Q2 2021 UDR Inc Earnings Call
Yeah.
Greetings and welcome to Udr's second quarter 2021 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the 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. <unk> you may begin welcome to Udr's quarterly financial results.
<unk> Conference call, our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website IR Dot UDR dotcom.
In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure.
In accordance with Reg G requirements.
Statements made during this call, which are not historical may constitute forward looking statements. Although 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.
Risks and risk factors are detailed in 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 1 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 as chairman and CEO Tom Toomey.
Trent and welcome to UDR second quarter 2021 conference call.
On the call with me today are Mike Lacy Senior Vice President.
Didn't of operations and Joe Fisher, Chief Financial Officer, who will discuss our results.
Senior officers, Harry Alcock, Matt Coss at Andrew Kantor, and Chris Van Ens will also be available during the Q&A portion of the call.
Our second quarter results met the high end of our guidance.
<unk> expectations.
In addition, our third guidance raise this year was driven by rapidly improving multifamily fundamentals across all of our markets combined with our competitive advantages which include our best in class operating platform on.
Our market selection and.
Capital allocation acumen.
And a variety of additional value creation mechanisms.
Mike and Joe will further address these topics in their prepared remarks.
During our first quarter earnings call just over 90 days ago, we laid out why we thought are strong.
Broad based multifamily recovery may be eminent.
Then our upside scenario has largely played out.
From a macro perspective additional fiscal stimulus improved vaccination rates.
Normalized business conditions, and our return to office have driven jobs.
And wage growth.
We are actively captured this incremental demand as evidenced by quarter end occupancy of 97, 5% a new high watermark for the company.
Ongoing regulatory restrictions continue to hamper our ability to fully operate.
In our business.
But these are now beginning to sunset.
At an accelerating rate.
As this occurs we anticipate recapturing temporarily lost income from limits on renewal rate growth charged fees collections and operating initiatives.
That were artificially constrained during the pandemic.
Moving on our innovative next generation operating platform continues to drive a wholesale change in how we approach our customer and run our business.
Since the platform initially came online in mid 2018.
<unk> self service attributes have allowed us to gain significant cost efficiencies by reducing our onsite staffing by nearly 40%.
Our slim down work force is better compensated.
Has more opportunities for career advancement and can more effectively concentrate.
Their efforts on resident satisfaction and profitability.
As well as new opportunities for UDR.
I count this as a win for our associates our residents.
And the company.
And certainly our stakeholders.
To everyone in the field.
And at corporate keep up the good work.
Youre doing a great job I look to more progress in our future.
In closing I remain highly confident in the strategic direction of our company and our team's ability to execute on the opportunities ahead of us.
We have a.
In particular, a better core operations.
<unk> revenue enhancing initiatives are innovative next generation operating platform and certainly our accretive capital allocation.
Constraint is driven above peer average earnings growth in 7 of the last 9 years and total shareholder return that consistently outperforms widely recognized industry benchmarks.
2021 continues to shape up well and our actions and approach to capitalizing.
Ongoing recovery are poised to set us up for continued growth in the years ahead.
With that I will turn the call over to Mike.
Thanks, Tom the pace of recovery in our business since the depths of Covid has been incredible and nearly the inverse of what we experienced a year ago.
On the on while we expected a positive inflection during the second quarter for our portfolio in aggregate the rapid rebound in multifamily demand and core operating trends has surpassed our expectations and led us to raise guidance for the third time and approximately 90 day.
First let me take you through our second quarter results with a.
Our focus on key operating trends.
Second quarter results came in at the high end of our guidance range with occupancy, reaching all time high of 97, 5% in June.
Effective blended lease rate growth accelerating 580 basis points sequentially versus the first quarter.
And same store revenue.
Both improving 180 basis points sequentially.
Strong underlying demand has persisted into July with market rents above year ago levels in all UDR markets.
Current market rent growth as a forward looking indicator of leases to be signed and this strength gives us confidence that 'twenty.
<unk> thousand 21, and 2022 results will continue to benefit from the ongoing recovery.
In terms of demand same store traffic during the second quarter was well above the comparable 2020 in 2019 periods.
This was driven by 2 primary factors first our self guided tour.
<unk> have allowed us to accommodate higher levels of traffic and second a continued migration by residence back to harder hit urban areas, which is best evidenced by sequential occupancy gains of greater than 200 basis points in both New York and San Francisco during the quarter.
For 30 day occupancy.
Which assumes no new leases are signed over the next 30 days currently average is 97% portfolio wide and compares favorably to the 96% 3 months ago.
Our elevated occupancy has translated into stronger pricing power across all our markets as such we are willing to accept.
Somewhat higher near term turnover to lock in higher rents and further strengthen our future rent roll.
During the quarter sequential improvements in our blended lease rate growth was widespread and averaged 580 basis points higher versus the first quarter.
Currently our weighted average loss to lease is.
Suddenly, 10% on a gross basis and higher on an effective basis.
This is a material improvement versus just a few months ago. When our average loss to lease was hovering near 2% and a complete reversal versus the fourth quarter of 2020, when our gain to lease reached 6%.
August and September renewals.
<unk> averaged 7% thus far are roughly double what we achieved in the second quarter.
For the third quarter, we are forecasting effective blended lease rate growth accelerating to the mid to high single digits, driven by ongoing strong renewals and effective new lease rate growth portfolio wide.
Additionally.
<unk> concession pressures continue to abate our strategy through the pandemic has been to maintain gross France and offer upfront concessions to better preserve our rent roll for the anticipated rebound.
At peak concession levels during the fourth quarter of 2020, we granted 3 and a half to 4 weeks of concessions on average.
Really new leases.
That declined to approximately 2.5 weeks in April and less than a half a week on average today.
As each week of concession equals to roughly 2% effective rate growth, we have effectively improved our pricing by 6% since late 2020 on top of market line.
I expect this dynamic.
On tenure throughout the third quarter, when we re price about a third of our portfolio.
Moving on as we discussed on our first quarter call emergency regulatory restrictions reduced our quarterly total NOI by approximately $8 million to $10 million.
Or <unk> <unk> per share at the Hyatt.
Most of this shortfall.
Short fall came through lower collections with a minority and reduced other income and restrictions on renewal rate growth.
This is now turning around.
First regarding collections, we've had success being a first mover and working with our residents to access state and local rental assistance programs and obtain re.
Eric to comment on accumulated background and perspective revenue year to date collections from these programs have totaled approximately $10.4 million.
And this is prior to California, the state of Washington, and New York contributing much due to their late starts or delays.
We currently have another $12 million.
<unk> of applications under review and are optimistic that we can continue to recover delinquent balances.
And second growth has resumed in certain fee income streams. For example demand for short term furnished rentals is back to 2019 levels and we expect our common area rentals to returned to 75.
Of 2019 levels during the third quarter.
Fee income now totals approximately $60 million on revenue on annualized a number similar.
For 2019 levels.
However, applying a standard growth rate of 3% 2019 fee income would imply a 2020.
Persistent that should be closer to $65 million as such we believe there is additional fee upside as regulatory restrictions continue to sunset across our portfolio.
Moving on our next generation operating platform version, 1 point O has now been fully rolled out to 18 of our 21 markets.
1 in over 85% of our roughly 55000 apartment homes.
Our residents have embraced our shift to a self service model as evidenced by approximately 97% of year to date tours.
Self guided or touchless.
Onsite UDR associates now spend 5 minutes on average on the.
Dave resident during a property tour versus 55 minutes previously.
The widespread introduction of automated self touring and easy to use resident interfaces across our communities has driven average head count reductions of approximately 40% compared to early 2018 staffing levels, primarily through natural attrition.
Our approach to staffing and the adoption of various technologies establishes a permanent reduction in our cost structure that helps to neutralize wage inflation and allows our employees to manage our communities more efficiently.
To give some hard numbers at the beginning of 2018, we had 1 associate for every 31 apartment homes, including.
Including corporate employees.
Today, we have 1 associate for every 42 apartment homes and see a path to achieving 1 associate for every 40 for homes managing the coming quarters, Inc.
Accordingly, these achievements have come in tandem with higher customer service as evidenced by the 24% improvement in our residents.
And our satisfaction scores since the formal implementation of platform 1.3 years ago.
The efficiencies, we can realize through our operating expertise and platform are also central to our acquisition strategy on the revenue side, the implementation of advanced revenue management capabilities better than expected market rent growth.
In certain markets and our platform's ability to accommodate more prospective residents on tours have resulted in occupancy and rate growth ahead of our underwriting expectations for our 2020 and 2021 acquisitions.
This is especially true for the more than 2500 homes, we have acquired in Florida and.
In Texas since the start of 2020 are.
Our portfolio strategy approach helped to identify attractive growth markets and I credit Harry in our transaction team for finding communities Theyre optimized our platform capabilities.
Proximity to legacy UDR assets is key to maximizing the benefits are.
Platform provides and realizing outsize yield expansion for our multiple value creation drivers for example at the 6 communities that we have acquired since the fourth quarter of 2020 onsite staffing has been reduced by 30% on average and is tracking to a pro forma for 45% reduction on average.
While still maintaining a high level of service.
In total we believe our operations first approach as a competitive advantage that should continue to drive strong growth in our legacy portfolio and acquired properties.
Finally, I want to thank my colleagues in the field and at corporate for their dedication to the platform vision.
UDR has a culture that empowers our associates and we continue to evolve based on your feedback through the team's collective efforts, we are well on track to achieving our original incremental NOI growth target of $15 million to $20 million by 2022 from platform 1 point O initiatives.
As we continue to improve.
And refine what has already been rolled out I am confident in our ability to generate an additional $10 million to $15 million and run rate NOI by the mid 2000 Twenty's from the next round of platform related ideas.
In particular <unk>.
Initiatives from platform 1.5 are designed to improve resident satisfaction.
Increased retention reduced days vacant.
And create a better pricing model that is driven by proprietary data analytics and heat maps.
To my UDR associates listening to this call you've done a great job of fostering innovation and I'm excited to work with you as we continue to enhance our platform keep up the great results.
And now I'd like to turn the call over to Joe.
Thank you Mike the topics I will cover today include our second quarter results and our improved outlook for full year 2021.
A summary of recent transactions and capital markets activity.
At our balance sheet and liquidity update.
Our second.
Quarter on <unk> as adjusted per share of <unk> 49.
Achieved the high end of our previously provided guidance range and was supported by same store revenue growth at the high end of our expectations for.
For the third quarter, our <unk> per share guidance range is 49.
To <unk> 51.
The 1 penny per share.
<unk> sequential increase at the midpoint is driven by our expectation for positive sequential same store NOI growth and accretion from recent capital allocation activities.
Our year to date results on.
When combined with our expectation for continued sequential improvement throughout the year drove the increases in our full year 2021.
<unk> and same store guidance ranges provided on our release.
We now anticipate full year <unk> per share of $1.97 to $2 on 1 zone with.
With the midpoint, representing a <unk> <unk> increase from our prior guidance.
This increase is driven by a 2 penny benefit from.
On an 88 basis point midpoint improvement in same store NOI growth.
1 penny benefit from accretive transaction activity and lower interest expense on.
Set by 1 penny from increased G&A expense.
For same store guidance, we are now forecasting full year 2021 revenue growth of negative.
<unk> <unk>, 5% to positive <unk>, 75% with concessions on a cash basis.
And negative 2.5% to negative 1.5% with concessions on a straight line basis.
This difference is primarily due to the residual impact of concessions amortizing during 2020.
<unk> that were granted in 2020.
As Mike discussed we are encouraged by the positive trajectory and sustainability of our operating growth, but a portion of the upside. We are currently realizing will likely manifest in 2022 as opposed to this year.
Additional guidance details including sources.
And uses expectations.
Are available on attachment 15, and 16 day of our supplement.
Next on transactions update.
During the quarter, we Accretively acquired 3 communities and 1 land site for a total of $406 million.
Subsequent to quarter end.
We completed 1 acquisition and are under contract to acquire 2 additional communities for a total of $410 million.
All acquisitions are in markets that are predictive analytics framework identify these desirable.
Are located proximate to other UDR communities.
Have been matched funded accretively price.
Sources.
Please refer to yesterday's press release for additional details on recent transactions.
Should these transactions all close as expected our year to date 2021 acquisition activity will total approximately $900 million.
There are 2 takeaways to be aware of when considering our recent acquisition.
<unk> growth.
First.
We believe we can generate outsized yield expansion at these communities in the coming years through our multiple value creation drivers.
These include improving core operations.
Implemented legacy operating initiatives.
Overlay on our next generation operating platform.
Driving proximity centric efficiencies.
And renovating apartment homes in common areas.
We have already successfully used this playbook on our nearly $1 billion on third party acquisitions completed in 2019 and 2020.
Second our willingness to source accretive capital and put it to work.
Through the first 7 months of 2021 has proven prescient as asset values have generally increased 5% to 10% on average over the past 60 to 90 days.
We continue to look for accretive opportunities to deploy the previously raised equity into.
Which will grow our earnings per share and create value for our stakeholders.
Holders moving on our investment grade balance sheet remains liquid and fully capable of funding our capital needs.
Some highlights include.
First.
During the quarter, we entered into forward sale agreements for approximately $8.7 million shares of common stock for a combined $425 million.
Expected proceeds.
We anticipate using these funds on accretive acquisitions, DCP investments and land site opportunities, which we expect to close in the coming quarters.
Second we.
We have only $640 million of consolidated debt or less than 3%.
Of enterprise value scheduled to mature through 2025.
After excluding amounts on our credit facilities.
Our proactive approach to managing our balance sheet has resulted in the best 3 year liquidity outlook in this sector.
The lowest weighted average interest rate amongst the multifamily peer group at 2.7%.
And a weighted average years to maturity is expanded to 7.5 years from 7 years a year ago.
Last.
As of June 30, our liquidity totaled $1.5 billion.
As measured by our cash and net credit facility capacity and including the future expected proceeds from.
From the settlement of our forward equity sale agreements are.
Our financial leverage was 27% on enterprise value inclusive of joint ventures, and our net debt to EBITDA was 7.4 times on a consolidated basis, but would be 6.8 times of approximately $400 million of outstanding Ford X.
Agreements were settled during the quarter to fully <unk> acquisitions that were recently closed.
Taken together our balance sheet remains in excellent shape.
Our liquidity position is strong on.
Our forward sources and uses remain balanced.
And we continue to utilize a variety of capital allocation options.
Value.
With that I will open it up for Q&A.
Operator.
Thank you.
And at this time, we will be conducting our question and answer session.
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Our.
That Youre Lushington comes from Nick Joseph with Citi. Please state your question.
Thanks, maybe just starting on the federal a rent relief program I think you mentioned $12 million in applications right now how much of your guidance assuming that you collect for the remainder of this year.
Hey, Nick It's Joe I appreciate the question.
My first club.
I'd say first off in terms of how we approach. This because we are pretty proud of the efforts that we put for us. So far so when this came out in the first 2 stimulus packages, we looked at that and saw really a win win for both the resident in the Investor base in terms of being able to get for it.
Payments to get some of these resident off for the past due rents as well as.
Of course get cash into the Investor funds itself approach just like we do any initiative via platform.
Parking commentary rentals et cetera, and through a team behind it and went after it pretty aggressively so very pleased with the 10 million we've gotten to date.
Actually just got an E mail again this morning on another 600000 from.
For now overnight, so continue to see momentum on that front.
In terms of the opportunity set and kind of how it plays into guidance.
I'd say at this point, we have $12 million out there on application.
Team continues to work with residents on trying to get more and more of them signed up as they have for the last several months so roughly half of our.
On <unk> right now as an application.
In addition above and beyond that we do have a $20 million approximately related to former residents.
It is out there from the Covid affected period.
Effectively half of that $10 million or so is in California, and Washington, who have recently announced plans to potentially start assisting.
A former residents.
With being able to get off of their past due rents.
From when they moved out with us. So we have a team focused on that as well so in terms of impacts on guidance.
A little bit on little bit of science with US we are picking up about $700000 a week and expect that trend to continue.
So in terms of.
<unk> factored in the back half, we do expect collections to start picking up.
Eventually gone to around 98% on past quarters, we think that picks up into the mid 90 eights as we get into the back half here.
And then hopefully as we get into the next part of next year.
We see that continue to improve as some of the regulatory restrictions come off.
What we can we continue the efforts with the passenger residents. So hopefully, we'll see that pickup into 'twenty 2 as well.
Thanks for that was very helpful.
And then just on the operating platform rollout it sounds like.
1 point I was almost on how much has it changed or how much feedback have you received as you rollout in each individual market.
And the initial rollout.
Hey, Nick It's Mike I. Appreciate the question now to your point, we are happy with that rollout and extremely happy to see the efficiencies start to play out as evidenced by that 2% controllable expense number.
I can tell you. The first thing that we're looking at is just going out and talking to all of our residents.
Person to our prospects.
And I've been going out and talking to the employees and they are starting to really embrace it and I think once that I would point to is that 97% of our tours herself guided that tells you right. There that people want to self guided tours. They want that self service and it's something that's not going to go away.
Thomas I'd say second.
We continue to run our properties with less people and we believe we can do more and you heard me on my prepared remarks, we're close to 1 employee for 42.
Pardon me homes at this point and we're tracking closer to the 1 for 44 and the last thing I'd say is pleasantly surprised.
This is going we're pretty excited to see that traffic continues to increase the funnel as wide open at this point starting to see that pricing power play out and we think there's more efficiencies to be gained.
Like what about your NPS scores.
NPS scores up about 24%, so we're continuing to see that they're on.
Our residence.
With where anything on this is what they want and happy to do business with us.
Thank you.
Our next.
<unk> comes from Jeff Spector with Bank of America. Please go ahead.
Thank you and congratulations on the quarter. My first question is on market just given some of your peers.
On brown entering new markets markets that you're already in.
What are your thoughts on on your footprint and expanding into markets I haven't seen anyone announcer Phoenix, which has been on a hot market.
Hey, Jeff Good morning, it's Joe.
I think we're in a great position already when you look.
Ours have been diversified portfolio via the 20 markets.
65, 35 mix on suburban urban the roughly 50.50.
So we're kind of coming from a position of strength on this 1 where we don't feel compelled.
To do anything in terms of add new markets.
Aggressively reduce or expand certain.
Look at it so.
The way we've approached it is really utilize the portfolio strategy work both for predictive analytics on the qualitative overlay to try to guide us a little bit in terms of where we direct our capital on our human efforts on our resources that we have here and make sure. We focus on markets that we think are going to outperform then incrementally deploy capital.
Markets into those markets.
But the real value add within all of that comes from what we're doing at the asset level. So.
When Harry on Andrew and their team got together with the odd statement, but together the business plan on these assets.
Making sure that we continue to find assets that have those competitive advantage and value creation levers that we have.
At the core ops the initiatives.
On the platform focused on the proximity of the assets to existing assets. So we can really part of the approach and get more efficiencies and then find capital programs that maybe the prior owner has neglected or to have capital for so the.
The market is helpful for us.
But I think the true recurring type of advantage, we have on the external growth from comes back to what we're doing here.
<unk> on the platform side.
Thanks, Joe very helpful. And my second question is can you comment on on supply over the next 12 to 18 months is it too soon to.
This day exactly your thoughts on supply for 'twenty 2 at this point.
No I think we've got a decent read on.
On the <unk> at this point.
As you start to head into 'twenty, 2 obviously there'll be some slippage throughout the year, but.
You did see permits come off a decent not as much as we would've hoped during the downturn, but.
But as we're looking at 'twenty, 2 I'd say that overall, our markets are looking like they're probably flat to down maybe at <unk>.
On <unk>.
That applies to the sub market level as well.
The markets that we feel better about from a supply perspective going into next year.
Really a Boston Dallas Tampa 3 of the markets that we've definitely been the most active in as well as our Orlando Denver Northern California.
Markets.
10, or so a little bit more concerned about New York City has a little bit longer lead time in terms of how long it takes to get through the construction on delivery process. So New York, maybe still a little bit higher next year.
In some markets like.
Nashville, DC looks to hold study Baltimore, maybe up a little bit, but overall, we feel pretty good that supply.
Supply come on off maybe a little bit.
Similarly, as you kind of look at recent permit activity.
Permits are still down in our markets call it 10% or so from the peak back in kind of late 19 early 'twenty, so a little bit of a reprieve there a multifamily supply, but I think as you've seen plenty of demand out there as well for single family Zone single.
Family permit activity is up so as you kind of go into late 'twenty 2 'twenty 3.
Maybe it starts to level out a little bit there given the permit activity that we're looking at.
Great. Thank you.
Our next question comes from Rich Hightower with Evercore ISI. Please go ahead.
Hey, good morning, guys.
So Joe I can see that the full year guidance assumes.
On a full settlement of the forward.
Shares, but can you help us understand maybe a little bit better around the timing of cash.
Pairing the settlement against new acquisitions, and I think you mentioned that it may go on for several.
Several quarters, obviously the exploration of those agreements as June of next year. So just help us understand the sort of the cadence and all that.
Absolutely. Thanks, Rich you are correct guidance does take into account the settlement of those forward equity agreements within the second half I think it's fair to assume at this point roughly.
50, 50 in <unk> and <unk>.
You look at the uses that we have teed up within the press release, we announced the acquisition of Brio up in Seattle as well as under contract on 2 assets for net equity needs of around 300 million for those 3 transactions. In addition, you have dev.
Roughly from DCP funding.
But that leaves roughly $400 million.
To identify and deploy capital into which should take place from the second half and we're really looking at 3 avenues for that 1 it's acquisitions acquisitions of existing DCP investments and then DCP investments and so.
I would say.
Read up on the acquisition side.
Continue to utilize those value creation mechanisms spoke about a little bit ago in terms of new acquisitions and feel good about the pipeline there and continue to deploy in a diverse set of markets.
Get the accretion that we've been able to get in the past.
We are having a number of discussions with existing ECP equity partners.
On potentially buying out some of those assets underlying those DCP investments so.
As we've talked about those in the past the DCP, we love the economics lovely.
Love, where we're at in the cycle to continue on deployed under that.
1 of the big reasons, we'd like that piece of the business is the optionality that creates and so having a seat at the table on maybe buying some of these.
That's another good opportunity for us to maybe create some value on those and of course still looking to grow that DCP pipeline. So.
When you roll it altogether.
Second half settlement 50, 50 is probably fair to assume for your models at this point, though.
Okay. That's helpful. Joe.
My second question.
Yes.
These assets on a couple of calls in the last couple of days just about the strength in.
Renter demand it seems to us.
Surprised a lot of people.
Maybe help us understand a renter psychology, right now where you've got a lot of people sort of coming off the sidelines for various reasons sort of the reverse of what happened.
Talking Covid was almost <unk>.
Scarcity mentality.
We see it in New York and maybe some other places.
So how long do you expect that mentality to persist and.
What are you guys seeing in that regard.
Yeah, maybe I'll start and others can jump.
<unk>.
Just say from a macro perspective, obviously youre seeing a lot of household formation picking up so as the consumer psyche improves and they get more confidence on the economy on the recovery.
Going out there and forming new households, and multifamily or single family clearly helpful. So you have a lot of pent up demand.
Yeah from individuals that moved home.
<unk> doubled up with friends or recent college grads that are obviously in the last couple of years didn't give out into the work force and form a new household so plenty going on there the.
The migration side clearly you are seeing more immigration take place within.
This political regime than the past, 1 and so definitely beneficial on the multifamily side for.
And then you get into the psychology of the renter.
You look at where wages have gone on there is significant wage inflation, taking place out there I think our markets are plus or -5 or 6% above pre COVID-19 levels. At this point in time, so more money on their pockets on that side. The average stimulus check for most of our vendors were around $3000.
For us quite as 2 a month on a half or so of rent and so they have a better balance sheet more cash that they're sitting on today.
And then you get back into the return to office piece of the equation, which has started but we think in some of these markets. There may be a second wave here into kind of post labor day environment that helps give us continued pricing power a little bit deeper into the leasing season.
So.
You roll it altogether and it's good demographics, it's a good economic recovery and a more stable and more.
More cash heavy consumer than we've seen in the past. So expect this trajectory to continue obviously through the rest of this year, but definitely into next year as well.
Got it thank you Joe.
Thanks Rich.
Our next question comes from Rich Hill with Morgan Stanley. Please go ahead.
Hey, guys I always get faked out when rich Hightower goes before me I think you're going to call on me and then you call on another rich.
So guys I wanted to just talk about you got your guide for a second it's a pretty I think it implies north of 4% same.
Revenue for the second half of the year.
And when I look at what you're putting up for July in terms of Linda.
Rent growth on our blended lease growth around 5% to 6%.
Why why can't same store revenue be even better than the for point to that's implied in the second half of the year.
Same store, what's holding that back.
Yes, 2 things 1 you do have the stair step as you think of the 4% implied on the second half we're going to go from our -1 this quarter too likely something less than for in the third quarter and something more than for in the fourth quarter. So there is a stair step taken place.
But when you think about the year over year, you do still have the.
Earn in of the prior rent roll maintain that blends have flipped to positive, which we're very excited about taking on Mike's script, you talked about blends continuing to get better in the third quarter.
Given the comps that we run into in for Q and the concessions. We had then probably not a stretch to imagine.
Funds continue to get better in the fourth quarter.
That said, we did have blends that were negative earlier in the year as well as in fourth quarter last year, which still pulled down that <unk> and for tier year over year number.
So that's why there's kind of the disconnect between what we're seeing today and blends and a lagged impact of when it eventually gets into the same.
On that revenue number but.
What we're doing a day on blends obviously builds on at a 22. So a lot of focus at this point on how do you continue to price and build that 'twenty, 2 rent roll and perhaps a little bit less so on just what.
And for it you're going to be.
This is toomey how much of your rent role for 22 of your already priced.
Same store, it's right around 50% so by the time, we get to the end of call. It September will be around 80% priced net will be approximately 40% of our 2020 to earn in.
And your loss to lease at least is very strong today sitting around 10% to 11%.
And the way we're thinking.
Thinking about that today is that's your base rents from market rent and then if you think about what we were doing last year with our strategy around concessions. We are starting to offer that call. It 3 to 4 weeks, where we're getting very close to offering next day nothing at this point, we should see anywhere from 4% to 8% growth on an effective basis.
Moving forward, if we can maintain net on top of whatever we can get on this market rent side. So we're looking at some pretty big increases as we move forward.
Coupled with your fee recovery et cetera government regulations coming down.
Richard to me, it's really hard for us to.
Map our number.
Or out for the second half of the year and next year. When it is accelerating at such a pace and you have on top of that for potential recoveries from your peers on the priors and then so I wouldn't get too much tied up in it for 2 or 4.5.
It's probably in a different zip.
ZIP code, we'll see where it plays out.
Yes, that's exactly what I was getting at and what.
What you just went through is very very helpful and it just brings me on to another question I just want to play Devil's advocate here for a second.
Some of the pushback that we get is that you know you you've outperformed your peers on.
On a gross basis in 2020, and so far in 2021, giving you a diversity of portfolios and doesn't that mean that you're going to have.
Not as steep a recovery on the other side on Covid, yet you continue to prove that otherwise with inflections that are stronger than than than the peer group.
So I guess the question is how are you doing that.
Is it really the best of both worlds, where you're getting the strong inflection in the coastal markets, but you're also getting the absolute high level of rents and continued rent growth in the sunbelt and suburban markets Whats your secret sauce, I know you've talked about it but it's pretty impressive what youre doing and so I'd just like to hear.
Maybe 1 more time.
Sure Rich I appreciate the question I'll start, but I think the differences has been this.
On the culture of the place continuing to innovate in the execution of the platform.
And if you think through the platform. If we can give a tour in 5 minutes, which is what the customer.
Is desirous of our 15 minute tour, we can run a number more on the demand side through the front door, which increases our pricing power conviction and literally if you say to a customer we had 240 tours last week and by the way, we only have 20 apartment when.
When would you like yours because these are the day to have to take it we've all been in that mode. In other aspects of our retail hotel travel schedule and when you put it to a customer that they have to take it on the date that you desire you increased your pricing power and your days vacant come down.
And that's a significant outperformance and just 1 of the things that we're learning with the use of the platform is that.
Clear example, so I think its culture the platform execution.
Joe anything else you'd add.
I know rich you were focused a lot on our relative.
Relative outperformance continued to.
<unk> performed well there relative to peers, but don't want to lose sight either of <unk>.
<unk> cash flow performance, which lion's share is driven by operational performance, but we have been by far the most active over the last 3 years on the external growth from being able to utilize this platform.
We've built being able to utilize the skill sets on the transactional team to go find these 1 off assets and keep driving performance for 2019 deals that we've talked about in the past I think we talked about last quarter talked about it within the presentation at NAREIT, which hopefully everybody can could take a look at the.
The building blocks, there have definitely come to fruition.
And driven a lot of upside NOI for 2019, you look at the 2000.22021 acquisitions. If you just look at that market rents today and if those hold.
We're 50 to 75 bps above pro forma at this point in time, so we're already capturing year 3 type of numbers in year, 1 given how quickly market rents.
So being aggressive during the down cycle and others Werent is definitely paying dividends for us. Similarly on the DCP side that market dried up a little bit in terms of participants that were out there, but equity was still looking for capital.
We went out and did for transactions during the downturn kind of 13, 14% target IRR.
Rents on obviously analyze on asset values have moved aggressively since then so hopefully the IRR is when we get all of a sudden done or actually better than that and so be on there and having a balance sheet ready and being able do.
Step up and continue with external growth and utilize the balance sheet utilize the skills of the company.
That's driving more <unk> on top of the core ops.
Tom is talking about so don't want to lose side of that kind of virtuous cycle that we have going right now.
I'll just summarize with what you said I think I think what you're saying is you have real earnings power rather than as just being a base effect, which we would completely agree with.
I think that was a much simpler way to put in it than items. Thanks rich.
Yes.
Yes.
Okay.
Thank you. Our next question comes from Amanda Sweitzer with Baird. Please state your question.
Thanks, following up on those DCP deal.
For your guidance unchanged.
Really rank in highly I think use of capital can you provide more information on the opportunities that you.
Youre seeing today to increase those investments both in terms of yields in the market in volume.
Sure Amanda this is Harry.
I mean overall the number of opportunities remains elevated there is a lot of developers looking for this type of capital.
However, the pushback is it capital overall.
<unk> continues to look for yield, meaning theres, new players entering the prep equity market. The market overall is very competitive.
So as Joe mentioned, our expectation is that overall returns are probably coming down.
We've done 20 deals since 2013.
We were low double digits in total return for a number of years.
Up to 13% to 14% for last 2 or 3 years and now we're probably back into the.
Double digit land again.
We do expect to be able to continue to deploy capital on DCP would flow.
<unk> 3 deals this year committing about $70 million, we have a track record and we will continue to access exists.
Loaded relationships.
We're currently at $310 million on capital committed to DCP and our expectation is that we'll add another 100 to 150 over the next year or so.
Yes, Amit I think I mentioned earlier to the Optionality on some of these.
We are having conversations on.
For some of that $300 million pipeline back and through acquisition. So.
They don't all have explicit options, we do have backup site participation on.
On 80% of these or so.
But we also have a 2 year lockout typically post certificate of occupancy, which makes us the only potential buyer during that 2 year window.
On actually and so a number of these equity partners or <unk>.
<unk> driven may want to take advantage of the pricing that's available on the market.
They want to get that cash back to redeploy into the next set of development on their side. So there are win win potentials here for us to potentially get access to some of those assets as well so that may influence the size of the DCP.
Window line from quarter to quarter as well for going by some of those out.
Yeah, that's interesting and then sticking on capital allocation from your recent acquisition activity.
<unk> looks to be a new sub market for you and it's a bit on side of your recent strategy I think of buying near your existing clusters can you just talk about the opportunity you saw on that market in particular.
But many of those properties as well.
Amanda This is Harry I think I've mentioned that while we have acquired a single turbine on asset the second quarter. We have another 1 tied up under contract. So we.
We're going to add the second property with 540 for homes a mile from the first property with 460.
So we will have 1000 homes.
With their mile 1 another and then again, we're going to implement our capital program.
On a $20 million plus on those 2 properties.
Implementing operating platform again, we will get those operating synergies given the of the.
The scale of those 2 acquisitions.
Hum.
Okay. Thanks.
Our next question comes from Austin, <unk> with Keybanc capital markets. Please state your question.
Great. Thanks, guys. Just curious what's your analytics are really telling you about southern California. Today is it seems like you guys.
From a couple of assets this year, you've got another 1 under contract.
The right exposure here and does it make sense still to over index.
For the region.
Yes.
So.
Following up on that and maybe closing out amandas question as well suburban, Maryland, and the D C region.
As a whole screen very well for us on the predictive and the qualitative side so and.
In addition to everything <unk> said about deal specifics for clustered on sub market the market as a whole screens while there.
I would say southern California.
Certainly kind of middle of the pack inland Empire in San Diego screen better for us.
Orange County.
In la.
On the middle of the pack from a client standpoint, but qualitatively given the regulatory environment. There obviously.
Obviously, not a positive when we look at the qualitative side.
So we have lightened up a little bit Orange County is a outsized market for us in the second largest from the portfolio beyond <unk>. So.
It makes sense to perhaps lighten up a little bit there.
In addition, we've been able to get pretty phenomenal pricing on a couple of these transactions.
Both are in Orange County, going back the last year to a couple of Seattle deals.
<unk> been able to get generally kind of pre COVID-19 type of pricing and pricing that relative to our internal expectations was.
A little bit better so when you mold it altogether it made sense to source of low capital from those.
That's helpful. And then and then Theres been a lot of discussion on calls around whether or not we get an extended leasing season. This year and I'm curious what you guys subscribe to.
As far as this thing goes in.
And would you say, it's reflected in your guidance or do you expect more seasonal patterns, because it's a little difficult to tell what some of the easing comps and just curious how you kind of thought about market rent growth and occupancy through the back half for the year.
Hey, Austin, it's Mike Thanks for the question.
I think we're seeing different things.
<unk> markets and just to take a step back first and foremost looking at some of our leading indicators, it's really that market rent growth and it's our 30 day trend so and a lot of cases, when we're running 97 to even 97, 5% 30 days out we have a lot of ability to push rents. We're seeing that people are renewing at a faster.
Right, we don't have an issue with turnover in the future. So we think that there's opportunity there and then in some of these urban areas, where we're hearing more and more of that people wouldn't be coming back to work call. After labor day into October we do expect that there'll be a second wave of demand coming there and so we're doing a lot of things with our pricing.
Today to make sure that we capture that.
I will say from a 30000 per day.
Bringing it back to your guidance in terms of what's embedded there there is a more typical seasonality.
That we have embedded within that number at the midpoint. When you go to the upside kind of goes into what Mike is talking about in terms of do we have that second wave on the sustained pricing power.
On traffic into the post labor day period, so that kind of gets you from midpoint to high point, if you will.
Austin very helpful. Jim.
Having done it for a while.
It's hard to ever see a period, where we were having this type of pricing power on a national basis and on.
Thank you Evan.
A fair question when do we think on <unk>.
<unk> will be fully back online, but you're at 98% occupied today.
San Francisco has turned back on what's striking to me is as people when they go out.
For a new apartment and move they're not finding the pricing or the deals so there.
There is going to stay put through leasing season, and so mark Mike's looking forward on notices to vacate he's actually got very limited inventory that is going to be able to present to the market new market rent, but he's got extreme pricing power on renewables.
So it's going to be an interesting fourth quarter for US you may not see a lot of leases signed but you may see some really.
Eye-popping renewal numbers.
Yes, I'd say, there and on top of that just places like Tampa today.
The demand is so good that some of the trends, we're watching and things that were true.
And some people are signing without even comes from property. So our closing ratios are off the charts people are locking them in quicker and Theres a lot of opportunity there.
All very helpful. Thanks, guys.
Yes.
Our next question comes from Brad Heffern with RBC capital markets.
Please go ahead with your question.
Yeah, Hey, everyone just sticking with the theme of the last question.
What do you think ultimately causes that pricing power to go away.
You know as that supply it sounds like youre seeing it effectively across the entire market, but obviously the population that hasn't grown a lot. So I guess, what do you think kind of the fundamental.
Mental driver is on what makes it stop.
Combination of things. This is toomey 1 supply we don't really feel threatened by supply at this point.
The second would be a recession.
Either focused on a national level, our industry specific that would reduce employment pictures.
I.
Either of those on the horizon right at the point.
People are very mobile looking for a job.
We're trying to hire people here in Denver, and it's becoming very challenging both from a recruiting and a weight standpoint, which tells me we have 1 of the unique things that has happened hasnt happened probably.
In 25 years, which is we have rapid wage inflation, which translates to rapid pricing power on rins.
Yes, Okay got it.
And then Joe you talked about it a little bit earlier on the call, but I just wanted to go through it again, because I wasn't sure I had it on bad debt.
Can you just talk about how thats improved.
And whether the numbers that you were saying before included the resident relief funds or if that's if that's just day to day collections improving.
Yes, it's going to be a little bit of both to be honest you have the resident relief funds coming in.
Which helps with current collections as.
As well as our historical collections, which I'll get into on a second.
But you also have just individuals' going back to work as we recycle and bring new residents and get good day and residents and after others have either skipped or decided to depart us.
So it's a little bit of a blend of everything it's hard to get too exact.
I would say.
Within the second quarter I believe our government relief funds were approximately $6 million.
And then quarter to date here in July around $3 million.
Did have a little bit back in the first quarter as well.
I would highlight if you just take a look at page 3 of our press release, we do have a table in there that shows.
Collections in the quarter than subsequent to.
And there are 2 different methodologies within the sector have reported collections. So just to highlight what our approaches.
When a dollar comes and we allocate that dollar over all former balances in the period in which debt balance was build and so if a dollar comes in today's for someone that's.
It's past due.
25% of that is going to be on a current quarter, 75% will re apply to prior quarters. So when you look at the footnote below that table footnote..1 you can see all our prior quarters continue to improve.
If we had just simply taken the approach that some of the others do of dollar in the quarter equals recovery for the quarter.
12 month for the quarter.
Our numbers go up to about 98, 5% collected at this point in time so.
I just want to highlight that there are differences when you are comparing collection rates within the industry.
Yes, Okay, that's perfect. Thanks.
The.
Yes.
Our next question comes from Juan Sanabria with <unk>.
And collection from our markets. Please state your question.
Hi, Good morning, guys, just hoping to talk a little bit more about the acquisitions and if you could talk about.
The going in yields versus what you're targeting on a stabilized basis larrigan.
Your platform for I guess, the second quarter deals and what's pending.
Okay and are those yields a product if any sort of distress in the market, which I don't suspect.
And if so how long do you think that that opportunity to last for you you can hit.
While there is some some unique opportunities.
Okay.
Okay.
Sure Juan.
This is Harry.
Yes, we expect to be able to continue to execute as we have the past couple of years and just to give you.
A couple of numbers were around 4.5% in terms of our year, 1 under underwritten yield, but we expect that to grow more than 20% over the next couple of years into kind of a mid fives.
By the third year, there certainly is no distress in the market. These are very competitive situations and again as we've talked about on the call on Jos mentioned a lot.
We're looking for.
Individual deals, where we believe we can push the NOI above well above.
The growth for the market.
We'll provide us.
I can tell you just as we look back at <unk>.
2019 for example over the last couple of years back in 2019, we acquired 8 properties for around $900 million.
As we look at what happened and Joe mentioned it earlier we.
We've cleared those with a 4.7%.
5% going in yield.
Today that it's grown by nearly 10% up to about 5.2% so even through COVID-19 by implementing these various value creating mechanisms we have been able to grow.
Why on yields by by nearly 10%.
Great and then just a quick follow up on the restrictions that have been put in place for subset sunsetting.
How much of a headwind for us that in the second quarter with regards to your reported financials and what's assumed for the for the balance of for years is there a difference between kind of the high on the low end or for your guidance range.
Yeah.
Yeah, It was probably around $6 million to $8 million in the second quarter. When you look at what we.
Recognize in terms of revenue on the collection side relative to total build you a cup.
Percent short there so theres kind of 6 plus million dollars on the collection side as we move.
For the next year that we hope to obviously recovered some of those sunset and we get back to 9.
<unk> 99, 9% collected as we have historically.
In addition, you still have renewal caps on call it 15% of the portfolio and you hear what Mike's talking about in terms of the strength of renewals on how those continue to move up and so continue to see benefit there.
On the fee income also see that coming back pretty strongly so you're probably a $6 million to $8 million of run rate that should be a pickup as we move forward.
And just to add this is Mike we do have about 400 people today is still that we if we could go in a victim. We would we're working on that we're working with them to try to secure these funds and.
And obviously, that's an opportunity for us going forward as well.
Thank you.
Our next question comes from Neil Malkin with capital 1 Securities. Please go ahead.
Yes.
Hey, everyone. Thanks.
I guess, maybe Tom for you you can start.
Yeah.
This this quarter or last quarter.
Your line in particular UDR.
EUR and Avalon.
The biggest coastal bellwethers that really talked about paring down the coastal market talking about.
Being less desirable regulatory challenged.
And then going.
Pretty decisively into Atlanta Raleigh Charlotte.
You name it Texas.
And I just.
Wondered because management teams don't come out and just say that kind of stuff.
And we've talked before and you said look you don't want to panic or move to.
Hastily, but kind of seeing the very strong results from the Sun belt, and some very large peers, making moves there.
Does that.
Is that a reflection do you think on or how does that look to you guys. Do you do you are you changing your view there on.
On the San Francisco and New York.
Are you comfortable with your positioning or are you also.
I have the same sort of.
View about some of the core gateway markets that appear in some ways broken.
Yeah.
Neil I'm sorry.
B.
A little bit of Liberty and talking about this subject I guess the first thing is I really don't comment on other company's strategy or their execution why because I think our greatest value add is focusing on what we control and what we do and so I won't address any of the comments.
With respect to what other people are saying or doing.
Doing.
With respect to our actions and strategies around portfolio composition.
Really credit a great deal of this to Chris and Joe and the teams they have working with them on their data analytics and seeing through windows, where markets blip and.
And not letting your bias.
Create a reaction and certainly we continue to give input on the ground for <unk>.
Through our acquisitions and operations, but the discipline about using analytics to give us a better lens into the future and you can look at it.
Years ago they.
<unk> identified Baltimore is a market that was coming back and we went at it pretty hard, Florida as well and so we're tending to look at it as a guiding tool towards where we should tilt our investment activities and then on the sourcing of capital.
Every portfolio has a handful of assets that.
You kind of say don't meet the great don't we've wrung out the value and we should sell those so we're going to stay disciplined using our model and our analytics and not let our individual bias or a moment in time or a press release drive our behavior pattern.
And believe that that really.
Really is what it's therefore is to smooth this out give us a action with facts based non emotions.
We.
We want to keep our footprint broad.
We can apply all of our value creation mechanisms because markets will have disruptions.
And we want to be able to pivot to a footprint that we can always create value.
No matter, where we are in the cycle and Thats, what youre seeing as a company we've Jos coined the phrase.
Full cycle investment.
That's our goal grow cash flow through being a full cycle investment.
Yes.
Appreciate that Tom Thank you on the other 1.
Do you.
Had zero reserves I think this quarter for the delinquency and.
I'm just wanted to be clear is that because youre attributing that to the funds.
Youre going to get from either California paying everyone that.
And the federal.
Federal subsidies.
The stimulus.
That's number 1 and then the second party.
Record that on GAAP right, just because I mean, if you'd recorded as at.
Before and then you get the money that's just cash on the balance sheet that doesn't run through the.
The income statement again right like in other words, you're not going to show like a 102% collections for something like that and then have the benefit on the income statement I just wanted to make sure I am.
Got that.
Yes.
Just.
Just to make sure so so Neil on the second 1.
So what we do is maybe I'll start with the first actually it wasn't on incrementally go up.
You still have an $18 million a balance.
Reserve against a $26 million a balance if you go back to first quarter those are roughly the same numbers.
We've actually seen a balance level out here over the last quarter.
Don't have any additional delinquency for <unk>. Therefore, you really don't have any additional reserve.
There is a lot more detail on discipline behind it within the process in the bucket position on assessment of each resident.
But that's the high level is that no additional.
So Quincy from end of first quarter end of second quarter equaled no more incremental reserves, so $18 million on 26, or so we're still about 70% reserved overall on the delinquent balances.
When we do receive a dollar in.
It's really going to depend on what was reserved against that.
If we've already reserved 90% of that dollar and we received that dollar you're basically reversed 90% of that reserve or all of the reserve and you'll get 90 of that dollars of benefit to revenue. So it really depends on if you've already reserved for that individual residents balance out or not if we hadn't put a balance up against it.
In terms.
So <unk> then no you wouldn't recognize that you've already recognized at once.
Okay Alright.
On that.
Hello bottom line. Thank you again.
Yeah.
Thanks, Matt.
Our next question comes from Alexander Goldfarb with Piper Sandler. Please go.
Hey, good morning, I'll be quick just given there is another call. It started just 2 questions here 1 Joe on the on the fall. So it sounds like overall, you guys see great demand youre going to push to either force vacancy you get people to market.
The rents that are already there so that people who have the free rents.
The free rent was given upfront right. These people are now paying the full freight so that when you are growing for the renewal they're already paying whatever the full freight rent is and therefore the increases just based off of that it's not based off of a of a weight of effective rate correct.
That is accurate they were given upfront and that was the strategy last year that Mike and team.
And on the view that the market would rebound and we'd be able to move those residents backup to a gross market rent and we're seeing that renewals are ticking up for the residents are staying and they're coming back and asking for their concession again, so we're seeing that on the renewals.
Okay and then second question is without E. Seattle recently meeting with some multifamily.
Families.
It sounded like Washington State, Unlike California does not have any program in place to help landlords recoup the money and that basically the landlords were on their own. So I just wanted to double check and see is that the way. The product is that is that accurate and if so how how are you guys planning.
I need to deal with that.
Yes.
And accurate unfortunately.
They actually do have a program in place I'll.
I will say that themselves along with California, and New York just happened to be laggards in terms of getting those programs off the ground, whereas states like Virginia, Massachusetts allowed to Sunbelt States really.
Really we are proactive at getting them set up quickly so that could be the disconnect, but they do have a program in place we are applying through it and getting a resident funds for that.
In addition, there are 1 of only 2 states I believe at this point that have a program set up for former residents.
On the parts with us during the Covid period so.
To help those that are.
<unk> gone on to rent elsewhere, but still have a balance with us.
They've set up that program as well I think it's Chris correct me if I'm wrong.
Capped at $15000 per resident at this point, whereas California's does not have a cap on the program. They just set up in the last week or 2.
Yeah, just for the former.
Okay.
Trying to think Joe listen Thank you for the clarification.
Cool Thanks Alf.
Yes.
Our next question comes from Rob Stevenson with Janney. Please go ahead.
Hi, good afternoon guys.
Markets are you seeing the most significant acceleration in operating fundamentals.
Since June 1st last couple of months.
Okay.
Hey, Rob It's Mike I would tell you that the greatest rate of change has actually been in places like San Francisco, New York and Seattle, just when you look at <unk> numbers from a blended basis to where we are today, but that being said, we're seeing pretty equal strength in places like Tampa, Richmond, Baltimore, where were seeing double digit.
Rent growth to me so.
Frankly, we're seeing kind of across the board.
Now is that because of the removal of the concessions is that whats Turbo Inc. Juicing those markets in particular.
It is yes, so it's a difference in that.
Non belt area, and you're definitely seeing it on the market rent side, we didn't offer concessions last year.
Market. So that's pure growth that's building up our earn in but to your point yes.
Urban areas, where we were offering big concessions, we're starting to see those come down to Joe's point earlier, we're seeing the retention levels no hump and.
Just a different way of getting there, but strength in both both areas. If you will.
Okay.
And then last 1 for me Joe how much is your non residential revenue off today versus prior to the pandemic how much has that recovered and how much you still have left to go and how material is that overall.
Yeah, Hey, Rob it's Joe so.
Non <unk> runs about.
2% of.
Total NOI, so call it $4 million.
So, let's say, it's a $16 million run rate right now I think pre COVID-19 was probably around $18 million. So it's up $2 million, we have seen that coming back quite a bit in terms of LOI activity and demand for the space So feel pretty.
Good about the trajectory on that side as well as well as.
I'm trying to get some of these tenants.
Tenants that were delinquent trying to get them current again on back on their feet. So that piece of the business is actually moving along pretty good for us.
Okay, and then how much is the growth today in fees on the resi side versus.
What you were seeing before you basically back to full fee levels and then continuing to grow that it's something you know maybe not as much as the market rents, but something significant or are you basically still being a little cautious there.
What we're seeing is for basically back to where.
In 2019 that being said, we should have been growing at least 3%. So we think theres still about $5 million on that line item.
I'm seeing strength.
Short term furnished rental program as well as kind of those common areas, where we're seeing levels back from that 2019, and even greater at this point where.
We want to tell you on the short term furnished program alone were signing about 20 leases a week I think were around 200.220 occupied today and just as a comparison that was around 120 <unk> hundred 30 last year, so definitely seeing that business pop back quickly and that's really happened over the last 30 to 45 days okay.
Okay.
Thank you I appreciate it.
Thanks, Rob.
Our next question comes from Alex Kalmus with Zelman Associates. Please state your question.
Alright, Thank you for taking the question today.
So looking at given the transaction market is extremely competitive and kudos for.
On.
Thanks, guys early as you alluded to.
Kind of cap rate compression have you seen from the quarter prior to today and just referencing that.
You're specifically targeting.
Communities approximating your current portfolio.
What kind of cap rate advantage, where would you guys say you have versus the competition.
Hmm.
Alex This is Harry.
Oh yeah.
To tell you I hate talking about cap rates and cap rate compression on these calls but in any event. We all know cap rates have come down a.
A lot.
From the beginning of the year, perhaps 50 basis points.
I would say in the last couple of months, perhaps as much as 25 basis points.
I can tell you that.
As we look at.
Future transactions and as we are in the market looking to source source deals Youre correct that if we buy a property within.
Or so of another UDR property, that's probably 20% to 25 basis points just through operating synergies.
We can add a similar amount in certain cases through redevelopment, we think other legacy initial operating initiatives platform et cetera can.
Can add a little bit.
On a milder.
A lot of tools on our tool belt that allow us to achieve returns above what the market is going to provide I will tell you. The other thing we.
We do have access to a number of markets. So we have a pretty pretty big playing field to play in if.
If we look back into.
So we get yourself capital we've deployed over the last.
2 years or so we've actually deployed capital and 12, Marty So while we're focused based on what the analytics are going to are going to provide us. We do currently operate in 20 markets. We've been deploying capital over the last couple of years and 12 of those.
3 build does give us.
First to look at look at transactions.
The 1 other piece Alex that the team continues to look at when you look at the 6 transactions to date, either closed or under contract half of those are actually has in place debt on them. So in terms of the ability to cash sitting alphabet in pool and find a little.
Net is competition.
That has been helpful. Having a balance sheet that can absorb.
On the secured debt take those assets on because we have improved unencumbered NOI within our balance sheet quite a bit in recent years, so being able to play on that space as well, where it typical levered buyer, who wants to put their own leverage on potential flow to and potential short duration.
It may shy away from those types of assets. So we've had a good amount of success on that front too to help out with the yield.
Got it makes sense. Thank you very much.
On operations.
Given the strong demand on low turnover you referenced earlier the limited inventory in the market.
I'm.
Little bit what the role of eviction moratoriums play as well.
Not necessarily in your portfolio, but but just broadly.
How that constrained the supply today, and and where your expectations are for the future.
Yes, I'd go back to for our core current portfolio.
Curious on we have about 400 people that if we could have Vic today, we would it's less than 1%. So when you are sitting here at call. It 97% to 97, 2 on a 30 day trend if that opened up and we were able to get access to those units. We're still on a very good position in terms of occupancy so we're not necessarily worried.
So again, where we're at with the supply demand curve on our.
And we do expect that when these open up other people will be bouncing around too. So there will be more demand when it happens.
I think too as you look at that 400. Some of those individuals are just non communicative individuals that will not communicate.
Kate with us that have not signed a declaration of hardship from Covid that in many cases have the ability to pay those rents so as you're worried about them exiting our side of the equation and going back into the homeownership for household formation.
Part of the equation they have the ability to pay in many cases, they have simply taken advantage of the system.
From and so the result in demand where they end up going so I don't think its that they disappear from household formations and it's a net decrease in demand in many cases.
Alex This is toomey because I can do this and get away with it.
Those 400 people the monthly rent number was about 1516.
$6 million a month.
We're fully reserving that today.
So the challenge for us in the future, we'd like to get the unit back.
Reprice it to market and get that revenue stream back on line.
That being said, we will work with any other resident.
Their hardship.
<unk> programs to take advantage of government aid or keep them in our apartment homes, but we are anxious to get those 400 units back online in terms of revenue.
Got it I appreciate the color. Thank you very much.
Thank you and there are no further questions in the queue I'd like to hand, the call back over to chairman and CEO, Mr. Toomey for closing comments.
Well, thank you and I know the call it ran over a little bit today, but I thought it was very productive and I certainly appreciate your time and interest in UDR.
As you have read and heard on this.
Our call today, we're very enthusiastic about our business today and certainly the future.
While we are enjoying a broad market strength.
I think we're most excited about our.
Our company its value creation mechanisms its portfolio and our culture to continue.
Ways to create value as the economy and.
Our our.
<unk> with our residents continue to grow.
We look forward to continuing to execute and certainly delivering the cash flow growth that we provided in our guidance and find a way to even exceed that.
With that I appreciate your time today take care.
Thank you. This concludes today's call all parties may disconnect have a great day.