Equity Residential (NYSE:EQR) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Cap Rates Transaction Market
Nicholas Joseph – Citigroup Global Markets Inc.: It’s actually Nick Joseph here. How has the transaction market in cap rates changed with the increase in rates?
Mark J. Parrell – EVP and CFO: It’s a very interesting question one that we are watching quite closely. I will tell you that on core market – core assets and core markets, not at all. There continues to be a very short supply and very long demand. So, we’ve seen very little change or cap rate there, we think values on those kinds of assets may even modestly continue to increase. On the not core, not A product, what we – kind of talk about is more leveraged product. We’ve seen some modest change. A lot of this increase in borrowing rates have occurred maybe over the last 60 or 90 days, and a lot of the deals we are getting done today would have been priced a while ago, but I think we are certainly beginning to see some pushback from investors, some re-trades and certainly we are beginning to see some small impact on values as a result. I guess, I would say that, I think you would expect to see a bigger change in value if rates continue to go up. We did not see any change early in this increase, but more recently have begun to see some modest pushback.
Nicholas Joseph – Citigroup Global Markets Inc.: Then what’s the difference in expected yields between the development assets delivery and over the next few quarters versus developments that you are potentially starting later this year?
David S. Santee – EVP, Operations: Well, I will tell you, I mean, the things that we are – we’ll be delivering in the next – this year, next year, these things, these are – would be stabilizing in some of them in the 7s and 8s and easily 6s and kind of what’s been starting now or what we’ll start this year on current rents, we think we’ll be mid 5s to low 6s.
Freddie & Fannie Details
Dave Bragg – Green Street Advisors: As a follow-up on Nick’s first question, I think that you were concerned about two issues as you evaluated your assets sales not just the potential upward movement in interest rates, but changes from Fannie and Freddie. I think you covered the first part, but can you talk about what you’ve observed from Fannie and Freddie over recent months and what the impact might be over time on cap rates?
Mark J. Parrell – EVP and CFO: David, it’s Mark Parrell. Just a comment on that, I mean tactically Fannie and Freddie continue to work just as diligently. They continue to get back to as there is no dysfunction occurring that we can see at all on the operational side. What they have done, though, and probably in reaction to the regulator is to really hold spreads constant. So, what you see at the time, we think that at the time we announced the Archstone transaction, the all-in rates for kind of the maximum leverage 1.25 times coverage loans in the kind of markets we’re selling out of like Phoenix, probably carried as a tenure matter. That loan would have carried a rate of 3.5% and would have had a spread of 1.7% or so. We think that spread is probably up 50 basis points and that all-in rate is probably around 5. And so, what I would tell you is that Fannie and Freddie operating day-to-day just fine but I would say that there has been an impact we have seen in terms of the regulators input into spreads or some other type of input in the spread that has really caused Fannie and Freddie’s rates to increase pretty substantially. What you see also are some of these buyers are taking advantage of seven year deals and trying to moderate some of that rate increase by just going down the duration curve. So we are seeing a little bit of that as well.