Q1 2020 Earnings Call
Hey, first quarter 2020 earnings conference call.
During the presentation, all participants will be in a with no we mode.
Doors, the company will conduct a question and answer session.
Binder. This conference is being recorded today maybe.
2020, I'll now turn the conference over to Tim Argo Senior Vice President Finance.
Please go ahead.
Thank you Jason Good morning, everyone. This is Tim Argo Senior Vice President Finance for M&A with me are involved our CEO al Campbell, our CFO well Delpriore, our general counsel, Tom brands, our COO and Brett Levy P. in head of transactions before we begin with our prepared comments this morning.
I want 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 statement section in yesterday's earnings release, and our 34 Act filings with the FCC, which describe risk factors that may impact future results. These are.
Ports, 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 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 our website at www Dot Mac Dot com I'll now turn the call over there.
Especially want to thank our associates, serving at our properties and working directly with our residents your dedication and commitment to supporting it serving our residents has been on full display over the past few weeks and has never been more important than it is today.
While the work you're doing and the service that you're providing.
As noted in our earnings release first quarter results were better than expected with solid rent growth and strong same store performance.
Our comments. This morning, However, we'll focus on April performance in early May trades.
We're encouraged by the solid performance in Red collections for April as well as early trends in my.
We've taken a proactive approach to directly assist and support those residents who are financially impacted by the shut down at the economy. While also working to ensure that all other restaurants in various aspects of our operations are performing and functioning as expected.
Given the severe severe pull back in the economy and the associated job losses.
Leasing conditions deteriorated beginning in late March this is particularly evident in our leasing trends as it applies to new move in residents.
Oh the other has.
We're seeing positive trends associated with our existing residents electing to stay put and resident turnover continues to decline.
Overall, we would expect these leasing conditions to persist over the next two to three months.
As you know the reopening of local economies and businesses across our sunbelt markets is now underway.
Given the range of protocols being used by various states in cities to reopen their economies it will be a choppy process.
However, with unemployment claims across the majority of our states currently running below national averages coupled with the active efforts now underway to reopen across the Sun belt.
We're hopeful that leasing conditions will start to improve later this year.
Its efforts to reopen sunbelt economies are just now getting underway, it's difficult at the moment to gauge the pace at which employment conditions will improve.
We hope to gain better visibility on the important underlying economic and implement market conditions during the second quarter and being a more informed position as to the outlook for the remainder of the year. When we report second quarter results.
In the meantime, we're confident that our strategy focused on the appealing sunbelt markets supported by our strong operating platform and our strong balance sheet.
Executed by cycle tested and proven team of associates.
Will enable.
Hey to continue to successfully navigate this down cycle.
So I haven't my prepared comments I'll turn the call over to Tom. Thank you, Eric and good morning, everyone I'll offer a short recap on the first quarter and then move to trends that we've seen in April in my.
First quarter of 2020 exceeded our expectations and the results for the quarter put us in strong position entering this disruptive covert 19 period.
Effect of rents were up 4.2% and blended lease over lease pricing, including concessions was up 2.6%. She was in line with seasonal expectations occupancy remained strong at 95.7%.
Sure shelter in place began in mid March occupancy was 95.9% and our 60 day exposure, which is all vacant units plus notice is there a 60 day period was just 7.6%. This was 40 basis points better than last year in short we had it into the cobot 19 disruption with stronger.
I'd say low 60 day exposure and good embedded rent growth.
During the quarter, we completed a 1440 interior redevelop and units and upgraded 8017 units with our smart home technology package. We felt it was prudent to pause both of these programs in March well monitor demand for these two programs and returned to production when appropriate.
Moving on to April and May trends.
Store coin April's, a month of accelerating pricing growth as we move into the higher demand season of the year as you will note from our lease over lease pricing, which includes concessions information listed in the supplemental data you will notice this year did not follow that trend.
New lease.
Leasing volume dropped 43% lower than prior year in the last week of March. However, the last three weeks leasing volume has rebounded and is 6% higher than prior years prior year levels. Our teams have been affected by using our virtual and software platform. We expect these practices to be.
But I guided tours in May.
As expected our current residents are choosing to stay with us and our resident retention plans are positive turnover for the month of April was down 8% versus April last year May June and July renewal acceptance rates are all running ahead of last year at this time.
We have worked we have worked diligently to identify and support those who need help as a result of covered 91.3% of our April build right because on a 60 day planned to pay it was established Oh paid those who were impacted by come in 19 in addition to flexible.
<unk> plans for that is affected by October 19, we've not charge late fees frozen eviction proceedings and actively work to pair affected resonance with local and national support resources.
These changes will cause our life can come to be lower than expected in the second quarter.
Collections have been a focus in April we have collected 98% of rent build for April when you add the 1.3% of covert 19 resident affected resident payment plans or mentioned earlier, we've accounted for 99.3% of April build right.
As inline with prior year results.
May rent payments trends are slightly ahead of april's patterns as of May 5th we've collected or executed payment plans are 94.2% of our may build rent as compared to.
As compared to the 92.6 of cash collections and executed payment plans at the same point in April.
I'd like to Echo Eric's comments and thank our teams as well and served and cared for our residents and associates well as Weve grappled with the constantly changing implications of coping 19, I'm proud of them and grateful for their efforts and character Brian.
Thank you Tom we're certainly an unprecedented times and the transaction market fully reflects this reality it transaction market is generally in a wait and see mode and the only transactions occurring or those that are where either fully committed.
Before we 19 hit with their debt and equity lined up or deals that have a strong buyer need to close such as intended 31 exchange because of this slowdown in activity.
And in an effort to allow our associates to focus on our properties in our residents we elected to pause the disposition process from Jackson, Mississippi properties.
And we'll reevaluate the sale of those assets at a later day.
At this time, we have no insight into any potential cap rate changes due to the lack of activity.
Going forward due diligence process is will be extended.
Meaning it could be a few months before cap rates in pricing trends more apparent.
We believe it changes taking place due to come in 19 will potentially lead to more attractive investment opportunities through each of our platforms land sites for future ground up development.
Pre purchase development, where we partner with strong developers and acquisition of existing assets, it's too early to saying when the opportunities will begin to materialize, but we continue to work closely with our network and brokers and developers to monitor a number of previously identified opportunities.
Since the pandemic had new development has shut down with most developers halting all predevelopment spending and many dropping land sites construction debt is nonexistent.
Forcing developers to shell the mini shovel ready projects due to our balance sheet strength and our available capital through a lot of credit we're receiving more calls from developers looking for cash.
As we filter through all opportunities that come our way, we will remain very selective cautious in our approach and disciplined in our underwriting.
The significant pullback in capital sources for New development, we expect Minstar's declined significantly over the next few months, leading to a sharp drop in deliveries within our markets and couple of years.
With regard to the acquisition of existing assets.
We continue to monitor the fundamentals in our markets with a significant focus on newly delivered assets that are still at lease up.
The second one of the market is likely to experienced the most pressure as rents underperform concessions increase and stabilization is delayed.
Additionally agencies have pulled back on their funding of non stabilized assets limiting the buyer all for the segment.
Finally, just to note on construction, we've been fortunate that all of the municipalities in which we operate has has classified construction.
An essential business and we've seen very little impact to the construction schedule of our seven development projects with that I'll now turn the call over to al.
Thank you Brad and good morning, everyone.
Some brief commentary on the company's recent earnings performance balance sheet activity and then finally, a few comments our outlook for the remainder of 2020.
The main focus of the call. This morning is only performance and May trends. It is important to remember that we did have a strong first quarter performance are putting corn for the first quarter of Dollarssixty two per share was three cents per share my the midpoint of our guidance.
Oh, It was essentially evenly split between April operations, primarily revenues and other items below.
Generally favorable interest expense for the corner.
Given the significant economic uncertainty related to come in 19, only but your guidance in March and don't yet have no clarity to reestablish for your guys.
As much information about current trends as we could we had enough of the 19 a section. So no doubt package pages session. I don't know Haswell, which has a lot of information about <unk> elements, including collections leasing occupancy and other key metrics.
Additional bearing current information about our main collections and that's not in our lease for April and May we provide flexible payment options and Wayne late fees residents financial impact about an Emmy.
Thus far we've been encouraged people in early May cash collections, Oh for current rent and deferred payments, but as Tom mentioned, we do expect the performance to reflect more pressure in the near term partial resin and as a reply to run at first and because we waived lakes ease and certain lease termination fees for impact resonance you can find details Frank things along with his for context financing.
So.
As Eric mentioned, our general expectation is for the current leasing conditions to persist over the next few must continue to impact impact revenue performance. However, overall, we expect operating expenses remained fairly consistent with our original expectations. As we expect two largest expense areas personnel and real estate taxes to remain near early projections for the year.
Some benefits expected and maintenance costs more turnover.
Perhaps offset by slightly higher utilities in marketing expenses.
Also blowing and while we expect overhead and interest cost trend somewhat lower than original expectations for the year is hiring plans and short term borrowing costs will also be impacted by the current economic environment.
Finally, it's it's important to point out that many of the activities over the last years to strengthen our balance sheet position us well in the current challenging environment.
Leverage remains at historically low level, we have a significant capacity provided by our 1 billion dollar unsecured credit facility, which is expandable to be in it has also our debt maturities for 2020 are only 137 million remaining development funding obligations years, a modest 175 to 200 million.
The Captain Morgan is not fully recovered recent transactions exhibits good access to public bonds and other forms of capital, especially for companies with strong credit metrics such as M&A.
Positioned to not only whether the CCAR stress will eventually pursue opportunities that may result.
We are committed to our long term a leverage range given our current metrics. Our rating. We expect we could immediately invest around $750 million in quality properties funding was down alone.
For the productivity and plan additional capacity is likely available as well.
All that we haven't away from your comments, so Keith will now turn the call over to you for questions.
I got this time, if he'd like to ask your question. Please press the star and what your Touchtone phone you can always remember yourself when they keep pressing the county once again its start at one.
We'll take our first question John It can't with BMO capital markets. Please go ahead.
Wanted to make sure I'm on the.
The 4% decline you're seeing in May if that's a good run rate.
Going forward and auto on there were no rate a is that something that you're right.
Specific markets that you're.
You know pushing you so no retired.
Hi, my that Johnny or a little word on the first question, what's going on the made delinquency is going to run right. What we expect to continue.
No.
The decline in new new rental rate for the.
I think on my commentary by market and that's a good run rate for the remainder of the year.
Oh I wouldn't say, it's a good run rate for the remainder of the or better thing April and May are running pretty similar to each other at this point really the run rate for the remainder of the year depends on how rapidly the economy recovers from the cobot 19.
And in answer to your second part of your question. The renewal performance renewal pricing performance is pretty consistent throughout the markets in the portfolio, There's really no difference there.
Great. Thanks.
Our next question comes from Neil Malkin with capital one. Please go ahead.
Hey, guys good morning.
Talking about the collection or the request from resident that had been financially impacted how that how that sort of trended.
<unk>.
Market.
And asset quality and even submarket location.
Yeah, I'll give you may all just Tom I'm, just sort of a broad brush.
As far as their requests came and.
They were a little higher places that are affected by tourism, such as Orlando Savannah and Charleston.
They were as high as $7 million and requests but have a VAT has been paid off at this point on asset quality, we're not seeing any difference at all A's paid.
98.1% cash.
1.3% deferred MBS, where 97 nine with 1.3 deferred so really on a asset class basis and honestly, if you look at it by suburban urban or high Roz.
Looking at and mid rise or a garden those are fairly consistent the differentiation really comes by market characteristics.
No that's really helpful.
I was wondering if.
You know your collection.
Seem to be the Hyatt.
For any of the apartment.
Reset reported last night I was wondering.
Do you what do you attribute that you I mean, yeah I think some people have talked about the sunbelt, maybe not holding up as well as some of the tech oriented coastal markets, but you seem to be doing.
Like I said better than than your peers.
What do you that what do you attribute that that too.
Well you know Neil this is Erik I would tell you that that its it starts with a a principle that we really want to help those people who need help and I think one of the best ways that you help people that really need help is you also expect that the other aspects of your operation performed.
As they should and a as there are capable of and so what we've attempted to do here is to.
Be very proactive at communicating with our residents.
And reaching out actively to those they need help and but also making sure that that people understand that this is a program that is intended to help those who truly need help the other thing that we opted to do is.
Really take more of a rifle shot approach to.
The the market environment, we find ourselves and then rather than come out early when conditions were really just a lot unknown at the time and just suggest that we're going to treat everybody in the same way with these following programs.
We really elected to instead.
Take it sort of month by month.
Approach it on a case by case basis in some cases, which gives us the ability to adapt and change as conditions evolved.
And and so I think this yeah, we took a very measured approach to things.
And and a lot of communication went on with residence and with our associates at the properties and I.
I think you know it through all that it resulted in I'm you know the collections performance that we feel pretty good about.
Hi, Great appreciate that one last quick one.
Accounts that are.
Are you planning on recognizing the delinquency certain <unk> netting that against a.
Billed revenue or are you going to recognize that on a gap.
And then have some sort of straight line offset.
Yeah.
Well part of the vast majority. This is a Neal this is al we certainly expect once we release our earnings for the second quarter that we'll have a portion of the will have a bad debt reserve that identifies what we think we'll ultimate collected some phase. According to note that the information we put in the press release. This morning was on a cash basis. It really doesn't reflect any of that and so anything we seem to second quarter and more.
Built it will be will be a good thing for us and it's also important now that you know the commercial cyber business you mentioned a straight lining at least at the commercial side of our business is much much smaller and my one and half cent of our revenues and for those ones. We are taking a month and pushing it to the end of the lease like like me to commercial operators are and ends and spreading it over the life at least for multifamily.
Yes.
Residence, we are we're doing a normal a collection process will ultimately have a bad debt reserve release second quarter earnings.
Okay, I guess, what I'm trying to get.
You have let's say, 2% delinquency.
You wouldn't report data.
Sort of 98%.
Yes, you reported at 100.
It did kind of high whatever you think.
Bad debt is that correct, that's exactly right I mean, so what we're showing you is trying to the point I'm trying to make is the information we're showing in the leap release on April and on May is just gross not collected ran at this 0.2, 0.3% of our rent and fees together as uncollected up but from that we have.
1.3%, which is we have promises pay which we feel like we will collect a vast majority of and put us in a much better positions. When we report our earnings for the second quarter, we will have like reported revenue for or for a large part of that.
Hey, I appreciate it.
Our next question from Austin Wurschmidt with Keybanc. Please go ahead.
Hi, Good morning, everybody I'm, just curious Brett Ratner erred on the call that you've received from developers looking for capital been laid the new starts like projects that are under construction or or or projects that are in lease up.
And then could you give us a sense of where you think terms are for.
Financing today, a best guess.
Well the Austin This is Brad the calls we're getting so far are for new starts I mean, I think it's too early really start getting calls for.
Deals that are in lease up but as I indicated in my.
My comments I do think that there's going to be some pressure on on the new lease up.
Segment.
We will start getting those calls I don't know when that's going to materialize, we don't know when that's going to be.
But the calls we're getting right now are from developers, who thought they had their debt and equity lined up and there are two months out from started construction and now they have no doubt they have to equity. So those are the calls we're getting right now.
And.
As I said, we're we're getting a lot of those calls because we looked at a lot of those deals originally and maybe you another equity source got the deal for whatever reason, but.
It's too early we think to to really take off any of those deals would we need a little bit more timed what kind of the cloud settle.
Around us in terms of debt terms.
There are certainly worse than they were before cobot 19 hit I think certainly ltvs are down really across the board you know there's additional requirements that are that are going to affect the proceeds that bars are getting good they're looking at trailing three months operations, which are going to.
The impacted.
You know what's going on around us some more so than others. So that's going to affect.
The proceeds that folks are getting.
And should as I said lead to additional opportunities for us on the buy side, but but there are there additional requirements at agencies are putting on oh buyers that are hampering their ability to to get their Max proceeds right now, but the spreads have come down from the end of March so.
They're not as bad as they had.
They're getting somewhat better.
So as you think about underwriting cost today, just curious where do you think costs start today.
Versus you know freak of it.
[noise] will contractors are not quick so to lower their pricing I think it's going to still takes some time before we see a reduction potential reduction in price kind of come through the system I mean from a sub standpoint, you know they still have jobs that they're working on right now I think a certain.
Lead to the new deals that their pricing will start to trend down.
But I think thats going to be a few months before you start see start seeing somewhat cost reductions come through the system.
It's not going to be immediate.
That's helpful. Thank you.
And then as it relates says the operation you guys had previously focused on on pushing rate on that the risk of maybe losing some occupancy and and.
As you alluded to I believe occupancy, it's kind of become more of a focus on do you think theres room or or you know enough demand to reramp occupancy in the coming month.
You know what we've seen where you know we made that shift pretty quickly.
Oh falloff in move ins and in late March that has recovered.
And we have our demand metrics are pretty good right now right in Boston, what I'd say, but I would say, we're treading water at this point, we've got enough demand to hold on and then it really just depends on how the how the economy shakes out and thatll be that will vary across the sunbelt based on locations.
But we will be looking at prioritizing occupancy exposure has flattened event, which is encouraging as we head into the low the higher exposure time of year, So and cautiously optimistic on our ability to hold the line.
Understood. Thank you.
Well take our next question from Nick Joseph with Citi. Please go ahead.
Maybe just following up on question there just specific to renewals.
C and.
Public peers come out.
Going to.
Increases.
Like you are able to continue to push.
Pretty healthy renewals in April so.
First of all how do you think about that.
Relative to those recommendations.
I'll give a sense of what your private competition is doing in terms of renewals within your markets.
Well Nick this is Eric.
Again, what I would say is that we're absolutely committed to helping those people that need help that have been financially impacted.
By this up endemic and we really believe that the best way to help those people who need help is to expect the other aspects of operation to perform.
As they should or as expected to the extent possible and and so what we elected to do is take this month at a time conditions have have changed radically in the last 60 days and going out and making a 90 day come.
But then taking kind of a shotgun approach in applying it to everybody just seem to be to us to be not the right way to go in in the yen as I say, we don't think it allows us to be as helpful. As we could be to everybody that really does need help. So we elected to take more of a rifle shot approach and taken more measured approach on kind of a month to month basis.
The other thing I would throw in that I think it's important to keep in mind is that we have a lot of confidence in our pricing platform in our pricing system. You know if you were obviously you recall I mean, we have the luxury of having been through a couple of pretty big mergers in the last few years.
Companies that were operating on the same system that we were operating on in the same markets that we're operating on we've learned a lot to that process and we have a very active very hands on approach to how we think about pricing and therefore, we think that that system and all the input variables that drive those recommendations ought to be.
Allowed to play out and if our system suggests that all the conditions that were looking at today support the ability to put through some level of really increase.
We're going to allow the system to do its thing now having said that in this environment. We're also very quick to provide ample space for our on site folks to negotiate.
We do not in this environment want to lose people that we don't really need to from a perspective Birch lane to rent increase so we do negotiate at some level, but I think when you put all that together.
Sort of drives the result that we have and and that's that's really how we think about it.
Thanks.
The other purposes.
Your private competition.
So increasing.
We also with the I don't know what are what the private guys, who do a we've not heard.
You know any any comments I mean, we monitor our comps very very actively as part of our revenue management practices and uncertain. In some cases there are some that are not putting through increases in somar, but.
It all factors into our pricing dynamic in market market factors.
I would just say based on industry conversation here and there was probably appears is mix that our allies.
Thank you.
And our next questions from Nick Yulico with Scotia Bank. Please go ahead.
Hi, Good morning. This is the summit in for Nick. Thank you for taking my question I guess.
Focusing on expenses a bit.
What drivers you have a due to keep the costs I Q1 levels because I know you mentioned that you're looking at expense growth, which is still in line with.
Inline with prior guidance or Brian.
And you mentioned in increasing marketing spend was some good because that's where you're putting the off of it I just wanted to get a sense of.
How should we think about your expense growth for this year with is what you had stated earlier in the.
Well. This is I'll give you a few comments on that and Tom I want to give something on the marketing as well, but for the first quarter. As you mentioned I think the two areas. The biggest increase of all is really that made the biggest impact was property taxes is over a third of our costs and so as we talk by going through your that played as expected. It grew 35% marketing also grew.
<unk> grew by 11% as you saw in the release almost 12%. There's a dollar value is much smaller the overall, it's been structure. So really had less overall impact and Tom can talk about you know what our plans are in there as we look at the rest of the year as we talked about a little bit in the comments. We expect you know hard hard to know exactly what's going to happen this year, certainly but expenses or.
We would expect have lessen the impact certainly than revenues and largely we expect our cost to be close to what we projected the beginning of year. The two major items are personnel and taxes in terms of size and we don't seem to reason right now that they would.
The.
Significantly out a lot of what our expectations were and we also expect some of our repair maintenance costs or turn cost you would maybe to be favorable because you are people will leave us and then offsetting that we mentioned a bit in the comments was the marketing costs.
Because of competitive environment, and maybe a little bit utilities calls because people are with us and their sheltering home and those kinds of things, but you have anything I would just on the operating side.
Attunitys.
I will touch on aren't M., all we'll probably see smartly as turnover lowers and then as you know as our self touring platform gets into points against moving and we really understand what implications that has for efficiency and maybe some opportunity there.
Marketing as I mentioned is all lower dollar amount.
We're going to be.
Competitive in the page search area, it's probably never more important to be active in that area and I don't I don't see an opportunity for savings about area.
Yeah.
Our next questions from harder.
Zelman <unk> associates. Please go ahead.
Hey, guys. Thanks for taking my question.
We think about the full year on the on the pricing power fraud.
You guys mentioned, sending out renewal or around the 4% range, so would that mean that.
Those are the renewals that'll get booked and May and June.
Is there a negotiation that happens where you don't actually booked the corporate lending book something lower or is that a good bogey for what.
We will look like.
Yeah, we do do some negotiation.
Comes out, but it's it's generally between 50 and 80 basis points.
Got it.
Just on the on the newly right.
Oh, what is what does the prospect on that becoming a positive number how long does that take is that something that can snap back quickly and they'll buy for Q and I know, it's really difficult because we don't.
Recover but right now we think I'm.
Negative numbers I'm, just wondering how to think about that well, though it is and can be fairly responsive I mean, new lease rate is sensitive. So if the economy recovers quickly that will shift a positive quite quickly, especially if it happens over the summer months.
If the economy, a slower to get going on about well that will stay negative.
For a period of time I know, it's really just a function of the economy and Earl I don't think.
Hi, good to see exactly how that's going to play out right now.
Sensitive and if it comes back we will see it and we want trust.
Thanks, So much and lastly, if you'll indulge me for just one more Oh, you often flexible lease phones on renewals or are you being careful about.
Run for all got them talk that Oh people want to move to a three month lease or two month lease what are the often.
The options or multiple.
Eric mentioned, we've got a pretty sophisticated approach to this.
And we price our units.
Really guide folks to the right.
Term that fits with our lease expiration guideline. So you know it as it was more beneficial for them to run in a month, where we have capacity in it and it is more.
It is more expensive tourette and a month that has lost capacity.
Quite a few options at renewal and making sort of choice. They can they can decide what's best for them and generally got as to what's best for us.
Got it thanks, so much.
Yep.
Your next question John Gotti with Stifel. Please go ahead.
Great. Thank you I'm just looking at your development page have you.
I view, we underwritten your expected yield on cost and.
Adjusting for route.
Expected, maybe a modest decrease and asking rents that are very lease up.
Yeah. This is Brad John No at this point, we've not adjusted or anything on our on our development underwriting at the moment I'd say I think it's really just too early to tell on that frankly.
The average period of stabilization.
Our deals is a couple of years out. So we've got some time on our development platform really to see how as Tom said, the economy goes and Thats really whats going to affect.
Our yields on those deals so at this point, we've not adjusted anything there and we think that are.
Original underwriting is still intact given the amount of time that we have on these deals before we start hitting our Lisa.
So thinking about say the green in Greenville, South Carolina, or a Cooper ridge and.
Or.
We are still.
Absolutely.
The same asking rents exist today that existed.
Three months ago.
Well aware and a lot on those two properties, but I think it is worth monitoring.
Great. Thank you.
Our next question come from Rich Anderson SMBC. Please go ahead.
Good morning, everyone.
So I think Eric you said that in April or May be you as Tom.
In April that you're leasing activities up 6% year over year did I hear that correctly.
For April Richard This is Todd.
But for the last couple weeks. It is now our leasing is about 6% over prior years levels, yes, but not for the entire huh. Okay. So how the heck is that happened it [laughter] sorry to put it that way but.
You are obviously operating with much fewer resources, how do you explain that.
It's a change in our behavior and I think it's a change in our customers' behavior.
And I suspect it as a little bit of recovery.
There was down close to 50% in late March so rich, we've really shifted the entire our offices are staffed but have been closed to the public in terms of visitors, but our teams are there to facilitate virtual and self tours and there has been increase.
Animal response to that.
Our conversion ratios on a on a self tours are very very good as you would expect but.
Is really just changing from probably.
Customer preference and.
Gearing towards guided tours first to virtual and self tours first and those.
So have gone quite well.
As the fact that you've had a lot more tenant retention also aided that number.
I mean, those two numbers or Standalone thats helped us hold the line.
Our leasing is and move ins will come up.
And you know we've got we've got a chance to sort of stabilize from there.
But.
In the sense of and fewer people given notice we have fewer tilly's.
That is a good thing, but the 6%.
Increase in leasing is really just on volume of newly system is not related to the amount of turnover.
Okay.
In terms of the sending out renewals at I think it was 4%.
Our future. This month the next how has been the response to that I mean.
Imagine you know in this environment your tenants or.
Expecting some some handouts or or what have you.
Has there been some I rolling or is that it's sort of like you. Okay. We get it type of response and I'm just curious practical practically speaking how is that Oh I mean.
First I, Miss Eric outline and some earlier comments.
We're working really hard to identify whose affected by covance. We're seeking them out we are working with them and we are doing everything we can to support them. So.
Group has been taking care of and a matter on.
The their response to the renewal offers in general.
Before May June and early look in July our substrates are running three and a half to four percentage points higher and this time last year and southern responses frankly pretty good.
Yes, we are going directly to those folks affected barcode asking trying to identify and I'm working with them and then they.
The other folks are responding to the offers quite well.
In terms of the commentary around a lot of your state starting the process of opening up and getting the economy moving.
Are you, but there are a lot of businesses behind that have that are going by their own rules and perhaps delaying out of you know can you know abundance of caution or whatever how will you as a company in that region respond well you're just follow the guidelines of the states, where do you have your own kind of more conservative approach to.
Opening up so to speak your business.
Yeah, we are.
We are.
And it's different by market, what is accepted and one in Scotland, and we are adjusting by market most of our leasing offices.
Our opening this wing forgotten tourists under sort of strict guidelines social distancing crowd kinda control. If you will understand those kind of items and then the amenities are really following Oh, my God ads and I wouldn't expect amenities to be open by the end of.
Okay, and most of the Sunpower locations.
Okay last question for me and this promise to pay you know sort of payment plan.
1.3% in April.
How formalized is that are they signing something and that gives lends itself to perhaps more certainty or is this sort of like I don't like a pink where type of thing.
Yes, it's an agreement it's it's an amendment to the leases and executed legal document yes, okay. Okay wonderful thanks very much everyone.
Go next exact silver bird with Mizuho. Please go ahead.
Hi, Thank you for taking my question just a follow up on rich is and how high do you think or retention can go and how much benefit or do you think that could have to the revenue.
Inside.
Oh, I mean, there's what I hope far and what I know and is it is difficult to estimate where in a time period, where rules that were normal have changed and we've just got away and well.
And I think what you have to recognize as.
You know when you start thinking about the reasons that people leave us the number one reason people leave us is because they make a decision to go by home and we certainly think that that reason is less of a pressure point today for all the yeah.
Sure broad economic worries are out there that's unlikely to be.
Ramping up anytime soon.
But another big reason and frankly, what has been slightly ahead of even people moving.
By home lately has been because of a change in their job employment status change and.
And I think that that continues to probably be the variable that will be the most impactful in terms of changing.
I'll be behavior and again, given the uncertainty in the economy body right now I don't think there's going to be a lot of job hopping going around I mean, certainly a those that have jobs are probably glad to have them they've got to hold onto though.
The third biggest reason people leave us is because they didn't want to pay the rent increase and frankly, what we've been doing is backing off on that.
As we've been talking about here. So I think when you start to look at all the reasons behind that yeah. It we're optimistic that we're going to continue to see turnover stay fairly low for some time I think we're gonna have to see the economy really start to pick up.
Before we begin to see turnover returned back to where it was and how long it goes our how high.
Retention goes or how low turnover goes is kind of hard to say right now no.
Data point Erics commentary.
Total turnover was down 8% that was driven by 13% decreasing job transfer.
Got it got it I appreciate the color just one more.
Guys speak to any or have you seen any benefits from your investments in technology in either the operations are leasing side and that does this sort of prove any future ramp up in investment or underwriting.
Yeah, No I mean, the overhaul platform.
As performed coin quite well and we're thrilled with that progress I think the place that it points to though the most is continued.
So touring and automation.
Sales side of things our teams are handling that process quite well and we would expect to continue to develop at a good club.
That's it for me thank you.
Well go next to jump philosophy with Green Street Advisors. Please go ahead.
Thank you Oh do Youve any early read the now municipalities are all are going to be approaching property tax assessments.
Well, we had four months and I get it back off or they just they got to keep coming in there for the money.
Now it's a great question, John we spent a lot of time trying to trying to dig into that and what we're seeing right. Now is it's just too early to tell we are seeing obviously for us the main states or Texas, Florida and Georgia.
What we're seeing right now is most most some of the states Texas.
Most prominently is is pointing back to the assessments for taxes are since the beginning of year January one and depending most people sitting right now doesn't apply for a change in that so for 2020, they're going to stick to those plans and any changes roll through 2021, and we certainly expect there'll be some pressure on that from people. There also be pressure from states in locales.
He is trying to get their budgets balance. So I think what we would say as 2020 is probably not going to change much from what our early expectations are but it's irrelevant 2021, if if economic.
Impact continues to persist and revenues continued to decline you'll likely see some impact and what we did see in the last downturn. We went back looked was.
In the states in our biggest Florida, Texas, Georgia, We did see ultimately those guys gave pretty good repreve, but it to six months to year. It took the next cycle thing to do that so.
Most were short I think that's what we'll see this time.
Got it that makes sense in the last one from me I'm trying to get a sense for what your guys pricing power or cash collections would look like in a world without this fiscal stimulus cranking and so any sense or late March or early April I know, it's very tough to extrapolate weekly data.
The points, but any sense for a any guesses or what you know April occupancy or cash collection would've looked like a without the unemployment insurance benefits are hitting and some other fiscal stimulus measures.
I think I think.
John This is Eric I think.
Well you have to recognizes that frankly, a lot of our region of the other country was slower to shut down then what you see happening a lot of other areas of the country and it's also showing signs of opening up faster. So we didn't really see the unemployment claims starting to trend up until.
So you know really well into April and across a number of our states and when you look at that kind of wait wait our performance of our portfolio of states. If you will we continue to run at unemployment claims as a percentage of the employment base that percentage is lower than national average and.
So I think that while certainly the the unemployment claims ramped up starting in sort of mid April.
Over the last part of April has been helpful.
I think that you know.
We don't think that that factor has been a huge tailwind for US certainly has helped but the other thing to keep in mind is that average rent to income of our portfolio a 20% a it's a pretty affordable reach of the country to live in and dollar goes a lot farther in our recently.
Country and so I.
I think that you know, we think that while certainly there's been some benefit from some of these federal assistance programs I would suggest is not a huge tailwind for us.
Okay, great. Thanks for that.
Thanks.
Our next to steal your broader with RBC capital markets. Please go ahead.
Hey, guys. Just a quick question about some of the redevelopment you're doing any earnings.
Call up to 10 properties, apparently working on a five of which.
It looks like it going through it besides the other five you're putting on hold it looks like.
Are there any indications or any sort of benchmarks you guys are looking for for when you're going to restart or start working on those five properties or Conversely.
Indicators, which would sort of it sounded like you to push those out until next year.
Yeah, I think it's a total 10 properties and.
Actually.
Hey, working forward with eight of those where we feel like the me the price to value, we can still narrow and those markets.
Even with pressure on a newer stuff from the high and they are in great locations, where where our price value alternative and we can still make a difference and will also there will be delivering.
And finishing and volume fourth quarter early first quarter next year, we feel good about how they are coming.
Hi, Paul.
Opportunity of you know sort of Oh, let's say why 2000 early.
Our lane 19 nineties early 2000 product, it's extremely well positioned.
We feel like our pipeline goes well beyond these 10.
We will will be underwriting and looking for the next trial as we move into 2021.
Well, that's fine we looked like it pretty much can we got fairly.
And.
You know even worse case scenario. This here in those other two I guess, you're just waiting to be opportunistic with what's going on and we were just falls and on those two they'll likely tee up honestly in early 2021.
Perfect. Thanks, so much that's all I got.
Thank you.
Well go next to Rick good more with Goldman Sachs. Please go ahead.
Thank you good morning, I'm just a couple of question first just on the demand trends in late April in May and with your market. Starting to open are you seeing anything that would suggest migration out of urban to more suburban relative to the the kind of a pandemic.
I think there is anecdotal evidence for that and we would expect.
But with such an early pick up and where our leasing is coming from is it's difficult to get that renewable how about or look at thought and.
And the end shifts.
As we finished the second quarter in a busy leasing season.
Understood and then just following up on Texas. Specifically is are you seeing anything with regards to what's happening in the energy patch.
And how it might impact your your markets in Texas looks like first quarter was actually pretty strong for you in Texas, but anything new on the margin in April in May.
I mean, we're monitoring Houston.
A little bit our level of requests for.
Colin affected.
John just there and we're watching oil and gas air and that is minimal worry for us.
Austin, and Dallas or are hanging in there with the portfolio.
Thank you.
And we'll go next we'll follow up the heart goal with Feldman. Please go ahead.
Hey, guys. Just really quick can you just give us more color on the way traffic is calculated.
Is it doesn't include the online traffic in the workforce for profit.
The comparison, what would traffic being for the last couple of we.
Does the physical traffic being kind of yes, yes, that's moved around a little better. So what we have as leads when she was an expressed interest we have traffic or visit is when she was actually if I recall is it took a property now we have a lease as much as someone who signed an application there's been a lot of moving around.
And not so what I would tell you is leads and mountains dipped as I outlined.
In late March and leads and move ins have.
Grown.
Our cover to about 6% or normal levels traffic, which is visits to the property.
Has remained relatively low because more of our leases are being executed virtual ourselves touring.
All right primarily virtual so you know.
Our closing ratio, which we used to income as a method of ER visits to lease we thought 20% as good or running 56% to 70% on that and because if you're coming out to see us at this point Theres a very good chance that you will close so.
Thank you I think we're kind of monitoring the lead side of it and worldwide. We are monitoring our we actually getting leases traffic.
Or visits.
As a number that has less meaning today than it did six months ago. We will certainly expect now that our leasing offices are opening backup the doors.
This week, we expect on site visits to really start to ramp up I did not exist and for the last few weeks. After the doors were lost and we're doing it all all virtual but but as the doors are opening up. This week, we think the traffic levels will start to pick up.
Well that's great color. Thank you so much.
Uh huh.
It does appear we have no further questions I'll return to Florida, our presenters for closing remarks.
Well, we appreciate everyone joining us and I'm sure we'll be talking to a number of you virtually for upcoming June meetings with day rates. So thank you very much.
And this will conclude today's program. Thanks for your participation you may now disconnect.
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