Q4 2019 Earnings Call

Good morning, ladies and gentlemen, welcome to the and they ate fourth quarter 2019 earnings conference call. During the presentation, all participants will be Anna listen only mode. Afterwards, the companies will conduct a question and answer session.

As a reminder, this conference is being recorded today January Thirtyth 2020, I will now turn the conference over to Tim Argo Senior Vice President Finance for at <unk>. Please go ahead.

Thank you for so a good morning. This is Tim Argo Senior Vice President Finance for M&A with me are Eric Bolton, Our CEO Al Campbell, our CFO , Rob Delpriore, Our general Counsel, Tom brands, our COO, and Brad Hill, Executive Vice Vice President and head of transactions.

Before we began with our prepared comments. This morning, I would like to point out that as part of the discussion company management will be making forward looking statements actual results may differ materially from our projections. We encourage you to refer to the forward looking statements section and yesterday's earnings release, and our 34 Act filings with the FCC, which describe risk.

Factors that may impact future results.

These reports along with a copy of today's prepared comments and an audio copy of this morning's call will be available on our website. During this call. We will also discuss certain non-GAAP financial measures a presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non gap in comparable GAAP measures.

Can be found in our earnings release, and supplemental financial data, which are available on the for investors page of our website at www Dot Mac Dot Com I'll now turn the call over to Eric Thanks, Tim and good morning, our first fourth quarter results were better than expected as improved rent growth.

Record low resident turnover continue to drive positive trends in overall revenue performance.

Over the course of last year, we focused on an opportunity to prioritize rent growth and push that agenda throughout the year as a result, we carry good pricing momentum into the new year.

Based on our updated analysis, we do now expect that the overall level of new supply deliveries in 2020, well run higher than in 2019.

Also of course vary by market.

That's has been routinely commented on the majority of the new supply continues to be higher end product at a high price point.

Based on our detailed sub market analysis, it's important to note that the new supply is forecasted to deliver in our markets and 2020 well be at rents that on average will be 25% higher than the rent across our properties in the same sub markets.

Well, we are certainly not immune to the impact of new supply.

We see this pricing gap is generating good long term opportunity the price point of our portfolio the quality of our locations the diversified nature of our Submarkets.

The strength of our operating platform in a number of new initiatives that we're rolling out in 2020, along with the pricing momentum that was built in calendar year 2019 will continue to support steady growth in in a wide over the coming here.

One of the benefit surrounding the new and higher priced product delivery into the market is expanding redevelopment opportunity created at a number of our properties.

The price spread between the new supply in the existing rents at our properties creates opportunity to upgrade its still all offer attractive value to our leasing prospects, while also generating a very accretive use of shareholder capital.

A property upgrade and repositioning pipeline will expand and 2020 supporting above market rent growth at a number of locations over the next couple of years.

We continue to find select opportunities to capture disciplined new external growth.

We began the year with our new development pipeline at 2100 units, representing 490 million in new investment.

In addition, we have 640 new units undergoing initial lease up representing 146 million in additional new investment.

We did close on one new acquisition in Q4, consistent with the transactions we executed on over the past few years. This was a newly built property undergoing initial lease up.

We partially match funded the acquisition with new equity issued through our ATM program, thereby retaining plenty of growth capacity and protection for the balance sheet.

So in summary, our sunbelt markets continue to capture great demand inmates portfolio is uniquely balanced and well positioned across the region to capture this demand our redevelopment and new development pipelines are growing emerging new technologies and products will also support further you know why growth and the balance sheet.

Isn't that great position with ample capacity to jump on compelling opportunities.

I went to think our team of associates cheered I My eye for a great year performance in 2019, if we look forward to another your progress and 2020 I'll turn the call over to Tom.

Thank you Eric and good morning, everyone. Our operating performance for the fourth quarter exceeded our expectations, what the study demand for apartments, and our enhanced platform. We've continued momentum in rent growth and strong average daily occupancy same store effective rent growth per unit increased 4.3% for the quarter.

This is the seventh straight quarter of year over year, improving the are you growth as a result, our year over year same store revenue growth was 4.1% the highest it's been since 2016.

Affective rent per unit increased 60 basis points sequentially sequentially.

Revenue performance was one best study momentum in blended new and renewal lease over lease pricing up 2.6% for the quarter, which is 100 basis points better than this time last year. In addition average daily occupancy during the quarter remained strong at 95.7%.

As we wrap up January average daily occupancy is still strong at night <unk> and compares to 96 in January of last year or.

60 day exposure, which is all vacant units notice just curious 60 day period is just 7.2% 10 basis points better than this time last year.

Looking forward as Eric mentioned, our overall supply in our markets is expected to increase in 2020, the Dallas Houston in Savannah markets are expected to be the most challenging based on our pricing progress last year, along with current rent and exposure trends, we expect our leading revenue markets to be Phoenix, Raleigh, Austin and.

Nashville.

Of course, the new supply creates an opportunity for redevelopment platform. In addition in addition to our kitchen and Bath program were underway with an amenity upgrade program at 10 communities. This 20 to 25 million dollar investment and 2020, it's primarily focused on legacy post assets, where the product was built an excellent locations.

And new supply continues to push the rent of the sub market up in these cases, we can update leasing centers hallways in common areas create shared workspace is outdoor gathering areas and rooftop tax to allow us to increase rat, while still offering come calling value in these submarkets.

Our technology platform also continues to expand our overhaul overhauled the operating system in new website has contributed to our ability to attracting cage and create value for our resonance our tests on smart homes have gone well the technology was installed and 15 communities with minimal disruption as has been well received.

Our residents, we expect to install 24000 smart home units in 2020.

Our high speed Internet access initiative is deploying and will be a contributor to 2020 I know I growth. We're also exploring arranger may I chat customer resource management and prospect engagement tools.

Pleased with the progress or teams made 2019 and greatly appreciate their efforts we have a solid base of earned in rent growth as we head into 2020 and are excited about the opportunities ahead right.

Thank you Tom and good morning, everyone I'll provide brief comments on what we're seeing in the transaction market.

As well as on our transaction activity in Q4.

As you're all aware the transaction market continues to be extremely competitive with record levels of liquidity and demand for multifamily properties.

Given the favorable migration in job growth trends that exist in our region of the country investor demand for multifamily properties within our footprint continues to be robust.

Leading to de better pools aggressive pricing and compressed cap rates.

Reflecting the positive job growth and strong demand, we expect supply the increase in 2020.

This increased level of supply should continue to support historically high level of acquisition and pre purchase deal flow.

We remain disciplined in our capital deployment decisions and al and his team have our balance sheet in great shape.

Allowing us to respond to compelling investment opportunities as they materialize.

As we've done in the past will continue to focus our acquisition efforts all new lease ups in Q4, we closed on the acquisition of the grain in downtown Greenville, South Carolina.

This was a recently completed asset involving a developer and equity provider we've worked with in the past.

Yes that was still in its initial lease up with the equity requiring a certain and quite close by year end.

We were able to execute on the acquisition at a stabilized market cap rate of 5.1%.

And 2020, we'll also continue to pursue pre purchase opportunities. As a reminder, this is a program where we partner with good developers that have access to great real estate.

We bring the capital to the venture and return and then return we get access to an asset at a reduced basis with a clear path to 100% ownership at stabilization.

This program allows us to selectively pet pick well located to be built assets, while minimizing our overall development risk in Q4, we closed and started construction on a 264 unit pre purchase located nine miles southwest of downtown Orlando and the very desirable high income Dr. Philips area.

And finally in Q4, we took advantage of strong investor demand and pricing and sold all five of our assets and exited the little rock, Arkansas market.

We had over 25 qualified bidders offer on these properties, we achieved good pricing for this non core market with 24 year old properties.

Equating to a 5.4% market cap rate.

We will continue to selectively prune our portfolio on an ongoing basis and we'll have more to say about our specific 2020 disposition plans in coming quarters without I'll turn the call over now.

Thank you Brad good morning, everyone [noise] I'll provide some brief commentary on the company's fourth quarter earnings performance major financing activity and then finally on our initial guidance for 2020.

Reported FFO per share of $1.68 for the fourth quarter was five cents per share above the midpoint of our guidance with the majority. This outperformance produced by property NOI as both operating revenues and expenses were favorable to expectations for the core.

AFFO per share was 6055 cents for the full year, which includes several items consider unusual and not core to our business such as the market market valuation of our preferred shares and gains on sales of land parcels. Excluding these non core items f. over the full year would have been $6.26 per share.

Lets discuss more in a moment, we are providing earnings guidance for 2020 on a core FFO basis, which we believe will provide a clear picture a performance.

We were active on the financing front during the fourth quarter as we issued 300 million a new public bonds. We also retired 170 million of unsecured loans and 17 million of this additional secured debt.

The effective interest rate of the new bonds will be 3.1% over 10 years after considering the interest rate hedges related to the financings. We ended the year with 98.4% of our debt fixed with an average duration of almost eight years, which is a record for the company.

During the fourth quarter, we also issued 20 million in new equity through our ATM program essentially match funding a portion of the Greenville property acquisition mentioned my brand.

Finally, we are providing initial earnings guidance for 2020 with the release, which is detailed in our supplemental information package, providing guidance for net income per diluted common share, which is reconciled FFO core FFO and core AFFO in the supplement.

Core FFO for the full year 2020 is projected to be $6, a 38 cents to 662 per share or 650 per share at the midpoint.

The definition of core AFFO, including a description of the items considered noncore can be found in our supplemental package.

The primary driver of 2020 earnings performance, the same store NOI growth, which is projected to be 3.5% at the midpoint.

Active rent growth for the year is expected to be around 3.7% produced by 2020 lease over lease blended rental pricing growth of 3.4% at the midpoint combined with a 29 team blend the rental pricing a 4.4% achieved.

This pricing combined with a slight decrease in average occupancy to 95.8% average for the year brings projected total rental revenue to the 3% to 5% range fees and other income items combined are projected to add an additional 20 to 25 basis points to revenue growth for the year with the primary driver being a 55 basis points contribution from the double play book Internet.

Program, which is partially offset by other fees and reimbursement items, which are projected remained essentially flat for 2020, primarily due to slightly lower occupancy.

These items combined to produce our total same store revenue growth expectation of 3.75% for 2020 at the midpoint.

Same store operating expenses will continue to have some pressure from real estate taxes and insurance costs for the year and we'll also have the additional expenses related to the double play book into that program, which is recorded on the gross basis. These items combined to produce projected same store expense growth a fourth quarter for the full year at the midpoint.

Our forecast also assumes a modest increase in overall overhead cost just below 3% for the year.

We continue to use or ATM program to essentially match fund expected acquisitions for the year with 80 million of new equity issuance projected of course, assuming we find accretive uses of capital during the year.

That's all we have in the way prepared comments, Brazil. So now we'll turn the call back over to you for questions.

Certainly at this time, if he would like to ask a question. Please press the star and one on your Touchtone telephone.

You may withdraw yourself from the Q at any time by pressing the pound key.

Once again to ask a question. Please press the star and one on your Touchtone phone.

Pause for a moment to allow questions to Q.

[music].

And we'll take our first question today from Austin Wurschmidt with Keybanc capital markets. Your line is open.

Hi, good morning, everybody.

And you mentioned supply is increasing in your markets in 2020, which I presume is off of your kind of detailed supply analysis could you quantify that thought and tell us what you. Your top markets are seeing the biggest increases or decreases.

Yeah, Brian our Austin, it's Tom I'm going to jump and were well, we really think that we'll see the most pressure from new supply.

Isn't Dallas, primarily it'll continue to be challenged but where the <unk>, but it's a that supplies coming in at 45% above our are some our market are probably.

And then I think we would expect that Houston, Savannah, Charleston will soften overtime as supply comes online and but feel like we've got you know Phoenix in Raleigh will probably lead to pack in terms of performance and we've also got strong momentum in the face of elevated supply with Austin, Atlanta and Nashville.

And Austin real quick just to clarify when when Tom says its supplies coming in 40, plus 5% on top of US that's a red gap between what we have in place with new supply that's coming in is about 45% higher in rent and what our assets are yeah that makes sense and then what's the supply sort of for the overall.

Folio water kind of the numbers when you compare what it was in 2019 and what you're expecting for this year.

So if you look at our radio supply as a percent of inventory wells weeks. This 29 team was about a percent of supply delivered and this year it'll be one six in 2020.

Got it. Thank you for that and then kind of going back to the clarification.

On the rents.

Four units being delivered versus what's in place on Eric you kind of highlighted that across the overall portfolio. I think you said, 25% how does that 25% compare to the last two to three years of where new supply was coming in versus where your portfolio was at the time, but I don't have those numbers writing.

Front of me Austin, but we review them and it's very very similar to what it is this year. I think is I think is construction costs continue to escalate land costs continue to escalate I think if you go back over the last several years, you're going to find that that gap is going up certainly the rise in cost of.

Construction is accelerating it up at a pace faster than rent growth is accelerating so I think if you go back over the last several years, you'll find that that gap is probably spread somewhat.

Got it that's helpful. Thank you for the time.

And we'll take our next question from Neil Malkin with capital One your line is open.

Hey, good morning, guys.

Morning.

First question on.

I talked about implementing.

Technology through.

Several of the assets in units across your portfolio I'm wondering if.

Any of that.

It's also pressuring.

Operating expenses.

Being capitalized and then.

Expectations for payroll and insurance growth.

Let me make sure I'm understanding you tell me what you're in the first portion what expenditures were you talking about specifically nail to make sure I'm clear, yes. So the elevated operating expenses years, most related to the bulk Internet program, but I thought your also implementing smart home technology package are those okay. Okay. I know I got yes, we are in the majority that is capital. So this.

Just give you a little break down of the expenses I think the mid point as we talked about was fourth quarter growth for the year and about 65 basis points that is related to the bulk Internet program. A and then you have real estate taxes, which are a third of our expenses as probably another 60 basis points. So if you strip all of that out the other items.

Personnel already utilities, all the things are growing on on together about 3% for the year no no add to that you mentioned, specifically insurance were expecting you know probably low double digit increase for insurance program, which will renew in July .

Okay great.

Recently, there's been some pretty strong homebuilder confidence I'm wondering if you're seeing that play out in any way or anecdotally in terms of the people who are moving out if they're moving out.

To home purchase and or if the builders are starting to focus more on the entry level homes are still the sort of higher price point homes.

Yeah, we're we're not seeing or the.

Folks move out for entry level homes in fact move outside combined was down 10% this quarter and that's part of what continues to drive our turnover down.

Okay, I guess last one for me can you just talk about what cap rates have done.

Talking about maybe in your top five markets.

You know over the last maybe six months.

For a and B product.

Yeah, Hey, Neal this is Brad I'd say, just broadly speaking a cap rates just continued to decline I mean, I'm certainly the demand for multifamily. If if you heard anything about the NMHC conference last week attendance was up a record levels. So I think the demand for multifamily assets continues to be very very.

For all.

And you know every indication we have in.

You know from selling properties to to be very active in the acquisition market in the numbers were seeing cap rates continue to to come down and I'd say the gap between A's and B's continues to compress and yeah. We don't we certainly don't see anything changing yeah. The liquidity in the market, that's really driving that at this point.

Thank you guys very much.

Thanks.

<unk>.

Thank you well go next to Nick Joseph with Citi. Your line is open.

Thanks, I hope you can give a little more color on the bulk Internet program.

In terms of the contracts with the providers how long are those typically.

From a renter perspective.

All you eat into the program or is there an opportunity to often.

No I'm on the first one there five to seven year contracts depends on the provider and we've got the option to opt out but.

For three years and believe that don't hold me to that Nick.

On the as the rollout goes.

Oh residents participate in it and when we did this you know Weve had the bulk cable program for a while we decided to add high speed Internet access when we did that we looked at our market and who's already subscribing for high speed Internet access and 80% of our residents are all.

Ready paying for the speed that we're providing.

Or less so it's an upgrade and they're paying less through us for that part of the reason that our our results were a little better than we expected in the fourth quarter is Nick we really assume that would roll in on new leases on renewals, but the number of existing residents who chose to opt in middle East was.

Higher than we expected.

Thanks, that's helpful.

Where are you in terms of the rollout and then how long will it take to be fully deployed.

We we have one provider dawn and the next provider under way and I would think we'd be deployed by may fully deployed by name with some carry over the benefit of course in mid 2020, because they'll ramp up from there.

Great. Thank you.

Sure.

Well go next to John Kim with BMO capital markets. Your line is open. Thank you I'm Tom in your prepared remarks, you mentioned a current occupancy is 95 and half percent, which is 50 basis points lower than last year.

Can you just comment on how concerned you aren't that occupancy me come in at the low end of your guidance or pictured lower than that given the supply.

No no.

And as you will notice for the last year, we really felt like and continue to feel that with the man to the way that it is now is the time to raise rents and build our effective occupancy and that is the basis for which our steady rent growth from quarter to quarter and the growth that we've seen throughout the year is built.

And we're willing to give up a little bit of occupancy on that though 95, five very solid from our perspective, but we feel pretty good about that this time, a euro expected to be a little lower and I would expect that you'll see that climb as the year goes on but we're certainly not gonna be shooting for 96 to nine six for you know we're very happy.

In the range that we're in and it's starting right, where we thought it would.

And can you provide commentary on how you see job growth or other demand drivers in your markets. This year versus last year, yet I mean job growth, we see no no slowdown at this point and the you know we continue to see I'm interested in the Sun belt and in migration trends renewal.

Rates continue to stay in a 6% to 7% range right now so we anticipate those coming down a bit this year, but right now if demand is very strong and for that reason well continue to prioritize rent growth.

And then your development pipeline increased to $490 million. This quarter can you just commented how big you feel comfortable with the pipeline is going forward and are you developing at any difference back as far as.

Adding smart home technology, or any new technology as part of that developing program.

Well this is Eric Jonathan I, you know, we're very comfortable where the development pipeline is at this point I mean, we've we've established a tolerance that were very very comfortable with the 3% to 4% of enterprise value, which would put the pipeline tolerance. If you will at 500 to 700 million dollar so at $490 million were.

Pretty pretty comfortable with where it is at this point we have several other projects that we're working on now if you will have the predevelopment since I doubt, we will start anything else. This year, we do have a couple of land sites.

That we their own are tied up but I suspect it will be early 21 before we'll get those projects are going so we're very comfortable with where the pipeline is at this point in yes.

As this new product is being developed a the smart home technology and a lot of the new technology services and products that Thomas alluded to there will certainly be a part of what we build going forward.

Great. Thank you.

And we'll take our next question from Haendel St Juste with Mizuho Bank. Your line is open.

Hi, guys excellent bird here with him tell just a quick follow up and John's question or how do you guys view new development Neal it's against Iris and how do they are I can fire as compared to a acquisition.

Yeah, we're generally seeing right now that are stabilized yield side of our development or somewhere in the hundreds or 125 basis points a higher than what we are capturing on the on the acquisitions, It's Brad alluded to the green the deal we bought in Greenville stabilized yield at just over five.

We're seeing are stable I projected stabilized yields on our development pipeline right now trading anywhere from 6% to 6.5% So call. It 100 125 basis point spread.

Hi, Thanks, and could you provide an update on the quarter and year to date lease rates between those legacy post portfolio and B M a portfolio.

And is there any extra opportunity that we shouldn't view this year between the two of them [laughter]. Yeah. We do we are I do not have then information in front of me, we've largely narrow that gap or is that gap has narrowed to be honest with you in differences.

Between posting mid America.

Assets in the same submarket or negligible now going forward as I touched on with our redevelopment program in a mini upgrade we do still have opportunities and those very strong locations to update the exterior and amenity packages, there and that that is more of a.

2021 impact that we'll see from the work that we do this shutdowns referring to the post the legacy post locations for the upgrade so we'll probably see more robust rent growth emerge out of the post but it's more a function of the upgrade as opposed to market differences.

Okay. That's all for me thanks for the time guys.

<unk>.

Well go next to Rob Stevenson with Janney Your line is open.

Good morning, guys.

Hi, Tom so.

Same store revenue guidance is three in a quarter to foreign a quarter. What do you expect where are you expecting your top market to come out where are you expecting the bottom performers to come out what's the sort of spread that under underpins that 3.75 midpoint.

Oh I mean.

That range to be I'm on a blended basis, the top markets and that probably in that four four and a half range in the bottom markets in the two two and a half something like that.

Estimating that to be honest with you, but that's rough feedback.

Okay. So nobody is sort of close to flat or even negative or anything it's all sort of at least one 1.5% positive at the bottom end.

Correct I think on a blended basis, we would expect to get full year attraction and not have many people go backwards and Rob I'll tell Ya you know this is Eric I mean to some degree the the opportunity that we carry from 2019 into 2020 because of the focus on prioritization on rent growth it really puts.

This in a much better position to work through some of the supply pressures in these markets in 2020, and really enables us to avoid any the real a weak performance metrics that that you might you know you were alluding to a as a possibility I think that we knew heading into this year that we were likely would.

See some moderation of some sort occur and and that that was part of the reason behind the logic of focusing so intently on the rent growth last year, which really helps us this year.

Where are you guys on that topic I mean, how are you guys thinking about turnover for 2020 made it was only 47% last year. I mean are you anticipating it being sort of flattish you expecting more contraction. Some re expansion there and how big of a benefit is that to you if it stays low from an earnings standpoint.

Yeah as far as our expectation we expected to be up slightly we don't see any fundamental changes.

Coming across board, but it is you know honestly hard to assume that it will continue to drop and that that plays into our earnings forecast. It really minimally at this point now may add some color if you're looking what we've got dial in for occupancy we've given ourselves about 15 basis points decline, there's a little bit of increase in turnover implied in half.

Nothing significant.

Okay, and then I hear you guys correctly that you're going to do 24000 Smart home unit installs in 2020.

Thats correct.

Okay, and what is the cost for that how much you're doing <unk> per unit.

The average cost on that is a $1300 on the install and that gives you Lux thermostats two lights to moisture says sensors and a interactive flat panel display that the resident interface as well as their app.

I just want to things it's important I think in doing your model Rob there the smart home program plus the amenity redevelopment I was talking about we're investing about 60 million in capital. This year in that a which is very strong returns, but a lot of that will begin to come more strongly in 2021.

Okay. So I mean in terms of units, though the Q redevelop in 2020, you know instead of being 6000 is that going to be wrapped up or is that going to be separated. So in other words are you going from essentially 6000 to 7500, a unit on the redevelopment. So I assume there might be some sort of cost savings if you've got to open up walls and do whatever.

Our anyway, but I mean is that going to be wrapped up into a higher redevelopment per unit cost for the whatever a number of units you do redevelopment into your full scale redevelopment on.

Sure and Oh, well, but those programs are separate and the reason that they are separate.

It is because the timing is different and them and if you'll remember on the kitchen and Bath redevelopment, we do that on turn when we install smart homes. We go in and we do the whole property at one time and then move people onto the products are those programs are our independent of one another and that's really why I mentioned number. Obviously this is Alan do you think about it the program that we've.

Done for many years into your redevelopment Park will continue along it basically the same pace call US 778000 units at you know five to 6000 per unit.

Spending on that and that's been the same level and that I have the caustic contribution to earnings growth on top of that are the two programs that Tom's mentioning that amenity redevelopment and of course, the smart home and those together about an additional $60 million that are a great investments that we're going to pay off more in 2020 and that was really a point as you model that help you laid out in right.

Okay, and just last one for me out a property taxes, especially elevated any specific markets.

You know continues to be the same offenders floor I mean, what we have this year. When you beginning in the year you don't know a lot. We'll go back to that Rob and what we do know is about a third our portfolio is a revaluation year. We continue to expect pressure in Florida, Texas, maybe North Carolina little bit this year, so we dial that in and and so we know overall, we do expect our cost come down little bit.

You know the four or 5% ranges for that midpoint is about 50 basis points down.

And also you know we're cautiously optimistic about some of the changes in Texas, the new law changes I'm hard to know where that's going to play out over the next few years, you don't yet know, how that's going to affect both millage rates or valuations.

So we dialed in what we think we're gonna have and over time, we're hopeful that a that lot of begins to come down a bit but one half from 2020 is our expectation.

Okay. Thanks.

Thank you well take our next question from hard to go with Zelman and Associates. Your line is open.

Hey, guys. How are you. Thanks for taking my question here.

I actually wanted to touch upon apply again the way we looked at it.

Doesn't seem to be as impactful as maybe you mentioned the on Dallas.

He was then the two markets that you highlighted.

Can you give us a sense for supply and Youre, maybe secondary tertiary markets and how that's shaping up.

Oh sure I'm, probably the market with the in the secondary group with the largest impact is probably Charleston, moving from two three as a percent of inventory to for a now we're a little encouraged by that because the where the supply has been where it lines up to our a assets.

Isn't Mount Pleasant and the Mount Pleasant Moratoriums finally, taking in effect and so while Charleston has seen higher that's a pause moved to the upper Peninsula area, which is as you know as it across the Robin All bridge from Mount Pleasant. So we were a little bit optimistic there, but again you know we've seen Charlotte two and a half to.

Three seven.

Others in the secondary market.

Our.

Yes, I agree Greenville goes from 2.1% of supply to two to 2.3, so not a lot of change there probably other market that.

Has the biggest increase delta between 19 to 20 is in Savannah, Georgia.

You know in 2019, they delivered 3% or the existing supply market supply into the market in 2020 that jumps to 7% now you recognize Savannah is only 2% of our same store NOI. So it's not a huge impact, but it's kind of hit or Miss.

You know summer summer up a little bit summer up or more than others, but because of the diversified nature of our capital across these particularly secondary markets. You know, we it's not particularly significant but but you know it varies a bit by market.

And just one quick follow up could you share the new and renewal for the quarter.

Yeah sure they the new for the quarter was 90 basis points down renewal of 7% appointed to six which was 100 basis points better than last year.

Thanks, that's all.

Thank you well take our next question today from Ritchie Anderson with SMBC. Your line is open.

Hey, Thanks, good morning.

Hey, rich so last year your same store growth sort of cadence kinda climbed over the course the year from 2.5% on at all I want to 5% to end the year out in the fourth quarter I'm wondering if that means sort of a mirror image and 2020, where you know you start the year somewhat stay.

Longer than you ended on on the basis of a you know increasingly tougher comps.

Well I mean, certainly I think the prior year comparisons will be a little bit more challenging for us. This year a lot of the momentum that we had last year was a function of our you know clear focus that we had been going into last year about a focus.

Moving on rent growth.

At the expense of a low occupancy give up and that momentum built over the course of the year. So I think that in which is really helping us. This year as we carry a lot of that momentum that baked and if you will into 2020, we do think that as a result to some of the supply issues in a number of mark.

Cuts that are our lease over lease pricing. If you will the more current pricing that's occurring in 2020 will be off a little bit from the trends that we saw in 2019, but a combination of the you know the carry forward that we have from last year and the you know the.

The plan. So we have this year still offer up a.

Blended lease over lease pricing performance for 2000, 23.4%. So you know we think that's off a little bit from last year, but 3.4% of blended pricing performance in 2020 in the face of some of the supply pressures that we've seen them. These markets, we feel pretty good about that.

Actually and still with strong occupancy that we think we'll we'll capture as well. So yeah. I think I think these markets continue to show resiliency because of the strong demand in our portfolio in particular because of the diversified nature of the markets that were in Ocala to add to two to give that how a slight and and so our projections that support.

With that with Erika, saying is all quarters and this year, it's going be a little more stable, just because where we are and all quarters, it's more in that 3.5% to 4% revenue range.

For the year end, so second third quarter, maybe a little bit higher, but but it's it's inside the all in that range much more to enable all at one point, even though the blended pricing is a little bit lower in 20 as the smart home in the bulk internet start to take hold it helps the back half of the air a little more than certainly the first time.

Okay, great. Thanks terms of the.

The external growth or sort of projection for this year, you obviously more on the acquisitions.

How much of that is sort of this pre purchase opportunity and how much of that is cost of capital that's making deals work a bit more easily in 2020 versus previous years.

Well I mean, we think that is more likely than not that the vast majority of the acquisitions that we do will be some pre purchases. So things to be built we may do typically as you get towards the back half of the year, we see the opportunity set improve a little bit for buying lease up deals as we get closer to year end.

And developers are owners get a little bit more motivated get some things done, but you know certainly oh, yeah. Our cost of capital is improved and it does at the margin generate a little bit more flexibility in this regard, but but at the end of the day I mean, we're really driven by can we.

Deploy the capital and create a stabilized yield on that investment that's going to be accretive to our existing earnings profile and that's what really drives our mindset, we pay attention obviously to our cost of capital, but just the idea that you know that theres all of sudden a better spread opportunity in of itself is not what compels us.

To go out and start putting money to work, we want to be sure, we're adding earning assets, they're going to be accretive to the existing earnings profile of the company. So I've gotten declining cost to capital doesn't mean, you know you're willing to take a lower yield or does that influence your underwriting.

No. It really does it we we do not want to begin to just take on a bunch of lower yielding investments have just simply because the cost of capital suggested as it has we were trying to compile a long term earnings growth profile for the company and and we're trying to bridge.

Tech that long term earnings growth profile, and just adding a bunch of learning investments.

That's because our cost of capital happens to be where it is you know really runs counter to that to that long term objective well I would say lower cap rates, sometimes lead to higher growth and second year of ownership, but that's just.

You can oh, okay. Another observation anyway last question for me I'm I appreciate the the positive rapper or you're putting around the supply, which it makes sense to me a in terms of premium relative to where your rents are but clearly.

You'd rather not be the case right. I mean this is this is making the best of of not so great situation from a supply perspective.

With concessions that can be off or newer product and a strong job market people might have a willingness to you know to entertain optionality. So in your mind.

While you see some opportunity out of the supply picture.

What is the risk, though that this could this could you know actually have be more damaging when you consider that the health of job markets in your and your.

Neck of the woods.

Well, certainly I think the supply picture in the supply pressure you know as and we've.

Talked about it does create some short term pressure and in as evidenced in our guidance I mean, we assume that our lease over lease pricing in 2020.

On a blended basis runs about 100 basis points below 2019. So there's no question that you get into these heavier supply scenarios, particularly where there's leasing concessions coming into the market, but there is some short term pressure generated and as I mentioned that could vary quite a bit by market and in a bigger market like in Dallas you know your.

Going to see a more pressure than you are in a smaller market like a Greenville, South Carolina and that's why we tend to be very focused in our efforts to deploy capital across the region in both large and secondary markets in an effort to something you remember rich in an effort to get our full cycle performance profile.

That were after.

So I you know I, certainly acknowledge and we do that there is gonna be so near term pressure from some of the supply. We've got that dollar then we think appropriately into our guidance, but I will tell you. The fact that is why this new high priced product gets coming into our locations. We think that long term. That's a good thing. It says good things about our neighborhoods. It says.

Good things about the value their real estate in those neighborhoods and it creates the opportunities that we alluded to to continue over the next few years to get some not only good rent growth because with the improvement we're making in the assets, but also great returns on our capital. This is the most accretive use of money that we have right now is this redevelopment initiatives.

So yeah, Yeah, we'll deal with a little short term pressure, but the long term value play is pretty darn attractive.

Gotcha, Thanks, Eric Thanks, Steve bet.

Yeah.

Well move next to true Babin with Baird. Your line is open.

Hey, good morning.

Andrew a quick follow on question to Rob's question earlier on the to Texas tax revenue caps on it sounds to me like that is not baked into your same store expense guidance range at all on it seems like maybe longer term benefit is that true or is there any kind of directional better her to getting to influence the guidance there.

Think we dial in what we think is one of the our assessment at this point through any of the cap is not a.

Taxpayer level is that the market level and so [noise].

I think theres still some things the work exactly how that's going to play each individual asset valuation mills rice.

Here are all Mark so Oh, we dominate what we think it's going to be Oh, well, even say overtime hopefully those balls are helpful. In restrain the ASP growth taxes in Texas, that's hard to say thats, the best but but thing in the short term is yet to be seen exactly what is going to play out and so thats when we put our best.

Yes.

Okay, and one follow up on the the same store revenue buildup blended leasing spreads from 19 blended leasing spread and guidance.

Marrying that with the occupancy guidance double play impact it would seem revenue buildup goes towards the high end the guidance, which I would surmise or maybe some other other ancillary type items. It maybe a little flattered and dragging on that which you know that water trend kind of throughout 2019 as well.

Talk about what kind of the growth in other aside from the double play what we've heard other income growth in 19, what would be in 20 and is there anything going on in that kind of driving new other income.

You know into 2021 anything else you're kind of doing.

I think the easiest way to do that quickest way, maybe juices to just say talk about what our growth would have been our guidance would have been without.

Assuming all Internet program this year and we would have had.

Our midpoint of right somewhere around three 2% growth revenues rose, 6% or operating expenses and three for NOI in it. So you have the bulk internet and on top of that and so that can kind of helping I think the three two on revenue is a combination of the rents that we put on capital this year.

3.4% blended lease that we expect yet about what we did last year thats helpful, giving up little bit on occupancy in basis points are so then the other fee income items other than the booking right.

Imbursement items and trashed <unk>. The other items there are expected to be flat with last year, essentially which you don't your growth rate looks a little bit gets you down 3.2% expectations for the year not only expenses, we talked about a three six I'm really everything but real estate access would've been about three.

Oh, Okay Thats helpful gives you what you're looking for.

Okay and it sounds like the double play program is being implemented kind of fairly rapidly and so the benefits will be kind of mostly in 2020 is there anything else you're doing on the other income side that might help 21 to kind of coming off of that 20 comp.

Any other additional pier park and things like that anything else kind of in the Hopper, that's being worked on or the technology element you know might that moves the needle as well.

Well I would tell you that a lot of the double play I mean, we're going to roll it out over the course first half this year, but I really think the full year benefit will be more more next year, it's about half this year and a half next year, because while we deploy it and we'll be deployed in may residents have to sign up for when they do on on lead time or not.

I think that that's going to build up over this year, we'll see we'll see more benefit in 2021, the other thing, though that Alan alluded to and we've talked about here is is this repositioning effort that we're doing with a double play and with the more enhanced a amenity upgrades.

What's happening is we're investing a lot of that capital. This year. This calendar year 2020 in the real rent growth. It from that will actually emerge in 2021. So that's really what's at play here a lot of that benefit will play out next year not this year.

Okay. That's all very helpful. Thank you.

[laughter].

Thank you well take our next question from Rick Skidmore with Goldman Sachs. Your line is open.

Good morning. Thank you Eric you mentioned in your prepared comments, some new initiatives in 2020, perhaps I missed them, but can you give me perhaps speak to what those new initiatives are that you're you're focused on in 2020.

Well I you know Tom can jump in here I mean, it it and now it's the the bulk double play initiatives the high speed Internet a program that we're rolling out was what I was referencing we've got the more the smart home technology implementation that we're going to be rolling out this year and.

And as I was just mentioning we've got some.

Repositioning opportunities with some of the legacy post assets that we'll be rolling out this year.

And are working on this year and is I was just mentioning.

And then as Tom alluded to there's some other new technologies I chat and some other things that we're you know self touring and other things that we'll be testing out a later this year, we don't really expect any impact this year, but we're going to continue to evaluate the those those those programs for possible implementation in 2021.

Great. Thank you.

Right.

And we'll go next to John Polasky with Green Street Advisors. Your line is open.

Hey, Thanks, maybe just a follow up to your response to Jerry's question. So it sounds like if the rollout for the double play and that goes as expected the NOI contribution or the NOI less and 2021 is greater than the 50, Bips and 2020 is that accurate.

Comparable I would say I mean, we're rolling out to two phase for around two major providers that we're doing it in 2020 will yeah, we'll have will bear one of those providers and building. The second one so I would say probably something or we would increase I was something comparable yeah thing equal maybe slightly a little less since we've we've got the biggest provider in line now.

And we're working on the rest portfolio.

Okay, and then Tom listening to your comments on which which markets you think will lead the pack and which markets may lag isn't it fair read that you're at the and the aggregate the smaller or secondary markets will be below average in terms of same store revenue growth.

Well I don't have them split exactly that way, but we've got you know some encouraging places on both sides of that on both sides of that equation. So I think we are the probably the runaway leaders are Phoenix in Raleigh, better tell you Birmingham.

Ensemble.

And play in Memphis have been pretty solid players horse and we would expect that to continue.

Okay. Then final one for me if I could sneak it in there or do you see revenue growth that had been accelerating nicely for you a year over year last few quarters and then.

That slowed meaningfully this quarter. So is there anything idiosyncratic this quarter that the DC market or the fundamental swelling in your eyes in the market.

Well, we don't believe the fundamentals are slowing it's really a a comparison between the prior year. The two quarters. So last quarter in the third quarter. We had a 30 basis point occupancy comparison tailwind that used revenues, a little bit and this quarter and their fourth quarter of eight.

Team, we were 96 six and were 96 of this go around so we had a 60 basis point headwind.

Okay. Thank you.

Well take our final question today from John Guinee with Stifel. Your line is open.

Hey, guys. Good morning, this is air and move on for John .

Two quick questions can you provide any detail on the price per unit on the Greenville asset that you recently acquired and also on the little rock, Arkansas portfolio.

Yes. So this is Brad here, let me, let me give details of that.

So the price per unit on the Greenwald meal.

Sure I get you though.

Right number there.

So that was to 68, a unit or the Greenville Neil.

Yes, we said a moment ago is a five one a cap rate on that asset.

I'm sorry, your second question, a little rock Dora the Fiat.

Yes, our little rock assets, we sold the total price there was just under 150.

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It was 109008 unit.

Okay, great. Thank you and one last that's helpful and one last for me you may have disclosed this already I apologize if you did but the or the average share price on the ATM activity in the quarter.

You can get from the press release the proceeds in the end. This shares is around 36000 shares please within Uh huh.

Okay, great. Thank you so much.

Thank you.

Yeah. This does conclude our culinary session for today as well as our call we would like to thank everyone for your participation today you may disconnect at anytime.

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