid-Atlantic in terms of the slowdown there or any deceleration in New York. So net-net, when you add it all up, it comes in about the same range.

Okay. So we should think about the ranges are the same but your Avalon same-store, legacy same-store, is probably like a little bit below the midpoint and Archstone is just adding a little bit above and that's how you're keeping same range, is that right?

No, I wouldn't quite say that, no. The range we provided for the AvalonBay standalone and the Archstone/AvalonBay basket for the last 3 quarters just ends up being basically the same range.

Okay, got it. And then lastly, what would be the key factor that determines if the $1.5 billion of capital is going to be weighted more towards debt versus asset sales? And how should we think about timing throughout the year? Is that going to be more back half weighted or steady throughout the year?

Sure. This is Kevin O'Shea. In terms of sort our perspective on the mix between asset sales and unsecured debt, consistent with our past practice of match funding on a leverage neutral basis, our plan is that it would be predominately oriented toward asset sales. In terms of the timing, I'll be roughly ratable through the year, but probably a little bit more weighted toward the back half just given where our cash position is today.

Our next question is from Ryan Bennett of Zelman & Associates. Ryan H. Bennett - Zelman & Associates, LLC: I was wondering if you could just provide incremental more color on your guidance, in particular given the weakness that we've seen there in the past couple quarters. And I guess based on your guidance in Slide 14 or so, you're projecting kind of stabilized throughout the year. I guess what's giving you the confidence that, that market's going to stabilize?

Ryan, it's Sean. We missed the first part of your question. Would you mind restating, please? Ryan H. Bennett - Zelman & Associates, LLC: For New York, we've seen it be weak here over the past couple of quarters. I was just wondering given your guidance on Slide 14, it implies that some stabilization in the New York markets. I'm curious what's driving your assumptions there for the market.

Yes. In terms of New York, and really for any other market, it is built up based on, one, sort of what the built-in growth rate is given where growth potential is starting the year relative to last year, as well as our outlook for job growth, renter household formation blended with the new supply that's coming online. So we saw some softening in New York in the back half of last year, and we're expecting that market will continue to decelerate, not drastically, but decelerate as we move through 2014 based on the supply demand characteristics. There's a fair amount of supply coming into New York right now. And for our same-store basket, it's impacted by a couple of major factors. One is we have 2 large assets in Long Island City to influence the performance of that basket. There's about 1,700 units being delivered into that market right now. And there'll be another 700 or so that will come in, I believe it's in July. And then in addition to that, we're also seeing some supply come into the Midtown West sector. We've got 2 assets there, the 3 assets in lease-up, 2 that have been leasing for a while that we'll complete in the next quarter or 2, as well as Gotham deal that we'll start leasing -- just started leasing and will be leasing for the remainder of 2014. So you have to sort of look at it asset by asset and build it up, but we do see deceleration in that market from '13 to '14 based on the composition of our portfolio in the greater New York City region. Ryan H. Bennett - Zelman & Associates, LLC: Okay, understood. And then going back to Archstone just real quick. In terms of the net operating income that you provided for guidance in the first quarter, it's down from what it was in the fourth quarter here. I'm just wondering how much of that is being driven by recent asset sales or what you're expecting to sell in the quarter versus just operations.

Yes. The major difference really is the composition of the basket. There's a few things going on there. One is disposition that we've had throughout the course of the year, including a couple that were sold in the fourth quarter. In addition, we determined there's probably a handful of assets that are related to Oakwood that are on master leases with Oakwood that are sort of legacy from Archstone that are not rolling into the same-store because they don't necessarily represent market performance. They reflect sort of previously negotiated terms under the master lease. So it's just a very different basket of assets in terms of the NOI. And then in addition to that, it's not necessarily comparable because during the first year of our ownership of the Archstone assets, there's some expenditures that are capitalized. And as we get into the first quarter, some of those items will become expensed once we clip 12 months. So it's a little bit of an apples-and-oranges comparison if you're trying to go sequentially from the Q4 Archstone NOI to the Q1 Archstone NOI.

Our next question comes from Nick Yulico at UBS.

I was hoping to get the new and renewal lease rates for D.C. in the fourth quarter and how they've been trending so far this year.

For D.C. specifically, be happy to talk about that. When you look at D.C. in the fourth quarter, it was pretty weak. Combination of not only the elevated level of supply kind of kicking in, in the fourth quarter, which is sort of at the rate we expect to see in the first part of '14, but also a lot of the gyrations that were going on with the government created a fair amount of uncertainty. So in terms of new move-ins, new move-ins were down in the 7% range in the D.C. region. And then renewals were coming in at about 2.5%. And as we roll forward to where we are in '14, renewals look slightly better. They're actually in the 4% range. But new move-ins to continue to hold at negative levels, not quite as bad as the fourth quarter. Based on what we're seeing in January it's sort of in the down 5% to 6% range.

And then as you think about that market and you think about the supply that gets delivered in Arlington versus in the district, what is your outlook on the supply in Arlington, whether you think it all kind of gets absorbed this year and then it's mostly a 2014 impact? And then similarly in the District, is that an impact that you think gets resolved this year or is it more likely to linger into 2015?

Well, it depends on a couple things, the big one being your expectation for job growth. If you look at the deliveries, I guess starting with Northern Virginia, if you look at, say, the RBC corridor, as an example, the peak deliveries are in '14, it's a little over 1,000 units coming in, in '14. But it's cut in half, down to about 500 units as you move into '15. In D.C., it really depends on where you are. So if you look at NoMa as an example, it's about 1,400 units in '14. It's about the same level, slightly higher in '15. Just one thing we have to keep in mind is the delivery schedules on several of these assets have been delayed multiple times. So things can shift around a bit. So but I'd say D.C., the bulk of it is, call it, 50-50 between '14 and '15. Northern Virginia, particularly the Arlington area, tends to be a little more front loaded in '14 versus '15. So we can talk about the supply. It really depends on what happens with job growth in terms of how much will be absorbed in '14 versus carrying over in terms of the impact on '15.

And just one last D.C. question is have you at all been forced to raise your supply forecast for D.C. over the past several months as far as getting the supply in the market?

I wouldn't say increase as it relates to '14. We have seen some shifts in terms of deals being delayed, as I mentioned. So there's been volume that's been shifted from it was late '13, it's now early '14 and stuff that's in the back half of '14, you still put some probability on whether they're actually going to execute it and get it delivered at that point versus some of the shifting into '15. But in terms of absolute numbers, I wouldn't say that it's increased by any significance, no.

The next question comes from Alexander Goldfarb at Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just going back to the guidance for a minute. If we take the guidance, as was indicated before, it implies pretty good ramp-up in the back half of the year. So understand that you have $1 billion of development that's going to stabilize throughout the year, but it also sounds like you're going to have a fair amount of dispositions. And the dispositions would seem to clearly offset some of the development. I mean, if you assume sort of a partial contribution of each, there's maybe a $0.10 net positive impact. So can you just talk where the extra sort of $0.25 of FFO is coming from above just the standard 4% from the same-store NOI pool?

Alex, this is Tim. I'll give it a shot. I think it's more than what you had mentioned in terms of development. First of all, you've got some free cash flow. And then you -- whether it's debt or whether it's asset sales, you're talking about a marginal cost that's somewhere in the 4 as it gets development that's been stabilizing close to 7%. So you've got -- as I mentioned earlier, you've got about 250 basis points margin on, I'll call it, $1 billion, somewhere between $750,000 and $1 billion that's stabilizing. And so we think that contributes around 2.5%, 3% to the FFO growth. And then you do have the stabilizing effects of owning the Archstone for a full year in 2014 versus 10 months in 2013, which contributes a couple percent as well. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay, okay. And so then the back half, I mean, is it -- Tom, should we expect this to be sort of a ratable ramp-up? It almost sounds more like there's a much bigger step-up in the back half, is that fair?

This is Kevin. There is a bit -- I think there's a bit of a ramp-up in the back half of the year from an operating impact as well as FFO. I think probably, Sean, if you want to speak a little bit to the expenses in the first half, that might be playing a little bit to sort of the FFO impact so that may accelerate a little bit of the FFO impact.

Yes. One thing to note, Alex, is that we saw some elevated OpEx in the fourth quarter of '13. We do expect that to hold at a little bit higher level in the first half of '14 as compared to the second half driven by a number of different factors, timing of insurance renewals, as an example, in terms of when that kicks in. I also mentioned the accounting treatment of the Archstone expenditures that in the first 12 months we're able to capitalize some of those costs based on our accounting treatment. But as you get into February, as an example, start shipping into March, we have to start expensing all those costs. So you'll see a year-over-year elevation in expenses in the first half, and then it'll fall off into the second half. So you will see greater NOI growth coming out of the second half to support greater earnings growth in the second half as well.

Okay, Alex, this -- I'm sorry, Alex, this is Tim. Remember, it's not unusual as you move through the year -- most of your leases turn, starting in the late second quarter going into the third quarter. So that's where you're going to get a lot of your growth in FFO through the calendar. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Yes, no, I just asked because last year was sort of a similar scenario, and then it seemed a little bit less in the back half than was initially suggested. Tim, the final thing is you guys in the press, the Christie Place is on the market, just sort of curious, does your guidance assume any promotes or any JV one-time fee income?

No, this is Kevin again. Our guidance for 2014 does not include any promote income from Christie.

We'll take our next question from Rich Anderson of BMO Capital Markets.

So if same-store is going to potentially accelerate in the second half of the year, I know you're not going to -- certainly not going to give 2015 guidance right now, but would a reasonable cycle suggest that, that type of acceleration could extend a few years beyond this year?

Rich, this is Tim. I think there may be too much being made of acceleration in 2014. If you look at Slide 15, essentially, we have the rate of growth more or less flattening out as we move through the year. And as I mentioned in my prepared remarks, we think this cycle looks a lot more like that in the '90s, where you had relatively stable supply. And depending upon the strength of the economy any one year, it was an expansion the whole time, it may go up a bit, the rate of growth, and then next year may go down a bit. As you can see, kind of in that 90 in it. This would be true, by the way, if you extend it back to about '92, '93. It looks a little bit more like sort of an EKG until you get to sort of the tech bubble in 2000, and so that's our expectation going forward. What that means for 2015, whether it tips up a little bit or tips down, don't really have any guidance at this point with respect to that.

Okay, doesn't look like my...

We do see supply deliveries being roughly flat though, if not slightly down in 2015, as I mentioned in my prepared remarks.

Okay. And the cap rate commentary, you said 4.5% to 5.5%, which is sort of similar to what the long-term 10-year average has been, but how does that compare to last year? Have you seen cap rates ticking up a little bit or is it also a similar number versus last year in terms of pricing of assets?

Rich, this is Sean. Yes, cap rates haven't really moved much. There's been some discussion about they moved 20, 25 basis points, as some people have commented on. I'd say if there's been any cap rate movement, it's probably been in sort of secondary, tertiary markets or assets that are a little bit out-of-favor in terms of what someone's looking for. So if it's up a B asset in a secondary market in the East Coast, I'd say. On the West Coast, I'd say cap rates have been pretty darn stable. We sold assets in the fourth quarter. We sold a fair amount, $670 million or so of which about $500 million was AvalonBay wholly-owned, and the cap rates for those assets weren't any different than what we would have expected 12 months ago, I'd say. Transaction market's pretty liquid. If you look at RCA's data, we're talking about $103 billion in transactions for 2013. That's right on par with the peak of 2007. It was around $100 billion, and it's up 12% from last year. So it's a pretty liquid market, but plenty of demand for product.

Okay. And on that issue, are you seeing any -- is the condo market starting to play a role in your disposition discussions or is that still too premature?

Still too premature at this point. There's a lot of chatter about that, but there's not a lot of action.

Okay. And then just kind of a broader question on Archstone, and it's been asked a few different ways. But if you're getting the same kind of identical growth prospects from this big portfolio you've inherited, you're not getting any immediate advantage from that huge investment at least right now. What are the 1 or 2 reasons? Why should we be so excited about the inclusion of the Archstone portfolio? Like what's the long-term reason you made the investment if you're not getting any more from an internal growth prospect -- from an internal growth perspective on the portfolio?

Rich, this is Tim. I think I'll handle that. When you get into -- first of all, Archstone was an accretive investment, and generally, when you get into large-scale M&A, it tends to be dilutive so...

Accretive for non-cash reasons in large part, is that right?

Yes, well, we could have a long discussion on that. It's probably better to have off-line, but we believe it to be accretive on a go-forward basis. Certainly, in terms of, as we talked about they had very complementary in terms of the geography and the nature of the transaction where we were able to team up with EQR. Both of us get more of what we wanted, which made it a very usual transaction where we picked up, as Sean mentioned, 30% in Southern Cal, 20% in Northern Cal, so half of what we picked up was in California. And we always looked at the West Coast. We always looked at needing to supplement our development pipeline there with acquisitions in order to continue to have a roughly balanced portfolio in our view. And then just there are scale benefits, if you just look at G&A and where that's trended relative to where it was before this transaction and what that means for additional cash flow bottom line that gets to the shareholder, there are definitely some benefits there, and we picked up some capabilities. We're able to continue to expand some capabilities organizationally that we think will have payoff as it relates to portfolio management, and again, ultimately, into increased cash flow for shareholders.

Do you think that your FFO or AFFO guidance for 2014 would have been 10% lower without Archstone? Do you have any -- have you done that analysis of how much better it is with it?

No. We've already funded Archstone as part of the company, and so they're now AvalonBay properties. So no need to do that.

Rich, this is Sean. The other thing just to keep in mind on that, you're talking about the impact on same-store numbers for one short period of time. So we certainly took a longer-term view of the portfolio in terms of how we thought it would perform relative to our base portfolio. We feel very good about the long-term prospects of those assets. If you said would you buy Archstone just because you're worried about what might happen in D.C. in the short run, that wasn't the topic that was on our mind when we bought the portfolio.

It's certainly the reason of my question, not for this year. It was meant, actually, to be a softball, so sorry.

Next question comes from Dave Bragg at Green Street Advisors. David Bragg - Zelman & Associates, LLC: As relates to your revenue budgeting, how would you characterize your process? It sounds very much so like a top-down approach. You've provided the helpful macro overview, but to what extent do you balance that with a bottom-up asset-by-asset outlook as well?

Dave, this is Sean. It is a balanced approach, I guess, I'll say, so certainly, the management team set some parameters based on macro factors that are going on in the economic environment. What's happening with supply, Tim alluded to some of the major factors related to personal income growth and the correlation with rent growth, and things of that sort. And so we sort of provide a framework for the operating teams in terms of what we might expect within a market but then they certainly create bottoms-up budgets based on what they know is delivering down the street from one property versus no supply next to another property, as well as other issues sort of at the asset and submarket level. So it is a balanced approach. David Bragg - Zelman & Associates, LLC: And historically, in your markets, have you seen a stronger correlation between personal income growth and revenue growth than job growth and revenue growth?

Yes, that's correct.

Yes, Dave, just to be clear, personal income growth, in effect, captures job growth underneath of it so it's not sort of same household growth, if you will. It's capturing sort of the increase in the collective buying power of that particular market, and I think that's the reason why it ends up having a higher R square, if you will, with respect to rent growth. David Bragg - Zelman & Associates, LLC: Got it. And this doesn't impact your outlook for '14, of course, but I was curious, what is your outlook for national multifamily starts in '14 relative to '13? You've been pretty vocal on that in the past.

I'm sorry, can you repeat the question? I'm not sure I caught it exactly. So our expectations of '14, go ahead again? David Bragg - Zelman & Associates, LLC: National multifamily starts in '14 relative to '13. If I recall correctly, over the past year or 2, you've been pretty vocal on an outlook for a flattening out in start activity, which seems to be occurring.

Yes. And I think I've also been speaking to deliveries as well because you could see it in the permit and the start data, and we roll it up just at a regional level as well. I think one of the things I've said, Dave, in the past is what was unusual about this cycle is we saw starts earlier in our markets than we traditionally have in the cycle. It's where capital wanted to be and the deals that were the land deals that were already entitled or more or less ready-to-go got funded. And so now that we're back to having to go through the entitlement process, and that often takes 2 to 4 years in our markets, you can just see supply coming from a lot further away than you could have frankly just 2 or 3 years ago when there were newer deals that were entitled and teed up, ready to go. They just needed capital and somebody to process them. David Bragg - Zelman & Associates, LLC: That's helpful. So is it your view that there will be less starts in your markets in 2014 than 2013?

Dave, this is Sean. Just one comment to add, and I know you were at NMHC as well. But the last 3 or 4 months, starts have been trending pretty flat, around 75 to 80 at -- in terms of just pure starts. Based on what we're hearing just anecdotally from talking to developers is that they are starting to experience some tightening in terms of the availability of equity capital to fund development deals. NMHC has an index that sort of tracks whether equity is more or less available for new development. And I think the last 2 quarters were the first 2 quarters in about 2 years, where that actually has gone negative in terms of the availability of capital to start development, multifamily rental developments are specific product is tightening. So based on what we're hearing from that perspective as well as the trends in construction cost over the last couple of years, I think there is some pressure on deals penciled-in and making sense. So try to extrapolate exactly what that means for starts other than it probably will be a more challenging environment for starts in '14 as compared to '13.

Dave, this is Tim. Just to answer your question. We are expecting less deliveries in '16, which would imply less starts in 2014. David Bragg - Zelman & Associates, LLC: And the last question relates to the transaction environment. Can you share your observations on buyer demand for portfolios relative to individual assets? Are there -- is there more demand today for portfolios than there was, say, a year ago?

Dave, it's Sean. That's a hard question to answer. Portfolios trades are so episodic based on unique circumstances that it's hard to dictate what people are thinking about. Certainly, the individual trade market is very active. As I mentioned, it's -- the entire market traded about $100 billion in '13. About 60% of that is individual transactions. About 40% was portfolio trades or entity deals. That's certainly a pretty big number. So you wouldn't expect to see that in '14. I don't know that it means that there's less appetite for portfolio trades. I think it really comes down to the economics of the specific deals and who wants to transact. But it's hard to extrapolate a trend from that data in terms of what the appetite might be in '14 for portfolio deals.

Our next question comes from Vincent Chao at Deutsche Bank.

Most of my questions have been answered here, but maybe just a question on the development rights side of things. If I heard correctly, I think 50% of starts for '14 are going to be in Boston and Southern California where you're seeing the best demand. I didn't see any additional development rights in those markets. Just curious if you could comment on how difficult it is to add land or rights in those markets, and if at the end of '14, will you be pretty much exhausted in terms of capacity there?

Yes, sure. Vincent, this is Matt. I'll speak to that a little bit. It is to some extent driven by the opportunities that the team's seen in the local markets, which is hard to predict, and also, just by the level of activity there. So we did stock up heavily on Southern California Development Rights over the last 18 months, and the team has really been focused on pulling those through over the last -- since that time really. So we've had 3 starts in Southern Cal, back half of this year, we expect 3 more next year, and so that has consumed a lot of their focus. There's just a lot of execution there. I think that we still expect and hopeful that we will grow our development rights pipeline in Southern California some during the year. But the best deals are usually the ones you see early in the cycle. So I'm not sure we'll be able to restock it to the same extent as we're taking deals out and into production. Boston is a little more steady, actually. We've been able to add Development Rights there at a pretty steady clip kind of year-in and year-out. So we do see kind of a bunch of starts coming in there this year as well, but that team has been very successful over the years. And so I do think what we're seeing is a little bit of a shift in the composition there. And just a little color on that, that I think sheds some light on the variety of our development activity, we're looking at probably 3 starts in the Boston metro area this year, one of which would be a high rise downtown, one of which would be a medium density wood frame deal, kind of in the 128 corridor, and the third of which would be a service parts wood frame deal in the 495 corridor. So we're trying to be mindful of kind of keeping that diversity of the pipeline going and responding to the opportunities that are different in each market and in different points in the cycle.

Okay. And just maybe moving over to New Jersey where you did pick up some rights, really, have a fairly big portfolio there, and just curious what the thinking is there given that most of the job growth in the area seems to be more in New York City or is this just to absorb the overflow? Or are you expecting to see New Jersey really kind of ticking up here shortly?

This is Matt again. I guess, I would say New Jersey is -- our focus on New Jersey has been almost entirely inland in the very high barrier to entry sub-markets that are away from the water, away from the coast, and so there are a lot of deals there. A lot of those are 200, 250 unit wood frame deals. So kind of your average capital investment per deal is on the lower end, and that is one of our highest yielding markets in terms of development yields because it's so supply constrained. So but it takes a long time to take those deals through the process. Those are very much deals that Tim was speaking to. You're bringing them through a process. There's a re-zoning involved. Sometimes, there's a tax abatement involved. So it probably takes that many deals to get to the point that we can start reasonable volume year-after-year there.

Our next question comes from Jeff Donnelly of Wells Fargo.

I'm curious on expense growth, what your assumption is specifically in the mid-Atlantic region, and maybe what you can do to offset the expectation of declining revenue? And then outside of the mid-Atlantic, is your assumption for expense growth fairly consistent across the regions for 2014 or is there a lot of variability?

Yes, Jeff, it's Sean. In terms of expense growth, I mean, what's really driving it across all the markets is the assumption for property taxes. Controllable expenses for the most part are going to be in the 1% to 2% range, and it moves around a little bit based on utilities and things like that. So really, for the most part, it's driven by -- taxes are 1/3 roughly of our expense structure. On a portfolio basis, it's probably going to be up 4% to 4.5%, but there is some noise in there in terms of which market's going to have more pressure versus others. And in terms of the mid-Atlantic, specifically, we're going to see some pressure there on taxes that I wouldn't be surprised if OpEx in that market is in the 3.5% to 4% range as an example. You can squeeze controllable so much, but when you've get taxes coming through and that's 1/3 of your expense structure, you just can't get rid of it.

That's helpful. And just one last question. In your presentation, it looks like you expect supply growth to decelerate slightly in 2015 versus '14. How would you handicap the risk if supply growth in '15 improves materially stronger than your expectation at this point, and maybe deals slated for '16 get accelerated? And maybe as an add on to that, how does the supply outlook change if you factored in condos and single-family in your markets?

Jeff, this is Tim. I don't know if there are a lot of condos planned in our markets for the most part. We've generally identified from the ground up all the multifamily deals that are out there. They almost need to have started by, call it, the first quarter of 2014 to even show up in the delivery and the supply chart for 2015. So I think there's probably a greater chance that some of the '14 may– as Sean mentioned some of the '14 deliveries could slide into '15, and that's what might push up '15. But we don't think there's a lot of risk that when you look at the 2 years together, that you'd see significantly more or less supply than what's depicted on those charts.

Our next question comes from Paula Poskon at Robert W. Baird. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: I have a quick follow-up on Dave Bragg's question about personal income growth. I was actually surprised at how robust the projections are. Does this basically negate investor concerns about rent to income ratios? And to the extent you have such concerns, do those vary across your brands?

Paula, this is Sean. In terms of personal income growth, as Tim mentioned, there's a critical ingredient to be able to support rent growth. Right now, across the portfolio, rent to income ratios are basically around long-term averages. And so to the extent that you want to be holding in that range, which is certainly in our best interest as well as the industry's, you do need to see personal income growth to make that work. If we start to see a 5%-plus personal income growth, there's a lot of runway there on rent growth. If you think about it from our portfolio, every 1% or so increase in personal income, given our average income, equates to 4% to 5% rent growth across the portfolio. So if we start seeing 5% personal income growth, it's definitely going to ease the pressure on rent-to-income ratios, and people should be feeling pretty good about what they're paying in terms of their rent across the portfolio.

Paula, this is Tim. Just to add to that, I'm not sure that 5.5% is all that robust, to be honest. I mean so I think personal income growth tracks kind of nominal GDP growth if you think about it over time. And I think we're so focused on real GDP and you sort of add the sort of inflation factor in, I think it's typically in that 5% to 5.5% range. So I'm not sure that it's a well above trend figure. It may be by 50 or 70 basis points, but we're really just looking for the economy to sort of rebound to more normalized levels of growth, which captures the personal income factor as well. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: And then following up also on the NMHC topic. Last week, there was a lot of talk about the strength in secondary markets, the tightening of the spreads and cap rates, et cetera. Any opportunities or temptation to stray from your current geographic footprint?

Paula, not yet, not based upon a one meeting with NMHC, certainly, but... Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: Well, I mean, there's been a lot of talk, obviously, about the energy sector driving places like Western Pennsylvania, Eastern Ohio up through New York, et cetera, as a long-term play. Clearly, the Archstone had assets even in South Florida, which is clearly rebounding. So I just wondered if you -- given that backdrop on a long-term basis if you were thinking more broadly about other markets.

Well, we try not to be complacent about strategy, and it's something we revisit at least annually in terms of our market footprint, as well as the various growth platforms that we're looking to lever in a particular year. But at this point, right now, I couldn't say that there's a lot of interest at this point pursuing those markets.

[Operator Instructions] And our next question comes from Haendel St. Juste from Morgan Stanley.

So can you guys talk a bit about -- more about Boston, near-term expectations. You mentioned earlier that you saw a few projects there, but we've seen some moderation in that market both in your results. Axio, obviously, is a market that held up very well during the downturn. And while rents are well above certain historical measures, looking ahead, too, it looks like supply is expected to ramp meaningfully over the next year, year and change here. So help us understand how you're thinking about this market, perhaps, comparison versus New York City? And then what type of revenue growth are you forecasting for Boston near term?

Yes, Haendel, this is Sean. In terms of Boston, you may want to think about it as sort of a tale of 2 cities or 2 submarkets, which is urban versus suburban. In terms of our portfolio, in terms of what's been outperforming, the suburban markets have clearly started to outperform the urban sector. And so the majority of our portfolio is in the suburban markets in Boston, North Shore, South Shore, MetroWest, et cetera. And as we look forward into '14, the support for our revenue growth assumptions comes from the suburban portfolio. We've got the Prudential Center in the Back Bay and a couple of other communities under construction, but we're expecting those suburban communities to outperform given the limited supply characteristics that we see just based on the pipeline. We can count the projects that are under production in the urban core, as compared to the suburbs, and those are very different numbers. So if you had a highly concentrated portfolio in the urban core in Boston, over the next 12 to 24 months, it's probably going to soften relatively materially. But based on what we're seeing on the suburbs and the fact that a number of those towns are now at or above their 40B requirements in terms of affordable housing, it's probably going to put more pressure on supply downward at the suburbs as compared to even the last decade. So I think you need to think about Boston sort of that way kind of urban versus [indiscernible].

Appreciate that. And obviously, Boston's a market that's been, well, very popular for institutional capital. And given your comments about supply coming online in the core and earlier comments about potential asset dispositions, would this be a market that we should think of, well, pretty high on the list of planned dispositions for 2014?

I wouldn't necessarily say that. I mean, we look at our entire portfolio in terms of trying to identify where the market's pricing those assets as compared to where we think the asset should trade, and what the forward IRRs are in each market in terms of trying to decide which communities to sell. So we evaluate Boston just like any other market. How much we're building in a particularly market does impact that decision as well. We have a fair amount going in Boston. We have a lot going in New York. We have more than $700 million going in New York. That was one of the factors that influenced our desire to consider selling Christie Place, as an example, which Tim mentioned earlier. So there's a whole lot of factors that go into deciding which assets to sell. So we might sell an asset or 2 in Boston, but it's not necessarily targeted for disposition for any particular reason.

Our next question comes from Michael Salinsky at RBC Capital Markets.

Just to go back to kind of looking at the revenue breakout, I know you guys haven't provided data on East versus Avalon communities in the past, but can you kind of break out what your expectations are? Is Boston going to be kind of a roadmap where suburban outperforms the urban assets across many of your markets in 2014 or is that going to be more of an anomaly?

Mike, it's Sean. Don't really have an answer for you on the eaves question specifically. But in terms of urban versus suburban, I think Tim mentioned earlier in his remarks, prepared remarks, that most of supply in many of these markets is concentrated in the urban core. So as we look out over the next couple of years, and you think about what's happening in Boston, what's happening in Seattle, parts of San Francisco, as an example, the supply is concentrated more in the urban core. So it's more likely that the suburban portfolio is going to outperform if you look at just supply as a percentage of inventory in the suburban markets versus the urban markets. And then in particular, as our market research expert, Greg Thomas, reminds us that as housing continues ramp up, you get a fair amount of production coming out of the suburban markets to support job growth in those market that will help as well.

That's helpful. Second question. Tim, your comments, you talked about material cost being up. Can you kind of give us a sense of how much those are -- how much you're seeing there? And also, can you talk about competition for new sites today? How much competition you're seeing? Has that slowed a bit just given the changes in financing and some of the other things you talked about previously?

Yes, first part of your question, Mike, was on material cost, is that right?

Yes, material cost, then can you talk about competition for new entitled sites?

Sure. Matt, you want to take one?

Yes, sure. I mean, well, as it relates to more construction costs more broadly, I think we are seeing a deceleration in the rate of inflation in construction costs. I mean, there's still pressures probably in our markets for most of what we do, which is typically wood frame, maybe construction costs are up low to mid-single digits, 4% to 5%-ish over last 12 months, except probably in California, where it's still materially higher than that, probably mid-to high single digits. But we do see that starting to stabilize a bit in the regions except for California. I'm sorry, what was the second part of the question?

Just in terms of competition for entitled land sites.

Yes, it's a crowded marketplace out there. I would say the sites that were entitled and ready to go early in the cycle and just needed capital and some execution, as Tim had mentioned, those are pretty much gone at this point. And if there's any of those out there, they're bid up to returns that are probably not that attractive to us. We still, in the high barrier suburban submarkets, where there's real entitlement issues, we're still very strong competitors in those situations. So I would say, the Northeast has been pretty stable. Probably, the West Coast is the area that is more cyclical, and where it's probably gotten more aggressive relative to where it might have been a year or 2 ago. And then I guess the other market that's been incredibly competitive has been New York, New York City, specifically.

Okay. And final question, I mean, we continue -- markets move, that ebbs and flows. We continue to talk about how bad D.C. is, but generally, when things look bad, might be the time to start planning developments because eventually they do improve. Is D.C. on the development docket for 2014 or do you think that's a market that's going to be challenged for a couple years and you want to hold off starting new projects in '14 there?

Yes, this is Matt again. We do have a fair amount of development rights in D.C. actually, including several that we picked up from Archstone. So we've been cautious in D.C., but I think you're right that as you look out a couple years out, hopefully, the supply demand fundamentals start to improve significantly, and we can still develop product in the D.C. Metro area at a pretty compelling cost basis. It's still surprising where assets are trading relative to replacement cost. So we may have a start or 2 in the D.C. Metro area in the next 4 to 6 quarters, call it. And we actually do have a reasonable pipeline, looking out to potential '15 or '16 starts in D.C. just based on what we had before plus what we got from Archstone, and 1 or 2 others that we've been able to pick up here in the last year or so, as the land market has started to soften a bit here.

Then finally, just in terms of CapEx for '14, obviously, as you've owned a lot of the Archstone assets now for almost 12 months, got a pretty good handle on CapEx, talked about some redevelopment ramp up there. Can you give us a sense of what you're thinking on in terms of just recurring CapEx in '14 relative to '13?

Yes, Mike, this is Sean. I think I mentioned earlier that '13 was a little bit depressed for us given the focus on trend to really go through the Archstone portfolio and identify the CapEx requirements both near term and long term, identify redevelopment candidates, as well as with some of that work going on, some delays in some of the CapEx for the AvalonBay portfolio. So as you look forward to '14, it's going to be more elevated, and then will trail off. We haven't finalized the numbers yet, but I wouldn't be surprised if we're in the 800 to 900 unit range as we look at '14 in terms of catching up from AvalonBay projects in '13 and getting through the initial rounds of the Archstone CapEx as well.

Our next question is from Jane Wong at Merrill Lynch.

This is Jeff Spector with Jane. Just a couple final questions here from us. On Slide 8, when we look at 2014 job growth, I guess, at least, I was thinking that in your markets, we might see higher job growth than the U.S. Can you just discuss that a little bit? Is that the same markets that dragged your numbers down in '13?

Well, it's -- I'll start, and it's Tim. Generally, we expect to see higher job growth in the West Coast than the East Coast. Seattle is actually a little slower, projected to be a little slower next year than it was in either 2013, or we expect in 2015, that's maybe one anomaly. And Southern and Northern California, Northern California is projected to have the strongest growth in the mid to higher 2s, whereas, I think, Southern California is just a little north of 2%. And then on the East Coast, generally in the high 1%, starting to approach 2%, depending upon the market. D.C., a little softer in 2014, than it would be projected to be in 2015. So I don't know if that answers your question, Jeff. It's really not until 2015 we sort of see kind of all markets kind of firing on all cylinders. A little bit of a story of some markets up being a bit and some being down a bit, but on average, up about 30 bps.

Okay, no, that helps. And then just one final question on deliveries, since it's been such a focus, and at least, we're thinking it's still one of the key risks in '14, '15. When your team is doing their work, I know, of course, we talked about permits and supplies, what else are they looking at? I mean, are they getting information from the managers in the field on what projects they're actually seeing out of the ground and what other steps are being taken?

Jeff, this is Tim. I mean, we've got developers on the ground in every market, and so they literally go through the -- they literally develop a pipeline sort of 0 base, and they know the people financing the deals and permitting the deals. So it's really -- it really is very much sort of a built up pipeline, if you will. And we have found that, that -- frankly, we sort of catch supply before some of the third parties do that way, and so I think we have a little bit more confidence in what we're able to sort of project over what third parties are telling us, which oftentimes, they don't sort of pick it up until it is coming out of the ground. So again, I think in '14 and '15, in terms of deliveries, we're not that concerned whether we've got -- whether there may be some surprises in our markets. When you look at them collectively, I think you got to go further out before -- just give it a gestation and production cycle on most of these deals before we have a lot of concern there. And we just don't see, again, for the comments Matt had earlier, and maybe before that, the same -- just the investment going into long-dated entitlements that's going to produce extensive housing -- multifamily housing in our markets. We are talking about levels that are about 2x historical norms, just to be clear, which this is the time of the cycle you would expect that to happen, and so we actually do see 2016 supply starting to come down, deliveries actually starting to come down in our markets.

Okay. And then our last question was just on one of the comments at the beginning of your prepared remarks, what was the forward unlevered IRR range you provided on the historical assets you've sold?

Sean, maybe -- I think the question is what was our projected forward unlevered IRR and assets that we sold, maybe just talk about '13. The back [indiscernible].

Yes. I think Tim quoted a market cap rate for dispositions over the last decade or so, not necessarily a forward IRR. But in terms of assets that have been sold recently, the forward IRR of those assets based on our models and our assumptions about revenue growth, expense growth, is in the, call it, the low 6% range, somewhere in that ballpark.

Our final question is a follow-up from Derek Bower.

I just had a quick follow-up on D.C. rent trends. It's interesting that renewals accelerated as new leases continued to hold negative. So how long do you expect that trend to hold or do you expect new leases to start to turn positive in the spring?

Yes, Derek, Sean. There's a little bit of seasonality in that. And if you think about the fourth quarter kind of broad picture, supply ramped up to a higher level, which is again a level we expect to see through the first half of '14. There's also a pretty significant amount of uncertainty. It wasn't that long ago in September, October, November in terms of discussions about the budget and debt ceiling and sequestration that people were uncertain about paychecks. So the fourth quarter certainly had not only a seasonal slowdown, but I'd say some uncertainty that really prompted some difficult market characteristics. As we move into January, we typically start to see things ramp up. Even though D.C. is decelerating and is weak, it is still following that same seasonal pattern, where you're seeing renewals more in the 4% range. So how long can that last? It depends on a lot of different factors that I can't give you a great answer to other than we would expect first quarter, second quarter to ramp up relative to the fourth quarter given the seasonal patterns. At what absolute levels is hard to predict. It just really depends on the demand side at this point.

At this time, there are no further questions, and I'll turn the call back to Mr. Naughton for some closing remarks.

Well, thank you, Lauren, and thanks, everyone, for being on the call today. Hopefully, you found this new format helpful. We'll be reaching out and seeing if you did. But we look forward to seeing many of you over the next month or 2 and a number of you at the Citigroup COO Conference in early March. Thanks again and have a nice day.

And this concludes today's conference. You may now disconnect.