Q2 2021 Mid-America Apartment Communities Inc Earnings Call

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During todays program.

Press Star Zero.

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Good morning, ladies and gentlemen, and welcome to the MAA second quarter 2021earnings conference.

And it's Carl.

During the presentation, all participants will be in a listen only mode and.

Afterwards, the company will conduct a question and answer session.

As a reminder, this call is being recorded July 29th 'twenty 'twenty 1.

I will now turn the call over to Tim Argo Senior Vice.

This president of finance of MAA for opening comments.

Thank you Mallory and good morning, everyone. This is Tim Argo Senior Vice President of Finance for MAA with me are Eric Bolton, Our CEO Al Campbell, our CFO, Rob Delpriore, Our general Counsel, Tom Grimes our CFO.

And Brad Hill, our head of transactions before we begin with our prepared comments. This morning, I want to point out that as part of the discussion company management will be making forward looking statements actual results may differ materially from our projections. We encourage you to refer to the forward looking statements section in yesterday's earnings release.

And our 34 act filings with the SEC, which describe risk factors that may impact future results. These reports along with a copy of today's prepared comments and an audio copy of this morning's call will be available on our website.

During this call we will also discuss certain non-GAAP financial measures.

A presentation of the most directly.

Directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data, which are available on the for investors page of our website at www Dot M. A C dot com I will now turn the call over to Eric.

Thanks, Tim and good morning, everyone MAA.

EMEA had a strong second quarter with rent growth same store NOI and core F. F. O results ahead of expectations straw.

Strong job growth and positive migration trends continue to drive higher demand for housing across our sunbelt markets and we.

Expect continued strong rent growth.

As noted in our earnings release, we are adjusting our performance expectations for the year and and meaningfully increasing guidance for core <unk> performance.

The various factors that were driving employers and households to the sunbelt markets before the impact of Covid continue.

In addition, the COVID-19 related recalibrating by both employers and employees about where they choose to do business and live continues to also fuel higher demand trends across the sunbelt.

And those trends are accelerating the new residents that we moved in year to date from outside of our Sun belt.

<unk> footprint increased and.

265 basis points as compared to the first 6 months of last year during the peak of Covid related relocations.

New move ins from renters relocating to the Sunbelt currently constitute almost 13% of our new leases so far this year and.

And are trending higher during the second quarter and a number of markets such as Phoenix, Tampa, Nashville, and Charleston, and the percentage of new residents moving to our properties from outside the Sunbelt was even higher.

And as housing demand growth across the region investor appetite for apartment real estate and the Sunbelt has also increased.

And as Brad will touch on we continue to see very aggressive bidding and the acquisition market with downward pressure on cap rates.

MAA is well positioned to harvest the opportunities surrounding our long time focus on these sunbelt markets with a uniquely diversified strategy across the region.

Increased strong leasing fundamentals, coupled with extensive redevelopment and repositioning opportunities along with the continued rollout of new technology initiatives that will drive further margin expansion.

Excited about the momentum from the same store portfolio.

In addition, as noted in our earnings release.

We continue to expand our external growth platform with earnings accretive new development and have several other projects currently under contract and in pre development.

As always I want to send a big thank you and message a well done to our team of MAA associates, your dedication and commitment to serving our residents and supporting each.

It is critical to our success and is key and driving our strong performance Tom. Thank you Eric and good morning, everyone. We saw strong pricing performance across the portfolio during the second quarter blended lease over lease pricing during the quarter was up 8.2% as a result, all in place rents.

Each other and year over year basis grew to 3.1%. This was more than double the 1.3% growth rate of the first quarter.

Average effective rent growth is our primary driver and with the current blended pricing momentum we expect it to continue to strengthen through the remainder of the year and addition average daily occupancy.

For the quarter increased to 96, 4%.

And as outlined in the release, we saw steady progress on our product upgrade initiatives. This includes our interior unit redevelopment program as well as the installation of our smart home technology package that includes mobile control of lights, thermostats and security as well and leak detection.

On a for the full year 2021, we expect to complete just over 6000 interior unit upgrades and installed 22000 and smart home packages.

Also on the final stages of completing the repositioning work on our first 8 full reposition properties and have another 8 that will begin this year.

What.

<unk> activity for July has been strong new lease over lease pricing month to date for July and is running close to 17% ahead of rent on the prior lease renewal lease pricing and July was running non percent ahead of the prior on lease.

Wireless as a result blended pricing for the.

The portfolio is up 12% so far on July <unk>.

Average daily occupancy from the month is currently 96, 1 which is 80 basis points better than July of last year.

<unk>, which is all vacant units plus notices through a 60 day period is just 7.1%. This is a 100 basis.

Points better than prior year and supports our ability to continue to prioritize rent growth and indicates that new lease pricing will peak seasonally later than historic norms, we are well positioned and as we move into the third quarter.

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

They have shown tremendous at avnet.

Adaptability and resilience over the last year and proud of them and excited for their progress and 21.

And I'll turn it over and our brand.

Thanks, Tom and good morning, everyone.

The strong investor demand for multifamily properties and our footprint.

Began prior to Covid continues to strengthen today.

Transaction volume is up significantly since the first quarter as investors look to buy into the strong rent growth outlook and our sunbelt markets.

Strong leasing fundamentals, coupled with robust investor demand and have accelerated pricing growth, putting additional downward pressure on.

Cap rates.

Cap rates on deals, we underwrote and the second quarter have compressed another 25 basis points from first quarter and the compression has accelerated and the last 30 days pushing cap rates down approximately 100 basis points since first quarter of 'twenty.

We like the overall balance and unique diversification of our sunbelt oriented.

And that <unk> and have no need to change our market weightings by participating in the aggressive pricing market for existing properties.

And therefore, we will continue to focus our capital deployment efforts on new development and pre purchase opportunities.

Which provide higher yields higher growth and a much lower basis and the acquisition opportunities, we're seeing and the current market.

Market, we can continue to make progress on our development pipeline as noted in our release, we closed and started construction on 2 pre purchase projects and the second quarter, bringing our pre purchase and development pipeline, both under construction and and lease up to 3347 units at a total cost of $775 million.

In addition to these 2 projects we have a number of other development sites owned or under contract and hope to start construction on several projects later this year and into 2022.

On a pre development opportunities are and Denver, Salt Lake City, Tampa, Raleigh, and Nashville, all existing markets within our portfolio.

Yeah.

We continue to see very strong leasing demand and our region of the country and our recently completed properties in Dallas and Phoenix that are currently in lease up reflect the strong demand.

Both properties continue to perform very well with rents and leasing velocity at or above pro forma.

All of our under construction.

And projects remain on budget and on schedule. Despite continued cost pressures and supply chain disruptions are under construction projects have fixed cost construction contract. So they remain on budget, but we are seeing continued cost pressure on new projects, while the lumber related run up and construction costs that we saw on the first half of the year has.

Footprint and mitigate a bit we are seeing cost pressures related to other commodities that we will continue to monitor.

Supply chain disruptions related to appliances cabinets windows and electrical components are occurring but our teams have done a great job working around these issues with very minimal impact to our delivery schedules.

As part of our planned dispositions.

Begun for 2020, 1 we exited the Jackson, Mississippi market at the end of the second quarter with the sale of our 4 properties for these assets with an average age of 36 years, we achieved strong pricing of $160 million, which was above the top end of our expectations. We are early in the process, but we are in the market with.

3 other properties that we expect to close before the year and the end of the year. That's all I have the way of comments I'll turn it over to al. Thank you Brad.

The strong second quarter operating performance produced <unk> that was at the top end of our prior guidance range or 8 cents per share above the midpoint, which also supports improved performance expectations over the remainder of the.

The year as you saw on our release, we are significantly increasing our guidance from both core <unk> and same store performance for the full year. The increases are primarily based on projections of continued high occupancy levels remaining essentially full between 95 and half and 96% over the remainder of the year and continued strong rental pricing growth over the second half, particularly.

<unk> during the third quarter with some typical seasonal moderation expected in the fourth quarter. This supports a revised revenue growth projection for the full year of 4% at the midpoint of guidance, which is 200 basis points above the prior midpoint.

Same store operating expenses have largely been in line with our expectations for the year as outlined early in the year, we expected expenses.

Expenses to be somewhat elevated during the first half mainly related to the impact of our double play program the difficult prior year insurance renewal as well as some continued pressure on real estate taxes, which represent about 40% of our total operating costs overall.

And with rate per total operating expenses over the second half is still expected to moderate as originally projected.

With some impact from increased property level performance based awards and inflationary pressures on repair and maintenance costs driving increase to the midpoint of the expected growth by about 50 basis points for the full year.

Finally, our balance sheet remains very strong as Bob outlined in his comments our development opportunities continue to growth we expect our total.

And pipeline of development communities and construction and lease up comprised of both in house and pre purchase deals to end the year, just over $800 million, which is well within our defined risk tolerances and while we expect the new high yielding projects to be very accretive to earnings and value and 2023 and beyond.

Our financing plans continue to include.

And some activity over the second half of the year current market conditions appear to be stable and strong supporting good pricing expectations across the maturity curve. We also continue to have positive discussions with the rating agencies regarding our corporate rating. We believe our current ratings are fairly conservative and we look forward to continue discussions with all agencies over the next few quarters, that's all that.

We have and the way of prepared comments. So matter, we will now turn the call back over to you for any questions.

We will now open the call up for a question if you're on.

And like to ask a question. Please press star and 1 on your Touchtone phone.

If you would like to withdraw your question.

Gross the pound key.

And we'll take our first call.

First question.

Nick.

And so.

Bush of bank.

Thanks, Good morning, everyone in terms of the you know the new guidance on a blended lease growth that you have for the year I guess, it's you know it's implying some some.

<unk> strength thing here, which you've seen and in July and I assume you know for the rest of the third quarter. It's assumed he is maybe just give us a feel for how that's going to look and the back half of the year and as well you know.

And if those numbers are still very high sort of single digit double digit numbers you know what does that mean in terms of the benefit.

And that you're starting to get for the lease roll as we're thinking about next year's results.

And Nick this is al I can start with that and maybe Tim and I can and join on some of those details. So I think obviously as you saw from in the second quarter, we had tremendous.

Trend coming from the first quarter on average pricing on blended pricing was.

And was 2.7 for the first quarter and you're going to in the second quarter and so as you look at the back half and you take the guidance that we put out a 6.5 to 7 and a half for the full year. We're obviously assuming continued strength in that and as I mentioned, a bit and my calls primarily and the third quarter. Because July we are seeing and it's already very strong and expect that to continue we do expect some normal seasonal.

Moderation in the fourth quarter, but still has strong numbers, but that blends down and so you can do the math on that you're around somewhere around 8% for the back half of the year. When you do the math on our new guidance and so so that's obviously with continued strong and stable occupancy that we talked about those and under.

And your guidance on that.

Yeah.

And to that Nick kind of answer your second question.

Seasonal now sort of.

With the with the baked and is the way, we think about that and if you take sort of a half on pricing and 1 year and half the pricing and the next year. It should sort of average out on a full year effective rent growth. So.

And I always point about our 7% blended lease over lease for the year on half of that we expect a blend in the 'twenty twos and certainly setting.

Cash and it wasn't good.

Strength for next year.

Okay, great. Thanks, so much and second question is just on you know if we look at some markets that are you know if we look at some of the industry data coming out on markets, such as Atlanta, Tampa Phoenix, right, which you also highlighted as being you know very strong market.

And I think you also said that the migration into some of those marketers and from without outside the Sun belt is higher than other parts of the portfolio but.

Which may be a factor and it's a question, but I guess my what I'm wondering is what when we look at the data it feels like those markets right now if you blend and what's going on with rent.

And growth this year and last year.

Actually looking better than pre Covid, and maybe that migration is a benefit or there's other factors but.

Just wanted to hear your thoughts on some of these really high rent growth markets, which are not they didn't have concession. So this is pure rent growth, you're seeing and it looks stronger than.

And 2019, maybe you could talk a little bit about what you think is driving that excess rent growth now versus pre COVID-19.

Yes, Nick I mean, it is our.

It is economy first we've seen those never let up the gas on on the growth and so.

So that's continued.

Well on and those larger markets and then secondarily you know this this move ins from out of market.

It has grown over COVID-19 levels and over prior year and someone like Phoenix 21 per cent of our move outs for our out of market Tampa 18 per cent out of market Nashville 15 out of market.

2 real Savannah, 16, and those are substantially higher than we saw even last year, which we believe it sort of accelerated the trend. So you know it is it is those items and youre seeing folks follow jobs announcements from places like Oracle and Tesla and Microsoft and places like that.

And.

And Nick this is Eric.

A statistic that I'll share with you that.

Tim and some others pulled together that I think is pretty telling.

If you look at the MAA markets collectively we have about 28% of the households in America live and.

August 28%, but you look at where new household formation is occurring our markets constitute 42% projected new household formations and that 42 is expected to grow to 44% next year.

There's a lot of factors that come into why the household formation trends or.

So much more robustness sunbelt a lot of them you know, but I think that the trends that were there before COVID-19.

And are still there and then I think COVID-19 is sort of causes I mentioned companies and employers and households to sort of recalibrate their thinking a little bit about where they choose to live and.

And I think that that is just added more fuel to the demand demand curve.

Alright, Thanks, Eric and everyone else.

Thank you Mike.

We will take our next question from Neil Malkin with capital 1 securities.

Your line is open.

Hey, good morning, everyone.

And Neil.

Okay, great great quarter on flow clapping year over here for the June and.

Amazing result.

And continue to blow on that night.

And you know first.

And the IRT and said that merger.

You know that portfolio and it'll be a little better under the radar, but a pretty sizable.

Mostly market that overlap and nicely with your portfolio.

You know some b b quality stuff in there so the opportunity to and.

And highly accretive redevelopment just wondering if you look at that deal.

No.

And if there are any other like yet out there and your thoughts on.

M&A using your your and your.

And your stock price given at very attractive currency at this point and the cycle and given the strength that you would probably expect for the sunbelt market for quite some time.

Hey, Neil it's Eric.

We are somewhat familiar with that portfolio given the as you mentioned the large overlap with a number of our markets, but candidly. This is that is not something that we looked at and is not something that we would have looked at simply because I really saw or didn't see.

And meaningful strategic value in and trying to pursue that the only new markets for us would have been and Indiana, Oklahoma and their small exposure and Chicago and frankly those are not markets, we're really interested in and pursuing.

In addition, the in place financing.

On the portfolio.

It's not really a good fit with where we are.

Our balance sheet strategy, and where we're working to get the balance sheet position too so absent a strategic a solid strategic rationale.

On or some form of and assessment that a big opportunity really makes us stronger in some way.

And just getting a little size is not something we're really.

Interested and trying to do we're looking to strengthen the platform. We're looking to make ourselves better if we do something strategic not just get a little bit bigger and certainly.

Absent some sort of a strategic compelling reason to do.

Do it waiting into this super competitive acquisition market and paying top dollar.

And this environment is frankly, and just something we werent interested and doing.

Yes. Thank you.

And at your.

The comment there other 1 from me is you look at especially this.

Quarter.

<unk> sort of coastal bellwethers.

And both made pretty.

Can you comment about the.

Regulatory.

Challenging less attractive coastal market.

California, and New York et cetera.

And it started to and to use your word wait and do.

Your market share backyard, and obviously, that's a positive in terms of value.

And you know.

Confirming your thesis on on your market, but what do you think the biggest I guess threats or risks.

Potential opportunities.

And could be now that some of the the Big Boy you know well capitalized.

<unk> reads are are starting to sniff around your territory.

Yeah.

Well you know, it's a it's a big region and a lot of market.

Our markets across the region MAA has a fairly in addition to a long long history focused for the last 27 years on this region and on these markets.

We also have I think a very unique approach to how we diversify across the region.

And and so we think that the long history, we have on the reach and the in depth deep knowledge, we have of the markets and the Submarkets.

And probably continues to create some level of advantage for us I think.

Overtime platform capabilities associated with scale and revenue.

<unk> cost of capital and market knowledge.

To support both operations and to also to support disciplined new growth can drive competitive advantages and long term outperformance and.

And as I say with a 27 year history.

Focused on this region.

And I continue to like.

Our chances.

Yes, okay.

Appreciate that thank you guys and thats tremendous tremendous quarter.

Thanks, Neil Thank you Neil.

We will take our next question.

From John Kim.

BMO capital markets.

Your line is open thanks Kim.

Thank you good morning.

And I wanted to ask about your guidance from our blended lease growth for the year.

And it actually seems conservative at 7% just given what you printed and second quarter.

And then 16%.

On July <unk>.

So far.

And on top of that Tom and I think you mentioned in prepared remarks that new lease pricing will peak season and later than normal.

Can you elaborate on that comment and then I'll go up you really anticipate.

The lease growth has slowed significantly from what you have so far in July.

And we start.

Don and maybe maybe Jim and Tom can jump in on some of that to them in terms of what we have our guidance with you. If you look at what we're projecting for the back half of the year.

We projected our strong performance, we're taking the third quarter as we talked about.

We continue that expect that to continue sort of July trends into that but we do expect some modest.

Seasonal.

Moderation in the fourth quarter and that's normal I mean, we typically that happens and so I'll say this we are still projecting a fourth cordless well above probably anything we've recently done and recent history for sure.

And so it's strong, but we will have that theres just less demand in that period and good thing is that we've designed it and so those are less leases being signed as well. So it has less of an impact as well, but we.

Do expect some so just to give you a flavor you can you can do the math on what we're talking about but you're talking to more like 10% or more expectations and third quarter monitoring down to 6 or so and the forecast still so very strong projection leading to the full year blend that we're talking about so so that's so there's very good to see these trends, but we reflected what we really.

And happen over the full year.

1 point of clarification, John and the July is 12% on blended I think he might have said 16 or 17 and the new lease was that with a blended 12. So we're expecting sort of August to be pretty similar to that and then start to trend down as demand typically starts to wane a bit John 1.

Quick way to think about it is blended a combination of both new and renewal pricing year to date through the first half of the year was 6%.

The forecast assumes that that blended performance over the back half of the year, even with seasonal factors is 8% so.

It's it's still positive and.

Things can and we think it's definitely reasonable to work off that kind of assumption.

Okay. Thank you and then for the guidance for same store expenses.

And they went up for the year, a lot of attitude and higher repairs and maintenance.

Are you accelerating any of these and it is cost.

Cost just given the strength and the market are you doing anything different as far as expensing versus capitalizing certain items.

No changes and.

Expenses and capitalizing on we would expect a repair and maintenance costs to come down and the back half of the year, just because of the odd comparisons this year.

We have some inflationary pressure on some specific items.

And good, but thats and Tim and ALS guidance for them.

And if things and that first it's a pretty modest increase and the range overall 50 basis points Jamba, there's really 2 things and that 1 has performed property level performance awards from the strong performance that we are seeing expected for the year I mean, we're very glad to see it and.

I'm proud of our teams for producing net.

And so let me some of Thats, the bulk and Thats, probably the bulk of it and then you have some inflationary pressures on repair and main suppliers and things that we do which is typical across I would say everybody is body right now the full market.

But pretty small growth.

Thank you.

We will take our next question from.

RBC capital markets.

Your line is open.

Yeah, Hi, everyone. Thanks.

And sorry on the topic of guidance can you just talk for the rent and you got a little bad obviously and the second quarter you had the 169 per core up of our and and the mid point of.

Quite a range of 168, so is there some sort of offsetting factor to the strong strong blended rate growth that you're seeing.

And I think you would be willing to historically you know over the last several years in terms of core <unk> third quarter is usually sort of a low point and it's really just with all of.

The activity going on and third quarter, we have on the expenses are at their highest point, obviously getting getting the highest rents as well, but just the seasonality of expenses, usually drive and I think honestly like I said I think if you look and the last several years Q3 is probably our low point in terms of course, and if there's nothing normal nothing structural driving that other than.

The third and normal pattern.

Okay got it.

And then going back to the first question on the call you know.

This double digit strength of our thing and a lot of your markets. How long do you think that goes on core broadly I mean is demand is so strong that it won't taper on telling you see either demand fall off or supply pick out.

Or is there sort of just a kind of onetime or pricing of the rent level that these markets can bear.

Well I you know I mean fundamentally it comes down to just supply demand sort of balance and we.

We certainly continue to see.

Evidence that the <unk>.

And bubble is going to remain strong and other than sort of normal seasonal patterns that we've alluded to it's hard for me to point to any sort of definitive reason as to why the demand side of the equation is likely to show any significant moderation I think that.

If you want to think about.

Some level of.

Catch up occurring if you will as a consequence of what went on last year. We went back and took a look at what we expected to occur last year, and the second quarter and our pricing before we knew about Covid and.

And obviously last year during Covid, we came in short of those original expectations to the tune of about 250 basis points in terms of blended lease over lease pricing. So if 1 wants to think about this year's performance has somewhat of a.

And extra juice to it as a consequence of recovered from last year from.

So release perspective, I would argue that probably no more than 200.250 basis points of that is a function of recovery from last year overwhelmingly.

It's driving it is just the all the factors that are driving the really strong demand side of the business.

In terms of employers and employees finding reasons to come.

From a Legion.

And then and then new jobs, just continuing to form here and as I pointed out a moment ago with our markets constituting.

Collectively 42% of the household formation projected household formations in 2021 and.

And thats growing to 4.

<unk>, 44% based on the information, we get from economy Dot Com and some of these other services. It suggests to us that the demand side of equation is likely to remain pretty robust and we do think that it's unlikely for all the reasons Brad alluded to surrounding.

And what's going on with construction cost land sites and things of that nature.

We think that.

We probably see supply levels remained fairly elevated like they are now going into next year, but it's hard for me to envision supply levels picking up materially from where they are so as.

As we sit here today I think we're pretty we're pretty optimistic that we're going to see pretty good <unk>.

<unk>.

Ply relationship.

For us going into next year.

Okay. Thank you.

Yes.

We'll take our next question from Nick Joseph.

Citibank.

Thanks you.

You guys talked about.

The competition for assets and all the new entrants into the market are you seeing a similar level of competition for developments and pre sale or is it a little different than stabilized properties.

Nick This is Brad I mean, I would say that it certainly aggressive there is theres certainly a lot of equity.

QWERTY, that's looking to put money out and development I would say, it's a little less.

And I think the.

On the demand for immediate earning assets is a bit higher than than the demand for assets that are not going to produce for 3.

3 years, so it certainly aggressive out there.

With a.

Capital, but I would say it is less in the development arena and in the JV arena than it is in the acquisition market.

Thanks, and then.

You talked about the population movement, a lot with people entering the market, but when you look at the move outs and obviously turn out.

Turnover is still low.

Are you seeing people leave the markets or any changes or reason to move out.

For the data that you collect.

No.

We're seeing a little bit higher move outs and slightly higher on home buying and but primarily job transfer which is kind of what you would expect especially comparing.

Pairing to last year, when there was less of that kind of movement, and then 4% of our move outs or to out of area and that's down from 5% so sort of once people move here they tend to stay in the area and.

Job transfers and homebuyers and generate the change.

Thanks.

We will take our next question from Alex Comer.

Selman and associates.

Hi, Thank you for taking the question when you look at their move ins this quarter and the demographics of the move ins.

Are they similar to your current portfolio and do they vary from the out of state movers versus within the same markets.

The when we look at and 1.1 thing that is interesting that is occurring Alex as you would think with the large run up in.

And pricing opportunity for us the Darwin stress on affordability, but we're seeing affordability stay and that 19% to 20% range or the rent to income ratio I should say and that 19% to 20% range. So the incomes are.

And that are coming in are higher.

And.

That is.

Gives us plenty of room to run and that area.

Got it thank you very much and moving to the smart home Tech side.

You've talked in the past about the a b testing and potentially getting some topline juice from including.

And smart home technology.

Have you updated that analysis and are you still seeing the same sort of topline benefits there.

So we're getting a very solid 20 to $25 bump and that and.

And then what we'll begin to see as well and we really underwrote on the thing that we knew we would get our and we felt strongly about was that the.

<unk> on.

Opportunity and we're beginning to see the benefits.

Of our mobile maintenance plan, which was.

And we just installed.

Mobile maintenance or upgraded mobile maintenance for the portfolio and the second quarter and that will begin to.

Create some efficiency for us on the expense side and on leak.

Detection as well as just saving time between units responding to calls real time, those kind of things.

Got it thank you very much.

Thank you Alex.

We will take our next question from Illumina Pfizer.

From Baird.

The revenue line is open and thanks.

Thanks, Good morning.

He's got plenty of questions on guidance and I did want to ask about your occupancy outlook, that's embedded for the full year.

It sounds like you may have seen a slight increase in turnover and more recently given the sequential occupancy decline and July how are you thinking about.

Balancing rate and occupancy for the remainder of the year and do you think you reached a structurally high level of occupancy for your portfolio on the second quarter.

Yeah.

Men and I'll start with that and then Tom you can you can but we the way we look at it as we've talked about in the past you know around the 96 point level, which we are we're talking about for the back half year High 90 fives to mid 90.

Range, we're projecting that's essentially 4 given given our turnover and the wait and wait things are right now and our portfolio. So we're projecting to be stable debt very strong.

But to give ourselves in the back half a little bit of room to continue pushing on price and we certainly didn't want to expect occupancy to keep growing from where it is because we like to continue putting these good prices and the portfolio. So so that's.

6 underlying our expectations and our forecast and I mean.

And Amanda on balancing price and occupancy I think we've always believed and when there is an opportunity to build strength and embedded rent growth that we should take that and.

That is something that we did before the pandemic, we were really push that and.

And that gave US gave us higher E R U or effective rent growth for all in place ahead of the downturn, which allowed us to weather the storm and again, we're and an opportunity where we can push rate and that is I would say primary.

And honestly I'd be happy from 95, 5% to 96, 5 and O.

That's what I think we were a little higher and second quarter, even with the rent increase than frankly, we wanted to be but given where our current occupancy is and more importantly, where exposure is I would sort of expect us to stay in that 96, 1 and above range for the next couple of months, but you know I mean, we are building strength now.

And opportunity to really help our future is to grow rate right now and where.

We're heavy that Wayne and Amanda This is Eric 1 final point I'll make on that I mean, we do monitor very closely the percentage of our turnover that's occurring because of the rent increase and we track that and in.

And the second quarter, the move outs that we had due to the rent increase from about 7% of our move outs and you compare and contrast that to 2019 and more normalized year and or move outs due to rent increase range anywhere from 7% to 10%. So we monitor it pretty closely if we saw move outs jump up a lot.

And lot because of rent increase and we would start to taper back a little bit but at this point no no real change occurring.

That's helpful and certainly a good problem to have.

And then on development how are you thinking about staging that construction starts for those pre development projects you discussed and then.

And you think about adding additional projects to that pre development pipeline and are you still finding the best opportunities and somebody that was longer term repurposing and permitting opportunities that you've talked about.

Well this is Brad Amanda certainly in terms of the staging.

The developments that we're working on now we've got a pipeline.

And right now of about $800 million or so that were really working through both owned sites and sites under contract and they were working on pre development on and then also our pre purchase platform. So.

And those take given where we are and the cycle and given how hard it is to get find sites and get sites and tight.

Titled.

And the staging of those.

You can't perfectly.

Matt those out frankly, and a lot of the developments that we're doing in house.

For sites that need to be Rezoned. So it takes some time to get through that process.

But frankly really what we're doing on those as.

Pipeline and the pre development process and our approvals and then really once we get to a point, where we can have a G. M P and known construction prices locked in and that's acceptable to US we look to move forward with those opportunities I would say the pre purchase timeline is a bit more truncated because again, we're putting off some of the risk associated.

And with the pre development work.

The developers that we're partnering with so those have a little bit shorter time period on them.

Sometimes not all the time.

So we're able to work those in kind of tire starts a little quicker than stuff that we're doing in house. So a long way of saying we can't really.

And is working to map that out it's really once we get costs and approvals and <unk>.

Thing behind us on those projects.

And then what was the second part of your question Amanda.

Just in terms and.

Future opportunities to add to your pre development pipeline and are you still finding from the.

Best opportunities and those longer term repurposing or permitting and opportunities that you've talked about and the fact.

Yes, I mean, we certainly have opportunities there I think I mentioned, a moment ago. We've got about 800 million that we think we can repopulate here and that's a mixture of stuff that is on balance sheet and then also our pre purchase.

<unk>.

The sites that our development team are working on now sometimes are.

A year and a half to get get through the development process. So so it's taking a little bit of time.

To do that on some of them but.

Those are great opportunities, but I'll say it is becoming increasingly.

To find sites, it's becoming increasingly difficult to get sites zoned and permitted and and really worked through that process.

So those are taking.

A bit longer, but we feel really good about.

The pipeline that we have and and the ability to repopulate that as we go forward and Amanda This is Eric.

I would add that we do think that we see the.

Competition for opportunities that involve rezoning are they involve a much longer process. The competition for those sites is not quite as fierce as what you find and something that is shovel ready if you will and ready to go.

Difficult cause a lot of it particularly among the smaller.

Developers and among the some of the private capital coming into the market. They have a mandate that doesn't allow them to take quite that much time, often and so we do find better opportunities more often than not and more.

Projects that require a little bit more time.

That's helpful. Thanks for the time.

Thank you Amanda.

We will take our next question from Austin, where Schmitz Keybanc capital your.

Your line is open.

Thanks.

Good morning, everybody.

I'm just curious if you mark to market and trend out rents on your existing development pipeline. What the differences are upside between the yield that you under wrote and what that might suggest and do you think that the projects could stabilize ahead of the timeline that you've outlined and the release.

Thanks, and us and this is Brad I'd say broadly again, we're seeing strength as I mentioned on my comments and our lease ups and we're seeing that both and velocity and we're seeing that also and rate So I would say.

If we trended that out we're going to see.

And some good positive momentum.

And the yields that we have there.

Certainly for the 2 that we have in lease up right now that's the case the other ones that are under construction, where pre leasing is kind of just starting it's a little too early to say on those but we're certainly seeing.

Really really good momentum as we go forward there and in terms of the velocity.

We did move up the expected stabilization date of our novel Midtown deal and Phoenix by 2 quarters.

And that again that market has been extremely strong and.

And the lease up and I was going very very well and ahead of expectations. So we have moved that data.

Net not the books you on the spot.

And could you quantify what the yield you think the yield upside and I think you've said, 6% as sort of the average yield across the pipeline I mean, it and you think it's is it 50 basis points.

Les and any sense putting on.

Randy.

No I wouldn't say 50 basis points, but.

I would say it's call it 20 basis points.

Since at this point, but again as we get into.

The novel Midtown deals.

And 46% occupied and.

It's really it's too early to put numbers on that but broadly I would say its 20 plus basis points.

Got it and then and then as far as redevelopment and I think the average increase.

Around 11%, but clearly the new lease rates, you're achieving across the portfolio or even higher what do you think the premium is youre getting on redevelopment today.

Premiums right at all.

7% honestly, because the way, we really tried and tried to understand what the market will pay for the premium and match that.

And then let the market rate.

Push us up from there so our redevelopment unit may be getting $200 more 100 of that is redevelopment and redevelopment premium on hunter and its market growth.

Got it got it and then 1 last quick 1 from me is whats the loss to lease today on the portfolio.

<unk> was off and you can think about that a lot of different ways and.

And we're talking to Nick earlier, the way, we really think about that because it can be very seasonal depending on what time of the year Youre looking at but I think we're expecting and 7% blend and leasing of release for this year. So that obviously half of that or so carries into next year. So.

So certainly on a good spot.

And depending on kind of where the full year lease and release.

Okay. That's fair thanks, guys.

Thank you.

We will take our next question from Rob Stevenson from Janney Your.

Good morning, guys.

And Tom can you talk a little bit about the markets and you know first half versus second half and which ones you expect to see the strongest incremental growth.

For the first half of the year the second half of the year, then which ones.

Either they've had such a big pop already are going to wind up seeing the least.

Sort of incremental growth.

And on forward here.

Yeah, I mean, and that's a relative question Rob.

Because you know at this point and July you know, our our leasing growth have got 6 markets below 10% blended rent growth.

And the slower of those are.

As you, but D C and Houston, which are I think 5.2 and 5.7 for blended rent growth, but that's encouraging progress per those.

So I don't think that we have seen and I.

And I don't see any market, where its slowing to be honest with you in terms of the the market again, we will have the seasonal trends as you're well.

But.

No.

Places like Phoenix and Tampa.

Continue to accelerate and places like Atlanta.

And Atlanta, and Austin have really picked it up recently and we're seeing that on into Dallas and across the portfolio I mean, a number of markets and the majority of our markets are large.

Majority of our market share now pushing higher than 10% blended rent growth. So.

And I don't see any sort of tipping point and that's been reached other than seasonality and of course, Eric made the point earlier, where we're pushing through stout renewal increases and we're getting less push back and then we have historically.

Okay, and then al 1 C or when did or when does the insurance renew and did you get hit with any type of major increase on the last renewal just simply because of higher construction costs on replacing units or.

Finishes et cetera.

And we will answer.

And that yes, we did a renewal effective July 1.

And it was roughly 14 and 15% year over year, which is right in line with what we were expecting we didn't see anything necessarily driven specifically by development calls frankly, the winter storm Yuri is really what drove it more than anything I think we would have had lower.

And without that but we feel like we're on a good position now and taking the appropriate amount of risk on our balance sheet and expect to see that continue to decline going forward.

Okay, and then 1 last 1 given your markets. How many units do you have that you would evict if you could but are legally prevented from doing so and then how many units overall on the portfolio.

Well Lee.

And the eviction process.

And Rob I'd say on that it is very limited and you can see that with our collections of 99.

2% right now for the for the second quarter, it's been strong I don't expect to change.

And rules on evictions to change anything much and.

Folio.

We're working closely with our relief.

And folks to manage that process. So I honestly I don't I don't see that it makes a big difference going forward.

Okay. Thanks, guys.

We will take our next question from Rich Anderson S.

And.

Thank you.

Your line is open.

Good morning.

So the ultimate sign of fundamental strength not that we need a hint is when new lease growth is greater than renewal.

Lease.

And so I'm curious if in the past when that's.

In addition, as existed with MAA, how long does it last and.

And is there anything strategically youre doing for and incoming new resident and that you know is perhaps driving that.

You know that level of growth relative to renewals.

Yeah.

Rich.

Rich I went on what I'll say is.

It is also a sign that we have opportunity on renewal and I will tell you their renewal pricing that was achieved on the second quarter was really priced and the first quarter and vice versa. So I think youll see that delta begin to narrow.

As.

As we pre price going out on you know.

July was higher than than the second quarter, and we'll see that continue to grow our beds.

But and the new lease rate really frankly gives us good cover to begin to move that out up and again as Eric mentioned, we have.

And although pushback on.

Renewal accept rates because they can get out and see the housing market pricing is very transparency and transparent and they know they've got a good deal right now and rich and in addition to what Tom alluded to in terms of the the GAAP closing just as a natural consequence of us of repricing.

Okay and rules.

Faster and then Theres a timing difference between how we price new leases versus how we price renewals, which he alluded to.

But in addition to that I mean, what frankly, what what defines how long the opportunity continues as a function of just basic.

Demand supply characteristics and as I have.

On <unk> too we as we sit here today, we don't see anything near term over the next year, so that's likely to disrupt kind of the.

And the strong environment that we find ourselves and so we think that we're going to keep pushing hard today on the on the.

Pricing increases for.

I alluded vans and today, we are pricing renewals for what we will achieve.

And 60.90 days from now and and when we get 60.90 days from now we'll be pricing those renewals at a steeper rate so.

It's sort of as you say, it's the it's an indication of a real strong fundamental.

<unk> and and.

We don't see anything near term that's likely to disrupt that.

And then what.

And you mentioned early on and the 13% new leasing is coming from outside the Sun belt and you gave some examples of some markets that are above that.

And what what was that per.

Percentage.

New move kind of 2019, what would it be typically I'm curious how much it's grown to that 13% level.

And I'll give you an example of it.

No.

And.

And Atlanta as an example.

12% of our move ins came from outside the Sunbelt and in 2019 that.

That was a little over 8%.

And a market like Phoenix, which is incredibly strong in terms of move ins from outside the sunbelt.

Over 21% and so far this year and compared to the same period and 2019 that was a little over 18%. So it's about a 411 basis points.

<unk> jump.

From.

No.

2019, and Phoenix, we're seeing.

So a big jump and Tampa.

And from 2019 is about over 18% today versus 13% and 2019, so 380 basis point improvement.

So it varies a bit by market, but it's pretty going back to 2019 before COVID-19, it's up and move ins from outside the sunbelt are up and lets see it looking at our markets here.

The only market that I see where it's actually the move ins from outside the sunbelt.

<unk> actually down is 1 and Thats Huntsville, Alabama.

Okay.

And just real quick last question a lot of talk about you know.

The cadence between suburbs and and urban.

And <unk>.

Coastal versus sunbelt, all those types of geographical dynamics.

Do you see within your portfolio any particular strength, where the population is is it kind of denser do you do you have better performance there versus the more rural looking area or is it just you know the whole places.

I mean broadly the whole places as good rich.

Or I know the delta between urban and suburban.

And inner loop and a b was wider during COVID-19, both have narrowed so a and b assets. The difference between the 2 is only 130 basis points.

It's 744 are lagging.

<unk>, a and 8.7 for leading me I mean, those are both numbers and I'm happy to have and and the same real story. It's almost the same for sort of urban inner loop versus the suburban assets and 7.5 and 8.7 and so.

There is.

Both are strong.

And there's just a little bit more of a supply headwind and the urban markets, but we don't see them as less desirable.

Got it thanks very much.

Thank you rich.

We will take our next question from John Pawlowski Green.

Your line is open.

Great. Thanks, so much Brad.

And would you mind share and the cap rate on the Jackson, Mississippi exit and the anticipated pricing on that the handful of upcoming dispositions.

Yeah. So we look at this a couple of ways..1 is the cap rate on M. As trailing 12 numbers that was about a 5.4.

Strong, but looked at on a from a buyer's perspective with kind of adjusted taxes and insurance and it was about a 4.7 cap rate.

Going forward on the 3 that we're looking to sell those both of the metrics are very similar because there's not a big reevaluation of taxes on those but.

We're looking in that call it 4 and a.

And 5.475 range and John just to keep in mind that 4.7 cap rate on the exit from Jackson, Mississippi, That's on 36 year old assets.

So average age of that portfolio was 36 years old and Jackson, Mississippi.

Understood and the brand the upcoming dispositions what market today.

So we have 2 and Savannah, and 1 that is in Charlotte.

Great last 1 from me Tom.

Single family rental build to rent communities and the <unk>.

<unk>.

And accelerated pretty meaningfully and the early vintages do have smaller floor plans and a little bit more.

And like apartment. So curious any case studies youre seeing and when it build there and community opens nearby any impact on leasing and any statistics or any color you could share would be of interest.

It's pretty limited.

And while that is a booming space. It is a relatively small space, but the price.

We've probably seen the most.

And that sort of thing happen and it's in Phoenix, and it certainly strat and slowed our momentum there and just as a reminder, and it's 5% of our move outs to single family rental which is really dwarfed by the job transfer and number it is not a driving factor and we love it that they're raising their.

Well no.

And as it's been steady where they've been.

Okay. Thanks for the time.

Thank you John.

We will take our next question from Buck Horne.

James.

Hey, Thanks, Good morning, just.

Thank you real quickly.

Any thoughts or potential impact from eviction moratorium roll off and.

And your portfolio and or how are you working with residents right now and potentially recover.

Any rental assistance payments through the government program.

But this is Eric and.

No we don't really see much change.

Coming as a consequence of the exploration of that CDC moratorium.

Frankly, it's not in our portfolio, we haven't seen a lot of that activity.

And I think.

And that.

As we touched on and ever since this started last spring I mean, we have been very active and reaching out to our residents and offering.

Assistance and various ways with.

Over 8000 of our residents that we've assisted and we continue those efforts.

And.

And we are also very.

Active and doing all we can to assist our residents with making application that need it for financial assistance, where.

Very aggressive and active and showing them.

And where to go we are.

Where we can we're actually doing it for them and making application on their behalf.

But it's not a big percentage of the portfolio, but we don't really see any near term change occurring.

And just as a consequence of getting into August and the CDC moratorium no longer being in place.

Great. Thanks, and just following up on the single family rental.

Question, there just maybe a different tack on it.

A lot of builders are out there and a lot of capital is out there building out entire communities and running them effectively like horizontal apartment any any evolution and your thought process about.

And maybe a partnership a strategic partnership with a homebuilder or someone else too.

Invest in our single family rental community.

Well, it's something we kick around from time to time book.

Have a number of our communities, where we actually do have adjacent town homes and.

And housing structures. If you will that are not traditional apartment type and design.

And if we were to find an opportunity too.

Do something where you've got a purpose built single family community and that continues.

And Miss.

Area with common amenities and all that kind of stuff, yes, I mean, it's something that we would we would invest in.

We're not we're not out actively looking to make that happen at the moment. We think we were able to capture a lot of good growth right now with what we're doing.

With all the projects and Brad diluted.

You too but.

We've got if you will a little bit of that and the portfolio already and it's something that.

If we find opportunities in that regard to look at we wouldn't hesitate to look at it.

Thanks, guys.

Thank you Mark.

Okay.

Diluted further questions I will turn the call and Ma.

For closing remarks.

Okay, well, we appreciate everyone joining us this morning, and any follow up questions feel free to reach out anytime. Thank you.

This does conclude today's program. Thank you for your participation you may disconnect at any.

And any time.

Yeah.

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