Good day and welcome to the Equity Residential 1Q 2016 Earnings Call. Today's conference is being recorded and at this time, I'd like to turn it over to Marty McKenna. Please go ahead.

Thank you, Kayla. Good morning and thank you for joining us to discuss Equity Residential's first quarter 2016 results and our outlook for the year. Our featured speakers today are David Neithercut, our President and CEO; David Santee, our Chief Operating Officer; and Mark Parrell, 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 law. 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. And now I'll turn the call over to David Neithercut.

Thank you, Marty. Good morning, everyone. Thanks for joining us today. We're very pleased to have had another very solid quarter of operations, growing same store revenue of 4.6% in the quarter, holding property level operating expenses flat, and delivering another very good quarter of 6.6% growth in net operating income. As is well known, the West Coast markets continue to lead the pack, while our East Coast markets deal with new supply. That, while being reasonably well absorbed, does continue to negatively impact our pricing power. As David Santee will discuss in more detail in just a moment, unlike 2015, this year we've experienced a more normal seasonal occupancy and pricing pattern that caused us to modestly reduce the midpoint of our expected same store revenue range for the year. Nevertheless, our current expectations are for another very strong year of revenue growth, growing again above long-term historical trends which continues to demonstrate the strong demand for rental housing in high-density urban and close and walkable suburban locations in our gateway coastal cities driven by a very strong and now positive demographic picture. So with that said, I'll let David go to more detail about what we're seeing across our markets today our current outlook as we enter our primary leasing season.

Thank you, David. Good morning everyone. Today, I'll provide color on our Q1 operating results, focusing on the four key drivers of revenue growth and the impact of those results on our full-year guidance, followed by what we experienced in each of our markets during Q1 and the direction we expect each to take for the balance of the year. I'll close with a brief update on expenses for the quarter and full year. Our 2016 revenue guidance assumptions were based on the expectation of maintaining the 96% occupancy we had in 2015, achieving the same level of rate growth that was achieved in 2015 comprised of the renewals averaging 6% and new lease rates averaging 3%, the turnover being flat. 2016 is shaping up to be another one of the best years we have had with our expectation of continuing above trend revenue growth and very manageable expense growth, leading to very good NOI growth in our same store portfolio. For the quarter, occupancy was exceptionally strong at 95.9%, but appeared to show a return to the normal seasonal pattern. One of the reasons that 2015 was an exceptional year of performance was that we did not see the typical seasonal occupancy dip at the end of 2014 and beginning of 2015. We have seen that seasonal pattern return but at 95.9% occupied, we are still a solid 50 to 70 bps higher than years past. The result of more seasonable occupancy in the quarter we've seen concessions into some markets and more significantly, in our New York City market, specifically Manhattan, there is new supply pressure on the West side. On the flip side, we saw improving occupancy in Southern California and Washington, DC. Based on what we saw in Q1, we are expecting to see some seasonal…

All right. Thanks David. Noted in last night's earnings release, we acquired three properties in the first quarter, one each in Brooklyn, Los Angeles and Seattle, for $204 million in weighted average cap rate of 4.9%. Now you may recall, we said that we had some cash protection obligations with some unaffiliated third parties arising from the Starwood sale that would be covered with approximately $300 million of acquisitions. So this activity, along with acquisitions in the fourth quarter of last year, have satisfied that responsibility. In addition to the first quarter disposition activity we discussed on our last call, which included the Starwood transaction in the sale of River Tower Manhattan. During the quarter, we also closed on the sales of seven other non-core assets, totaling 2,577 apartment units. The largest of those deals was our 1,811-unit Woodland Park property in East Palo Alto, California, which we acquired out of foreclosure in late 2011 for $130 million. I was very pleased to sell this asset for 412.5 million and realized an unlevered IRR of 37.2%. We also sold four properties totaling 274 units in Massachusetts, one property in South Florida, and one property in Denver. Our transaction guidance has not changed for the year and as a reminder, calls for $7.4 billion of dispositions. This is comprised of about 6.2 billion from Starwood, River Tower, and Woodland Park, an additional $900 million of non-core sales, the gains from which would be included in the special dividends paid this year, which Mark will discuss more fully in just a moment. At $300 million of activity to occur, if and only if, we can find suitable acquisition opportunities for which we are willing to trade out of current assets. But I'll tell you, we're not working on much of the present time and by way of new acquisitions, so this activity, if there is any, will occur towards the back end of the year. Of the 900 million of non-core dispositions to have occurred this year, which will not be reinvested in new acquisitions or developments, about 150 million was closed in the first quarter, leaving 750 million yet to be closed this year. Because of the average size of these deals, this represents a significant number of transactions and the team is hard at work to get all this done by year end but it is possible that some of this activity will slip into 2017. With regard to the development business, while we did not start any new projects in the quarter, we're currently working on $380 million of deals that could start construction yet this year, with a weighted average yield on cost at today's rents in the mid [5%s] while it's possible we can get all of this underway this year, it's also possible that some of this activity will slip into early 2017 as well. So now I'll turn the call over to our CFO, Mark Parrell.

Thank you, David. I want to take a few minutes this morning to talk about our guidance revisions for 2016. I will also discuss where we stand in terms of the remaining special dividend payment and review some of the changes we made to our press release and to our supplement. As David Neithercut discussed, portfolio wise, 2016 will be another very good year for Equity Residential. And as David Santee mentioned in his remarks, our New York performance is slightly below our expectations for the year, making the very high end of our original guidance range unattainable in 2016. As a result, we have revised our guidance range for same store revenues to 4.5% to 5%, from 4.5% to 5.25%. On the same store operating expense side, we have revised our guidance range to 2.5% to 3%, to about from 2.5% to 3.5% growth for the full year. The mathematical results of all these changes, the same store revenue and expense guidance, is to reduce our NOI range to 5% to 6% from our previous guidance range, which was 5% to 6.5%. The impact of this on normalized FFO was relatively minor, about $0.01 per share negative. Switching to our normalized FFO we have narrowed the range of our normalized FFO for the year to $3.05 to $3.15 per share, which maintains our $3.10 per share midpoint. This is being driven by our expectation for slightly lower same-store net operating income and for higher G&A costs than we expected. These negative variances are being offset by the additional NOI from owning our disposition assets longer than we had expected. While we have maintained the dollar amounts of our transaction guidance, we have moved back the timing for our remaining dispositions and acquisitions from occurring relatively evenly over quarters 2,…

[Operator Instructions] We’ll take our first from Ross Nussbaum, UBS

Hey, it's Ross Nussbaum with Nick. Two distinct questions. I guess the first is, is there any way you can navigate the tax waters and shift gears to move towards a stock buyback versus the remaining special dividend you have planned given the decline in the stock has occurred here of late?

Not really with the PRIM sheets from dispositions that we have announced for us; these are assets, many of which we have owned an awfully long time and the gain is significant. We made that pretty clear when we first announced this deal. However, many months ago that the, in order to right size a balance sheet, we'd be thoughtful about doing something on an unlevered neutral basis and then just dealing with the gain, there would be very little proceeds left over for the stock buyback.

Okay, and then operationally, I understood the comments about seasonal patterns coming in with the addition of the supply, but I guess my question is, how can you really tell the difference between the seasonal occupancy impact and the supply impact? Or maybe said differently how do you know that the erosion of rent growth that you saw wasn't purely by DRIP.

Ross, this is David Santee. I guess I would say for the past several years, we had several, I mean, all of the markets have had significant levels of new deliveries and we've seen that when properties go head to head, but when you see softness in occupancy across the entire market, that impact like a San Francisco, what have you, where occupancy is softer and your exposure builds up across the entire market, then that's more of a sign that seasonality is back versus like a SoMa, where occupancy fell to probably 93% or 92%, which was a direct result of new product in downtown and in Mission LA. So it really just comes from understanding the flow of the numbers and doing this for 30 years.

Got it. I think Nick's got a question.

Yes, hi. Just one sort of bigger picture question was, it seems like the market is having more concerns about new supply impacting more urban areas. How do you think about your own portfolio and I know you haven't really done this historically but thinking about perhaps doing some joint ventures of either existing assets or future development pipeline just to show sort of the market that there's still a lot of value in the portfolio and if not, really reflected in the stock price today?

Well, I think that there are and while there maybe have been fewer transactions maybe in the first quarter of this year, Nick, I think that there are often very meaningful transactions in our space and across our markets and that clearly demonstrate what NAV is of our portfolio. We sold a property in Manhattan at a low 3% yield, more than $1 million a door, so I think we did do a transaction ourselves which kind of clearly demonstrates what the value is of these assets. I'm not sure we need to do anything specifically. I think that there's enough activity going on around the marketplace, I think that clearly demonstrates where NAVs are, the demand for assets in these markets, the yields at which they trade, which suggests that we've got a significant amount of value in our portfolio above where we may be trading today.

We'll take our next question from Nick Joseph with Citi.

Thanks. Looking at same-store revenue growth guidance for the last seven years, you have either met or exceeded the midpoint of your initial guidance each year and then you just talked about that the likely shortfall this year is caused by a return to more normal seasonality. So what was assumed in this year's guidance in terms of seasonality versus past years when you initially issued guidance? And now that we're six months past when you initially gave that guidance, what's the biggest surprise that you didn't initially expect?

Well, I don't know if it was a surprise. I think in my comments, I said we really just expected 2016 to mirror 2015. And I would say that in hindsight, 2015 was an anomaly year in the 30 years that I personally have been doing this. You know, occupancies did not decline in Q4. They did not decline in Q1. I mean places like San Francisco saw a 100 bps pick-up in occupancy, with rates continuing to grow versus the typical seasonal softening of 3% to 5%. So really, I don't know that I'm surprised. I'm disappointed that the market doesn't, isn't as fantastic as it was in 2015, but nevertheless delivering the 4%-plus revenue growth is still a very strong number.

Thanks. And then just competing with new supply is 2016 the peak year for your submarkets and can you talk about expectations for 2017?

Well, again, it's different by market. Certainly, Washington DC will be much more palatable this year, coming off delivering two years of 30,000 units. Everywhere else, Boston is down. This year, New York is relative to what looks to be coming in the future is manageable. Let's see, San Francisco, you know, San Francisco is, I think, is more of a matter of concentration of assets. I don't know that you can oversupply apartments in San Francisco. Seattle is certainly very manageable. This is a peak year for Seattle about 7,000-plus units but it will fall off in the next couple of years. LA, you know you'll see continued 10,000-plus units probably for the next couple years but that, again, is a very large geographic market that you're talking about so it's more about concentration and submarkets of where these edicts get delivered, and then Orange County and San Diego really negligible.

Thanks, and then finally, Mark, you mentioned the core FFO should trend up over 2016, and I think last quarter, you mentioned that 4Q, it should be around $0.80 a share, a little higher so given the updated guidance both same-store and transaction, what do you expect the run rate to be at the end of the year?

Yes. It's about the same. There's no change, we didn't change the midpoint. So we feel the same way.

We'll take our next question from Steve Sakwa with Evercore ISI.

Hi. I was wondering if you could maybe share your expectations about what you think turnover and then renewals and new lease figures would look like for the second quarter and for the full year? Just in total.

Steve, so we really don't see any turnover. In fact, if you look at market by market, almost, a lot of the market showed 20 to 40 basis point declines. Boston had 180 basis point decline that -- I'm sorry, increased that overshadowed that. So, it's clear that once people get situated into their neighborhood and enjoy their lifestyle, they're not going to move unless it just becomes totally unaffordable. So we would expect turnover to continue to decline, as it has for probably the past four or five years. Renewal rates, we expect more of the same. I said in my prepared remarks that we would expect to average 6% for the full year. We've averaged 6.2% for the quarter. It looks like we'll get 6.2% for the second quarter, and as we get into peak leasing season when full on demand and I don't see any softening there. The problem is really rate and the level of new supply that competes head-to-head with our properties. Again, as an example, in downtown Boston, 60% of our revenue comes from the urban core, from probably four or five assets where rent new lease rate growth has been zero. So when you're getting 4%, 4.5% on a renewal and then someone moves out, you're giving back that 4.5%. So the real pressure will be new lease rate.

Okay and is that number 2.5% for the quarter and the 2.5% for the year?

That's what we're saying now, about 2.5%.

2.5% to 2.75% [ph].

Okay. And then I guess David, you sort of talked about some personnel changes or rightsizing. Maybe Mark made a comment as well about the severance. Can you maybe just talk about what areas that's in? Is that in market research? Is that in development? Is that in asset management, property management? What changes are you making at this point?

Well, I guess without going into a great deal of detail, Steve, clearly, we solved 20% or so of our units sold this year and we'll have to look at every function and make sure that we properly right size given what to do with unit count is going forward.

Okay. And I think on the development front, if I did my math right, about 60% of the under construction assets today are in San Francisco. And I don't think you provided necessarily a specific yield either on each one or certainly in aggregate, but just as you survey the development yields and the development projects today, how do you assess your ability to hit pro forma, given what's going on in San Francisco today?

Well, I mean really nothing's changed, we continue to be very well. We've delivered a couple of properties there one in San Jose and one in the Mission Bay and have done very well and looking at where those deals we trade at today; we've created considerable value. And the other transactions in San Francisco have been low 6s, mid 5s, may be to low 6s, and at the present time, we think we'll be just fine there. We really look at these as we start based upon where their yield based upon current rents, that's where the trend, continuing to trend rents, low double digits, high single digits, so as you look at lease up absorption of what we've done, absorption has been very strong and what we've achieved has been very much in our wheelhouse. So, and we continue to feel very good and again, I guess I just want to emphasize this. We think about building these products. I mean, really think about building long-term strings of income, not so much just what things will yield upon delivery but really try to think about investing capital over an extended time period. So well, half of the deals we'll get, we're quite confident that their locations and product that we're building will be happily owned for an extended time period.

Okay, and then I guess just last question for David Santee. Taking your expectations down a little bit but if you kind of just look at and assess the risk upside, downside from here, what markets or what things could maybe potentially surprise you to the upside and what things could maybe be downside risk to these revised numbers?

Well, I guess I would say if DC continues to gain traction, that could certainly be accretive to the upside LA, all of Southern California, is trending ahead of our expectations. You know, we also, just another data point, you know, back in December, it was clear that in many of our markets, that our employees were being challenged in finding places to live and so we implemented a larger employee discount. I mean, some of our employees in San Francisco were driving two hours, 2.5 hours to do an emergency service call. So we increased, on a market by market basis, we increased the employee discount. As an example, in San Francisco, that cost us 40 basis points of revenue growth in Q1. So we, without that increase and floor concession, we would have done a 9.9%. So you know, there's some little volatility in these employee concessions line and really, we have a lot of visibility into rate which we've already kind of adjusted for, we've already issued renewals through June, and really, once you issue renewals through August, you know you're pretty much baked for the full year so then it comes down to having a strong occupancy finish in Q4.

We’ll take our next question from Conor Wagner, Green Street Advisors.

On the 3Q call, David, you mentioned the process that began last spring when the stock was trading at a meaningful discount to NAV which ultimately led to the Starwood sale. How long did this NAV discount need to persist for you guys to start another process and what options would be on the table?

Well, I guess I'll just answer your last part of your question first. I think all options are on the table. I think that, I think we're in a little different camp than what many on the sales side think with respect to the magnitude of the discount and how long that needs to persist before one takes a lot of the actions that you all think one should and I guess I can only tell you that we have been a stock acquirer in the past. We will not be afraid to do so again and we will monitor the situation. I think that our actions with the special dividend suggests that we try and do what's right by our shareholders and if doing a stock buyback makes sense, then we can, are able to do so on a balance sheet on a neutral basis, we will certainly consider that going forward.

Thank you. And for David Santee, were there lower lease expectations in 1Q this year versus last year? And can you give us your estimate for lease expirations in the coming quarters?

Yes. So we moved 8% of lease expirations in Q4 and 8% of lease expirations in Q1 into Q2 and Q3, I'm sorry, yes, Q2 and Q3. So the peak leasing season is really that much more important for us.

We’ll take our next question from Jana Galan with Bank of America Merrill Lynch.

This is for David Santee. If you could comment on how rent, as a percent of income, is trending in your markets? And then with the revision of guidance, mostly on lower new lease rate expectations, is there any risk to renewals due to affordability concerns?

You know, I mean, every market will show, as rents escalate rapidly, just as San Francisco did two, three years ago, where 29% of our move outs were due to rent or just the increase being unmanageable, but yet, there were people waiting in line to backfill them and you're going to start to see that in Southern California, but as we said before, I mean, we use the same rent qualifier, 3 times the rent. So we only measure a person's income when they move then. So really that rent to income ratio never really changes. It's very, well, it's virtually impossible for us to track changes in people's earnings, as they live with us for three or four years. So no impact to the rent to income ratio and the move outs due to rent increase to expenses will fluctuate market by market depending upon the velocity of rate increases.

Thank you. And you've broken out the retail and the garage exposure versus rents. I was curious if there was a particular concentration in any market like New York and Boston or is that pretty much distributed around the six core markets?

Hi, Jana. It's Mark Parrell. So on Page 8, the change overall for the Company on average rental rate was about 4%, so this is 4% lower than what we would have reported under our old methodology, there's really two or three markets where that's concentrated. New York, we would have reported a number instead of 3,740, more like 4,000 and that's just because we have a lot of retail in that market, a lot of garage operations. In Boston, similarly that would have been about 2,900, so about 10% difference because again, that market has significant garage operations and some retail. And Seattle is the other one that was not as significant where it's maybe $100 higher in that market as well and everything else was de minimus.

We will take our next question from Greg Van Winkle of Morgan Stanley.

Hey, guys. Is there anything notable you see happening on the demand side of the equation in any of these markets? We certainly see the supply issue but I think if you go back and look at historical cycles, it seems like supply can cause some softening for sure but it takes a shift in demand to really make or break a cycle. So I'm just kind of curious what you're seeing on the demand-side in markets like New York and San Francisco?

Yes, I guess I would say other than New York, demand is very robust. I mean, our occupancies, I think, reflect that being 96% plus. I think the challenge in New York is the disparity between the luxury apartments that have been delivered and will be delivered versus the mix of job growth quality of jobs that are being delivered in New York City. So a lot of tech jobs, a lot of marketing jobs, probably in the $90,000 to $100,000 range, but it takes $130,000 a year in New York City to afford a one-bedroom apartment. So you've got a glut of luxury, a lot of the condos are adding pressure as well. Just a bit of color at our Prism Property, a resident bought one of the condominiums and rented it for $800 less per month than our rents. So it's just there's some crazy stuff going on in New York.

Okay. And then, two, is there anything in particular that's change since mid-March? I think at the Citi Conference, you guys said you were about where you thought you'd be at that time of the year, that may be some markets were doing worse than expected but others were doing better. And that you were about where you thought you would be so was there any one thing or one market that really got a lot worse than since then? Or was it just kind of all of the things you've already talked about, continuing to be an issue?

I think it was mostly New York. We had some significant concessions that ended up as a result. We talked about New York at Citi, the concessions grew through March and ended up being a little larger than we had expected. But other than that, nothing else has really changed.

We will take our next question from Jeffrey Pehl with Goldman Sachs.

Hi, thanks for taking my question. Just a quick one on portfolio exposure, how you feel about your current suburban exposure relative to the urban and rest of your portfolio? And then how do you believe your suburban assets versus urban assets will perform in 2016 and 2017?

Well, I guess that we're happy with our allocation. We're in high-density urban kind of markets as well as sort of closed-in walk-able more some suburban locations. We feel that we have an appropriate sort of mix of A's and B's, if you will, within that. We're really focused more, frankly, on markets and as a kind of agnostic, as it relates to property quality. We've talked in the past and I think that we've had a lot of a disproportionate amount of new supply as of late in that in the urban core and they're expecting that to move more out into the suburbs. So I think that, a lot of that performance will be a function of where new supply is and we think that the suburbs might have missed some of it over the last several years but will get their fair share going forward.

We will take our next question from John Kim with BMO Capital Markets.

Good morning. David Santee, you mentioned that there was disproportionate increase in vacated premium units during the quarter. Can you clarify how you define premium and were the exit purely a function of new supply or were there other factors that led to this?

So how we arrived at that is we had this process called early lease termination where people can buy themselves out of their leases for a month-and-a-half to two months' worth of rent. What we saw was a 25% increase in that income quarter over quarter, but really, the same number of lease, early lease terminations as last quarter. So the math tells you that those people that bought themselves out of their lease were paying a much higher rent.

And how concerning is this to you as a premium rent landlord?

It was -- it only cropped up in January and February. But, again, I mean, people have different reasons for buying themselves out of the lease, whether they are buying a home or they're getting transferred overseas, what have you, but I think the important thing is, is that the number of people doing this did not change. It just happened to be more high end units.

Okay and then a question on your development yield on stabilized assets. They trended down over the last couple quarters and I realize this could be due to mix this quarter, Prism was going stabilized development. But overall, did these yields come in below your expectations?

No, generally they were in the ballpark. I think what's happened is that the deals that were started earlier in the cycle with the expectations for higher yields roll off the page, that means those transactions, development projects that have started more recently on that which we knew going in, would have lower yields, remain on the page. I think that generally, we are getting within the ballpark of our expectations and certainly from a value standpoint, I think are exceeding our expectations with respect to the underlining value of those transactions.

We'll take our next question from Rob Stevenson with Janney.

David Santee, in your New York attachment in your outlook, are you expecting any softness in jobs in the city in that?

No, I mean we still see good job growth. I think when you look at the mix of jobs, there's obviously pressure on financial services jobs. And then when you and then really when you just look at the deliveries, as I mentioned in my comments, the Upper West side, Midtown West, you have a lot of deliveries. And there are parts of town that are more appealing or more hip, so to speak, to Millennials or other folks and so there's just more pressure on the Upper West side where we derive 30% of our total revenue.

Okay. And then, Mark, I can't remember if it was you or David Neithercut was talking about potentially $380 million or so of development starts during the year, if I look at your development pipeline, there's about 154 million of book value of land. Does that -- if you start that 380 million, does that basically take you down to land parcels for only one or two incremental projects or is there still a decent amount of land for future development on the balance sheet?

What's on the balance sheet, Rob, is product that would only really go through 2017. We've not been replenishing our land inventory at a rate anywhere close to that at which we've been putting projects under development so the coverage is getting quite bear with respect to land.

Okay. And I mean, from the standpoint of out there today, I mean given the commentary of construction, et cetera, are you starting to see any softening, given the -- you guys not being able to hit lease up pro forma, et cetera? Or is it still at the point where between that and condos and other uses, the land prices is just still too rich for to pencil for you guys?

I think the latter. I think you've answered your question. There just continues to be a great deal of demand. A lot in our markets, a lot by the condo side. But it's very difficult for us to pencil. I mean we sold a piece of property in the first quarter because we felt we'd rather monetize the value of the land rather than do the constructions and we didn't think the yield necessarily made sense for that particular location. We continue to underwrite new development potential. We do believe that building new streams and long-term shares of income is a great strategy for us and will be a core competency of ours but as you noted in the tail end of your question, that land pricing is tough. Construction costs are up and yields are down and we just, again, have taken a little bit more of a conservative approach going forward. Recognizing that we have delivered a lot lately, still got a lot underway that we'll deliver in the short-term, all of which, as I noted earlier, is probably getting yields very much close to what we had expected and have created value significantly more than our expectation but we just sort of think we're at a point where we've got to take a little bit more cautious approach.

Okay. And then just real quick, lastly, do you guys see any markets where you're seeing any notable condo conversions from apartments?

Not really. Not really. The condo conversion business is a, you know, it's a risky business and our markets requires an awful lot of capital just simply to acquire there what would be a fully-leased rental property and then to go through an extensive renovation of that property and I sell out is just a long process and we have not seen a great deal of that activity in any of our markets.

We’ll take our next question from Tayo Okusanya with Jefferies.

Just two quick questions from me. The first one, after sales being pushed back a little bit towards the back half of the year, could you talk a little bit about just how much additional earnings you're getting from that versus the original plan? Where you got your more asset sales a little bit earlier?

Hi, Tayo. It's Mark Parrell. Sure. So we really shifted things more into the later third and fourth quarter when they had been more evenly spread than before and that's worth somewhere between $6 million and $10 million, depending on when exactly you put those numbers in and that offsets the increase in G&A that I spoke of and the slight decline in NOI and that's why you didn't see our midpoint move.

Let me just follow up on that, Tayo, if I might and this has nothing to do with any change in demand for these assets it's just the process we are going through sort of metering out, just bringing these assets to market in these locations, either Western Massachusetts and in, around Hartford, Connecticut, that we intend to sell. So the process is going about as what we had expected, pricing wise, the amount of interest, et cetera, it's just, we just think it's going to take a little bit more time. But it has nothing to do with any change in the demand for those assets or the valuation of those assets.

Okay. That's helpful. And then your 2Q normalized guidance, the midpoint is $0.76; you came in at $0.77 in 1Q. We're going into a seasonally stronger quarter for you guys. Is the decline purely because of all the asset sales in 1Q?

Well, they start with $0.76 because that was this quarter. We reported $0.76 and at this point is $0.76 again. I mean when we're looking at next quarter, we do see increases both in same store and in non-same store, but what you're really going to have happen is the impact of some of this disposition income sequentially. Because remember, we did own Starwood for one month of the first quarter so that's why you really see that lift that usually comes between Q1 and Q2 and FFO gets muted and be about flat.

We’ll take our next question from Alex Goldfarb, Sandler O'Neill.

Yes, good morning out there. Just a few questions here, first, David Santee, did you say that as you guys were planning 2016, the seasonality you were mirroring 2015 or that's just as you're looking at the situation now?

So when we gave our guidance, which we gave I think back in October on our Q3 call, the assumptions were, was that we would not, we wouldn't see any seasonality enter the market just as we did not see the seasonality in Q4 of 2014 and Q1 of 2015. We assumed the same turnover and we assumed rate growth would be actually identical to what we experienced in 2015. So when you look at our top line, you want to refer to it as the rent roll. We are trailing behind that a tad, so can we make that up and still achieve our month over month growth targets? Certainly we could, but we feel prudent to assume that we did see seasonality creep back in, in Q1. We can only assume that 2015 was an anomaly year and that it will creep back in, in 2000, I'm sorry, in Q4 of this year and beyond.

But just sort of curious, I mean, 2015 surprised a lot of people with how strong it was at this point in the cycle. So just sort of curious, why you guys thought then that 2016 would mirror 2015 versus a more normalized year, if last year surprised most people with its strength?

Well, I guess when you look at the key revenue, drivers of revenue, we're pretty much on target, we're pretty much on target on occupancy. I mean, we could have stronger occupancy in the peak leasing season. We're ahead on our renewal rate expectations and really, a lot of the rate growth that we're discounting guidance from is in New York City. So I think New York City just turned very quickly and more deeply than we expected, and but is already showing signs of kind of returning to normal. I mean, new lease rents are still under pressure, but we're still doing well on occupancy. We're 98% plus occupancy there. And so I really think it's just New York is 20% of our revenue. So if you can't, roughly 20% of our revenue so if you can't achieve 3% or 4% rate growth there, then it's going to impact your full-year growth.

Let's put this a little bit into perspective, Alex. You know, we're still within our range. We had within our range for this year the possibility, the potential that the 2016 occupancy curve would look like 2015. And it's not and so we're, but we're still within our range and the change in this guidance is just 10-plus basis points, 20 basis points and it's still delivering with what year is, on a historical basis, extraordinarily good results. So I just want to put all this in perspective.

I appreciate that. And then the second question is on New York, just given absence of 421a and it doesn't seem like anything is going to get resolved soon, it would almost seem like the market is set up to accelerate the absorption of all the supply if new development starts to decline. As the surge at year-end last year, as that stuff gets to the pipeline, it would seem like New York could actually accelerate given the lack of new supply going forward. Do you guys have a view on that?

I guess we're tracking supply across our markets, Alex, and then maybe just the best way to address the question is to go back to one of the prior questions about what we're seeing about demand and absorption. We continue to see a significant amount of demand to live in these markets, to live in these kinds of properties. And in Seattle and in DC, where we had a lot of new supply, that was absorbed and occupancy stayed very strong and in Seattle, we saw, still saw a very strong revenue growth. We think the demand will continue to be very strong in New York. As David said, we are already beginning to see some recovery from a little bit of softening that we saw in the first quarter. We don't really see supply that we think is going to really overwhelm that demand. We might lose a little pricing power from time to time but long-term everything is pointing upwards and to the right.

We will take our next question from Kris Trafton with Credit Suisse.

Hi, guys. I just wanted to circle back quickly on Northern California and what you're seeing in leasing there? Could you maybe compare what you're seeing with Potrero versus maybe Vista 99s in San Francisco versus San Jose, and then maybe compare what you're seeing in San Francisco now versus maybe Mission Bay lease-up and towards the middle or end of last year?

Well, I guess it's a little difficult to kind of compare some of these but I guess, I'll tell you that the absorption at Potrero has been very strong. We had pro forma 25 units a month and we've been doing 36 units a month. Out of Vista 99 we pro forma 20 a month, and we've been doing 37 a month, and at rates that are actually better than what we had expected. The thing I'll just caution you about those absorption levels, at the very early stages of leasing, you tend to get a lot of absorption because you've been taking names and building a wait-list and so you kind of have a little rush through the front door and so you don't want to be carried away by those statistics that you see early on. But at least, all signs are that we're going to do very well there, both at those two transactions, both with respect absorption levels as well as to the rental rates that we'll achieve. And as we're dealing with or near, kind of completing in Mission Bay, we leased a 27 units a month which exceeded our absorption levels and essentially getting rates that were right in the wheelhouse of what we expected.

Great. That's really helpful. And then just one other question on when you announced the Starwood deal, you were pretty explicit in terms of not being able to get any G&A savings. I guess one, one, what changed from that? And then two, what would be like a good run rate for G&A going forward maybe in 2017?

So, it's Mark. We said there wouldn't be any savings in G&A and indeed, there isn't at this point. We moved the midpoint of our G&A, guidance actually up just now to account for some severance cost that we discussed earlier in the call. I certainly think that the midpoint now at $59 million will be considerably lower next year. I'm not sure that I'm ready to say exactly what that is. I'd also expect that property management will go down. I mean we have severance costs in both of those lines. We have run rates of employees that were part of our Denver and South Florida portfolios. So I mean those numbers will generally decline, offset by just the normal raises and resets of accruals and stuff. But I'm not sure I can give you an exact number for overhead at this point.

We'll take our next question from Wes Golladay with RBC Capital Markets.

You guys highlighted supply pressures in various submarkets. I'm wondering how much of this is just transitory? Do you see it persisting into 2017 for any of the submarkets?

This is David Santee. So Boston is probably a good example of where a good majority of the new deliveries has been in, call it, a two-mile radius of the financial district where we re-derived an outsized portion of our revenue. When you look at occupancy over the last several years, you still maintain 96% plus occupancy. You've still been able to achieve renewal rate growth. You're just not getting any new lease pricing power. With a lot of those units delivered and fully leased up, there is nothing coming online until the first of '17. So, we will see as we enter peak leasing season, if pricing power returns to that market, but I guess I would say every market is different. I mean, Seattle, we delivered considerable new product that goes head-to-head with some of our communities, but the demand has been so great from the growth in Amazon jobs downtown, it had zero impact on the new -- on our existing same store assets. So I think it's more of a market-by-market discussion.

We'll take our next question from Tom Lesnick with Capital One Securities.

Thanks. Just a quick one from me. Switching gears entirely, but looking at the Archstone portfolio and given the age of some of those assets, what's the remaining CapEx requirement there? Can you provide us some sense as to how far long you are in refreshing that portfolio?

Well, I guess I don't have any specific statistics for you on that portfolio alone, Tom. But I will tell you that we have identified opportunities in those assets, as we have in our own but we do rehab, kitchen and bath rehabs and refreshing opportunities in those assets. And we think we'll deliver a very strong return in the mid-teens and we are in the process of going about that. With respect to general CapEx, our assessment was we've got those assets, if those were not lacking, then starve the capital in any respect but we are addressing the opportunities we believe that there will be in the interior. So I would think that the run rate to CapEx for those assets would be not too dissimilar to the run rate of CapEx of our assets of similar vintage.

[Operator Instructions] We'll take our next from Pete Peikidis with Zelman and Associates.

Hey, good afternoon guys. It's actually Ivy Zelman. Thank you for taking my question. I really appreciate all the detail and disclosure you provided. I've just -- really into New York City, recognizing you talked about an initiative, I think David, you talked about how you tried to hold the lines but then you had to capitulate to the questions that you saw. Do you have any way to frame that in terms of like the type of incentives? Is it like one-month free rent, three months, and just thinking about the portfolio at large, how does that compare to your strategy on normalizing a lot of operators given those months free and some exclude -- increase it to three months or they get cash? So that's my first question and I have a follow-up please.

Yes, I mean, when you look at our -- when I look at our concession line, we virtually run concession free, so to speak. In the last downturn, we had or in 2001, we had $40 million in concessions. In the last downturn, we were down to $4 million in concessions. So, we really believe in our net effective pricing program, and we try not to confuse the customer with whether it's $3,000 gift cards, which is, it's really not an administrative task that I would like to take on. So, it just became clear that has concessions, whether it was the gift cards, whether it was too much free or whether it was free vacuum cleaners, what have you, people would come in and prospects and expect, what are you going to give me. And basically our response is this is our rate. They had no point of reference, whether that rate compared to what someone else was offering them, whether it was the gift card or more free months' rent. So we started to see pressure on occupancy. We are more focused perhaps on providing incentives at the broker level versus at the prospect level. But that's what we saw and it started the impact on our occupancy so we ended up doing some concessions late March, late February, and through March, that really cost us about 50 basis points in growth in, for the quarter in New York.

And just to follow-up on that, so that has now diminished in terms of the need for the concessions and recognizing as a companywide, it's really only New York City where those concessions accelerated for the quarter?

Yes. As an example, and we have a look-forward that allows us to look forward, concessions in New York were probably $600,000. We expect them to be below $200,000 in April and even lower in May.

That's great. Thank you for that. And my follow up question just relates to a question earlier about, you mentioned the lack of condo conversion and the costs and expenses, that makes tremendous sense. But on the flip side in New York City, there's a tremendous amount of for sale condos that's also coming delivered at this year and next and there's estimates, not my estimate, but estimates out there that it, for several, five years I've heard so a lot of the condo developers that are privately held companies are contemplating, maybe reconfiguring or going to the rental market. What, in fact, have you heard on that front or is that a potential headwind that you may not have incorporated into your outlook?

We haven't heard that, Ivy, yet. We have seen it in the past in markets that sort of had a lot of condo inventory that is not selling and people had sort of switched to apartments. You know, while it certainly is apartment supply, many of those properties that we've seen in the past are significantly larger units than ours. They are significantly better appointed and better pictured and so the rents on those are significantly higher. It's tough to compare a one-bedroom apartment property we've got with a brand new one bedroom that might be 50% larger in size with the amenities and you know, features of an apart, of a condo property that's switched. So while it certainly is inventory, it's often not inventory that competes directly with us.

With no further questions, I'd like to turn it back to our presenters for any closing remarks.

Great. Thank you all for your time today. As we noted, it continues to be a very good time in the apartment space. We look forward to delivering another year of very good results for you and look forward to seeing everybody in the upcoming conferences. Thank you very much for your time.

That concludes today's conference. Thank you for your participation. You may now disconnect.