Q4 2020 Mid-America Apartment Communities Inc Earnings Call

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Good morning, ladies and gentlemen, welcome to the MAA fourth quarter and full year 2020 earnings conference call. During the presentation. All participants will be in a listen only mode. Afterwards, the companies will conduct the question. The Mesa session and the reminder of this conference is being recorded today February 4th 2012.

The one I will now turn the conference over to Tim Argo Senior Vice President Finance free N E E.

Thank you Ashley and good morning, everyone. This is Tim Argo Senior Vice President of Finance for MAA with me are Eric Bolton, Our CEO Al Campbell, our CFO, Rob Delpriore, Our general Counsel, Tom Grimes, our CFO and Brad Hill, our 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 statements section in yesterday's earnings release, and our 34 Act filings with the SEC, which describe risk factors that may impact future results. These reports on the copy of todays 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 of presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and 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 Mak Dot Com I will now turn the call over to Eric.

Thanks, Tim we appreciate everyone joining us this morning.

As detailed in our fourth quarter earnings report MAA ended 2020 on a positive note.

The results were ahead of expectations and we carry good momentum into calendar year 2021 <unk>.

During the fourth quarter leasing traffic was strong and we captured 6% higher move ins as compared to prior year.

And despite the normal seasonal slowdown during the holidays, we were able to capture positive blended lease over lease rent growth that equals the prior third quarter with particularly strong renewal lease pricing, averaging five 2% in Q4.

Average physical occupancy also remained strong at 95, 7% in the fourth quarter, a slight improvement from the performance in Q3.

We believe these trends supported by improving employment conditions, and the positive migration trends across our footprint positions MAA.

For continued outperformance into the coming spring and summer leasing season.

Overall conditions are setting up for a solid recovery cycle for apartment leasing fundamentals across the Sun belt over the next three years or so as demand recovers and supply levels moderate a bit into 2022.

I believe for several reasons that MAA is and particularly strong position as we head into the recovery part of the cycle first.

First we expect that our sunbelt markets will continue to capture the <unk>.

<unk> growth migration trends and demand for apartment housing debt will be well ahead of national trends.

While there were clearly favorable sunbelt migration trends by both employers and households prior to Covid. This past year the trends accelerated the.

The primary reasons behind these favorable migration trends, including an enhanced affordability favorable business climate and lower taxes will still be with us well past the point, we get the pressures, especially with Covid behind us.

Secondly, the efforts we have underway this past year implementing change to a number of our processes involving new technology and web based tools will continue to drive more opportunity from margin expansion.

Specifically steps taken to automate aspects of both our leasing and maintenance service operations will drive more efficiency with personnel cost we expect to begin harvesting some of those early benefits later this year.

Our redevelopment operation aimed at upgrading and repositioning many of our existing properties continues to capture very attractive rent growth and returns on capital.

These higher levels of the higher levels of new apartment supply introduced into a number of markets over the past year will actually expand this redevelopment opportunity for us over the next couple of years.

As outlined in the supplemental schedules to the earnings release, we also expanded our new development pipeline in the fourth quarter with just over 2600 units now underway.

Our external growth pipeline executed through in house development pre purchase of joint venture development projects and the acquisition of existing properties will continue to expand over the next year.

The addition to the projects outlined in our current pipeline schedule included on our earnings release, we have pre development activity currently underway with sites, we own or have tied up in Denver, Tampa, Raleigh, and Salt Lake City.

Finally, and importantly, our balance sheet remains at a very strong position with ample capacity to support both our redevelopment and our new growth new growth initiatives.

Calendar year 2020 was certainly not the year, we expected. The MAA is full cycle strategy with a uniquely diversified portfolio across the sunbelt supported by a strong operating platform and balance sheet position the company to hold up well.

Before turning the call over to Tom I want to also say, thank you to our MAA associates for a tremendous year of service and support to our residents our shareholders and to each other on.

Our strategy is working and our platform capabilities are strong however, its share of intensity and passion for serving those who depend on our company.

Enables us to truly excel.

Tom.

Thank you Eric and good morning, everyone. The recovery, we saw beginning of May and June continued across the portfolio through the fourth quarter leasing volume for the quarter was up 6% that's allowed us to improve average daily occupancy from $95 six in the third quarter to $95 seven in the fourth quarter. In addition to the improvement.

Occupancy, we were able to hold blended rents in the fourth quarter in line with the third quarter and an 80 basis point increase all in place rents are effective rent growth on a year over year basis improved one 3% for the fourth quarter.

As noted in the release collections during the quarter were strong we collected 99, 2% of billed rent in the fourth quarter. This is the same result, we had in the third quarter of 2020, we've worked diligently to identify and support those who need help because of COVID-19, the numbers of the seeking assistance has dropped over time.

In April we had 5600 residents on relief plans.

<unk> of participants has decreased to just $4 91 on the January rental assistance plan. This represents less than 5% of our 100000 units.

We saw steady interest in our product upgrade initiatives during the fourth quarter, we made progress on our interior unit redevelopment program as well as the installation of our smart home technology package that includes mobile control of life's thermostat and security as well as the leak detection for the full year 2020, we installed.

23950, smart home packages and completed just over 4200 interior unit upgrades.

January's collections are in line with the good results we saw on the fourth quarter as of January 31st we've collected 98, 7% of rent billed which is comparable to the month end number for the third and fourth quarters of 2020.

Leasing volume in January was strong up four 9% from last year blended lease over lease rent growth effective during January exceeded last year's results for the first time since March effective blended lease over lease pricing for January was positive two 2% of <unk>.

40 basis improvement from the prior year.

<unk> of new lease pricing for January.

Was negative one 8%. This is of 70 basis point improvement from January of last year January renewals effect of during the month were up six 3% or.

Our customer service scores improved 110 basis points over the prior year. This age to our retention trends, which are positive for January February and March as well as lease over lease renewal rates for those months, which are in the five five to six and a half range.

Average daily occupancy from the month of January is 95, 4%, which is even with January of last year 60 day exposure, which is all vacant units plus notices through a 60 day period is just seven 8% were well positioned as we move into 'twenty and 'twenty one.

Led by job growth, which is expected to increase three 4% in 2021 versus the six 1% drop we saw for our markets in 2020, we expect to see the broad recovery in our region of the country continue we expect Phoenix, Tampa, Raleigh, and Jacksonville to be our strongest <unk>.

<unk> and expect Houston Orlando in D C to recover at a slower rate.

I'd like to Echo Eric's comments and thank our teams as well.

<unk> and care for our residents and our associates and they have adapted to new business conditions, the dry and they drive are recovering well done and thank you all I'll now turn the call over to Brad.

Thanks, Tom and good morning, everyone.

While most buyers have returned to the market the lack of available for sale of properties continues to restrict transaction volume.

Investor demand for multifamily product within our region of the country is very strong and the supply demand imbalance is driving aggressive pricing.

Due to the robust demand supported by continued low interest rates cap rates have compressed further and are frequently in the high 3% and low 4% range.

For high quality properties and desirable locations within our markets.

We expect to remain active in the transaction market this year, but based on pricing levels. We're currently seeing we're not optimistic that we will succeed in finding existing communities that will clear our underwriting hurdles in 2021.

While acquiring will be of challenge as noted in the earnings guidance, we do plan to come to market with 200 million to $250 million of planned property dispositions this year.

We will redeploy those proceeds into our growing development pipeline, which currently stands at $595 million with eight projects and just over 2600 units.

In the fourth quarter, we started construction on the MAA Windmill Hill in Austin, Texas as well as novel Val Vista of pre purchased in Phoenix, Arizona.

Both of these are lower density suburban projects that we expect to deliver stabilized NOI yields around 6% well in excess of our current acquisition cap rates.

Despite increased construction cost as well as some supply chain issues related specifically to cabinets and appliances, our development and pre purchase projects remain on budget with no significant delay concerns at this point.

We have several other development sites owned or under contract that we hope to start construction on in 2021 and into 2022. We are encouraged the despite facing some supply pressure our phase II lease up property located in Fort worth continues to lease up at our original expectations as does our soon to be completed phase two in <unk>.

Dallas, where over 90% of the units have been delivered.

Turning to the outlook for new supply deliveries in 2021 based on our assessment in the projection data, we have new supply of deliveries across our major markets are projected to remain flat with 2020 levels at two 8% of existing inventory consistent with previous years, we expect delayed starts extended construction sketch.

<unk> cancelled projects and overall construction capacity constraints to continue to impact actual supply deliveries to some degree.

While clearly new supply does have an impact on our business. It is just one side of the equation with demand playing a significant role as well and for reasons of Eric mentioned in his comments, we believe the demand for multifamily housing within our region of the country will remain strong and improve this year as the economy continues to recover.

When looking at the ratios for expected job growth to new supply deliveries in 2021, we expect leasing conditions in our footprint to improve from last year encouragingly the data on permitting activity in construction starts for our region of the country continued to show activity below pre pandemic levels. This group.

This drop in activity will likely lead to a moderating level of new supply deliveries into 2020 to setting up for what we believe will be an improved leasing environment beyond this year. That's all I have in the way of prepared comments, so with that I'll turn it over to al.

Okay. Thank you Brad and good morning.

Okay. So $1 65 per share for the fourth quarter produced full year core of <unk> of $6 43 per share, which represented a two 7% growth over the prior year and is well above our internal expectations. Following the break out of the pandemic.

Stable occupancy strong collections and positive pricing performance were the primary drivers of continued same store revenue growth for the fourth quarter, which was one 8% and for the full year of which two 5% as.

As expected same store operating expenses for the fourth quarter were impacted by growth in real estate taxes insurance costs and the continued rollout of the bulk Internet program, which is included in the utilities expenses and there was some of this pressure will carry into 2021. We expect overall same. It's the same store operating expenses to begin moderating this year, which I'll discuss just a bit more in a moment.

Our balance sheet remains in great shape, we had no significant refinancing activity during the fourth quarter, but we continue to fund the development pipeline and internal redevelopment programs as Brad mentioned on development pipeline has increased to eight deals with total projected costs of $595 million during.

During the quarter, we found it of $104 million of the only costs, leaving less than half or another 259 million remained to be funded toward the completion of the current iPhone.

They'll still growing our pipeline is still is only about 3% of our enterprise value, which is a modest risk given the overall strength of our balance sheet and the diversified portfolio strategy.

As Tom mentioned, we also made good progress toward the <unk> during the quarter on our internal programs funding of total of $40 million towards the interior unit Redevelopments smart home installations, and external amenity upgrades, bringing bringing our full year funding for these programs to $76 million, which is expected to begin contributing to our growth more strongly later.

In 2021 and 2022.

We ended the year with low leverage debt to EBITDA of only four eight times and with the $850 million of combined cash and borrowing capacity under our line of credit.

Finally, we provided initial earnings guidance for 2021 with a release, which is detailed in our supplemental information package of <unk> for the full year is projected to be $6 30 to 660 per share, which is $6 45 at the midpoint.

The primary driver of earnings performance is same store revenue growth, which is projected to be around 2% per the year. This growth is based on the expectation of continued improving economic trends in job growth in our markets as Tom outlined we believe these trends will support both stable occupancy levels, averaging around $95 five per cent for the year and modestly improving pricing trends through the year.

Driving effective rent growth for the year of around one 7% in.

An additional contribution of 30 to 40 basis points of projected revenue growth for the year is related to the final portion of our double play bulk Internet program.

We do expect the first quarter to be our lowest revenue growth of the year as it will bear the full impact of 2000 Twenty's pricing performance growing from there as the at from there as the improving leasing trends take full effect.

Same store operating expense growth is projected to moderate some as compared to 2020 will continue to be impacted by the rollout of double play and higher insurance costs with these costs combining for an estimated one 4% from the same store expense growth in 2021, but excluding double play and insurance. All other same store expenses are expected to increase in a more modest two and a half three.

<unk> range for the full year and this includes real estate tax growth growth of three and three quarters channel at the midpoint, which is moderating but still somewhat elevated.

Overhead cost for 'twenty 'twenty, one and are projected to be more normalized with total overhead expenses expected to be about 107 million per the year, which is of two 8% increase over the midpoint of our original guidance for 2020.

For cash forecast also assumes development funding 250 to $2 million to $350 million per the year, primarily provided by projected asset sales of $200 million to $250 million.

Our current forecast we have no current plans to raise additional equity and we expect in the year with our debt to EBITDA just below five times.

So that's all we have in the way of prepared comments. So Ashley will now turn the call back of you for any questions.

The only will now open the call from quick questions, if you'd like to ask the question. Please press Star then one on your head.

From.

And he would like to withdraw your question you may from the policy.

The first question from Amit Sharma with Deutsche Bank. Please go on.

Hi, Good morning. Thank you for taking my question and thank you for providing all of the color on that.

On the on the stats in Q4.

Yes.

Kick things off in terms of the VSS Rev growth I know I know.

You mentioned that the Tampa and Phoenix of one of your stronger market. So just wondering as you looked at 2020 Phoenix was the strongest the pharma Orlando is the we get the spread in excess of threats with 630 bps in.

In Q4 that changed Tampa with better in Orlando at the weekend so.

I guess, what's that spread look like in the context of your 'twenty 'twenty, one guidance of 1% to three per cent and where do you see the most meaningful change in performance inbound.

In terms of the things you already know about.

Yes, I'll start with that one.

Tomorrow, we're out of on the forecast what I would tell you is.

As I mentioned on the call. The thing that is most different for us in 2021 is the shift in the swing in jobs, bringing from negative six six.

The six Florida positive three or four and that's going that's going to be the thing that drives the sand that moves that moves across the markets. We see that at the high end, where we'll continue to see markets like Tampa, and Raleigh, and Phoenix and Jacksonville.

Accelerate but we'll also see it in places like Orlando, and Houston, and DC, which are of weaker now, but they will be begin to improve as job growth comes to play in those markets.

Yes, I was just looking for the future of what we have on our forecast of 2% overall I mean, I think you just think about the the markets in some of the markets that we're thinking of would be the strongest as Tom talked about mentioned Phoenix, Raleigh, Tampa, Jacksonville, and some of the ones that are going to be OK markets are there that are going to be.

The reasonable that still challenging Atlanta, Dallas, Austin, and then some of the more challenging markets of Houston, Orlando and D C and I think all of those together.

Based on the pricing trends, we see right now and expect for the for the year given that the job growth comes the 2% expectation.

Alright got it. Thank you so much of the color one more if you will indulge me on now on the floor.

Hi.

Now you've talked about 2021 supply being 25% price, 25% higher and centered in urban and downtown markets or Submarkets.

I guess the permit levels of less than <unk> at low levels from pre COVID-19 levels, but they are increasing as we've heard from other market participants as well the keeping that in mind.

Do you have any insights to share on what types of markets are products of price points out of being emphasized by the new permits of now.

The 21, 21 deliveries, but what's being started right now of the more garden side of the motor of unless oven any color on that.

Yes. This is Brad.

I would say that yes, just giving the the economics of what we're seeing today, it's really hard to underwrite.

More urban high density products. So I think it's safe to assume that the.

Higher percent of the product.

Being developed today is more suburban in nature.

But I would say, having said that when we look at the spread between the rents of new supply that's coming online.

Versus our properties that that spread is still really good and as Eric said that that's leading to more redevelopment opportunities for us. So we think that that continues.

It's hard to say, we're just looking at permitting trends, while there are clearly down.

<unk> pre COVID-19 levels I would say construction starts are down even more it's hard to say just from the permitting data of where where that supply is located but but my sense is it's going to be more suburban in nature, but the given the economics of.

Where costs are.

The rent levels of those are still going to be pretty substantial compared to our current product.

This is Eric Southern all I'll add to what Brad is saying I agree.

Based on everything that Ive seen that it does it would appear that the majority of.

Of a lot of the knees permitting activity is oriented more sort of urban in nature, but having said that one of the things that we're really starting to see more evidence of is frankly entitlement and.

Permitting is getting more challenging.

As more of this multi housing product heads to the suburbs, we're seeing a lot of.

Particularly in the satellite cities of the suburban cities. If you will that have their own school systems in their own municipal governments. They are becoming very restrictive about what they are allowing the way of apartment permitting.

The believing that these additional households will put some level of stress on the infrastructure and we're seeing that that the per meaning activity is starting to get a lot more restrictive than it ever has been in a lot of the south eastern markets. So I think there is another if you will a hurdle starting to develop across some of the southeast markets.

That will make it.

The increasingly a little bit more challenging to to supply. Some of these are some of the suburban locations.

Thank you so much of the color I'll I'll use my Dan. Thank you.

And we'll take our next question from Neil Malkin with capital one. Please go ahead.

Yeah.

Hey, everyone. Good morning.

One of them.

Okay.

So.

This is the first time I think that you guys really called out of Eric.

The call that the in migration on.

Can you maybe talk to that.

What you've seen over the recent market share.

Some of that sort of out migration from the coast I just given the the cargo into.

The bad factors that the the coasts are facing which has been exacerbated by the COVID-19 work from home.

The last quarter, you laid out some statistics about like what percentage of your new leases were from out of state. If you could just update us on that and any incremental commentary from the property level of managers would be would be great to hear thank you.

Yes, Neal it's Tom I'll jump in on that one of if that's all right.

Move ins from people moving into our footprint from outside of our footprint was 12, 2% of total move ins in the fourth corner of the highest we've seen and reflects the steady upward trend that we've seen over the past couple of years.

For context, it was nine 2% in Q1 of 19.

So almost a 300 basis point increase we've seen that steadily happening from from 19 on just to give you a little bit more color on the Q4 move ins New York move ins.

Moving from New York State, we're up 36%.

And our apartment searches we pull some information from Google apartment searches in Atlanta.

60% in New York City.

Events from Massachusetts were up.

43% in apartments, and Raleigh searches were up 68% in Boston.

Trends go on from there on the other notables probably California.

Which is up 60% and apartment in Austin <unk>.

Searches were up 90% in Los Angeles.

Neil This is Eric just to add on to some of that detail that Tom laid out there.

I do think that there are a lot of reasons to believe that a lot of this migration trend that we saw the U S population to the southeast over the past year as I mentioned in my comments earlier a lot of these trends were evident prior to Covid COVID-19 accelerated those trends somewhat and I would tell you that I.

Believe of lot of this a lot of the moves that took place during 2020 are pretty sticky in nature and I think that the trends are likely to continue post COVID-19 I think you have to recognize a lot of the southeastern markets. They continue to offer all of the same attractive qualities debt I think started the trend some years back.

And what is though.

Happening as more employers are bringing more.

Knowledge based jobs and tech jobs into this into this region of country. The employment base is really starting to further diversify and of course work from home and these knowledge based jobs allows a lot more remote working which I think is also working in our favor and so I think that a combination of just of just how the.

These economic trends.

Had been building frankly in these job in migration trends have been building for the last 10 years or so recognizing some of it a little bit last year, but those trends were in place well before COVID-19 and I think we will continue past COVID-19 the affordability of the region, particularly as it relates to housing continues to I think be very very attractive and will become even more so over the next 10 years.

And I think we also have to recognize that the Sun belt markets are continuing to become very desirable places to live and what Nashville on what Austin, and what Raleigh have to offer people today.

Today versus where they were 20 years ago is night and day difference and so I'm very optimistic that we are at the at the beginning of.

Some continued very favorable trends for housing needs throughout this region of the country.

Thank you al Eric So I guess, what Youre, saying you think it would be.

It will take longer or it may not happen or the.

The people who've moved here areas to make the track back to the.

The coastal urban urban debt.

I think the idea that net debt once the vaccine is in place and if you will society of returns to normal the idea that there's going to be this giant reversal of population shifts back to the gateway markets. I think that's a ridiculous argument I don't think that's going to happen.

Those trends are in place to the southeast and Sunbelt markets before Covid COVID-19 accelerated it a little bit.

And I think those trends are going to be.

We learned a lot last year and employers learned a lot in and households learned a lot and I think the attractiveness of this region is only.

Was is better understood today than it ever has been and I think these trends are going to continue.

That's great on the other one.

For me the single family market has been very strong.

Yes.

New and existing home sales and the mortgage application debt multiyear highs.

Just wondering and obviously you guys are theoretically more.

Most of that sort of risk just given the relative affordability.

Have you have you seen any uptick in move outs for home purchases or home rentals or anything like that that would give you.

From Radisson.

Just in terms of potential demand erosion, let's say over the next 12 months.

Hi, Neal, it's Tom I mean, nothing I mean zero resident rather than so I would say and we're quite pleased with the way the market conditions are going at this point in the fourth quarter home buying this time was up slightly by <unk> three percentage points.

Move out reasons.

Or about 200 move outs on total so.

I mean, we saw a little bit there, but as you look forward.

Except rates are at their normal levels. So we're not seeing turnover go up over time, there and home renting is flat again, so that continues to be a major factor we agree with you.

The overall on by market, certainly getting stronger and we wouldnt surprise to see that tick up from time to time, but.

It is it's really reflective of a strong jobs market and a good economy and that produces jobs and frankly jobs of the thing that drive our business.

From BMS as far.

Alright, Thank you guys for the for the time and.

Loved the sunbelt.

Thank you Neil we do too.

Well take our next question from Nick Joseph with Citi. Please go ahead.

Hey, it's Michael Bilerman here with Nick.

So I had a question on Nick one had a I had another one as well.

Eric as you think about and I know how positive you are on the current market from the Sun belt.

And all of the trends that have been accelerated away from the gateway markets.

You inherited D C. When you when you bought post on their off what was the gift with purchase or whatever but you've got some exposure to some coastal.

Closure in the northeast.

What would make you.

I come in and want to buy or develop any gateway markets I guess at what point the risk reward what needs to happen from.

From a diversification standpoint is the trend is it relative values.

The growth profiles I guess.

Where is your mindset about that.

Today because of everyone is digging maybe you want the zag.

And maybe there would be a good opportunity from a value perspective there.

Well, Michael I would tell you that my.

Principals and sort of the philosophy that I've always had in terms of how we think about deploying capital is really.

<unk> continues to be grounded in the in the overwriting belief.

Debt. The most important thing that we're charged with doing is deploying capital in a manner to create the highest recurring quality revenue stream and earnings stream that we can to pay a steady growing dividend.

Throughout the cycle.

And if you will and creating a optimize sort of full cycle performance profile at the end of the day I think.

The REIT shareholder capital over time over a long period of time is largely rewarded through steady earnings growth, obviously, and particularly the dividend growth.

And having said that I've always believed then that the best way to accomplish that performance objective in that profile.

Is deploy capital where demand is likely to be the best and the strongest and growing in a consistent fashion over a long period of time I get it that the southeast markets.

For years, the arguments and the criticism was that there are lower barriers to supply.

And new supply can come in and the oversupply of market. What I would tell you is what supply causes as it causes moderation what demand causes is steady earnings growth over time and on the falloff in demand can have catastrophic consequences and.

An oversupplied market is unlikely to be catastrophic in nature can be weak for a year or two but it's unlikely to trigger.

The massive.

Sort of upset your earnings stream, which can put a company of trouble create dividends stress from things of that nature. So I've always believed that the sun belt markets offer the performance profile that we're after.

And debt.

That's what we should be doing and where we should focus of our capital. So it's a very long answer to your question, but no. We have no interest in now using this opportunity to go into these gateway markets I don't I don't think our what we're trying to do for capital for shareholder capital would not be sufficiently rewarded for pursuing that at this point, we don't see a reason to do that.

We like what we're doing.

How do you think about just the risk reward.

From a return perspective right I think you are extraordinarily fortunate to be so heavy in these markets having built the platform that you have done through a lot of hard work and the acquisitions in the M&A and development.

But there's a lot of capital chasing these markets to right, which is going to drive down returns overall and I'm not.

Ignoring the fact that the demand of historically strong but is there a financial side of it to that.

The money is coming out of these gateways that you could create a better total return by deploying capital or reallocating capital in the portfolio or is that just not.

In your view of the demand is not there so I'm not going on it doesn't matter if I can get a 500 basis points or 200 basis points higher initial return out of it.

No I get your point and I mean, obviously I think it depends somewhat on your investment horizon.

As you think about risk return of risk reward return I think you know clearly there's going to be opportunities that are going to emerge in some of these gateway markets.

You can go in and.

And deploy capital and make an investment and create.

Create an exceptional return on your on your investment.

I think it's somewhat depends on your horizon and how long.

On to think about the capital being deployed in that market again from our perspective, we're very long term investors very long term holders and we're trying to create an earnings profile from that investment action to match up well in terms of how we're trying to perform per capital over a long period of time and so we just don't believe that with the.

That that horizon that we're working with and that objective that we're shooting for the at the gateway markets really aligned for us in the way we want to try to perform for capital I'm, not suggesting that focusing on those markets is wrong.

And I think there are certainly ways to make a lot of money in those markets, but I think I think you have to think about your horizon, perhaps a little bit differently.

<unk>.

I will say that debt.

While we continue to see capital coming into these markets I think that.

There are times, where these gateway markets over the last and you know this over the last 10 or 15 years, I mean, just attracting the enormous enormous amount of capital.

On a lot of international capital, sometimes that I think.

It was really motivated by now so most of.

Looking for a great return on their capital in some cases, just looking for a place to preserve capital. If you will and so you get a lot of different influences of some of these bigger gateway markets and particularly with the international capital that can that can I think creates some some distortions from time to time in terms of assets of being priced relative to the.

The the long term earnings potential of the investment. So we just we just see volatility and other aspects of those markets. Those gateway markets that just don't really match up well to how we're trying to perform for capital and.

We're going on we're going to continue to focus on it the way we do.

Thanks I appreciate that this is Nick just one other question on guidance the first quarter range is pretty wide.

Obviously, we're a month into the quarter and there are fewer leases that are signed I recognize it's still the uncertainty, but I was just wondering if you can walk through how you could end up at the high end of the low end and then specific to your same store revenue comment where do you expect same store revenue to be in the first quarter. I know you said it should be the lowest point of the year.

Yes, Nick this is al I think and just overall I mean, just given the uncertainty that's in the marketplace I think the first quarter being the first quarter of the of the year and we have the most of uncertainty I think the the range was just to reflect that.

I think the driver for the forecast for the whole year is based on revenue performance and so I think thats the key to be the top of the bottom of the range and really for the year or for the quarter Snap Inc.

The first quarter has talked about all of it in the comments is expected to be the lowest revenue.

Quarter for the year, but that's really reflecting effect effective rent per unit, which is a combination which is the backward on a trailing indicator, which is combination of the pricing you did last year, plus what you're doing this year and so so we're expecting improving pricing trends, but the first quarter will be the lowest revenue quarter, because it will reflect really the bulk of last year's pricing.

Which was one 3% on average and we certainly expect that to be higher in 2021 based on the forecast we're putting together. So so that's really the key factors I hope that answers your question.

Hey, guys. Thank you.

Well take our next question from Rob Stevenson with Janney. Please go ahead.

Hi, good morning, guys.

There was nearly on 800 basis point delta between the new lease rate and the renewals how sustainable is that type of spread and given the pricing out there on the internet why arent residents pushing you guys harder on renewals.

The the spread is always going to be kind of the widest at this time of the year because.

Because new lease pricing is at its most challenged.

But the.

Net delta in the adults will close over time, but that GAAP will always be there.

And the the really the variation is with a with a new rent or they have a level of leverage because they're shopping and they can move anywhere on their switching costs are really the same if we have done our job and provided good resident service.

In taking care of the residents and frankly, a pretty challenging time.

We've earned the opportunity because we've created for value to charge a little bit more Inc.

So that is where we have the most pricing power because we've worked with them we've earn them and theyre switching costs are a little bit higher so that that delta that you talk about has always been there. It is widest in this time of year on it will be tightest in the.

And in the summer months, but we.

We expect that and we plan for that and we.

You ask our residents.

For a little more to reflect the value that we've created one of them.

And.

Implied in the guidance for the year, I mean, where where are you guys thinking the new lease versus renewals winds up coming in we're talking about something thats more of less flat on new leases are still negative there and how significant should the or is the guidance anticipating renewals being.

Rob This is Tim.

Well, we would expect overall is that new lease pricing probably slightly negative.

It's very seasonal as Tom mentioned it depends on the sort of the leading edge of demand so you'll see a.

Pretty negative in Q1, and Q4 moved to positive as we get into the summer, but I think over the over the over the average probably probably a little bit negative and the renewals kind of hanging in there like they have anywhere in that five to six range and again bearing on what's a little bit higher in the summer of a little bit weaker in the in the fall and winter.

Okay and then the other one from me is you guys did call it $424 million of revenues in 2020, how much of that is non residential so retail commercial other spaces at your properties and where did that wind up coming in versus expectations a year ago. I mean, what was the negative delta how significantly was.

That impacted over the last year versus what you would've expected at this time of year ago.

I think the.

Major.

Component that's outside of residential is really just commercial was the only about one 5% of our revenue streams. So it's really minor overall Rob.

So we've had pretty good performance I mean, we've looked at our our tenants and we certainly have some programs to the deferred rent where we need to book we had good collection on a lot of our tenants are are very strong and.

The strong businesses that have been able to continue paying well and so it's so collections have been good so it hasnt even on a small number hasnt, we've had pretty good performance still on a relative basis.

And the occupancy there are many of you guys fairly full is that sort of is that you know.

Half full I mean, how are you guys sort of characterizing even though it's a small percentage given that it's also amenity space for some of your tenants as well I assume.

Hey, Rob it's Rob.

The.

And we're sitting at about 85% to 90% occupied and we've collected about 90% of the revenues in cash on the commercial side.

Perfect. Thanks, guys I appreciate it.

And we will take our next question from Amanda Sweitzer with Baird. Please go ahead.

Great. Thanks, good morning, everyone.

Can you talk more about what youre seeing today in terms of construction financing have you seen the large money center banks come back to the market at all and then how is the development loans firms changed relative to breakout of Ed balls in terms of interest rates and then ltvs.

Yes, Amanda this is Brad I would say that the construction financing.

It's really kind of a mixed bag I think it depends on a few things.

One of the markets that folks are looking in <unk>.

Certainly some markets are easier to get the.

The financing in <unk>.

Or less hard to get financing in than others.

And I think it also depends on the sponsor I mean, I think what we're seeing is generally for the larger developers the strong sponsors that historically have had a pretty good pipelines.

They are still able to get financing, but I think the smaller developers that do.

Just a handful of deals a year theyre not as strong they don't have as strong of a relationship with the banks are having a little bit tougher time getting their debt financing lined up.

So that certainly has been an impact.

And financing and that also certainly leads to some of our pre purchase opportunities.

In terms of loan loan terms.

We're seeing call it 10 year rates.

In that.

4% four 5% range for construction financing.

Which of which I think is still decent at the moment really the only change that we've seen the biggest change we've seen in construction or in financing non construction financing, but is is really has to do with the low cap rates that we're currently seeing.

For for the stabilized assets the low cap rates are starting to drive some LTV movement in order for for debt service coverage ratios to continue to to be held so we are seeing loan to values come down a bit we're not seeing any impact yet on pricing, but we'll really just see how that.

Unfolds later this year as more opportunities come to market, but the.

That's basically what we're saying at the moment.

That's helpful. And then on your comments about that cap rate compression, what's kind of a reasonable assumption for our cap rates of your targeted dispositions this year.

I think for our dispositions given that we're selling.

We're selling our Jackson, Mississippi portfolio, which we had on the market last year is 30 to 35 year old product in a tertiary market.

Youre talking five to five and a half cap rate for what we will look to sell this year.

We're looking to sell properties that really don't line up as well with our overall growth strategy.

It's going to tend to be older property in some of these smaller markets initially where really the after capex cash flows are really not what we're looking for and then the long term growth is obviously not what we're looking for as well, but on a historical basis the cap rates.

For these properties are still really really good at the moment, but but I'd say five to five five.

Okay that makes sense that's it from.

Thanks for the time.

And we'll go next to Alex Comer from Zelman and Associates. Please go ahead.

Alright, Thank you for taking my question.

Quick one on stimulus checks given your market backdrop the thing.

The onetime payments will likely go further for your residents.

Compared to the urban environments.

So what is the.

Limited historical precedent.

How do you think of these will play out.

Terms of your brand negotiations this year.

I would think any stimulus check is going to help that situation, but we're frankly on such a strong position on that with our collection rate where it is.

It will help close the gap to get us back to last year.

And it would be welcome but.

It was just primarily help a little bit.

Got it thank you and just touching upon the recurring Capex I noticed year over year, there was a little jump there can.

Can you provide some additional color.

And what drove the increase.

I think on recurring Capex can be it can be the timing of certain jobs, where the some of the significant jobs like paint jobs and some of the things of that nature I think over time, we expect for which we put recurring and read the enhancing together and we'd expect to spend call. It.

100 to 200 per unit those two together.

In 2021, which is fairly significant to what 2020 was but somewhere in that net field for for the long term yes.

Yes.

We had a little bit bigger job from 19 to 20 and recurring capex, but for 'twenty, one where we're projecting a very modest increase in terms of recurring capex.

Got it thank you very much.

We will take our next question from John Kim with BMO capital markets. Please go ahead.

Thank you.

On your prepared remarks, you mentioned blended lease growth rate was two 2% in January you expect improving pricing trends this year.

Then effect of rental growth of one 7% per the year.

Assuming the these are apples to apples numbers are pretty close to it why wouldn't that effective rent growth for the year from higher.

Well.

John This is al the effective rent growth talked we've talked on a moment ago about that a bit I think that's more of a trailing indicator. It's a combination of all of the leases you have in place right now and so so so the pricing performance. We have for 2020 was one 3% on average and so we're projecting for 2020 is certainly higher than that I think you can do the math, but.

This is of.

Our rough approach, but it's been a pretty pretty.

Easy way to look at it is take half of what we did in 2020 and half of what we expect the due in 2021 and that will drive your effective rent growth of one seven so you can do the math on the back into we're expecting something in the.

Two to two five per cent range on pricing in the first quarter was I mean, the January was a good indication toward that the takeaway to Alex's said, if you take half year lease over lease performance blended lease over lease performance for 'twenty and half of your blended lease over lease performance for 'twenty one.

Collected together that comprises of what your effective will be for the year.

And that's the that's a back of envelope way to do it but I think if you do that given that we have at least as of on an average of the year that works out pretty close and you can you can you can get to where we are on our forecast.

Okay.

On your redevelopment pipeline is up 15% sequentially. This quarter can you just remind us how long you think it will take to complete the 10 to 15000 units of redevelopment.

In terms of the pipeline going forward will we.

We will do.

Over 5000 units and 21 towards that.

What we've found John overtime as the as we move forward on.

The product ages on another year and new supplies brought into the market. So I would be surprised if we ever blew through our potential on that but at this rate would be about three years, but I would expect us to.

To see the pipeline.

Grow over time as new properties are added to it as market conditions change product added product is added in product ages and John just to add to what Tom was saying that.

<unk> mentioned Theres, new product comes into the market that really what that does is that the expands our opportunity for redevelopment and historically at least over the last number of years, where the redevelopment opportunity for US has been the best has been in some of them are more urban oriented locations, which is really where the opportunity largely.

The loss of portfolio now, particularly with the legacy post portfolio, but as as new supply begins to.

Over the next few years, if it is more oriented towards the suburban locations thats actually going to expand our field of opportunity for more extensive redevelopment of out in the suburb components of the portfolio because of obviously this new product is coming in at a price point that is well above our existing product and with the comparable.

Total locations and comparable appeal on that regard we can go in and make these investments with the kitchen and bath upgrades and create a very competitive product and so off of the market. The renter market a slight discount to the newer product and get great returns on capital and get great great lease up success with it so we think.

This is a real opportunity for us over the next few years and we expect it to stay at the same high level for the next three or four years for sure.

Yeah.

The 95% of good run rate of sorry, what do you expect.

The effect of rental growth.

For the pipeline.

I'm, sorry say that again.

The nine 5% rent growth.

Yes, yes, yes, yes, yes those are.

Sure.

We test and we would expect a return to continue absolutely.

Okay, great. Thank you.

Thanks, John.

And we'll take our next question from Zach Silverberg with Mizuho. Please go ahead.

Hi, Good morning, Thanks for taking my question could you guys just talk about the opportunity set on your development pipeline. After the two new starts are up to about.

601 million properties under development of what type of turns on you underwriting and sort of the how does that compare to the acquisition market in those specific markets.

Yes. The act this is Brad.

I think Eric touched on it a bit in his comments, we do have a number of sites that.

We're currently working on pre development work on we've got some that are own some that are under contract.

I would say in terms of the terms that we're underwriting not a lot different than what.

What we've underwritten.

Previously.

<unk>.

We're fortunate in our markets that the rents have continued to hold up within our market. So the.

We're not having to make some.

Aggressive assumptions with rent trending or some large recovery in rent in our underwriting.

So the two that we just started as I said in my comments, we're still looking at north of a 6% yield and certainly that compares very favorably when you look at.

Class a brand new products in our markets what they're trading at today. So we continue to believe in that we have the.

On another one site that we purchased in Denver, We hope to start in 2022.

We're working on a site in Tampa site in Raleigh, those are likely 2022 sites as well and then we have under our free purchase platform, where we've got one in Salt Lake City that we hope to start in the second quarter.

Then another site in Denver, and our pre purchase platform that we're hopeful we'll start on the third quarter of this year. So.

Got you I appreciate the color in your prepared remarks, you mentioned it was about 3% I think of our growth assets and it was moderate risk.

What is the maximum and minimum risk youre willing to.

Slide the lever on in between.

The development.

I think we've discussed historically somewhere around 4% to 5% would be would be a range that we would we would look at I think but when youre looking at your actual pipeline relative to your enterprise value. Another aspect of risk is how much is unfunded and so on point to this fact that we have 600 million sort of going right now we only have a fairly small amount.

This unfunded so I think those two factors together is what you would consider so we're definitely at the low end of the risk range on that right now and Youll see our pipeline grow a bit in 2021 as Brad talked about and then early 2022, but certainly a modest risk program given our profile.

Thank you.

And we'll go next to rich Anderson with <unk>. Please go ahead. Thank.

Thanks, Good morning, everybody and of.

Of course, the Eric I didn't expect you to open up the comments, suggesting that everyone is going to move out of the sunbelt next year or so.

No surprise there.

But if you do look at the statistics.

On the pure rate after the last great recession 2010 timeframe the migration out of New York for example substantially slowed.

And you can argue that there are some real bargains in a lot of other.

Areas that you're not in that could entice people, perhaps even more this time around than then.

Again, it's never been positive in migration really I don't think thats ever happened to some build into a market like New York, but it probably will normalize and so when you mentioned this 12, 2% of total leasing is moving from outside your footprint.

How much of that impacting your growth profile, because you really probably don't want to hang your hat on that type of level for very long.

No.

I think that.

Debt.

We still believe that.

Lot of the growth that we will have.

In demand if you will will be people that have been in the sunbelt will stay in the sunbelt organic if you will so I don't I don't disagree that.

The 12% go back two years ago before Covid.

The move ins from outside of our footprint, we're a little over 9% so even.

Compared to where.

Where we are today.

With Covid, it's only moved up from 9% of our move ins from outside the footprint of 12% of the.

So.

Your point is valid in that sense it hasn't it hasn't changed radically but I just I just I feel like that debt, what we're going to find is that over the next I think theres, a theres a real fundamental shift.

That has that was in place if you will to some degree before COVID-19.

As employers.

And job seekers, if you will we're continually drawn to this region of the country as the consequence of all of the things that you know about and I just.

Believe that those those factors have not moderated they have not of.

Lessened.

Covid et cetera accelerated them, a little bit, but those trends are going to continue.

Well past Covid and.

Debt debt.

What we're finding that as particularly as some of the millennial generation continues to age of.

They've moved in up in their career, they've moved into jobs and increasingly that I think offer the ability to be more remote.

And then they have been in the past.

That that that drive that they had.

On the in New York and work 60.

60, 70 hours a week.

That was then they're in a different place now and I, just I feel like that debt and a combination of frankly, the aging millennial generation and how their lifestyle needs evolve and desires change as well as retiring baby boomers, who are looking for change.

And looking for more affordable living that those two big slugs of of the.

The demographics of the U S. The millennials in the in the retiring baby boomers those are huge numbers and as those two H demographics evolve I think the sunbelt stands to benefit more so than some of the higher cost coastal markets and so on.

Somebody.

Suggest that yes the.

The the coastal markets are going to the gateway markets are going to come back, but they are probably going to come back a little bit cheaper and a little bit younger than they were before and I think there's probably some truth to that.

Alright, good enough the color and then my second question perhaps.

Well, maybe on the uncomfortable side, but I've never shy away from that you've had some sort of C suite succession.

Activity.

In some of your peers ethics, UDR Avalon Bay.

And I wonder to your credit Eric you of.

MAA not in Eric Bolton, Joe you are of Great bench, there and I think everyone recognizes that but can you talk about how much. This team right now today it looks to be in place for the next.

A few of three four years or so.

We can talk about the succession plan, that's perhaps in place for you and others.

The dialogue is happening at the board level. Thanks.

Okay, well, we could take of Paul around the table right now if you want but we won't do that.

What I would tell you rich is it's a very active topic at the board level, we discuss it to some degree at every meeting.

Active planning.

That's underway and continues to this day.

I will tell you that.

Feel great and have no plans to do anything different.

Don't play golf and the.

I don't really have anything else to do so.

I'm focused and plan to continue in that way for some time, but as you pointed out we've got a great team a great bench strength.

The company has.

<unk> been through a lot in the last seven to eight years.

The team has really come together and so.

We are developing.

And focus on leadership development and leadership succession, but frankly, we don't see a lot of a lot of change on the near term horizon, Okay, great I mean, youre, probably not bench and 500 pounds anymore either.

Now it's down to 490 <unk>, okay great.

Real quick point on what we're hanging our hat on as you mentioned earlier.

The plants can be pretty much the same.

Job growth in 2020 was negative six 1%.

In our markets and it's going to be plus three four at 900 basis point swing in job growth is really what we're hanging our hat on for near term growth.

Got it thanks, Tom I appreciate it you bet.

And we'll take our next question from the Rick Skidmore with Goldman Sachs. Please go ahead.

Eric just the question just with regards to how you think about development going forward and the shift in perhaps working from home and people wanting more space or are you are you changing the design of the developments and does that change the economics.

In terms of how you think about returns as you go forward.

I mean, we are of.

A little bit more focused on.

Creating.

Space areas, nooks and things of that nature.

In a number of our apartments.

We're also very much more oriented towards outdoor and many of the areas in shared office.

Sort of configurations, and some of our leasing centers frankly, it's not really having much of an impact on our overall cost of build out and.

We certainly think that there's a lot of reason to continue to introduce more of the support for work from home, but no real real significant change in terms of the cost impact for us.

Thank you.

Thank you we'll take our next question from Austin <unk> with Keybanc. Please go ahead.

Hey, good morning, everybody could you give us the actual data around what the ratio of jobs. The new supply is in 2021 for your markets versus maybe 2019 and some historical averages if you have that with you.

No of course.

For our group.

On the jobs to completion ratio of last year was negative eight point on it swings to positive 7.1.

And I think we've consistently found the 5%.

One.

It is a place where we can grow at so.

It's a substantial shift.

And sort of the key to our growth aspirations.

Yes, I appreciate the data point and I think you kind of.

Really.

To some of the questions that Ive heard asked and maybe Eric your tone just on the recovery in your markets.

Seems pretty upbeat, but yet when you kind of take where fourth quarter same store revenue growth was and you look at the midpoint of the guidance.

You layer in the accelerating redevelopment I guess.

One of the questions, we have and I think others are driving at is why isn't that driving a little more reacceleration.

Other than just the earn in of last years.

The effective rents is there anything else you've assumed in guidance higher higher higher turnover lower occupancy that's contributing to maybe a more muted reacceleration.

In 2021.

No I think that what you have to recognize is that getting the revenue impact of pricing changes takes time.

And the <unk>.

And it takes time to go up and it takes time to go down we went into the 2020 with some of the highest earned in.

Our leasing performance that we've ever had and that allowed effective rent per unit to remain fairly strong. If you will throughout 2020 of which was hugely helpful. I remember late in 2019.

The people asking me worried about it.

Instead, I worried about a slowdown I worried about something happening with the economy and in preparation for that worry. The best thing. We can do is grow rents as hard as we could even at the expense of giving up a little bit of of occupancy and allow that compounding benefit too.

B there is of protective.

<unk> on revenues should we see the economy weakened and that certainly helped us this past year. So what I would tell you I mean, there are two things at play here that I think are going to cause the recovery process the recovery slope to be steady.

As opposed to being a real steep up curve. If you will one is we are still battling supply issues and we will have those supply issues throughout 2021 pretty consistent with what we saw in 2020, we think it actually peaks in the first part of the year and probably starts to moderate a little bit towards the back half of the year, but that's.

Well after we get past the peak leasing season for 2021, so there's that.

We pointed out the supply picture I think improves as we get into 2022 and beyond.

At least for a couple of years I think probably by the time, we get the 24 25. It starts to accelerate again as a consequence of what we see happening with permitting today.

But the but the other factor that is at play here is that we are still carrying in the first quarter of this year is going to reflect the full of negative impact of the pricing performance that we had to do during the spring and summer leasing season of 2020, when he was at its weakest and so.

The all of that is going to continue to roll through the portfolio and it will peak, we believe in the first quarter, but as we get into the spring and summer leasing season of 2021, where we do believe that the leasing environment will be much more positive and better than we will again start to call.

Compound that improvement in terms of our revenue performance and it will build and it will build by the time, we get into late 2021, and particularly as we get into 2022. So that's the those two things.

Sort of the supply pressure, but particularly sort of the compounding effect of lease over lease pricing and what it does to revenues. It takes time for that to work through the system.

Yeah, No that's very helpful and then.

You guys mentioned the.

<unk>.

Where you expect cap rates on on dispositions this year for the asset.

<unk> teed up.

What would you peg cap rates today, just kind of across your markets and the.

I'm curious if you have a sense of maybe what type of growth buyers are underwriting and how far off do you think you are on assets that you're bidding on.

Well Austin this is Brad.

I would say.

Talking about cap rates across our markets certainly as I mentioned, it's very aggressive on new assets.

These class a new assets in our markets that were looking looking at.

I would say from a from a growth aspect.

It's hard to pinpoint.

What the other folks are certainly underwriting I would say one of the things that's driving the difference in valuation.

It really is leverage.

Certainly our leverage level is a lot different than high levered buyers that are looking for 65 to the call. It 80% leverage on some of these deals and given where interest rates are.

That's a big difference in the valuation of these assets and so I'd say, that's probably one of the the levers that's the.

Having our biggest impact of on our ability to be able to compete with those folks.

That makes sense any sense, where maybe the cap rate spread is versus long term interest rates versus a couple of years ago has that tightened.

At all on your markets.

I think it's certainly pretty low I think if if we're seeing.

Interest rates right now on the $3 five three to three 5% range its probably come up a little bit in the last 30 60 days or so.

Youre still seeing again cap rates in the low threes.

Our high threes low fours.

That spread is certainly.

<unk> right now and.

And we'll just have to see as interest rates move a little bit more on these ltvs change a little bit how that that filters through in pricing. We just don't know right now.

There is so little.

Assets coming to market that theyre able to still find a buyer for most of these assets but.

As the supply of these properties.

Up and come to market, we'll just have to see if there is an impact of pricing once that picks up in the supply demand on investments here of changes a bit.

Got it that's very helpful. Thank you.

We'll go next day, John Pawlowski with Green Street. Please go ahead.

Thank you just one question from me.

The last few quarters the.

Of all our markets of really outperform your larger metros are you seen notable.

Same notable and migration trends in the the Alabama's and Memphis Greenville or is this just more of a factor of more supply hitting in the larger metros a little harder.

I think I mean, we're seeing the.

Increasing the migration sort of everywhere and you do have it in places like Greenville, but it's consistent and it's been the same thing that it has been before things like BMW, MBA, ASF and Michelin and those large international manufacturing conglomerates that are in those.

In those places but.

It is.

It is those are holding.

That is coming on is continuing.

And then obviously, we're seeing strong results out of the.

Out of some of the larger markets kind of like Phoenix, and Raleigh, but the.

The spread of in migration is fairly is fairly widespread.

Even even the Huntsville is picking up some of it because of the NASA expansions and John I would I would add to what Tom is saying is that yes, I mean, we do see the supply pressure more pronounced generally in the bigger markets that and that historically has always been the case, which is why we've always.

<unk> intentionally embraced a good component of our percentage of the portfolio to be invested in some of these secondary markets. We think that debt that secondary market exposure does provide some downside protection to our performance profile against the pressures that often come from time to time from supply and so.

The secondary markets are doing exactly what we thought they would do during this phase of the cycle, Yes, sorry, John I misheard of it there and then I'd also add in the supplies you expect on largely now on those large markets tends to be more urban inner loop enough suburban balance that we have has helped us there as well.

Okay. Thank you very much.

We will take our final question from Buck Horne with Raymond James. Please go ahead.

Yes, thanks for keeping the call going along I appreciate it I'm going to ask one question and then single family rentals.

Thinking about <unk>.

<unk> seen a lot of homebuilders validate the concept getting into purpose built.

Communities of single family rentals that can operate like horizontal apartments with an amenity.

Maybe in more of a kind of outline locations, but definitely sun belt.

Does the concept like a purpose built single family rental community.

Potentially offer you anything attractive in terms of diversifying the product mix or how do you. How do you think about that concept going forward.

The bucket is something that.

We've been talking about a bit I.

Do think that if you get a purpose built single family rental community, where you get.

If you will all the homes in a very.

Organized.

Find sort of community footprint.

Yes.

Along the lines of what you just described kind of a horizontal.

Multifamily plan. If you will then yes, we think that we think that there may be some logic to that.

We are we've seen a few examples from time to time and should.

Right now of course that kind of opportunity is attracting.

A ton of capital so pricing is pretty competitive but should the opportunity present itself.

For something that.

Along the lines of what Youre, describing it would be something we would take a hard look at for sure.

Alright, great. Thanks, Congrats guys I appreciate it.

Thanks, Bob.

No further questions I'll return the call from <unk>.

For any closing remarks.

No no further comment so I appreciate everyone. Joining us this morning on lot of stuff you have any additional questions. Thanks.

We will conclude today's program. Thank you for your participation you may disconnect.

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