Q4 2020 UDR Inc Earnings Call
Greetings and welcome to Udr's fourth quarter, 'twenty and 'twenty earnings Conference call. At this time, all participants are on a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host director of Investor Relations Trent Trujillo. Thank you Mr. True Hill, you may begin.
Welcome to UDR quarterly financial results Conference call, our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website IR Doc UDR dotcom and the supplement we have reconciled all non-GAAP.
Financial measures and the most directly comparable GAAP measure in accordance with Reg G requirements statement.
Statements made during this call, which are not historical may constitute forward looking statements.
Though we believe the expectations reflected in any forward looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met.
A discussion of risks and risk factors are detailed on our press release and included in our filings with the SEC, we do not undertake a duty to update any forward looking statements.
When we get to the question and answer portion we ask that you be respectful of everyone's time and limit your questions to one plus a follow up management will be available after the call for your questions that did not get answered during the Q&A session. Today I will now turn the call over to UDR, Chairman and CEO Tom Toomey.
Thank you Trent and welcome to Udr's fourth quarter, 'twenty and 'twenty conference call on.
On the call with me today are Jerry Davis, President and Mike Lacy, Senior Vice President of operations, and Joe Fisher, Chief Financial Officer, who will discuss our results.
Senior officers, Harry Alcock, Matt Coss add and Chris Van Ens will also be available during the Q&A portion of the call.
Throughout 2020, UDR was able to actively and successfully come back many other challenges brought on by the pandemic.
This was the direct result of our company's strategies in particular, our diversified portfolio. The versatility of our next generation operating platform.
Outsized cash flow accretion from our 2019 acquisitions, and 'twenty and 'twenty capital recycling activities.
And the ongoing dedication of our UDR teams.
And 'twenty 'twenty one.
Maximizing cash flow remains our primary goal.
To achieve this goal we segment growth drivers into what we can and cannot control.
Things, we can control and include the ongoing rollout and successful implementation of our next generation operating platform and.
Employee and dynamic pricing across our portfolio to maximize revenue growth.
And utilizing our value creation mechanism, including selling low cap assets.
And recycling proceeds into accretive uses such as acquisitions with operational upside and D. C. P investments.
So far this year. These factors have contributed to continued stability and our billed revenue and improvement in occupancy and lease rate growth.
Mike will provide more color on our operating trends later in the call.
The early year results when combined with the strength of our platform, our diversified portfolio across markets and product types and our accretive approach to capital allocation allow us to provide 2021 earnings guidance, which Joe will discuss further.
As we move forward, we will continue to closely monitor factors that are out of our control.
These include the speed, which vaccinations proceed.
What this means to cities reopening and emergency regulations and how these will drive forward rent growth trends.
In short what worked for 'twenty and 'twenty should continue to work in 'twenty and 'twenty one.
And I remain highly confident that we as an industry and a company.
We'll be better positioned 12 months from now.
And the path to get there we will continue to be slow, but the inevitability of a recovery. It's just a matter of win not yes, and our minds.
Moving on.
E S. G remains a cornerstone and how we operate our business and invest our capital.
Over the past three years, we have dramatically improved how we report our ESG accomplishments to our stakeholders.
I'm proud that this was recognized in late 'twenty and 'twenty by grasp me, who named UDR, a top performer and ESG among global real estate firms move.
Moving forward, our intent is to continue to refine and improve our ESG goals, while also providing comprehensive metrics to our stakeholders as we share our continued success and the years ahead.
Last I've had the honor to lead Udr's team for 20 years and.
And active in the apartment industry for 30 years and and lived through multiple cycles Udr's team has always risen to the challenge just as we did in 'twenty and 'twenty and we'll continue to do so and 'twenty 'twenty one.
I'm confident in and the direction of our company. What we are actively doing to improve how we conduct business through the next generation operating platform.
And our ability to handle any obstacle that comes our way moving forward.
With that the executive team would like to thank all our associates for their dedication service and unwavering focus on executing our strategy in 'twenty and 'twenty.
And in closing I'm reminded that every year presents its own set of unique challenges and I'm confident that the UDR is ability to adapt whatever 2021 may bring.
With that I'll turn the call over to Mike.
Thanks, Tom and overall I'm encouraged by early 'twenty and 'twenty, one results portfolio wide traffic occupancy and blended lease rate growth are trending and the right direction. However, the timing around widespread vaccination and the resulting reopening of urban areas and relaxation of emergency regulation remains uncertain.
Nevertheless, we will continue to leverage our platform to maximize revenue and limit controllable operating expense growth moving forward.
To start and stop effect. The virus continues to have on business activity and our coastal markets. What's reflected in cash same store results during the quarter.
Divergence from our previously provided guidance was the result of first submarkets enforcing stricter COVID-19 restrictions around the holidays.
And the lower traffic and higher than anticipated concession levels that came with those and second a modest decline collections compared to prior quarters, which aligns with the seasonal pattern, we have experienced in the past.
As such with concessions that accounted for on a cash basis year over year combined same store NOI declined by 10, 1% year over year.
Driven by a revenue decline of five 9% and and expense increase of four eight per cent.
When accounting for concessions on a straight line basis combined same store revenue declined a more modest four 5% with NOI down eight 1%.
These results were in line with our guidance.
Please see page four of our press release for drivers of year over year and sequential combined same store revenue growth during the quarter Encouragingly, our 2019 acquisitions illustrate the operational upside we can realize from integrating our platform.
These communities produced sequential revenue growth of 2% from the third quarter to the fourth quarter compared to a 50 basis point sequential revenue decline for our combined same store communities.
Looking ahead 2021 and started off on better footing as a reminder, the key to turning the corner on revenue growth will be sustained traffic improving occupancy and reduced concession activity.
Positively our occupancy has grown concession usage has started to decline and we're operating with minimal or no concessions across approximately 65 per cent of our portfolio.
Where we are using them the average concession level has come down to approximately three and a half weeks from.
And from four weeks on average during the fourth quarter. Additionally, billed revenue remains relatively stable a trend that has been evident since August despite more widespread regulatory measures that impact our business.
Build revenue as one of the major factors that influence our bottom line results and I'm encouraged by the stability.
Combining these year to date 2021 factors with favorable occupancy trends, especially in our harder hit coastal markets. We're now expecting sequential revenue growth be positive from the first quarter as suggested by our guidance straw.
Strategically we continue to focus on maximizing revenue growth by pushing rate growth, where we can and driving occupancy where necessary.
This property and unit specific approach to pricing our homes benefited us greatly during the pandemic and we anticipate this will continue to do so throughout 2021.
It's important to recall that higher than typical level of concessions were granted during the third and fourth quarters of 'twenty and 'twenty negatively affected our earn and for 'twenty and 'twenty one.
Even though we have been able to offer a lower level of concession and thus far in 'twenty, one as compared to recent months. The straight line effect of amortizing what has already been granted served as a headwind to <unk> growth and.
And as such we expect the first quarter will bear the burden of this impact Joe will provide additional color and his comments.
Moving on page three of our release and attachment 15 of our supplement provide combined same store growth guidance for the first quarter and full year 'twenty and 'twenty one.
Additional high level context on how we arrived at these factors is as follows.
First 25% to 30% of our NOI is in markets and fewer business and regulatory restrictions and are therefore effectively open. This bucket includes Tampa, Orlando, and Nashville, Dallas, and Austin, Richmond, Baltimore, and Monterey Peninsula and California.
Stable to improving fundamentals and positive 'twenty 'twenty one revenue growth is anticipated in these markets due to a combination of occupancy gains and positive effect of blended lease rate growth.
Sessions across these markets have generally remained and the zero to four week range since March.
And demand remained strong which has translated into average physical occupancy of over 97 per sale.
Because demand and occupancy are high and these markets, we are opportunistically pushing market rent growth where appropriate.
And this may result in a modest decline in occupancy during the first half 'twenty and 'twenty, one, but it will benefit our future rent roll and thus.
Thus far in 'twenty and 'twenty, one we have generated blended lease rate growth of approximately 3% and these markets with occupancy averaging 97, 3% as of January 31.
Second roughly 55 per cent of our NOI and markets that are partially open where fundamentals have likely bottomed and are showing signs of improvement this bucket and crude some of UDR as larger markets, such as Orange County, Seattle Metropolitan Washington, D C and Los Angeles.
Concessions across these markets are generally range between two to six week with occupancy holding steady.
Thus far in 'twenty and 'twenty, one we have generated blended lease rate growth of negative one to negative 2% in these markets with occupancy averaging 96, 5% as of January 31.
West roughly 15% to 20% of our analyze and urban areas of coastal markets, where emergency regulation and additional restrictions on business activities continued to present challenges. These include Manhattan, San Francisco and downtown Boston concessions across these markets continue to average 48.
But we are still seeing competitors offering up to 12 weeks on new leases.
Average occupancy across these markets improved from the mid 80 per cent range during the third quarter to nearly 90% during the fourth quarter, but came at a price thus.
Thus far in 'twenty and 'twenty, one we have generated blended lease rate growth of negative one 5% to negative 2% and these markets with occupancy averaging 94% as of January 31.
At a high level, we believe widespread vaccination will be the tide that lifts all our shifts in 'twenty and 'twenty, one, but the timing of when this occurs and therefore, when regulatory and business restrictions are a thing of the past remains difficult to pinpoint.
Next 'twenty and 'twenty with a disruptive year in many ways and with the recent focus on net net migration trends within and between markets. It's important to highlight that UDR is 'twenty and 'twenty annualized turnover was up only 30 basis points versus 2019.
Most of our markets are stable to improving retention with the exception of New York, San Francisco and Boston.
Our latest analysis and move out data in these three markets shows most of our former residents are staying and then relatively close proximity to the urban areas. They day.
And as last year.
Approximately 70% of our fourth quarter, 2020 move outs and Manhattan downtown Boston and San Francisco proper moved within the MSA comparable to one year ago and significantly better than the third quarter 'twenty and 'twenty.
This suggests coastal markets should rebound once health and safety issues are addressed.
Finally, I want to thank my colleagues and the field and here in Denver for their dedication and executing our strategy and adapting to a new environment. The past year has brought a lot of change and the lessons. We learned will help shape, how we do business and interact with our residents and the future and now I'd like to turn the call over to Gerry.
Thanks, Mike and good afternoon, everyone.
Many of our operating successes in 2020, we're driven by the ongoing implementation of our next generation operating platform.
Our platform self service components allowed us to stay engaged with our residents and deliver a high level of service satisfaction throughout the pandemic and limit controllable operating expense growth to just 20 basis points for the year.
And our five year controllable expenses have average growth of 70 basis points and our improvement in 2020 from already strong expense growth containment reflects a continuation of our constant and consistent focus on driving efficiency and our business because of this five year period overlaps with our platform initiatives.
The efficiencies we have generated to date are best illustrated after comparing our nominally positive controllable expense growth over this time frame to more normalized two 5% to 3% annual wage inflation growth across our markets. We expect to realize additional cost control benefits over the next two years with.
The full rollout of the first phase of our next Gen operating platform.
As you will recall, we began the full rollout phase one of the platform and Nashville, and Seattle during the fourth quarter. This encompassed automated self touring our new customer service technology and updated resident App and head count reductions among other things so far the results and these two markets are in line to <unk>.
<unk> better than our initial expectations.
We have realized strong efficiencies by refocusing those markets work forces on customer service and the new technology deployed has been widely adopted by residents and prospects, which has proven beneficial to our leasing process and resident satisfaction of note during the fourth quarter and 93% of our <unk>.
Any wide prospect tourists were conducted and a self service or touchless manner and since the second quarter of 2018, our net promoter score has improved by more than 20%.
To date, we have rolled out per full platform one point out of six of our 21 markets with the remainder scheduled throughout 2021.
Portfolio wide, approximately 83% or 400 head count reductions have already occurred since mid year 2018, and anticipation of these rollouts, we've seen no discernible evidence of disruptions to operations.
To date, we have realized 50% of the benefits of phase one of the next Gen operating platform, which is expected to total $15 million to $20 million. As we look ahead, we expect to realize an additional 25% of run rate NOI from our platform by year end 2021, and the remainder in 2022.
Moving on and we're working hard on planning phases, 1.5 and to point our platform primary areas of focus include utilizing more data science to increase resident retention better directing marketing dollars to optimal sales channels and making the leasing process quicker and easier to complete to name a few <unk>.
2022, we anticipate that these objectives should continue to drive margin expansion.
Last many businesses have moved or and the process of moving toward increased self service is preferred by their customer base UDR and eventually the multifamily business are no different 2020 was a key year for implementing and proving out many of the technological components of platform on point out but 2020.
One is the year that we will fully unleashing a sincere. Thank you to all of my fellow UDR Associates, who have embraced this new way of doing business and I look forward to providing additional updates on our successes and the quarters ahead with that I'll turn it over to Joe.
Thank you Jerry the topics I will cover today include our fourth quarter results and guidance for the first quarter and full year 2021.
A balance sheet and liquidity update.
And a summary of recent transactions and capital markets activity.
Our fourth quarter <unk> as adjusted per share of 49 cents achieved the midpoint of our guidance range and.
Combined same store revenue and NOI growth with concessions reported on a straight line basis met our guidance expectations.
And regards to collections and residential bad debt and the fourth quarter, we wrote off $3 5 million and reserve $4 million of revenue for a combined $7 5 million or two 4% of residential build revenue.
This is based on our assumption of ultimately collected and 97, 6% of Q4 revenues were slightly below the third quarter level of 97 seven per cent.
Looking ahead, despite the inherent uncertainty around how the pandemic will impact the economy.
The regulatory environment, and our business moving forward.
We have provided first quarter and full year, 'twenty and 'twenty one guidance.
We anticipate full year <unk> per share to range between $1 88, and $2 with $1 94 midpoint, representing a 5% year over year decrease driven by a year over year decrease and straight line NOI.
Really offset by accretive financing and transaction activity.
We expect full year 2021 year over year combined same store revenue growth of negative two five per cent to positive 0.5 per cent with concessions on a cash basis and.
And negative $4 five per cent to negative one 5% with concessions on a straight line basis.
This difference is due to the residual impact of concessions amortizing during 2021 that were granted in 'twenty and 'twenty, which as indicated earlier, we will also serve as a relative headwind to ethical weighted growth until concession and amortization papers.
And regards to our first quarter, 'twenty, 'twenty, one and flip away and midpoint of 47.
And the two cent per share sequential decline.
This is being driven primarily by the straight line effect of amortizing concessions that have previously been granted.
Full year guidance assumes a headwind of three to four cents from concession on amortization with approximately two thirds of the impact expected to be realized during the first quarter.
Additional guidance details, including sources and uses expectations are available on attachment 15, and 16 EBITDA of our supplement.
Moving on our balance sheet is liquid and fully capable of funding our capital needs due to ongoing efforts to reduce debt cost.
Extend duration enhance liquidity and preserve cash flow.
As such we remain in a position of strength to continue weather and the effects of the pandemic.
Some highlights include.
First as of December 31.
Our liquidity as measured by cash and credit facility capacity net of our commercial paper balance was $958 million.
Second.
After using a portion of the proceeds from our $350 million, 194% Green bond issuance and the fourth quarter to prepay additional higher cost debt originally and scheduled to mature in 2023, and 2024, we have only $350 million of consolidated debt or less and 2% of enterprise value.
And scheduled to mature through 2024, after excluding principal amortization and amounts on our credit facilities.
Please see attachment for B of our supplement for further details on our debt maturity profile.
Third we remain thoughtful and our capital allocation decisions largely funding our recent acquisition and DCP activity through property sales and the proceeds from our previously issued forward equity sales agreements.
Our identified net uses of capital remain minimal and predominantly consist of funding are $491 million development pipeline, which is less than 3% of enterprise value and is over 50% funded with approximately $244 million of remaining capital to spend over the next several years.
Fourth our dividend remains secure and is well covered by cash flow from operations.
Based on the 'twenty 'twenty, one <unk> per share midpoint of $1 76 on.
Our dividend payout ratio is forecasted to be 82%.
And then on approximately $100 million of annualized free cash flow after accounting for dividend payments.
Last as is evident on our attachment foresee of our supplement.
We continue to have substantial capacity under our line of credit and unsecured bond covenants as.
As of quarter, and our consolidated financial leverage was 35% on the unappreciated book value and 31% on enterprise value inclusive of joint ventures.
Net debt to EBITDA Rd with six eight times on both a consolidated basis and inclusive of joint ventures.
Taken together our balance sheet remains healthy our liquidity position is strong.
And our forward sources and uses remained very manageable as is detailed on attachment 15 of our supplement.
Next a transactions update.
From a thematic perspective and irrespective of the macro environment. We continue to believe that our platform and other operating initiatives helped us to generate outsized returns while paying market prices for acquisitions.
Funding these acquisitions by selling assets that are attractive to private market buyers, but potentially less platform centric and some cases on.
Serves to enhance this accretion.
Our fourth quarter, 2020, and first quarter, 2021 acquisitions, and Tampa suburban Washington D C and suburban Boston are perfect. Examples of this trading approach and we continue to evaluate additional opportunities to create value.
Some highlights include <unk>.
First during.
During the fourth quarter and first quarter to date, we sold or are under contract to sell three communities one each in Washington D C Orange County, and Los Angeles.
Proceeds total approximately $360 million net share reflect a low 4% weighted average cap rate.
And with the sale of all of D. T L a and Los Angeles we.
We have wound down our west coast development joint venture.
Second.
During the fourth quarter and first quarter to date, we acquired three communities, one each and Washington D C Tampa and Boston for a combined $328 million.
All three communities are expected to generate outsized returns once fully integrated onto our platform with a weighted average yield projected to increase from four 6% and your one to five 3% and year three.
Third and subsequent to quarter and we committed to fund a $30 million of DCP investment for a development community and suburban Washington, D C and a 9% yield and with profit participation. Upon a liquidity event, which we expect to occur and approximately five years.
The development is fully capitalized and is approximate to two other UDR communities.
Please refer to yesterday's release for additional details on our recent transactions with that and we'll open it up for Q&A operator.
Thank you.
At this time, we'll be conducting a question and answer session.
You'd like to ask a question. Please press star one on your telephone keypad and.
And confirmation tone will indicate your line is and the question queue. You May press star two if he like to remove your question from the queue.
As a reminder, we ask that you please limit to one question and one follow up.
For participants using speaker equipment, and it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
Okay.
Our first question comes from Nick Joseph with Citi. Please proceed with your question.
Thanks.
The comments on the operating platform and dynamic pricing just wondering as you think about markets like Manhattan, or San Francisco downtown Boston, which I think he said where their challenge and 15 to 20 per cent do you see the benefits from those.
Given the disruption currently from concession activity or do you get more of that benefit when the market's more stabilized.
You know and and acting more normally just starting to see how Alice benefits roll through and when the market's really getting disrupted.
Hey, Nick it's Mike here, Yeah last year, we added at the Citi Conference, we're able to present and while we saw and some of the dynamic pricing and using some of the heat maps and over the last three or four months.
Our mid to high rise assets. So it has benefited us quite a bit over the last few months just in terms of optimizing our rent and occupancy within those markets, Yeah, and I would add Nick This is Jerry.
It's probably got more benefit today on these stabilized suburban markets, especially in the Sun belt. When you have that much price pressure and concessionary impact from competitors, there's less differentiation based on view and.
Location of the unit people are just tending to look for the.
And the least expensive unit most frequently so I I think youll see more of that when San Francisco.
New York and the other urban areas stabilize there'll be more benefit, but I think the biggest benefit to date has been on the suburban.
That makes sense. Thanks, because I just didn't know yourself and migration trends that you were talking about with with a lot of those rights and if maybe staying within the MSA.
Where are they moving I think gobbling up I think moving back home and would you expect it could be those residential actually move back and or the debt.
And that type of resident at least or do you think it could be a different resident base that ultimately moves back into somebody's more urban areas.
I think its different by market from what we're seeing today I'll give you. An example, and New York City, we're still seeing people moving out closer around call. It Boston, New Jersey, even Connecticut, and we're staying in touch with those residents and just trying to get an idea of when the city starts to open up more and what their intentions are so.
And places like that we do expect that they'll come back and today, we are seeing.
People come in from outside of the MSA as well and then when you look at some of our suburban assets down in the sunbelt, it's a little bit of a different story there.
Yeah.
Thanks.
Our next question comes from Jeff Spector with Bank of America. Please proceed with your question.
Hey, Jeff he might be on mute.
Can you hear me now.
Yep, Yeah, good great sorry about that.
Good afternoon, and thanks for taking my questions.
Wanted to circle back to Mike's initial comments on Manhattan, and San Fran and Boston improve occupancy, but it came at a price and then again the discussion on 70 per cent stayed within the MSA and specifically on Manhattan.
You know what are you what are you seeing there.
I think you just commented that.
You're staying in touch with these people to see what their intentions are I guess from the last month or two have you started to see some of those younger millennials.
You know generally start to come back to Manhattan, specifically or we're not yet.
To some degree we're starting to see a more on our traffic patterns and so our traffic has increased I would say over the last 30 to 60 days.
<unk> piece of that was the fact that we started using our brokers a little bit more within Manhattan versus call. It a San Francisco. It's just we found a little bit more success, there and so we were able to capture a little bit more incremental demand from I think people from within that market looking for a deal or maybe trying to to move into a place that day.
Couldn't necessarily afford before and they can now.
Okay. Thank you and then my follow up is just on acquisitions, I think youre guiding to a minimal amount.
Everyone's talking about the Sun belt, but you know there's a lot of supply there just thinking about the taking a contrarian view back to Manhattan, let's say or San Francisco.
Are you seeing any distress opportunities for for UDR to strike and.
And 21.
Yeah, Hey, Jeff Good morning, it's Joe.
I'd say at this point really not seeing any distressed opportunities.
Generally speaking the only area that we saw a distress kind of come on through this has been up on the D. C. P side, where you did see us do and investment there and the quarter, another $30 million and suburban Virginia.
That really just due to the pullback that you saw on construction financing and mezz financing and equity financing for developments and.
The other day I think for stabilized assets, the gse's as well as other financing sources remain available proceeds may come down a little bit coverage issues and some of those urban high.
High rise markets might get a little bit more stressed from a coverage perspective, but overall not really seen any signs of distress I think generally speaking the urban high rise product pricing might be on 5% to 10%.
Relative to pre Covid.
But overall not seeing the distress come through and and Jeff. This is Terry I'll just add on.
I think I'd say generally and the core urban deals while there hasn't been a tremendous number of trades.
And to form a definitive opinion, our pricing is likely hit bottom and possibly even started to rebound our buyers are no longer trading on cap rates.
Really are trading relative to replacement cost and replacement cost continues to increase.
Great. Thank you.
Okay.
Our next question comes from the line of Nick <unk> with Scotiabank. Please proceed with your question.
Hi, Good afternoon. This is on submit here for Nick.
Hi, guys two questions.
One on your San Francisco, New lease rate fell by about 3% year over year, which is which is pretty good compared to some of your peers and whether it's some of the market reports and physical occupancy was up 410 basis points Q over Q.
So.
Overall, I'm trying to sort of reconcile this against the revenue per occupied unit, which declined 9% Q on Q.
Guess what.
Was there a lower impact of economic occupancy in San Francisco, and particular or were there other elements that drove the sequential decline. What's is the improved rail performance is it a mix issue and some sorry.
Sure Great question and this is my first just put it and contact San Francisco makes up about 9% of our NOI, we have 40% of our properties urban and 60% suburban we are seeing market rents, especially and that urban area down tend to negative 18%.
And in our suburban assets closer to flat to down 5% I'll tell you the biggest difference on and sign new leases is where we have higher vacancy. So during the fourth quarter for example, down and the city and some area, we were closer to 83% occupied versus the peninsula, where we ran closer to 95% so.
And as you can see that you're sitting on more vacancy in the areas, where you have more of a depressed rents compared to where we had a little bit more pricing power and so it goes back to our.
And I say by asset strategy, all along and just trying to make sure that we're optimizing total revenue and San Francisco debt. A very good example of that and I will tell you to answer your second question.
And as it relates to our growth the biggest piece is and that economic occupancy and so again, if you look at the second quarter. It was down about 1000 basis points on a year over year basis and this market is also one that has historically been our strongest when it comes to other income growth through initiatives and things like that but whether it's the.
Short term furnished program amenity rentals.
Fee income was down about 11% because we just werent able to do a lot of things that we are accustomed to doing and again the last piece I'd point to is that urban and suburban piece of the equation. When you look at San Francisco.
Got it got it. Thank you for the thank you for the color on that and.
And we'll probably take that offline as to what what's in the fee income and always wanted to know whether there's some sort of app that you guys used to control the AC but that's a different question.
Moving ahead and do like a I guess.
Sales on.
And on the West Coast Development JV, you guys had a fixed price option on all of our at least based on something you said in 2018, and you chose to sell it and I apologize for the background noise. That's my four year old sorry about that but with D. C. P. You stated that you're always looking for.
These assets that you'd like to own and submarkets that you'd like to be and so what made on live less platform centric I'm, just curious to understand whether the pricing what the pricing comes from our pre COVID-19 or whether it is a push to reduce exposure to other neely in such markets.
And there's something about the assets.
And this is Harry the AR and the decision was made primarily around price as our pricing and so from our perspective.
And the price at which the <unk> was going to sell on the market, but we chose to be on the seller.
Based purely on.
And on asset pricing and I can tell you that Oh, you know with the sale of D. T L. A and and now parallel we've wrapped up the Wolff JV that we did and.
Two phases, and 2015 and 2017 of the seven and total properties and we ended up owning three and selling for and again, we were just entirely rational and our thinking about what to buy and what to sell.
And we achieved an unlevered IRR of 11% on our total of $260 million and capital invested.
Which is at or above our expectations and parallel that and Anna.
And then we're going to close but we're gonna so we actually sold it for call it 20%.
Above the the price at which we bought out Wolf and in 2019. So that was a that ended up being a good trade as well.
Thank you so much other public guidance.
Our next question comes from Austin, where Schmidt with Keybanc capital markets. Please proceed with your question.
Hi, Thanks, everybody.
So I appreciated all the detail you had on the preferences for pushing rate and and some of your markets that are a little more stabilized and and as well as the challenges that others are still facing and predominantly those coastal markets.
You did mentioned and it's more if and when the recovery occurs and some of those those challenged markets. So I guess, what did you incorporate in terms of your guidance as far as our recovery and the coastal markets on from a timing perspective, given all the uncertainty and and do you think or did you assume that that leasing spreads across the portfolio can turn.
Positive at some point and the back half of the year.
Yeah, Hey, Austin, and as Joe maybe I'll kick it off with a high level comment just in terms of how we formed the same store NOI guidance and F away guidance overall, and Mike and kind of take you through some of the specifics when you look at that same store NOI cash guidance range of flat to minus 4%. If you just utilized <unk> of 'twenty as the.
The starting point to go to that low end of minus 4% NOI. All you need to see is NOI stay static relative to <unk> of 'twenty. So basically no improvement from <unk> all the way through <unk> of 'twenty. One gets you to the low end of our range that minus 4% year over year to get to that and midpoint of minus two basically a two per.
And it left men and we have to average about 2% better than where we were at and <unk>.
And the sequence of that we've run through a number of different scenarios. Obviously, you have a piece of the portfolio that is stable and improving our pieces and that 20%, but we've run through a number of different scenarios as to when that starts to lift based off vaccinations and reopens and feel pretty comfortable that that's a pretty good and bad point to put out there at this point.
Yeah Austin This is Mike, Brian and I would add obviously the cadence of mark from the openings dictate those results, but what we're seeing right now is promising and we expect that traffic will start to return kind of and that <unk> time frame and places like New York, and Boston and probably traffic starts returning and <unk> maybe into <unk> for San Francisco.
And results will follow those trends.
And that's that's really helpful. Appreciate that and then just one on the acquisitions.
Which you did highlight you know these are some older vintage kind of higher and higher yielding deals predominantly what are you assuming in terms of you know our capital plan are incremental dollars to get invested to drive that yield over the next couple of years and you know how should we think about that trending.
And then you know.
How do you think about I guess.
The recurring capex piece to buying and owning some of these older assets versus selling maybe some of the newer stuff. That's lower you know a lower cap rate today.
Yes.
Necessary I'll start and then and <unk>.
Joe May jump on but in terms of other capital spent.
And of the three assets, we acquired one was brand new coming out of lease up we located.
Next to another UDR property, so we were able to benefit from platform upside on that one.
The other two 115 years old and Boston will spend about 16000, new units. So that will help drive year, one more year, two and year three and likewise, the Tampa acquisition, we're going to spend about 10 Grand and unit on that so there will be some minor.
And the carrying of deferred maintenance and addition to and.
A little bit of.
Hum.
Our return on Capex.
I think they have a little bit of upside, but that's why four 6% and you want it will be up over 5% and and the second year.
In terms of recurring Capex I think when when we buy these assets, we do care deferred maintenance and put them back into position. So that we can own them for 20 years with a sort of a normalized.
Capital spend trajectory.
And in effect the capital we spend upfront.
It goes into the purchase price and our initial yield and that allows us to to manage recurring capex going forward.
Yeah, and also just to give a little bit more commentary on the yields as well I want to make clear that while we have capital plans for the assets and we get a return on that capital. You also have a lot of lift and the NOI stream coming just from pure blocking and tackling the initiatives and and the overlay of the platform so relative to the private market operators and your one we get about it.
5% lift ignore and the influence of market rent growth and then from there on as we continue to lay on the platform plus Capex you get another five plus percent. So we typically see about a 10% lift over time between ops and capital plans on these new acquisitions and one last thing and this is Jerry.
Tampa deal, which I believe as and when you're probably referring to its over 600 units. It was really two properties that were run separately that are getting merged together, but day. One we went in with platform staffing levels, because we were rolling our Tampa market and it's that exact same time.
And the process right now.
Putting and smart home technology to enhance and even further but yeah. I mean, we went from about 12 ftes down to about eight.
And those that community as Harry said.
Youre right to look at some of those older markets and the Sun belt and think about Capex, but we're doing HVAC replacements throughout that community, which is big burdens and hits that theres, a paint job would replacement and it can also impact and so.
And what Harry said is right and I feel good about that property's capex spend over the next 10 years it'll be just like a fairly new property and.
And as they said, there's a couple of new acquisitions and one in D. C kind of offsets and we have new development that continues to benefit us on the capex side going forward. So when you sprinkle and some of these older assets like this one Rogers Forge and Windsor Gardens, and we got last year and.
<unk> addressed it with initial capital expenditures and.
And most of that's been cured. So I don't think youre going to see a pop if we continue to buy these things and take care of them and at times of acquisition and our recurring Capex.
Alright, that's all very helpful. Thank you.
Okay.
Our next question comes in the line of Rich Hill with Morgan Stanley. Please proceed with your question.
Hey, good good afternoon guys.
Joe you you do something that I really appreciate which is report numbers or metrics on a cash and GAAP basis and so.
And I think you and a unique position to maybe help me and others.
Think about how these metrics might trend and.
Late 'twenty one into early 'twenty, two and maybe even beyond that so as we think about it on a cash basis is it is it is it fair to say that day.
On the concessions that were made in 'twenty will become pretty material headwind or tailwind excuse me.
In late 'twenty, one into early 'twenty, two but then there is a scenario and later 'twenty two where any growth is primarily going to be driven by our base minimum rent growth and rather than the concessionary impacts or lack thereof.
Yep I Gotcha rich Yeah, I think that's generally a fair statement. So as you look at the concessions granted in 2020 as of year end, we had about a $20 million straight line.
And that needs to be amortized overtime, we think net net the headwind relative to <unk> is about a call. It three to four penny headwind as we work our way through out 2021.
So you have kind of cash underperforming GAAP here and <unk> and throughout 2020, we start to crossover and first quarter of 'twenty, one those effectively level out and you get a crossover point between new concessions granted and those that had been amortized and then you start to revert as you go through and into the back half of the year where cash.
To outperform GAAP and.
That's really the strategy that Mike and team have been employing throughout and talking about a lot about in terms of if you believe there's a recovery that's going to take place. While you take the upfront concessions you keep the face rate higher and that helps juice. The revenue growth on the backend helps you renew off a higher number on the back and so you should see see that start to drive our relative performance here as we go into the back.
Hi.
Got it that debt.
And was sort of a lead into my next question now we noted that your effective lease.
Growth in January.
And correct me, if I'm wrong turned positive which is a pretty interesting indicator.
At least relative to your peers. So as you think about your diversified portfolio across geographies and and quality. How do you think that sets you up to push rents true rents not effective rents because we've been I think and I'm hopeful there'll be a time and and not too distant future, where we can think about true rents again.
And how do you think that positions you to to outgrow.
And for lack of a better term your peers.
Hey, rich and Mike and he puts us on a good position and as Joe alluded to that's something we've been focused on for quite some time and I would tell you over the last three months, we've seen sequential market rent growth in our portfolio and Nevada that has to do with trying to find those pockets, where we do have high occupancy and we can start to push.
Our market rents a little bit because obviously that helps on the renewal side too and so we're starting to see some promising signs with what we're sending out for renewals going forward and again kind of where market rents are today and it does vary market by market, but it goes back to that asset by asset approach and I think it's starting to pay dividends.
Got it I think that's all I had guys I'll follow up on offline with any additional questions. Thanks, and a nice a nice quarter and and prep.
Thanks Rich.
Our next question comes from the line of Rich Hightower with Evercore. Please proceed with your question.
Hey, guys I appreciate all the other valuable color so far.
Just maybe to get back to these questions on the urban core for a second but I guess you know to the extent that you did see increased.
Demand and traffic.
The fourth quarter went on and year to date 21 is there anything about the composition of those you know the unit mix you know in terms of whats leasing up a little faster that might give us an indication of who is actually moving into the to the to the cities and and where they're coming from and what their motivation is other other than you know just rents.
La was there anything about studios versus one bedrooms, and so forth that might be.
Fill out the picture there.
Hey, rich, it's Mike Yeah, we're seeing very similar trends to what we've talked about on the last couple of quarters quarterly earning calls and that's our studios are a little bit less occupied and what we're typically seeing and and regular cycle. So nothing really different from that and I will tell you though.
One thing that helped us out probably more than anything over the fourth quarter is when you look at our tours and you look at how many were guided for self guided and all the things that Jerry and the team have done for the platform.
And 7% of our tours were guidance. So the fact that we were able to just get more traffic through the door and really accommodate them.
We were able to push.
And we otherwise could and so that's that's about it on that side.
Okay.
Okay I appreciate that Mike and then maybe just a little bit bigger picture question and.
Again sticking to the sort of the more troubled urban core markets, but you know every every few days and and you know yesterday was another one.
You know you see some corporate announcement about sort of a permanent.
Work from home or remote workforce.
Stands from from some large company day.
Seem to be predominantly located on the west coast, but not not always you know at what point do we sort of tally up those anecdotes and and maybe change our longer term view about you know what.
What growth could be and the urban core what cap rates should be and how we should underwrite just along those lines. If you don't mind commenting.
Yeah, Hey, rich, it's Joe we see all those same headlines we're doing a lot of work on the qualitative side.
And within Port strategy thinking about things like the business friendliness and the migration of these incomes where they may ultimately go I think you know the Google announcement.
Yeah, the headline perhaps read negatively but I think as we go through it.
And it seemed that it's much more of the anchored to a office approach, which is majority of individuals' continue to come in two to three days a week. There are some that will never come and again, if they are fully remote and art and a location that has a office.
But I think our approach and thought process throughout this will be well returned to some degree of normalcy, where most employees will be anchored to and office for a set amount of time.
Day, two days three days five days whatever it may be.
So that will impact obviously, how you think about commute times and locations and submarkets within those msas, but it is kind of a rising tide lifts all ships are thinks all ship so.
To the extent that you can work from home more and maybe that is beneficial to the suburbs on a temporary basis, but over time, it's going to come back to are these knowledge based.
Economy drivers many of them.
Are the technology company is going to remain based to a high degree within those markets are the finance company is going to stay base to a high degree out and New York and Boston The life Sciences of the world are they going to be there and are they going to help drive income growth over time, and I think we believe they ultimately will debt bias us towards these markets need.
To remain and our portfolio right now, they're probably not the markets that we're trying to fill additional capital towards what you've seen through our disposition strategy. We've done one generally taking a more dollars out of them on those markets and into those markets.
And I think those markets long term have viability, we're not going to rush to the doors and the tried and exited at this point.
Got it thanks, Joe.
Okay.
Our next question comes from the line of Neil Malkin with capital One Securities. Please and just see with your question.
Hey, guys, Thanks, and good afternoon, and thanks for taking the question.
I guess, maybe a continuation on the previous question, maybe for Joe or Mr Van and.
You look at maybe a buy and administration and potential risks there slower rollout of the vaccine companies pushing there you know kind of back to work from July timeframe Day September October and.
And then also the micro Tory patterns, you you mentioned, but our work from home I mean.
You guys are seem to be hazards and on you know what youre going to make a call on a shift from the coastal market, but I just wonder when you kind of look at everything and the port portfolio strategy.
Column are you.
M D.
And do you see this cycle or at least you know next couple of years, you know shifting from selling you know cap rates that are very depressed and in coastal markets urban markets and and moving those to the Tampa and Nashville.
The world potentially other markets that have similar attributes where you're seeing all the out migration flow to them is that is that are you know I mean or are you thinking about those are that sort of the allocation.
Going forward.
Is this is toomey.
I'll, let Joe and Chris add on to it but.
My sense about this is first and foremost youre right and the middle of the storm and and to try to navigate a different path and the middle of the storm usually means Iraq.
So I don't see us adjusting and while this is still unsettled, where we would adjust any of our capital deployment strategy, we have a pretty simple game play and by the one next door overlay on the platform.
We make money.
So we'll stay with that while the storms occurring we can debate for hours.
All of US with respect to what's the long term implications of Covid might have with respect to work, our lifestyles and all of those and and what I'd characterize it as debt.
People and the short term, we will do everything they can to accommodate their workforce their customer and their business and have done so that doesn't necessarily.
And a long term for.
For example, and if Youre growing young talent and your thriving dynamic business. It is really hard to do so and assumed setting.
It is hard to become creative <unk> been setting on a zoom call for eight hours as an example, so the desire to be back together I could see as many surveys talking about businesses working from home and Joe covered the tethered to office element of it and.
Just as many saying, we really want to get back in the office, Colorado today is back and 50% and frankly, there is a great deal of energy and the building at 50% walking up and down the hall seen people checking back in with them and while we are talking to them every week zoom. There's a difference when you see him.
And person and I think when businesses get back to having that dilemma, 50%, 25%, they're going to say heck, we're having a lot more fun together at 50, why don't we go to 75.
And the power resides predominantly with the employer.
To set the tone, while listening to their associates and their customers.
And so I just think that the make this call and the next six months is foolish.
Wait and see how it plays out.
I do remind myself quite often new York is the capital finance capital and the World.
San Francisco is the technology innovation of the World.
Both are critical to our long vibrant society growing as a result, those cities are going to come back.
<unk>.
I remember 2000.
When we had nine and 11 and no one who is going to end up and lower Manhattan.
I thought it would take three years it took seven.
Maybe I didn't get the timing right, but the end result was they came back and and great numbers. This same thing will happen and with post COVID-19.
Sorry long and.
No no debt a long is good and I appreciate the time.
The other one I had is on development opportunities and kind.
And I mentioned, a and D C P or alluded to DCP.
And either distressed but on the on balance sheet side are you seeing any deals come to market are land deals falling out or maybe shovel ready product.
Sorry, and shovel ready projects, where you had.
A capital partner pull out or something are you seeing those opportunities you know potentially a pre purchase buyout and anything like that and just given the more dislocation and four.
<unk> D a.
Development and multifamily good day.
Well this is Harry where we're not seeing too much of that and and I mean, you're seeing construction starts are continuing.
Continuing at a fairly high level around the country. There is not a tremendous amount of distressed it's taking longer for developers to put their capital stack together on some cases they are.
Struggling with the overall economics, but I will tell you the land sale and sellers by and large are allowing the.
The developers to extend and contracts and that type of thing to developers are trying to hang on to those land parcels and wherever possible and so we're not seeing a lot of that type of activity right.
Right now I mean, we do have some land parcels within our existing portfolio that we expect to start over the course of the next year or so I will start another phase of the Trubion they'll get a land parcel and Tampa tied up across the street from us.
The slate that we acquired last year.
We have another phase and.
And the property and Alexandria, Virginia.
Should start late this year early next where will add 300 units two and existing property. So again a lot of our development starts will also allow us to to.
And to implement the benefits of our of our platform as well.
I appreciate it thank you.
Our next question comes from the line of John Kim with BMO Capital markets. Please proceed with your question.
Yes.
Thank you unheard one.
You raised unsecured bonds at one 9% back in November and back then your stock was trading.
And with five implied cap rate.
And you didn't really have that same disparity and the cost of debt per exactly with industrial and data center REIT at the time.
But can you just share any color that you have on how bondholders valid and good cash flow and that risk versus equity markets other than just being more focused on risks Christians growth.
Yeah, Hey, John it's Joe so.
You know in terms of the balance sheet I think we've done a lot of work both pre COVID-19 and during COVID-19 and to continue to enhance.
Our credit profile, obviously throughout the cycle, we target lower metrics, such as kind of five to six times debt to EBITDA. So that in times of distress. We do have the ability to withstand downturns such as this and continue to maintain a high quality cost of capital and maintain the triple B plus b double a ratings and so when they I think when our debt holders.
Look at that they look at one we are in a sector.
But by and large has weathered the storm quite well.
And from an asset value and capital flow standpoint continues to hold up quite well and when they look at our metrics more a lot of individuals' get hung up on debt to EBITDA a lot of our metrics are doing fantastic relative to where they've been the last several years. So when you look at three year liquidity look at duration fixed charge coverage ratio on.
Unencumbered NOI you kind of go down the list and we've improved a lot of these metrics and especially when we do these refis and Prepays as we did earlier.
Earlier this year the ability to lock in 2% debt for an extended period of time take out higher cost debt and improve the cash flow growth profile of the company and helps as well so I think overall there.
There is a scarcity of locations that you can go for high quality yield and so that investors are generally attracted to us on a relative basis.
From an equity perspective.
And I think youre seeing coming out on last quarter's call exactly what equity investors have been waiting for for multi and it's really about the rate of change since last quarter ourselves and the sector of trade quite well and as we've gotten closer and closer to the bottom and or that level of stability like Mike's commentary on the stability and what we've kind of put out there for guidance.
So some improvement relative to <unk> run rate is kind of what the investors have been waiting for so I think that's likely.
And some of the disconnect. If you will where we were historically versus where we're at today.
Yeah.
On the monarch I got it correct.
And second question is on.
The concessionary environment, just a follow up from what you've discussed earlier, but you discussed today and also a quarter ago that you're off the market and New York San Francisco, Boston was four to eight weeks and session.
Since then you've built up a lot of occupancy and those markets.
But other than New York, your new lease rates, and San Francisco, and Boston don't really reflected your offerings and fashion.
So I'm wondering is this just a timing issue and we're going to see that new lease and lease growth reflected going forward or are you not offering.
Incentives on those markets.
No it varies by market. So let's take Boston for example, and we went through San Francisco and I'll come back to that one for Boston for US again. This is about 12% of our NOI and this market 70% of our NOI comes from suburban assets first 30% down.
And on Europe, and Eric So and the urban areas and we are still seeing concessions and Ross.
Yes.
But that 70%, we're still offering between more on phones, and we're having higher occupancy there and not as much.
Coming through so I think youll see some come later as that market starts to balance, especially in the urban areas and that goes to what I said was San Francisco as well today, we are closer to 90% and their urban area first the suburbs where over 95%.
And if and when those start to bounce back and depending on how much our market rents grow in the meantime, we will depend on where our new lease growth.
And on.
Yes.
Okay.
Okay. Thank you.
Yeah.
Our next question comes from the line of Amanda Sweitzer with Baird. Please proceed with your question.
Yeah.
Great. Thanks, following up on your guidance for full year, what bad debt are you assuming on all your guidance and then does that change as the year progresses and.
And then finally I recognize it's early but have you started to see a seasonal uptick and collection.
<unk> gone through February.
Hey man and it's Joe.
And we aren't really going to get into the granularity of assumptions underlying that revenue and NOI guidance, just given the number of levers that can be pulled between occupancy rates et cetera. So I do think it's fair to assume however that you do start to see and improvement and bad debt and write offs and as you move through the year, so we'd likely start a little bit.
And.
On collections and move higher.
At the end of the day, what matters. The most tiers that we reopened the markets and put people back to work and once you have income coming into their pockets either through a job additional stimulus additional unemployment or tax refunds and hopefully we see some improvement and the collection data.
In terms of February trends February trends are really Marin.
What we've seen in November December January at this point, so really no tick higher Ah stay and on pace with what we saw previously.
Thanks, Joe that's it from me.
Okay.
Our next question comes from the line of Rob Stevenson with Janney Montgomery Scott. Please proceed with your question.
Good afternoon guys.
The 1% to 4% same store expense guidance is pretty wide, especially given gerry's commentary about savings from the operating platform rollout what pushes you to the top and bottom and does that range.
Yep.
And I'll hit on a couple of areas on the non controllable side and Mike can talk to some other controllable.
On the non controllable you're a real estate tax obviously being a big component of those numbers. When you look at the valuations that we've received to date, we're right around 60 per cent or so.
Are valuations being locked in for this year on rates about 35%. So there is still a degree of variability out there and I like the markets probably that you're most concerned on would be those that have lower income tax rates. So, Texas, we don't have much info yet Florida.
Virginia.
So there's a couple of areas there as well as rates on the state of California that we're waiting on and so that could push up or down insurance is always a wildcard we know our renewal on the premiums which was up about 20%.
For 2021, so we know that number but about half of the insurance line item is typically claims activity. So that can always be somewhat volatile and so.
And Mike on the controllable side, probably have some details for you.
Yeah on the controllable side I think you can expect to see similar to what you've seen and the last couple of years from us.
Cost control as is and a good place based on what we're doing with the platform and how we're trending as far as markets transitioning head count reduction things of that nature. So I would expect our controllable operating numbers to be very similar to what you saw out of us from 2020.
What was the big driver of the 12% repairs and maintenance pump.
It was really a this is Jerry it's really.
Outsourcing so when you look at it.
And you saw personnel go down a commensurate amount and so on a blended basis between those two they had negative growth. When you would have expected some level of inflationary growth. So it's really you know outsourcing of maintenance functions for the most part.
Hey, Rob and one other area of expenses to keep an eye on as we move throughout the year is going to be the eviction costs and legal costs.
And our intent remains to continue to work with all residents that are willing to work with us.
And negatively impacted but as we go through the year and you see some other regulatory restrictions potentially be lifted.
And if those residents don't want to get on a payment plans don't want to make good on their contractual commitments then we'll likely have to move forward with eviction processes and that could result in additional expenses that said you are hopefully picking it up on the revenue line item by getting a non payer out of that unit and bringing on some cash flow.
And then the other question from me is any reason to believe the turnover won't be in the sort of 48, plus or minus per cent range that you've been averaging the last few years and if it changes dramatically from that how far does it have to go before it really starts impacting you guys on and on an <unk> per share basis.
And it's still too early to tell exactly where the turnover is going to go but I will tell you over the last 30 60 days, we have seen again net.
Mass exodus and it's not there anymore and some of these major markets. So we do have some signs that it's getting better.
Okay, and then from an <unk> impact rate used to be two to 300 basis points.
And something like a penny to you guys is that still ballpark.
Yeah, that's probably right when you think about it the average cost of a turn is plus or minus $3000. When you factor and vacancy loss differential and new versus renewal rate growth.
And turn costs.
So 1% increase on a 50050 thousand plus unit portfolio was about 1 million five.
Okay and percentage would be about a penny.
Alright, Thanks, guys appreciate it.
Yeah.
Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please proceed with your question.
Hey, and good afternoon, and thank you I'll be I'll be quick and that's.
There are two questions here.
First.
How are you thinking about or not how are you thinking about that and for the sake.
And you guys are talking to your residents who move out you know and the.
And March to June exploration.
And how far out are you going with them. So are you talking to the ones who are expiring and like April May June and do you have a sense for how many are going to renew versus how many move out.
So we're talking to more and more recently, Alex that people had moved out probably over the last four or five months, there a little bit more apt to tell us kind of where they're at and where they're they're planning on going and.
And we don't know necessarily.
What that percentage is going to equate to when it comes to future occupancy today, but we are getting a sense that people are sticking around the hoop. If you will and they will be returning if and when the third party herself and come back.
Right, but the point is that your ex U.
And your expirations for those on the upcoming months, you don't have a cent per who's staying and who's going to let their unit lapse.
Yeah.
Yeah, So we actually as it relates to our lease explorations remove some of that around so what youll see from us and the first quarter, it's a little bit lower than what we've historically had and.
By the time, we get to <unk> and <unk> it starts to inch up a little bit more and it kind of goes in parallel with what we expect with traffic coming in and those are the people that we're trying to target to get them into a unit and we're trying to.
Source, what theyre looking for where they want to live and work with them in parallel with our incoming prospects.
Okay. So basically you're just trying to hope that and manage that could move and match the move out but right now you don't have a sense for it.
Okay got it and then the second question and your leases that are expiring and the first half of this year do you know how much above market those are.
No I don't have that number in front of me, but I would go back to what I said earlier with three months of sequential market rent growth. We've had about 12 months of a gain to lease and we're very close to crossing over and showing a loss to lease if that helps.
Okay. Thank you.
On the comps that we're facing and Alex.
Ed plus or minus three to four good months, obviously in 'twenty and 'twenty. So that should tell you that you're.
Underwater there for the first three or four months and then hopefully we're hitting a crossover point sometime in <unk> and we're talking to you on the <unk> call.
But Joe that's obviously a portfolio wide I'm, assuming you know the real focus market. The big three that that is still going to be on a gain to lease correct not a not a lot.
Yeah.
And then a foreseeable future guests.
Okay cool thank you.
Thanks, Alex.
Our next question comes from the line of John Pawlowski with Green Street Advisors. Please proceed with your question.
And thanks for keeping and Colorado.
And just quick one quick one on Los Angeles.
Occupancy and rate were pretty weak sequentially and Mike any color in terms of traffic or lease lease cancellations lease breakages and L. A.
Sure John debt.
That market how did you know, it's only about 3% of our total NOI.
And it's heavily focused and that Marina del Rey area. So what we're experiencing there is a little bit of weakness, but I will tell you over the last 30 days. That's another one where we've seen traffic bounce back a little bit we've had to go upwards of four to six weeks on concessions to try to drive some of that demand and then down when you get into the <unk>.
City area still seeing <unk> weeks and occupancy levels still around 90% to 92%, so a little bit different there.
Also too John just in terms of collections activity.
And it's probably the biggest outlier within the portfolio and it does have the California overlay from a regulatory standpoint, which is very resident friendly, but also the city and county overlays that are very residents friendly so collections, there and the amount of what we would call squatters.
And are exponentially higher than the rest of the portfolios on collections are somewhere in the 80 788 range and.
So despite it being probably our ninth or 10th largest market.
From a reserve and bad debt perspective, it's sitting there on the top five so it is difficult in that respect, but also hopefully gives us some hope that as the market reopens do you get those people back to work with some other regulatory restrictions down the road hopefully you start to get some of that back.
Yes understood.
And then Mike I wanted to pick up on your comments about the mass exodus getting better and some of these hard hit markets and you take a zone and on San Francisco.
And just in terms of the lease ex the lease breakages.
Scalable on a 10 10 being peak Covid everybody's getting the heck out of the city and one being prior to Covid Everything's fine like where are we on this this mass exodus type of dynamic.
I would say closer to a six and we were probably and eat or nine about 60 days ago and I think that's what you saw when you look at our makeup of our revenue growth during the quarter. Our other income was actually positive and that had to do with transfer and relapsed fees and places like that where we saw just an uptick.
And people dropping keys and paying us.
We have seen that come down on last 30 day 60 days.
Yeah.
Thank you for your time.
Yeah.
Okay.
Our next question comes from the line of Dennis Mcgill with Zelman and Associates. Please proceed with your question.
Hi, good afternoon, and thanks for taking my question.
I wanted to go back to that same point is brought in and brought up a couple of times the 70% that moved out stayed within the MSA and those urban areas and the interesting part for me is that it was pretty stable on a year over year basis, but you are hearing from others that have more suburban portfolios, whether it would be multifamily or single family rentals that they're seeing much higher apt.
Acacia and volume from out of state coming into their market and.
It seems like you have a unique perspective to be able to look at both sides of that so can you maybe round that out to help us understand how much of the rhetoric around state to state moves is real it's as you see it and your data and how much of it is and.
Maybe exaggerated a bit.
Yeah, I'll give you a little bit more color because we did talk a lot about move out and we haven't really talked about prospects and move in and so just to give you a little bit more color on that and you saw about 23% coming from outside the MSA and and places like Nashville, Texas, Florida, Denver, It was closer to 30.
Percentage, where we experienced people coming from outside of the MSA and that compares to about 20% the year prior and I'd.
Tell you for us the one that jumps out to me is D. C. We saw the highest number of people coming from outside of the MSA and it was pushing close to 40%.
How do you square that with some of the data that would indicate that they are leaving your properties aren't leaving the metro where are the people coming from and are going into the metros, where you're seeing that big year over year space.
So it's very different data and then move out data from the people that we're seeing our residents and where they're going they have to provide us very detailed information on where their address and so we can send them kind of the final accounts steamer so very accurate information as far as the people coming in it's a little bit.
Hard to understand exactly where theyre coming from because they don't have to provide you that information. So we're looking at things like our Google analytics to understand our prospects as well as the data that we are able to get from incoming move in and so it's a little bit easier to give and move out Dana because again, that's pretty hard concrete data.
Versus the move ins.
Okay, Yeah, I realize it's difficult to triangulate it but I appreciate the perspective, and then just a quick one Joe just for comparison points. Historically, all the same store measure that we would've been provided and the supplements and so forth.
Would that have been on a cash basis.
Yep correct.
Correct, historically and provided cash and had minimal differentials, obviously between the two but and the highly concessionary.
Delta.
Okay perfect. Thank you guys.
Okay.
There are no further questions and the queue I'd like to turn the call back over to chairman and CEO, Mr. Toomey for closing comments.
Let me begin by thanking you for your time and interest and UDR.
We strongly believe that Covid will and just as other prices and challenges have as well.
The pace of the recovery, though is out of our control, but promising signs is the vaccination rate going from one 4 million per day, two weeks ago to $2 4 million today.
Vaccination production and March looks to be over 100 million doses.
These are certainly encouraging signs, but at the same time, we are reminded that regulation and opening of cities and lifestyles remained challenging and will throughout the year.
Our focus though remains on our strategic plan and particular, our cash flow growth platform execution and capital allocation.
And with our teams help we will be successful.
Thank you and take care.
This concludes today's conference you may disconnect your lines at this time and we thank you for your participation.
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Yeah.
The conference call has ended please disconnect your lines at this time. Thank you.