Q2 2020 NexPoint Residential Trust Inc Earnings Call
[laughter].
Good day in and welcome to the next point residential Trust Inc. second quarter 2020 Conference call Today's conference is being recorded.
At this time I would like to turn the conference Havertys Jackie Green Investor Relations. Please go ahead ma'am.
Thank you good day, everyone and welcome to <unk> point residential tract conference call to review the company's results for the second quarter ended June 30 on the call today or brain Mets Executive Vice President and Chief Financial Officer, and my Greener Executive Vice President and Chief.
As a reminder, this call is being webcast due to companies that www dot net lending.
Before we begin I would like to remind everyone that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act like 95.
That are based on management's current expectations assumptions and beliefs.
Forward looking statements can often be identified by words, such as expects anticipates estimates may should intend and similar expressions are variation or negative before these forward looking statements include but are not Monday, Kim statements regarding Nx, Turkey isn't industry in general They told me 19 pandemic and its effect.
<unk> company and expertise 2020, adjusted I know I estimate and a related assumptions and Turkey strategy for dessert wonder and full year 2020, and her team [laughter] value minutes related components and assumption lands on that program, including projected right projected average ramp rent change and return on invested.
And expected acquisition and disposition.
Not guarantees of future results any forward looking statements are subject to risks uncertainties assumptions that could cause actual results to differ materially from those expressed in any forward looking statements, including the ultimate geographic spread duration and severity of the cover 19th endemic and the effectiveness of an action he can't afford.
Actions that maybe taken right governmental authorities sticky outbreaks or tree impact as long as described in greater detail in our filings with the Securities and Exchange Commission, particularly knows describing the Companys annual report on form 10-K, and quarterly reports on form 10-Q listener.
Should not take undue reliance on any forward looking statements and are encouraged for music companies. Most recent annual report on form 10-K, and the company's other filings with SEC form young complete discussion of risks and other factors that could affect any forward looking statements.
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This conference call often include analysis of funds from operation or FX, though core funds from operation or core, though adjusted funds from operations or a oh and net operating income or I know why all of which are non-GAAP financial measures of performance or total debt.
These non-GAAP measures should be used as a supplement to and not a substitute for net income in total debt computed in accordance with Guy.
For a more complete discussion of SFL <unk>, Okay. So I know I know that see the company's earnings release that was filed earlier today I would now like to turn the call isn't a brain Mets. Please go ahead [noise].
Thanks Jackie.
Welcome everyone to the next Archie 2022nd quarter Conference call.
Today, we're going to discuss the highlights for the quarter.
We'll spend some time analogic Q2 results as was the early part of Q3 through July.
This is Brian its let me start with the Q2 and year to date highlights first we announced last week on July 27 to support elected to expand the composition of board from five to six members. We added Catherine would as an independent director.
We believe Kathy brings significant experience and a unique perspective to the board.
I had to walk in her on.
Net loss for the quarter was nine point Threemillion or 38 cents negative 38 cents per diluted share.
As compared to a 2 million dollar loss or negative eight cents per diluted share in Q2 90 same store NOI increase for the quarter is 1.1 million or an increase of 5.8% just compared to Q2 2019.
Reporting Q2 2020 pool.
FFO of 40.5 million or 59 cents per diluted share, which is an increase of 31.1% or per share basis as compared to Q2 2019.
Revenue for Q2 was 50.7 million in total in Hawaii was 29.2 million.
This represents an increase of 70.6% an 18.9% year over year, respectively.
And why margins for Q2 were 57.6%, which was a 50 basis point improvement over margins in Q2 19 of 57.1%.
We continue to execute our value add business plan by completely foreigner loves unfold impartial renovations during the quarter with 392 upgraded units leased achieved an average monthly rent premium of $113 at 23.4% ROI during the quarter.
Inception to date and portfolio as of June Thirtyth.
Completed 7325 full and partial upgrades achievement in average monthly rent premium was $95 and a return on investment of 25%.
There are equity repurchase program, we've repurchased approximately 2.4 million shares of stock through.
Q2, 2020 at an average repurchase price a $25.70 per share.
We ended the quarter with $85 million of cash.
On our NAV per share given that a precedent disruption in the economy over what is also an unprecedented a short period of time cap rates become difficult to judge although we do have more clarity today than we did after Q1.
Nevertheless, we are updating are now based on our revised outlook for it on cap rates and Matt will discuss this and that's a detail in his prepared remarks based on our updates in cap rates and then why we're revising our NAV per share are as follows $34, a 37 cents below and $42 and 30.
One cents on the high end from mid point of $38.34, that's compared to midpoint is $38 in 47 cents in the prior quarter or 33 basis points quarter over quarter decrease the midpoint of $37 at 51 cents at June Thirtyth of last year.
Right to point to 1% year over year increase.
For dividends for the first quarter, we paid a dividend of.
31, sorry for the second quarter paid dividends 31.25 cents per share on June thirtyth to shareholders of record as of June 15th.
And last Monday, the board declared a dividend per share of 31 cents in 2000 13.25 cents per share payable on September thirtyth to shareholders of record on September 15.
Year to date or Deborah dividends is 1.77 times covered by core FFO for pay payout ratio of 56% of core assets.
Overall.
Just big picture, a rig collections are stronger than we anticipated in Q2 that maybe.
Better than everybody anticipated across the industry and that trend continued into July and Matt will give some details around that our biggest attracted a higher revenue was our inability to charge late fees or process evictions moratorium on evictions under the cares Act ended July 27.
However were still restricted in certain markets and six that we can process evictions, we're doing so thoughtfully.
As a number of local governments are offered assistance to residents were encouraging our residents to take advantage of that.
And also helping them to find information and or complete applications for the next big event that we're watching closely the new stimulus package or lose out how lot [noise].
The withdrawal stimulus may impact our results overall in our ability for tenants to to make rent collections. However, given the force nature of the situation Unprecedent declined the economy, an increase in unemployment not to mention the fact that it's a major election year. We continue to believe that some sort of stay.
This will be forthcoming how however, we also believe that initiatives bill is not impact the past the impact maybe less than perhaps people expect.
So this is a decline in assistants requested by our residents throughout the quarter into July and just the general strength of our portfolio performance since coated.
And the non payment of rents is only impactful to extent, we can't do that non paying tenants, which we've been.
For been to do up until just last week in that regard any additional stimulus is likely to be a double edged sword with the carrot of more stimulus, which.
May help some since it has made payments, but the stick is if we can.
We have continued I'm extension of moratoriums on addiction.
We continue to see strong demand for our product in most markets, which is evidenced by our results as well as the.
Man that we've seen on our upgraded units.
Where weve been able to drive strong rent increases.
Thats going to get to that will more details wall.
One of the reasons that we see strong demand for our product something we've talked about historically, we're starting to see now is the trade down effect.
We believe this was a factor.
And Oh, eight or nine and beyond.
Generally a tenant in a product decides to trade down to one of our renovated units saving money, but sacrificing little in the way of quality or amenities and we think this is probably very an underappreciated part of our strategy and our story.
Net net all these factors have resulted in strong into why growth relatively strong new lease rent growth in most of our markets strong renewal rent growth and occupancy compared to our public peers and far better.
Smaller private operators so although some of the unknowns remain ronko that we believe that after five months, we have lot more transparency in an understanding of how this is going to impact our business and believes that we're well positioned.
For the future.
Let me go through some of the details on results.
I'll turn it over to Matt.
Total revenues for the second quarter 50.7 million versus 43.1 million for the same period in 19, 70.7% increase in Hawaii was 29.2 million.
Second quarter 2020 versus 24.6 million last year were 18.9% increase core FFO.
Increased to 59 cents per diluted share from 45 cents, which is a 31.1% increase on a per share basis same store rent increased 2.1% year over year for the quarter same store occupancy increased 120 basis points for the quarter year over year.
Which we were excited about that's a strong number same store revenue increased 4% for the quarter year over year.
That's 5% increase in rental income and a 31% decrease in other income driven mostly by the inability charge late fees and other types fees same store NOI was 20.2 million versus 19.1 million the same quarter last year for 5.8%.
Same store NOI increase.
Year to date, our total revenues are 103.3 million versus 84.6 million for the same period 19, which is 22.1% increase.
So why is 59.2 million year to date 2020 versus 48.2 million last year for a year over year, 22.9% increase.
Core FFO was $1.11 cents per diluted share versus 91 cents per diluted share last year for 21.4% increase same store rent increase year to days, 1.9% same store occupancy has increased 100 basis points.
For 2020 versus same period is where United team.
Same story on same store revenue year to date, hi increases.
Rental revenue of 5.4% increase but a decrease in other income.
Same store NOI as 36 million year to date for 2020 versus 34.2% or 34.2 million last year, four or 5.3% increase in same store NOI year to date.
So that let me turn over to Matt to fill in some of the details for the quarter year to date.
Thanks, Brian.
Well, we're extremely pleased with the operational performance of the portfolio during the quarter, especially given these difficult time.
The property and asset management teams would be agent next point are operating at high levels and the performance this quarter demonstrates their talents and the durability of our company's investment thesis, namely that well located affordable classifieds apartments, and sunbelt should continue to produce durable cash flows even during the most challenging operating environments.
As Brian mentioned same store NOI grew by 5.8% year over year. It was 20 basis points sequentially better than the first quarter, we saw strength across most of the portfolio during the quarter with seven out of arts and market is growing in NOI by 4% or better, including Dallas, Houston, Atlanta Phoenix Nashville.
West Palm and Tampa, notably Tampa West Farm in Phoenix, All grew in NOI by double digits during the quarter.
On the operational front leasing activity in revenue growth for better than expected during the second quarter, new lease rates were slightly negative down, 1% and down 3%, excluding rehab units, but renewals were positive in increased by 2.3% across the portfolio for one did positive rate change during the quarter 54 basis.
Yes.
Our top markets for revenue growth during the quarter were Dallas Fort Worth Charlotte Nashville, Phoenix, Tampa in West Palm, posting 4% or better revenue growth Houston made this list as well during the quarter a surprise the upside for us.
Our quote unquote weakest markets for the revenue for revenue growth during the quarter Las Vegas.
And Orlando, but were only down modestly Las Vegas revenues were down 73 basis points from from the first quarter Orlando revenue was down 4.8% year over year, but only 1.2% quarter over quarter.
[noise] overall occupancy for the current portfolio grew 90 basis points year over year and finished the second quarter for us at historically strong 95.3%.
No retention for the quarter was an all time high for the company as well at 57.9%.
Collection activity for the quarter ended at 96.5 person and ultimately finished 98.1% as of the end of July markets below the portfolio average were as follows Las Vegas at 95.9% in Atlanta, Orlando, but did 97.3%.
Importantly, as of July 30, Onest, only five basis points or 70 into 14104 units were unaccounted for meaning we have seen no rent payments from such residents during the quarter.
For July our preliminary operating performance metrics are as follows. So I occupancy finished a month at 95% rent collection for the month totaled a strong 99.1%, including payment plans with Las Vegas being the only market below 97% at 95.6%.
Our new leases in renewals were positive, 1.5%, one quick by 2% and 1.96% with a blended positive rate change of 1.72%.
[noise] onto our Q2 value add programs you may recall, our Q2 rehab pipeline base case was previously revised lower to 225 upgrades. We're pleased to report that we completed 411, Rehabs leasing 392 of them for a blended ROI of 23.4% again demonstrating consist.
The demand for our upgraded but still affordable housing product.
We completed rehab in every market the saw particular demand in Dallas Fort Worth Atlanta, Phoenix in Nashville, our largest asset Yvonne timber crime, we completed 22 into your upgrades during the quarter, achieving a 17% ROI on leased units.
And our Las Vegas assets demonstrated demand for upgraded product realizing 14% revenue growth on 34 rehab units.
For the third quarter, we have budgeted at 540 interiors fairly evenly distributed amongst all the markets with the exception to that we find the upgrade over 100 units in Dallas Fort worth, but almost none in Houston in Orlando.
The fourth quarter, we expect to complete 290 interior upgrade again, largely evenly distributed across our markets with the exception to this or Houston, Orlando, bringing the annual expectations to 1900 units or approximately 75% of 29 teens pace.
Given the circumstances.
Oh, the transaction front, we're pleased to announce that we assign to contract to sell Eagle crest.
Asset located in Dallas Fort Worth we purchased in 2014 for 55.5 million generating approximately a 5.2 times multiple on invested capital Levered IR, 35%.
The purchase are currently has a meaningful amount of nonrefundable artists money in escrow and closing is expected to occur in the third quarter.
Purchase price represents a 4.75% nominal cap rate, which is tax adjusted on Q3 revenues are 12 expenses.
Congrats my prepared remarks, I'd like to update our stress scenarios and provide some observations operationally for the rest of the year.
First we expected and work through a challenging leasing it operating environment during the quarter. We do expect this environment to continue you may recall, we underwrote bad debt to reach over 4% for the year increasing to over eight times from our historical average we hit bad debt, particularly hard in Q2 thinking it could reach as high as a percent and then level.
Off in Q3 in Q4 recall also that we are assumed rents. We go modestly negative April through September and they remain flat for the year.
We underwrote physical occupancy to 92.9% economic occupancy declined to 89%.
Fairly modest savings were express them on controllable expenses.
And then further recall that these two crony draconian assumptions, so yielded a $2 per share core FFO for the year result.
Obviously Q2 bad debt performance in general have outperformed our expectations for the quarter given our released today as affordable housing our suburban sunbelt markets have continued to demonstrate resiliency.
Given this Q2 performance we have to take a step back from considered what we need to go wrong in order for our portfolio is still produce a two dollar share core FFO per from performance for the year, which again is modestly up seven cents from last year, and incrementally and relatively positive as compared to our public peers.
In some even if revenues were down 4% for the second half of the year and vacancy losses increased from a budget is 5.4% to a 7% of GPR and bad debt rose to 4% or tripled from the first half of the year. We still believe we could produce the $2 share of course.
Earnings for the year.
Finally on the NAV fries, despite the Eagle crest transaction as Brian mentioned, the only changes we made this quarter was was the plug in actual Q2 and a wide reflect repurchase activity reflects a fair fair value do that on our swap book, which reduced our NAV midpoint by about 13 cents per share to 38.
$30 in 34 cents.
So that's it for my prepared remarks, but in closing I just want to thank our teams that VH next point for all the hard work during these difficult times.
Thanks.
Let's go ahead and turn it over for questions.
Thank you.
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[noise] [noise], our first question will come from Alex cubic with Baird.
Good morning.
Have you gotten a material performance differential between those units, which youve renovated and just your kind of more core products I'm. Just curious if that you've seen the trade down effect is more pronounced on those upgraded units a person, it's something that might be.
Many years removed from our recent route.
Yes, I'd say I'd say, yes market dependent.
Obviously markets there are stronger for example, Phoenix in South, Florida, where we can just rehab more.
I think that I think that we've seen.
Again, as I mentioned demand.
Rise in those markets I think Dallas Fort worth.
Darlot Phoenix and self quarter we.
We we didn't think we budget as many during the quarter, but ultimately did increase our revised pipeline numbers because of that demand. So I think that there are there our trade down effects and these organically strong markets.
With 1000 dollar affordable rent.
Yeah. That's helpful. And then just a follow up there have you adjusted your guide your internal hurdle requirements that you guys are underwriting on renovations or how do you guys kind of adjust your expectations going forward as you kind of evaluating opportunities.
You're talking about in terms of adjusting.
ROI is we would need to to test the in upgrader.
Correct, correct or kind of both on the current products that you guys or future acquisitions as you were underwriting and then kind of call. It the next.
Thanks.
Yes.
Yes, sure we haven't we haven't adjusted our internal expectations for the current pipeline.
Full and partial.
Into your Rehabs that we plan to complete we still think we can get the consistent 20% to 25% or wise on the on that stock.
Going forward in terms of the new the new acquisitions that we do if any.
There will be interesting to see but I think that will hone in on markets that are showing are demonstrating the growth that we're seeing right now like like Phoenix in South, Florida, Charlotte et cetera.
Okay.
That's helpful. And then just one more quick one just any accounting side, how do you guys recognized bad daddys that certain months of delinquency. Just just wondering how you guys judge flexibility.
Yes, it's good question and that's exactly how we did.
Yes, and we seats is a little bit given the payment plans, we put in place for coated.
Once you put somebody on a payment plan in there.
60 days more out that's when we started to write it off pretty aggressively and then once we get past.
220 days, it's completely written off unless that they've been making payments towards it.
If they're not on the payment plan, it's just.
Kind of typical what we've been doing historically, we write that off much quicker.
And as Matt mentioned, there's there's not many of those that are out there, but thats didnt flushed out pretty quickly.
Understood. Thanks for taking my questions.
Thank you.
Thank you. Our next question will come from Mexico with Ladenburg Thalman.
Okay. Good morning.
Good job.
It was talking about Eagle crest, I mean, you know I know its still kinda early days for the market kind of the transaction market kind of good going and beneath that any technical where are you think transaction activity could shake out.
When the market gets a little bit more liquid.
Yes.
I think it's.
It's not surprising to us that we can we can still kind of hit pre code pricing, given where where interest rates are right now.
New new acquisition buyers can obtain agency financing in the 70% ranges two and three quarters of 3%, which you take a for three quarters cap you layer that on you can still produce a desirable cash on cash yield.
Yeah, the geographical dispersion between markets with a evictions or higher bad debt I think will you'll see harder and harder it's to pricing expectations, but for Dallas largely.
Thanks.
At foreign three quarter cap or the cap rates expressed in our and our navy on a nominal basis or we're going to be pretty steady for the rest of year and plus for just.
The market being right now, there's just not a lot of product. So theres a scarcity too that we thought we would take advantage of.
Yes produce a little bit of liquidity have a nice Fred price discovery.
And really it take recovery pricing.
Okay.
And then I think about leasing ending in portfolio.
How kind of maybe total shows the end applications trended.
Especially maybe some of the sunbelt states that have been kind of hit a little harder hitting the last couple of months by endemic.
Yeah, I mean, we think that.
In the us really the renewal retention.
The shows were down obviously in Q2, we did just spike and kind of new lease traffic and lower retention in July and so we think that though potentially be it via trend when people start getting out more and looking for updated updated product. One one thing to note is that our leasing yard.
Revenue on new lease units in July.
Yes, basically went up.
Three 3% from where it was in Q2 so.
Were positive, possibly inclined to believe that that's a healthy sign for for our market and so Brian Coyne have somewhat of a trade down effect occurring.
There.
Our markets for affordable product.
And when you can't turning down affecting some of that potentially maybe it and urban suburban kinda switched potentially going on or is.
Was it more economically but does not mine pay rent.
I think it's both I think you're.
The propensity.
For folks to wise.
With a higher quality.
Upgraded unit for three or $400 or $500 less than that what they were paying in the same essay.
You are seeing that and then you add to that our product is just has lower density.
Structured parking fiber 20 stories.
Can drive up to your unit you have to see anyone else getting in an elevator.
So I think that that that type of qualitative.
Aspects, it's our apartments are going to.
The in the near term probably at higher demand and that otherwise would be the case.
Okay, and then I guess, how about the other income yeah now they.
The moratorium was our expire I mean, that's something that could potentially salaried a little bit.
In the coming quarters, just given the ability going any card some of these fees again.
Yes, I think it absolutely will.
Well it will increase but it's not in our that kind of base case that I went over we're not assuming that that's going to be.
Big driver.
Okay.
Thats It for me make all very much thanks, Joe Thank you.
Thank you if you find question has many sir.
You may remains yourself from the questioning key by pressing star team again to ask your question you can do so by pressing star one.
Our next question will come from Barry, Oxford with da Davidson.
Great. Thanks, guys I'm kind of getting back to the bad debt expense and I know, it's hard to tell but are you able to kind of get your hands around what percentage of tenants that you have or paying rent from a you know the government unemployment benefits Oh, there is there a way to kind.
[music].
You know look at that are kind of getting our arms around that and then if so how does that play into your bad debt expense calculations.
Yes, I mean, I think the bad debt expense. The last time. We did this was a neighbor in June and we did a deep dive in our portfolio and I think the results that came out of it was that at that time, 2.5% of our.
Total population in our units.
Describe themselves as having lost a job due to coded.
So that's going is very modest we plan to do a refresh.
At the end of August to see where we are based upon the stimulus expiring in July so didn't really makes sense to do it then.
That's the that's the latest kind of indicator of.
That metric if you will.
But in terms of underwriting bad debt going forward as I mentioned.
I thought I could reach as high as a percent it was.
About 2% or less and then if we if we had 4% for the rest of the year. We still think we're positive result.
Hey, Barry on the accounting side, yes, what we're trying to do is do deep dives into all the payment plans and if people are making payments.
We're trying to take that into consideration as we think about who may be just stops paying and never repays.
Thats how were arriving at the percentages of what are we write off in win.
So it's sort of evolving as we get more information obviously, we take a backward look also for example.
We took it all the way through July and said if these people.
Paid and maybe had paid.
As of June Thirtyth, and we've got a slide or supplement to the sort of talks to that because of its quite a bit of payments for Q2 outstanding in the month July. So we're trying to learn as we go and take that into account obviously be conservative in our numbers, but that's that's what we're doing from accounting perspective.
Okay that makes sense I appreciate that and when you guys have is kind of switching gears. When you guys just looking at acquisitions.
As far as the competitors are out there has that mix changed any or is it still you know the monies roughly coming from the same group of people.
Yes, there it really has various good question there aren't.
There are there are a ton of institutional buyers right now partaking in the current transaction environment. Despite the fact theres on top of deals out there the institutional businesses.
10% to 15% discount, so where pricing is and so they're not actively seeking to purchase right now in more of a wait and see the most.
Most of the buyers that are out there or private.
Private syndicators high net worth.
It's in 31 type of type of money so.
It will see there's.
Interesting.
Survey that seabury put out across their investment sales.
National platform that.
There's more north of $10 billion in multifamily product. It's on the sidelines that use that was going to be.
Launch during the second third quarters, that's now been put on hold in their system. So.
Yeah when that comes out later in the year, perhaps the institutional bid comes back but for now.
It's largely just the private smaller folks.
Okay. Appreciate it thanks guys.
Thank you Sir.
Thank you. Our next question will come from Rob Stevenson with Janney.
Hi, Good morning, guys, Oh, sure Hey has gone well.
When you guys take a look at your new move ins where are those people coming from is that people trading up or down by price point is that people coming in from out of state. How you characterizing the new leases that you guys are have been signing over the last few months.
Yes, I think.
We were talking about this earlier today so.
The actual household income of the portfolio our portfolio is increasing so that's I think we're now at $65000.
And that's that's up.
Roughly $78000 year over year I think so that's I guess.
Quantitatively, telling us that there's.
Folks that just or more that want to live in our in our housing.
We've tried our best it's really difficult and we're going to continue to do that because I know, it's very germane to the industry right now and see what.
You know where folks are coming from what we can tell you is that of our applications. During the during the second quarter that we had.
Incrementally more from California, and New York, and it's not a huge number but it is 100 or so.
And that's 75% is California, 25% New York.
So that's the best modestly up at a 100 isn't.
50% of our traffic, it's more like 10% of restaurants.
Okay.
Then given all the rhetoric, that's been going on around.
Actual changes to the 10 31 structure you guys if that winds up driving pricing up are you guys prepared or planning on putting additional product on the market for disposition to the back half of the year to take advantage of people that need to close at 10 31 by December 31.
Yeah, I mean, we would.
I think we sell a few more but it probably is just because we we like the.
We're not revising incrementally our disposition outlook as result of.
The rhetoric.
Joe buys plan.
Yeah, we did have I think initially guidance to sell the $180 million of assets this year or more we've obviously completed a bunch right before coded.
The producing liquidity so yeah, we could probably sell one or two more years. This year not nothing on the block other than Eagle crest, but.
And 31 I read it isn't.
Isn't a catalyst for that.
Okay, and then last one for me what are you in your partner, saying in terms of availability of labor as well as a material costs for a redevelopment project right now what's going on cost wise, there and availability.
Yes, so the.
Availability of workers is increased and so the the work the labor and materials costs have gone down modestly the problem is getting crews on site and materials on site at the same time, so it's really.
We've been a timing challenge.
Logistical challenge versus a.
Yeah and availability so to speak you might have crews that has gotten some some folks within the crews have covidien. So there's a two week delay in and what those crews or what that company those subs can.
Can deliver in terms of on site performance and Rehabs, but.
Nothing.
Nothing material, but there is been a modest decrease in terms of costs on both fronts.
Okay. Thanks, guys appreciate it.
Thanks, Rob Thank you.
Thank you. Our next question will come from Gaurav Mehta with National Security.
Thanks, Good morning.
Good morning, following up on the following up on the asset that to Central Coney Island contract sale was wondering if you could provide more color on on how the buyer pools like and no well then I'll off market transaction. All you can be marketed that deal.
Yes, good question we.
We attained a broker opinion of values from.
From Seabury JLL late last year than earlier this year.
And we're set to launch it in.
Yes call. It March to the market. This is eagle crest not that nothing else.
Obviously, we didn't but as we got through further into the second quarter, we had unsolicited folks with capital on hand that went to Cvs three and expressed interest in value add product in Texas and so.
We were.
We were open to showing it to four or five groups and we hit our free coded pricing and so we decided to transact.
Okay, and I guess, though for your limits to talk to them in children's in this markets are you seeing an uptake on what do you kind of expecting for the second half, but it's not.
I think insurance, we renewed in March.
And.
We saw increases and tried to.
Do you pull the levers we can pull to keep that down the team did a.
Fairly decent job compared to some of the numbers we heard.
I think taxes, we're going to continue to do we've always done which is very aggressively.
Protest and try to get those down good of litigation is necessary.
I don't know that the.
The recent.
Vince for going to be helpful. For us I think cities are probably more squeeze now in counties in the various.
Places that we have properties located are probably more trouble today, and we're a year ago and I think are going to be every bit as aggressive on property taxes is the happened. So we're not expecting that nothing.
You're not going to see that reflected in any of our estimates or stress test.
Where are you get a lot of relief from insurance or taxes in the coming years.
Okay. Thank you got pulled ahead.
Thank you I mean, its question will come from Jon Petersen with Jefferies.
Great. Thanks, just one question for me I'm, just curious I know you guys get the net effective rent, but as we have you increased incentives for for new tenant there had to offer incentives on renewals.
You know, whether it's free rent or or anything else, how should we think about that.
No incentives on renewals other than to say that they've been largely flat.
And then on new leases we use.
So we feel source so it's not algorithmic there's no like concessions, we over obviously waving application fees.
And in some aspects waiving fees and other kind of other income line items, which resulted in a down.
Somewhat of a material down other income line, but.
No, we're not giving two or three or four months.
Oh away like like some of the gateway coastal markets arc, which not seeing that.
Any sort of modestly down.
Rent for US is a 20 $30.
Hundreds of dollars.
It's been pretty setting.
Got it okay. Thank you thats it.
Thank you Alan questionable.
Our next question will come from Michael Lewis with true Securities.
Great. Thank you.
My first question just a point of clarification as you know I was going to ask.
The casualty losses of 1 million 79, it looks like is exactly offset by in the miscellaneous income with insurance collections of a million 79, and then in the core AFFO calculation you add back a million 79 again I just want to.
Make sure that it looks to me like double counting but I'm sure. There's there's something I'm missing there.
Yes, the background on that is the cutters deal that we had a tornado come through last October is here in Dallas and so as we.
As we rebuild that we're getting business interruption insurance, so overdues reclassing it from.
Expense into the income line to reflect that revenue.
And then we added back to the.
[noise] core FFO just to reflected in there the fact that.
It's not really a part of our our overall.
Operations, but at the same time, we're getting the income but were as we would on any casualty loss for reverse it out a core assets.
So it is income that's coming in.
From the insurance company, so thats a.
True number, but then you've got this casualty losses. It we've already kind of recognized a lot of that we wrote off it was actually it again.
Because the the proceeds that we're going to get are going to be in excess of the carrying value at the time.
So that's what which I think is why most people because not everyone.
Takes casually out there, they're FFO numbers because it gets its more of an accounting thing than a economic or cash flow item.
Okay, I think I understand maybe the timing.
A little its.
Yes, there you summed it up in one word it's timing.
Okay.
My second question.
Page five at the supplemental you know you've got the tight relatively high rent collection numbers and then at the bottom of the pitch some of these markets.
With a lot of units that with delinquent. So for example, the lightest cap I saw was.
I think at the end of June it was something like 95% Orlando rent has been collected but at the same time about 20% of the units with the link back is that just a function of.
The lower the rent of the less likely people have been the path.
Well, it's also all out not doing this in detail here, but just high level. It's.
We have tenets that haven't fully paid but they paid a lot.
And so they've got balances that they're carrying and that's what we're trying to highlight here is that most of the balances are spread across a very few number tenants.
In some cases as tenants that just been completely unresponsive to our outreach.
And I think are kind of writing this moratorium on addictions.
To to our detriment, probably ultimately there that's meant but.
Matthew want to talk with the details yes, Michael in the first time I saw this is Charlie I didn't like it either and then it grew on me because I think what is what it depicts is showing the progress.
Made.
From quarter to or from the June to July for the units that are.
Our fully collected and so the way I the way I look at this.
From a positive perspective is that.
Everyone and there is only eight 840 resins into July that word that were delinquent and then there you show the dispersion across the markets, obviously base Orlando.
Some of the larger ones, but over.
Most of those most a 40.
Which isn't that much across the portfolio.
Has paid and then really no payments only 70, which is five basis points the portfolio, which I mentioned in the prepared remarks et cetera.
Yeah, I I like it at first but I think it is a helpful in depiction on in terms of progress.
And just breaks out by market.
Yeah, you know I don't I don't the testing that hurt from anybody else before I guess I was a little surprised how many people pay partial ran I was kind of ran as you. They would pay it or are you don't [laughter] and it looks like there's a lot of people that pay some of it.
Yes, no you're correct in normal times, but the during coated with the payment plans there's been.
I mean, we candidates anybody so we do the best we can to try to collect as much as we can.
Okay and then the last question for me, it's obviously too soon to talk about August but you know as you saw improvement in July.
At the same time, the cases, where surging, Florida, Texas, Arizona, especially were all in the news every day.
And that's that's a big chunk of your portfolio obviously.
I mean are there are there any signs or you know I don't know how cases match up with you know exactly and I took with employment or who pays ramp but.
Does that increase in cases.
You know is that because I give you any concern as we as we head into August and we just had no big ramp up in some of those markets.
In July.
I think.
Yeah, I think I think July has been really strong both from a.
I mean, a relatively really strong from a.
Growth standpoint from a revenue side and collections and occupancy.
We expect that can to continue into into August.
Our our markets didn't.
Didn't absorb as many job losses that as the gateway markets did so I think that that.
Kind of makes up for some of it.
But by and large most of.
But most of our most of our markets are not correlating in terms of.
Demand is down if you will from from from co bid I think I think.
July's really.
Hopefully an indicator of future activity in our markets and.
Short answer is we haven't seen a correlation between the two.
Okay. Thanks, guys.
Thanks, Mike Thanks.
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