Q4 2021 Washington Real Estate Investment Trust Earnings Call
[music].
Welcome to the Washington Real estate investment Trust fourth quarter earnings Conference call.
As a reminder, today's call is being recorded.
Before turning the call to the Companys, President and Chief Executive Officer, Paul Mcdermott.
Hopkins Vice President of Investor Relations will provide some introductory information.
Amy Please go ahead.
Thank you and good morning, everyone. Before we begin please note that forward looking statements may be made during this discussion such statements involve known and unknown risks and uncertainties, which may cause actual results to differ materially and we undertake no duty to update them as actual events unfold, we refer to certain of these risks in our SEC filings.
Conciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement which were distributed yesterday and can be found in the Investor Relations page of our website.
Participating in todays call with me will be Paul Mcdermott, President and Chief Executive Officer, Steve <unk> Executive Vice President and Chief Financial Officer Drew Hammond, Vice President Chief Accounting Officer, and Treasurer, and Grant Montgomery, Vice President and head of research and now I would like to turn the call over to Paul.
Thank you Amy.
Everyone and thanks for joining us today.
Last evening, we released our fourth quarter and full year 2021, the earnings results, which were in line with our guidance.
Our full year results reflect our transformation into multifamily, which is the asset class we identified as having the best long term growth prospects in our region.
We also expanded outside the Washington Metro region for the first time in the history of our company and we continue to make solid progress on growing our portfolio in Atlanta and evaluating opportunities in our other target markets.
2021 was an eventful year for wash REIT.
And as a result, our long term growth prospects are much stronger going forward.
Today I plan to provide an update on our transformation progress, including our recent acquisitions and our plans for internalizing property level residential operations.
I will also provide an update on the operating environment in the Washington Metro and Atlanta, where we are actively growing our footprint.
Steve will provide an update on our performance and trends and we'll discuss our fourth quarter and full year results and outlook.
Starting with an update on capital deployment.
Since our last update we acquired 880 homes in Atlanta for a total of $212 million.
Our latest acquisition plus the one completed during the third quarter amount to $260 million of our $450 million acquisition target.
We expect to deploy the remainder of the net sale proceeds from our commercial portfolio sales by the end of the first quarter or early in the second quarter.
Our pipeline is very active having fully ramped up after the natural new origination market yearend take.
The transaction market remains competitive but pricing has remained relatively stable since our last update.
We are currently evaluating multiple opportunities that fit our portfolio strategies in Atlanta as well as in our other targeted markets of Charlotte and Raleigh Durham.
Got some good prospects.
Our in process on several opportunities and look forward to updating you with more details upon closing acquisitions.
The acquisitions that we've completed thus far are performing very well and are generating strong revenue growth that will translate to even stronger NOI growth as we continue to expand our portfolio into new markets.
While it is still in the early days, our Atlanta portfolio is outperforming our initial underwriting assumptions and we remain confident that our research has led us to invest in areas that are poised for strong sustained growth.
As a case in point, revealing the electronic carmaker recently announced that they are building an assembly plant just minutes away from the Oxford, which is set to bring 7500 jobs and ties directly to our strategy of selecting areas with industries of the future to drive demand.
Furthermore, the jobs that <unk> will bring our expected to pay salaries, which align with our targeted income range.
The Oxford has performed very well in the first six months that we've operated it and has generated new lease rate growth of over 20% and blended lease rate growth of 16% year to date.
Occupancy is above 95% and retention has been strong at over 63% on a year to date basis with even better performance to come as the Submarket continues to rapidly grow and add middle income workers.
Assembly Eagle's landing, which was acquired in November 2021 is a garden style community with 490 homes located in Henry County, and the southern suburbs of Atlanta.
We acquired Assembly Eagle's landing for $106 million.
This equates to an initial cap rate of over 4%.
The community is comprised of two properties that are located immediately adjacent to each other.
Historically, each asset has been operated managed independently.
However, our opportunity includes creating significant economies of scale by operating them as one community.
As the 19 nineties, Venice community with a price point that represents 85% of the market median rent.
The opportunity to drive NOI growth through our operational efficiencies Assembly.
Assembly Eagle's landing fits squarely into our class B strategy, which targets targets vintages from the 19 eighties to the 2000 and price points that range from 80% to 95% of the market medium and high growth sub markets.
Assembly Eagle's landing does not compete with new supply in Henry County.
As new deliveries have an average monthly rent that is nearly $375 per month above what we are currently offering.
The property has performed very well during the first three months, we've operated with very strong new lease rate growth of 23% and blended lease rate growth of 18% on a year to date basis.
Furthermore, we are already beginning to realize operating efficiencies at.
To date, our daily pricing models are achieving higher rents than we originally underwrote.
We expect assembly eagle's landing to generate low double digit NOI growth over the next few years with strong long term growth prospects thereafter.
Our investment strategy targets strategic locations proximate to growing job markets as.
As I mentioned earlier Assembly Eagle's land is located in Henry County, which is approximately 20 miles southeast of Atlanta's downtown business core.
Interstate 75.
The area is comprised of family households, who are attracted to the value proposition afforded by the high quality yet more affordable units in a low density neighborhood with highly rated schools, while providing nearby Interstate accessibility and connectivity north to the urban core and south to employment.
And retail offerings in Mcdonough, Georgia.
Henry County, strategic location with immediate access to Hartsfield Airport and within a two day drive of 80% of the U S population.
Makes it one of the key supply chain management and Premier ecommerce locations in the south Eastern United States.
Over the past five years same store rent annual growth for the Submarkets 19, nineties product has averaged eight 6% outperforming the four 9% average annual rent growth for all nine these vintage apartments in the Atlanta market and also outperforming the overall Atlanta growth rate.
For all product of five 1% according to real page.
Carlyle of Sandy Springs, which we acquired on February one for $106 million at initial cap rate of approximately 4%.
Gordon style community with approximately 390 homes located in desirable Sandy Springs, Submarket of Atlanta, Georgia.
As the 19 seventies vintage community with a price point that represents approximately 90% of the market median rent and the opportunity to drive NOI growth through value add renovations it fits squarely into our class b value add strategy.
Our opportunity includes the implementation of our value add renovation program for approximately 270 of the homes set to begin in year two of our ownership.
We are positioned to generate strong returns on these renovations as Carlyle does not compete with new supply and the Sandy Springs Submarket.
New deliveries have an average monthly price point that is over $350 above the monthly rents that we are currently offering.
Located north of downtown Atlanta, Sandy Springs attracts families and professionals seeking an amenity rich suburban micro location, providing proximity to entertainment and jobs.
Fulton County is the most economically active in the state of Georgia, including the third largest concentration of fortune 500 companies in the United States and one of the southeast largest technology capitals.
The area is known for its pro business environment, and superior quality of life, making it a sought after location by businesses and residents alike.
Additionally, excellent connectivity via Georgia, 400, and <unk> hundred 85 provide quick and easy access to other major employment nodes throughout the Atlanta Metro as well.
Built in $19 72, and spanning approximately 30 acres Carlyle of Sandy Springs features apartments and is primarily comprised of Townhomes.
Over the past five years same store rent annual growth for the Submarkets 19, seventies product has averaged six.
Six, 4%, which significantly outperformed the overall Atlanta growth rate for all product at four 5%.
We expect Carlisle to generate high single digit to low double digit NOI growth over the next few years with above market growth driven by value add renovations thereafter.
Our initial acquisition fits squarely into the portfolio strategy that we laid out on our transformation rollout webinar last June 15.
Our strategies are tailored to each market and submarket by vintage and price points and are designed to target mid market renters, which represent the deepest sections of the demand curve in each market without competing with new supply.
We are thoughtfully approaching each opportunity and passing on opportunities that do not fit our strategies.
We're not provide upside to NOI growth that will lead to.
Long term shareholder value creation, as we scale our platform.
While we believe diversifying and expanding our footprint makes sense.
Growing and scaling our portfolio is also a top priority and will allow us to be in a position to deliver greater value for our shareholders.
Investment strategies, we've used over the past few years to grow our portfolio in northern Virginia had been very successful and we will continue to explore acquisition opportunities in northern Virginia should they create greater value.
That said at this time, we are seeing very good growth and geographic diversification prospects in the pipeline, we are evaluating and our new target markets.
Now I would like to take a few minutes to update you on the operating environment in the Washington Metro and our expansion markets.
While the Washington Metro apartment market is on the rise and is exhibiting some of the same positive trends that we're seeing in our southeastern target markets.
Washington Metro a rebound has been less pronounced than it has been in other metropolitan areas that were hit harder by the pandemic.
We believe that the Washington Metro market offers tailwind that will carry over into 2023, which Steve will discuss in more detail later on this call.
Furthermore, we are outperforming our region and we attributed to our affordability based investment strategy.
Which led us to target the largest underserved renter cohorts in strong submarkets.
Year over year effective market rents in the Washington Metro climbed 430 basis points from third quarter to fourth quarter 2021.
Suburban Virginia continues to deliver stronger growth with year over year effective rent growth accelerating to nine 5% in December .
Overall, Washington Metro effective blended lease trade outs increased six 8% during the fourth quarter compared to the prior year period.
While our same store blended lease rates grew eight 4% on an effective basis.
Absorption hit an all time high at nearly 27000 units during 2021, and the Washington Metro had the fifth highest absorption by unit count in the U S. According to real page data.
Year over year effective market rents for Atlanta, Raleigh, Durham and Charlotte.
Grew by 29% 21, 6% and 19, 3% respectively in December as reported by real page.
Annual demand also surged across these three markets in 2021 is in migration and household formation drove record setting absorption.
Charlotte posted fourth quarter annual demand that was 56% above its five year average.
While Atlanta, and Raleigh, Durham fourth quarter annual demand top to 135, and 131% of their five year averages respectively.
Moving on I'd like to provide an update on the efforts that are underway to transform our infrastructure as we scale our portfolio and prepare to internalize property level residential operations.
We are working on several major initiatives that will have a significant impact on our ability to drive better performance one implemented from.
Defining our go forward technology strategy and implementing a scalable core technology platform to reshaping our human resource program ahead of internalizing property level residential operations later this year.
Since our last update we finalized our technology design and selected our core technology platform.
Evaluated our operating model cost structure to determine the optum.
Optimal staffing model for each phase of our growth.
And we wrapped up the background research phase of our branding initiative, which we plan to rollout over the summer.
We are now moving into phase two of our project, which includes implementing our core technology platform.
Building, our operating model and launching a brand that supports our transformation and resident focused strategy and designing and launching our new website.
Phase III, which starts in late 2022 with expected completion in mid 2023 incorporates the onboarding of our property level operations to our internal systems we.
We expect the vast majority of the work that needs to be done to prepare for the onboarding process to be completed by year end.
Following the complete internalization of property level operations and enhancements to our operating platform, which includes leveraging a centralized model for certain support functions.
We expect to realize significant benefits as we scale the business and optimize our expense base.
The future operational and financial benefits from these efforts will increase our ability to compete in the marketplace and will create long term value for our shareholders.
While transforming our operating platform will impact near term expenses it will generate more operating leverage over the long term as we continue to grow and scale the business.
Steve will provide more details about the impact of these efforts later on this call.
Before I turn the call over to Steve.
I am pleased to share that we have been recognized by <unk> for achieving the first ever <unk> certification for the multifamily industry in the United States.
Our successful certification of eight of our multifamily assets, which was completed in alignment with our green bond allocation requirements marks a milestone for wash REIT and brand as we work together to create more opportunities for sustainability and efficiency advancement and the class B multifamily space.
This.
As we continue our portfolio transformation, we remain committed to bringing all of our properties, including new acquisitions and development up to wash REIT standard for delivering superior efficiency and sustainability performance for our residents.
Now I'd like to turn the call over to Steve to discuss our operating performance, our fourth quarter and full year results.
And our outlook in 2022 guidance.
Thank you Paul and good morning, everyone.
August changed since this time last year.
We're at our pandemic lows from November to February and we're preparing to roll out the transformation, while also facing headwinds.
Our portfolio is performing historically, well and certainly outperforming our normal seasonal patterns.
Effective rents are boosted by occupancy that is historically strong as we head into the spring and summer leasing season.
Very limited amount of new concessions being issued and.
And the strongest fleet lease rate growth tailwind, we've seen in 20 years.
Our effective rental growth is being achieved as the leases that were signed during the pandemic lowes roll off and are replaced by market rate leases.
We expect growth in average effective monthly rent to accelerate as activity increases into the spring.
This positive momentum.
Makes us confident that we will have strong NOI growth throughout 2022 into 2023.
As Paul highlighted earlier, we are also outperforming our region.
No signs that our lease rate momentum has moderated.
Effective new lease rate growth was 10, 7% for leases signed year to date.
Our same store portfolio and 22, 4% for our Atlanta portfolio.
While new lease rate growth has trended positively on a quarter to quarter basis, which as I noted earlier, it's not a pattern that we're used to seeing during the winter months.
The more significant trend that has surpassed our expectations is how strong our renewal rates have been without significant impact to retention.
The effective renewal rate growth was nine 7% for leases signed year to date, our same store portfolio and 13, 7% for our Atlanta portfolio.
Market rents grew quickly through the fall and while we achieved very strong renewal rates. The late season timing of the urban recovery created a tailwind that will continue to provide strength into 2023.
Furthermore.
Small portion of our portfolio is still operating under our renewal rate restrictions, which creates the opportunity to bring those leases up to market rates as the restrictions are lifted.
80% of our Washington Metro NOI comes from Northern Virginia, which is producing stronger growth. However, 13% of our NOI comes from D. C where the restrictions were just recently lifted for March renewals.
The remainder of our same store NOI comes from Merrill Lynch.
We are still kept from renewals through September one.
Therefore, the removal of a renewal rate cap should provide some additional growth later in this year and carry into 2023.
As I said.
Occupancy remained strong and we're seeing very strong retention, which will allow us to continue to grow rents.
We are essentially at a low to no concession environment with occupancy running above our targeted level, we see greater opportunities for rent growth ahead, as we approach the spring months.
Portions of our portfolio are still in pandemic recovery mode, and while new lease rates.
For our suburban portfolio are now 15% above the pre pandemic level and growing our urban portfolio is still catching up to the market.
We believe this creates additional growth opportunities and we expect urban lease rate growth to be very strong over the balance of the year with revenue strength carrying over into 2023.
We expect to achieve this not only by capturing where market rents are today.
But also additional market rent growth expected throughout the year, particularly in northern Virginia, where most of our portfolio is located.
As you May recall, we had fully invested in the trove as 2021 began.
But unfortunately delivered it into the teeth of the pandemic, we steadily at least it up throughout 2021, and then stabilize near year end.
It's year over year growth represents true growth without any additional capital requirement to obtain it.
In addition to our strong same store trends, we expect <unk> to be a key growth driver over the next few years.
Adding approximately $7 billion of NOI in 2022.
$8 million of NOI in 2023.
Which reflects a very strong NOI growth rate of 14% for 2023 on top of much greater growth 2022.
<unk> is fully leased up and stabilized with occupancy at 95% heading into the strong spring and summer months.
During 2021, we completed full renovations on over 180 units across 10 properties and achieved a 14% average cash on cash return.
Just on rent increases that are above what we would've achieved otherwise.
After putting our programs on hold during the pandemic 2021 represents a year of gradual ramp up and we expect to spend approximately $8 million. This year on renovations, which represents a significant increase from the $3 million spent on renovations in 2021.
And our current portfolio, we have a pipeline of approximately 2900 units, where the rent gap between those properties and the class eight product offers room to renovate and capture and ROI.
Our targeted range, we are capturing very strong lease rate growth on a renovated units and believe we will continue to add to our renovation pipeline as we expand into the southeast extending our growth pipeline further into the years ahead.
That said, we are more than doubling our renovation investment from the prior year to create additional growth there.
Now turning to our financial performance net income for 2021 was $16 $4 million for 19 cents per diluted share compared to a net loss of $15 $7 million or <unk> 20 per diluted share the prior year.
The increase was partially due to the net gains on asset sales that were executed during 2021.
Core <unk> for the full year 2021 was $1 <unk> per diluted share, which was in line with our guidance range, but just slightly below our midpoint due to a tax expense recorded in G&A in the fourth quarter.
Multifamily same store NOI increased four 2% during the fourth quarter and 8% on a cash basis compared to the prior year period.
Looking forward, we expect same store cash NOI to continue to be higher than our same store NOI until midway through 2022, when the amortized concessions granted during the pandemic.
Fully burned off.
Same store revenue grew 4% during the fourth quarter on a cash basis, driven by strong lease rate growth.
Same store expenses declined by three 6% due to lower taxes and lower turnover expenses.
Same store effective lease rates increased eight 4% on a blended basis for move ins that took place during the fourth quarter comprise.
Comprised of new lease rate growth of eight 7% and renewal lease rate growth of eight 2%.
Retention was very strong during the quarter at 72% higher than expected at <unk>.
Significant increase compared to 51% in the year ago period.
This allowed us to retain high occupancy during the winter months and to begin to capture stronger renewal rates, which as I outlined earlier have exceeded expectations. So far this year.
The higher renewal rates have allowed us to grow rents even more so since year end and we expect this trend to continue into spring when demand should be even greater.
We continue to benefit from owning and operating Watergate 600.
They've grown occupancy steadily over the course of the year to.
To 91, 3% as of December 31, which represents a 220 basis point year over year increase.
The percentage lease now stands at 92, 4%.
With an iconic status.
Quality institutional tenant base and a weighted average lease term of eight years, we continue to see opportunities to create value by owning and leasing Watergate 600.
On the financing side, we issued $68 2 million through our ATM program.
Since our last call.
At an average price of $25 79 per share, which positions us to further strengthen our capital allocation as we grow our multifamily portfolio.
We remain confident that we will be able to execute further value creation opportunities.
And now turning to our outlook for the balance of the year.
We are guiding to a full year core <unk> per share range of <unk> 87 to 93 per share.
We expect same store multifamily NOI growth of between 7% and three quarters percent to nine and three quarters percent.
NOI growth for same store and <unk> combined is expected to be between 11, 5% and 13, 5%.
As I mentioned earlier <unk> was fully invested in both years and represents true year over year growth on the same capital investment.
Non same store multifamily NOI, which consist of trove.
Preferred assembly Eagle's landing and Carlyle of Sandy Springs is expected to range between 17% and three quarter.
$18 $5 million.
Whats troak represents approximately $7 million.
Same store other NOI, which consists of Watergate 600 is now expected to contribute between 13 and 13 to three quarters of million dollars of NOI.
Our acquisition of Carlyle in Sandy Springs closed on February one for $106 million at.
The cap rate of approximately 4%.
And our <unk> guidance range incorporates approximately $270 million to $290 million of additional acquisitions.
When fully invested we expect our leverage to be in the mid five times range.
Annualized basis.
G&A is expected to range between $25, five and $26 $5 million, excluding the impact of transformation investments for our future platform and our full integration.
Interest expense is expected to range between 24, and three quarters and 25 and three quarters.
We expect our core <unk> payout ratio for the year to be in the mid seventies.
And as we continue to invest in multifamily assets, which are less capital intensive than the commercial assets. We sold were establishing an <unk> growth profile that should allow us to grow the dividend.
And finally, we expect transformation costs to range from 11% to $13 million.
These costs are related to our strategic transformation, including core system implementation branding and human capital initiatives.
Operating platform design and retention of termination benefits.
At the end of 2022, we will build out the internal infrastructure needed to internally manage property level operations.
All of our communities and we will begin to onboard communities onto the new platform in late 2022.
At that point, we expect to have the G&A expense space, which will not be substantially different.
The level that it's at today to support a doubling of our unit count.
While we're not yet giving guidance for future years, we expect we will incur only minimal transformation costs in 2023, as we complete onboarding the remaining communities to our systems and platform.
Following the internalization of property level residential operations and the rollout of our streamlined operating model, we will be positioned to achieve expense efficiencies.
And to deliver operating leverage.
As we scale, our business and with that I will now turn the call back to Paul.
Thank you Steve to.
To summarize we are entering 2022 as a significantly different company and a much stronger and more opportunistic operating environment.
And we are focused on growing in the southeast markets, capturing our loss to lease executing renovations standing up our new operating model integrating our core technology platform and preparing to internalize property level residential operations.
We have an active pipeline of opportunities that align with our strategies and we remain confident that we can allocate this capital appropriately over the next several months.
We are excited for the year ahead, and the growth that has to come and we look forward to keeping you updated on our progress.
Now we would like to open the call to answer your questions.
At this time, we'll be conducting a question and answer session.
You have any questions or comments. Please press star one on your phone at this time.
We ask that we're posing your question you. Please pickup your handset listening on speaker phone to provide optimal sound quality.
Please hold while we poll for questions.
Your first question is coming from Anthony Powell. Please announce your affiliation then pose your question.
Great. Thank you J P Morgan.
My first question is as you look out at the $270 million to $290 million of incremental deals can you talk about where youre seeing cap rates.
And also as you underwrite the growth in these new markets, where do you think those yields trend say in years.
2345.
Sure Toni it's Paul.
In terms of the $270 million to $290 million.
We have.
State of the markets, we're going after Atlanta.
Charlotte and Raleigh, Durham, I would say that that just because of the virtual scales of the individual markets. We're definitely seeing more deals in Atlanta that really fit within the three strategies.
Class, a minus b and the b value add.
The cap rates that we've achieved.
Ben just above a four cap.
Thus far.
And but I would also say that.
We have seen a couple of deals with a very compelling growth story that have been executed in the high threes and were.
Say that probably above three in a quarter three and three quarter cap rate.
And we would probably look at those again, if the growth story was compelling.
I think in terms of.
The yield.
That we're seeing.
In years, two and three I would say.
Low <unk>.
Low double digits moderating into the single digits and then.
NOI growth in terms of NOI growth. Thank you Steve.
And then returning to more normalized levels after that Tony.
Okay got it thank you and then.
Back in your D C core D C Metro region.
Like what do you think happens.
With rent growth do you think there's a forthcoming pop there or do you think it's just going to continue to grow more steadily.
So Tony we certainly we look at our opportunities in terms of when our own rents expire and all but.
If we just use real page data, they're implying just for the year something like a five seven.
Growth on top of.
A true market growth for the current year.
When you think about our opportunity.
We really saw the post pandemic rate inflection for new leases in July of 2021.
And obviously there was a lag for renewals. So they came later.
And so what was happening right up to the first half of the year we were.
The real pandemic, Lowe's, where like November of 'twenty to January of 'twenty, one and concessions were high that we had to give at that time. So we were basically in a concessionary environment and epidemic low rates and then we had our inflection I will say our suburban portfolio was already stronger probably starting to inflect and.
May of last year, but on average for our portfolio we saw it in.
And in July so that for US we had a pretty good loss to lease, but we look at our ability to capture rents in the trade outs going forward.
We see we see a pretty good trade outs ahead of us all the way through we reach those anniversary dates.
Collection a year ago.
There is that market rent growth on top of that I think is going to happen over the course of the year. There is the loss to lease capture.
But there's also from an effective rent trade outs standpoint, we've.
We've got we've got amortization of concessions that burn off about mid year.
So I think.
We will have very strong.
New and renewal effective trade outs right up to those anniversary dates and we're hoping that we'll still have enjoy some market rent growth on top of that.
Okay. Thanks, and then.
It sounds like a new brand forthcoming should we expect a new name.
Tony.
Value, adding that right now.
We're in the middle of kind of reviewing.
Our branding.
Soup to nuts, and so I think we will have something to talk about probably mid summer.
Rebranding involve potentially a new name so, but we look forward to rolling that out mid summer Tony.
Okay, great. Thank you.
Okay.
Your next question for today is coming from John Pawlowski. Please announce your affiliation then pose your question.
It's John with Green Street. Thank you very much that time, Steve could you give us a sense for what percentage of the units. We're still caps on rental increases until I guess March and then what percent of units are capped until September .
Sure.
Yes, if you look at our so our same store portfolio is basically the DC region.
80% of the portfolio is in northern Virginia, Hasnt been capped we've gotten great growth, 13% is in DC and that's what's unlocking here starting in March and that leaves about 7%, which was a Maryland, Maryland was something like one four and then they lowered it down to a 0.4 until.
September .
So that's kind of the pattern for how much will get unlocked win.
Okay. So all 7% of those units are currently capped and they don't and they are on.
<unk> come in September .
On renewals.
Until the downward dose okay.
And then I appreciate the color on the transformation costs.
Is there an additional tranche of cost that are being capitalized this year above the.
$12 million.
That was detailed in guidance yes.
Yes about $4 million is capitalized wells, we're putting in some of the technology.
Okay last one last question for me you mentioned you don't expect at this time G&A to be meaningfully different.
That is it today just curious your definition of meaningful are we talking plus or minus 5% or plus or minus 25%.
I guess it would be very similar.
Expect to be able to give a very similar range for G&A guidance.
After we get this done to what it is today.
I think within the same range.
Your next question is coming from Chris Lucas. Please announce your affiliation then pose your question.
Capital One securities. Good morning, everybody just a couple of questions from me just sticking with the G&A topic, Steve should we expect sort of a step down in cost as we go from the beginning of the year to the end of the year or is it going to be fairly ratable throughout the year given your guidance.
I don't think Youll see a lot of fluctuation I mean, theres going to be some changing out during the course of the year.
But I think.
Theres so much emphasis is being put into the transformation costs and investments that when we get that all invested I think then there'll be like a new study G&A and it will be at about similar levels. So I would expect that to settle out towards the end of the year.
We were a little bit higher than our own guidance on G&A, because we had a onetime tax thing that hit that's not recurring in the fourth quarter, Chris but otherwise I think we would have been from top of numbers that I saw people quoting their notes.
Okay, and then just can you remind us sort of what the renovation economics have been for the portfolio that you've executed on and then when you talk about the stuff that youre looking at doing and then with the new assets sort of what's the per key investment and what sort of revenue.
Are you looking at.
I would say Chris.
Up here in DC, and our same store portfolio.
The renovations have probably average about 13% to 15000, a door and we've achieved.
Mid teens return on cost in some cases close to 20.
I'd say, it's less in.
In Atlanta.
Closer to.
Probably let's say 10000, a door or under.
We're still evaluating the one project that we just took down on February 1st Carlyle at Sandy Springs, which will have 266 units to renovate.
But we have a we have a nice robust program 2900 doors to renovate.
Over the next five years.
And I think the <unk>.
Economics should continue to mirror.
What we've been experiencing Chris.
Thanks, Paul and then.
Stick with you just on Watergate 600, showing some.
Decent improvement.
NOI year over year.
How should we be thinking about.
Sort of the hold period for that asset.
Given sort of the that's the last remaining noncore.
Non apartment assets in the portfolio.
Sure, Chris well first off I mean, I commend our team they've done a great job managing and leasing that asset.
We still think that there's value in there and we have a.
Long dated Walt on that cash flow.
Our.
Our <unk>.
<unk> into Watergate more importantly into.
The market conditions, we want to see the market conditions.
<unk>, we're going to constantly evaluate that asset, but we're not really making a decision at this time.
By the end of the year, it's going to be less than 10% of our NOI and I think <unk>.
<unk> you should we should look at the whole portfolio and so not just Watergate, but we're looking at some other apartments.
To potentially monetize and when we would do that that would be really reallocating that capital to higher growth.
Markets in the southeast while also diversifying our risk.
Perfect actually answered my follow up question. So I appreciate that that's all I had this morning.
There are no further questions in queue I would now like to turn the floor back over to Paul for any closing comments.
Yeah.
Like to thank everyone again for your time today, and we'll look forward to seeing many of you at the upcoming conferences over the next several weeks.
Okay.
Thank you ladies and gentlemen, this does conclude todays event you may disconnect at this time and have a wonderful day.
You for your participation.