Q3 2022 Mid-America Apartment Communities Inc Earnings Call
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Good morning, ladies and gentlemen, and welcome to the MAA third quarter 2022 earnings Conference call.
The presentation, all participants will be in a listen only mode. Afterwards, the company will conduct a question and answer session. As a reminder, this conference call is being recorded today October 27th 2022, I will now turn the call over to Andrew Schaffer, Senior Vice President Treasurer, and director of capital markets and May eight for opening comments.
Thank you Ray and good morning, everyone. This is Andrew Schaffer, Treasurer, and director of capital markets for MAA.
The management team also participating on the call with me. This morning are Eric Bolton, Tim Argo Al Campbell, Rob Delpriore, Joe Frankie Tom Grimes and Brad Hill.
Before we begin with our prepared comments. This morning, I want to point out that as part of this 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.
<unk> future results. During this call. We will also discuss certain non-GAAP financial measures a presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data our earnings release and supplement are currently available on the for investors page.
Each of our website at Www Dot M. A C dot com a copy of our prepared comments and an audio recording of this call will be available on our website. Later today. After some brief prepared comments the management team will be available to answer questions I will now turn the call over to Eric.
Thanks, Andrew and good morning.
<unk> posted solid results for the third quarter as strong demand for apartment housing across our portfolio drove a 16% increase in leasing traffic volume as compared to last year's third quarter.
A higher leasing traffic supported continued solid occupancy and rent growth as was detailed in our earnings release.
While as expected we are seeing a return to more normal seasonal leasing patterns with slower leasing velocity that is typical during the coming holiday season, it's clear that leasing conditions have held up stronger than expected over the back half of this year and we are carrying solid momentum into calendar year 2023.
Sorry.
We will have more details to share about our expectations for next year. When we provided earnings guidance for 2023. This part of our fourth quarter earnings release.
But absent a severe recession, taking place with resulting weakness in the employment markets. We expect the demand for apartment housing across our portfolio to continue to be strong.
At this point, we've not seen any evidence of weakness in the drivers of demand for apartment housing as it applies to our sunbelt portfolio.
The leases written in the third quarter, 15% of our new residents who are relocating to the sunbelt from coastal markets. This was comparable to the trends we saw last year.
It's also worth noting that of the move outs, we had in the third quarter only 5% were moving out of the Sun belt. This is also consistent with last year's trends.
As noted earlier leasing traffic is high and resident turnover or move outs remain well below long term trends.
And importantly, we are seeing no signs of stress in terms of affordability with rent to income ratios on the leases completed in Q3 remaining consistent to Q3 of last year, and the 22% range and resident payment practices remaining very strong with over 99% of billed rent being collected.
As detailed in the earnings release, we are nearing full completion on several of our new development projects and we have recently started construction on a new property located in Tampa, Florida.
In addition, we expect to start construction during the fourth quarter on a new property located in the research Triangle Park in Raleigh, North Carolina.
During the third quarter. We also closed on two acquisitions, where we had initiated negotiations and due diligence earlier in the year.
The transaction market has become increasingly choppy as rising interest rates and economic uncertainty have presented more challenges and as a result seller activity has slowed we are actively monitoring conditions, but are not currently under contract at the moment with any additional acquisitions.
Before turning the call over to Tim to recap more details associated with our property operations I did want to acknowledge the retirement that the announcement that we made last week concerning the planned retirement of Tom Grimes, who has been with our company for the past 28 years.
Tom has been a large part played a large part of supporting MAA is long and established record of strong performance and steady growth I'm grateful for Toms contributions to our company and we all wish him well.
As outlined in last week's release, we have a strong team of leaders at our company with extensive experience expertise and our record of strong performance and we are well positioned for continued progress as we move forward into 2023.
That's all I have in the way prepared comments I will now turn the call over to Jim.
Thank you, Eric and good morning, everyone.
Same store performance for the quarter was once again strong and ahead of our expectations. We saw broad based strength in pricing performance across the portfolio.
During the third quarter with blended lease over lease pricing achieved a 13.9% as a result effective rent growth or the growth on all in place leases for the third quarter was 16, 7% versus the prior year and five 6% sequentially from the prior quarter based on our forecasts.
For in place rents at the end of 2022 we expect our earned in or baked in rent growth for 2023 to be in the 6% range before considering any new rent growth that may occur in 2023.
Along the alongside the robust pricing performance average daily occupancy for the quarter remained strong at 95, 8%. We have continued to achieve pricing better than our previous expectations in the early part of the fourth quarter with blended lease over lease pricing for October to date at a very seasonally strong eight 3%.
Average physical occupancy for October to date is in line with expectations at 95, 7%.
Additionally, on average we are achieving growth rates on sign renewals at around 10% for the fourth quarter.
Despite projections that supply will likely remain elevated in 2023 that we think its similar levels to 2020 to various demand indicators remain strong and we expect our region of the country to continue to benefit from population household and job growth.
During the quarter, we continued our various product upgrade initiatives. This includes our interior unit redevelopment program and our installation of Smart home technology that includes mobile control of light thermostat and door locks as allowance leak detection monitoring in addition, our broader amenity base and more extensive property repositioning program.
<unk> continues to make great progress the value to residents provided by these programs can be particularly impactful when new supply is being delivered into the market on average we are seeing new development being delivered in our markets with monthly rents that are $350 or about 22% higher than the average rent of our current portfolio.
It helps drive the value opportunity associated with our repositioning programs.
For the third quarter, we completed 2000, and 305 interior unit upgrades and installed 652 smart home packages in 2022, we plan to complete over 6000 interior unit upgrades and approximately 23000 smart home packages by the end of the year. We expect our total number of smart units to approach 70000 for <unk>.
Our repositioning program leases have been repriced at the first eight properties in the program that are now complete and the results have exceeded our expectations. We have another eight projects that are currently in various stages of construction and unit repricing. Those are all my prepared comments I'll now turn the call over to Brian .
Thank you Tim and good morning, everyone. Despite the.
Challenges in the transaction market. The team continues to make good progress in executing our disposition plan for the year.
In addition to the two Fort worth properties, we sold in the second quarter. We closed on the sale of a 396 unit community in Maryland early earlier this month.
We have one more disposition property located in the Austin market that we expect to close in the fourth quarter.
Totally expected proceeds for all for disposition remains at the midpoint of our guidance of $325 million with an NOI yield of four 3% generating a total expected IRR for these 25 year old assets of 17, 8%.
The slowdown in transaction volume that started in the second quarter continued in the third quarter as dislocation in the capital markets increased over the quarter.
<unk> buyers remain on the sidelines and with only a limited number of properties coming to market.
This discovery will take some time.
However, as we've seen in previous cycles when deals begin to come to market. The evaluation of counterparty risk will drive decisions with buyer financial strength and speed of execution being attractive key differentiators.
During the third quarter, we were able to opportunistically use those strengths to close on two compelling newly constructed properties for a total of $213 million generating an initial stabilized NOI yield of four 7%.
Which we expect to increase further through our operating platform capabilities.
These investments not only provide a higher immediate NOI yield and what we are selling but they also give us more scale and higher demand higher growth markets, where we expect to generate higher organic growth over the long term, especially on an after capex basis.
Due to their locations near other MAA communities. Both investments also provide additional margin expansion opportunities.
Then we will fully harvest over the next few years.
We continue to make progress in building out our development pipeline, while our under construction pipeline remained at $444 million at the end of the third quarter earlier. This month, we started construction on a $197 million 495 unit project in Tampa, bringing our total active under construction projects today to six.
And $41 million, representing 2254 units.
Pre development work is nearly complete on our Raleigh project, we expect to start construction this quarter with a scheduled completion of our Windmill Hill property in Austin during the fourth quarter. We expect to end 2022 with approximately 23 <unk> hundred 10 units under construction at a total cost of $723 million.
Also during the third quarter, we purchased a land parcel for a potential late 2023 start of a 500 unit development and the Denver MSA.
We now own seven and control five development sites with total entitlement entitlements in place for approximately 3700 units.
As we've indicated in previous quarters, the timing of planned construction starts can change as we work through the local approval and the construction bidding processes, but we are hopeful we can start a number of these projects over the next 18 months.
Having said that our balance sheet strength gives us the option to be patient in Arkansas, and our construction timing if it's warranted.
Our disciplined approach to asset allocation, including site selection and land valuation will continue to be an integral part of our capital deployment decision process. Our construction management team continues to do a tremendous job of actively managing our projects and working with our contractors to keep the inflationary pressures surrounding labor and material.
Cost from causing a meaningful increase to our overall development costs or our schedules to help mitigate some of the potential cost escalation and schedule expansion that is prevalent in the market today.
We are working with our contractors to make commitments to purchase materials much earlier in the process.
Today, our biggest challenges involves securing labor obtaining cabinets and electrical components and securing building permits.
Our team has been able to work around these issues on the majority of our projects to stay on schedule.
In line with the performance of our overall portfolio operating performance at our development communities in their initial lease up is strong with results at each community well ahead of our pro forma expectations demand remained strong and the competition from other new supply is not impacting our lease up performance during the third quarter, our Jefferson San.
Lake community in Orlando reach stabilization and due predominantly to the strong rep performance, we expect our stabilized NOI yield to be between seven 8% and 8% exceeding our original expectation by over 25%.
That's all I have in the way of prepared comments, so I'll turn it over to al.
Thank you Brad and good morning, everyone.
<unk> per share of $2 19 was 12 cents above the midpoint of our guidance for the quarter and about three quarters of <unk> of the outperformance came from revenues stronger than expected rental pricing trends continued into the quarter, producing 14, 6% same store revenue growth, which was over 200 basis points above our expectations.
The remaining core Cup hope Hershey outperformance, primarily came from overhead and other nonoperating items during the quarter, which was slightly favorable to expectations.
Same store operating expense growth for the third quarter was impacted by continued inflationary pressures as well as a challenging prior year comparison, if you will call operating expenses grew only one 5% during the third quarter last year.
Real estate taxes made up the biggest portion of the variance from our expectation for the third quarter. This year, we received a significant amount of information during the quarter, particularly in Florida.
Some pressure in both values and millage rates as compared to our expectations. We will continue to aggressively challenge values, where we can but we now expect our real estate tax expense to be at the higher end of our previous range revised guidance for the year discuss more in a moment reflects flex.
Flex these expense pressures, but they continue to be more than offset by the strong revenue performance.
Our balance sheet remains stronger than ever providing both protection and opportunity as we move through this volatile market environment. In August we received an upgrade from S&P to an a minus credit rating, we're now ready to a minus by both S&P and Fitch and continue to have positive discussions with Moody's, which we believe will eventually lead to an upgrade.
We also completed the early renewal of our unsecured credit facility at very attractive pricing levels during the quarter and Upsized. The facility from 1 billion to one and a quarter billion, despite a challenging financing market in.
In addition, we expanded the size of our commercial paper program from 500 to 625 million to reflect the increase in our credit facility. These two programs for about significant low cost and flexible capital on our development program and our future capital needs at.
At the end of the quarter, we had over $1 2 billion of combined cash and borrowing capacity available our leverage remained historically low net debt to adjusted <unk> adjusted EBITDA rate of only 3.97 times our debt balances also have significant protection from rising interest rates as over 97% of our debt is fixed at an average interest rate of three 4% and.
With an average maturity of eight years.
Finally, given the third quarter outperformance and expectations for the remainder of the year, we are increasing both our core <unk> and same store guidance for the full year, we increased our full year range for core <unk> by <unk> 20 per share at the midpoint to a range of 837 to $8 53 per share right 45 at the midpoint, which now represents a 21% growth over the prior year.
This increase is primarily a result of higher revenue growth is strong pricing trends continued into the third quarter with the projected impact of our prior year comparisons and seasonal trends coming later than originally projected.
We now expect same store revenue growth for the year to be 35% at the midpoint, primarily driven by 125 basis points increase in our effective rent growth expectation for the year over our previous guidance.
Our revenue projection for the year continues to be built on strong pricing performance and stable occupancy with growing impact from prior year comps and normal seasonal trends during the fourth quarter. We're now seeing the beginning of this impact, albeit a few months later than originally projected we expect average blended lease pricing to be in the 7% to 8% range for the fourth quarter, which for context is on top of a record.
Hi, 16% ROE captured in the fourth quarter of last year.
We also narrowed the expected range for same store operating expenses for the full year effectively increasing the midpoint by 25 basis points from last year's Guy last quarter's guidance excuse me, primarily reflecting the pressures from real estate taxes I mentioned earlier.
All impact of these changes is an increase to our same store NOI growth guidance for the year, a 200 basis points to a midpoint of 17%.
So thats all we have in the way of prepared comments racer will now turn the call back over to your questions.
We will now open the call up for questions if you'd like to ask a question. Please press. The Star then one on your Touchtone phone.
If you would like to withdraw your question you May press pouch.
And we'll take our first question from Nick Joseph with Citi. Your line is open.
Hi, Good morning, just given your experience recently in the transaction market, particularly on the sales, but as you look.
To acquire maybe if there's interesting opportunities.
It's possibly that you mentioned in terms of being a certainty of buyer how're you thinking cap rates have trended and then how are you changing your underwriting standards.
Any future potential opportunities.
Yeah, Hey, Nick this is Brad.
I'd say, we've certainly seen cap rates come up here in the third quarter as we've seen interest rates really rise very quickly now interest rates are regularly over 6%.
We don't have a whole lot of data points frankly.
In the third quarter.
Our second quarter. We commented we saw cap rates in the three seven range for what we did see close in the third quarter call at 4.5% is really where we saw cap rates, but again not a whole lot of trades, there and I would say that.
What we've seen.
For what has traded as theres been some characteristic about the property really that has allowed the buyer.
Really to take advantage.
Frequently of previous debt rates through loan assumptions, while taking advantage of the rent profile today. So I would say that what has traded so far in my opinion is not reflective of where the market is going most of what we're hearing today is.
New assets that are being priced <unk> are going out today.
5% or more in terms of a cap rate. So I would expect to see cap rates rise from where they are today, where they shake out.
It's hard to say, but given where interest rates are over 6% given where.
We are starting to see seasonality come back into play, which we did in last year the appetite for a significant level of negative leverage from a buyers perspective.
I think that appetite is dissipating a bit.
So my sense is that we'll continue to see cap rates rise a bit next year, but I think it'll be mid next year before we really start to see.
Some transactions come to market in transactions to clear. So I think it's going to take some time to really get visibility into what that looks like.
That's very helpful. Thank you and then maybe just tying that environment to the new starts and any plans for starts how do you think about kind of underwriting or starting to project today.
Given maybe the uncertainty of where the acquisition cap rate and trying to question that risk premium on development.
Yes.
I'll back up and just start with you know we have purposefully sat out of the acquisition market over the last couple of years. The last deal we purchase was in 2019 because.
But really the spreads between development yields and acquisition cap rates had gotten really large over the last few years. So we are purposefully focused our capital on development.
Where we sit today with cap rates of four 5%, perhaps moving up to five I think.
Youre going to get back to a more normal 101 hundred 2500, 50 basis point spread between.
Cap rates and development yields.
So I think that they'll need to be some movement going forward and all of that is really dependent upon the quality of the development that you have.
Where it's located and what the ramp.
Excuse me rent for that trajectory looks like on that asset, but clearly I think first starts going into next year on the development side, I think you're likely to see a drop off in the construction starts developers.
We obviously are active in the now.
JV market partnering with developers.
We're certainly hearing that equity partners on deals or are backing out some of the <unk>.
Pipeline I think is shrinking as you go forward from here because those yields do need to go up a bit so were hopeful at this point that that some of that starts to manifest itself through construction costs, but as you know.
Just like land costs, it's a little sticky it takes time for that to manifest itself down into the cost, but we are certainly hopeful that yields expand a bit on the development pipeline.
Thank you very much.
Our next question will come from Neil Malkin with capital one your line is open.
Good morning, everyone great quarter Congrats.
First high level Eric.
Good to talk with you.
I think last quarter last few quarters, you started your comments by saying.
You expect given the favorable demand trends.
That rent growth or same store top line trends will continue to be.
Nicely above trend for I don't know if it was like 23 of the foreseeable future, but maybe can you can you just comment on if you still think that's the case and <unk>.
I guess, a more uncertain macro cloud over the general U S. In global economy, maybe has changed that in the near term. Thanks.
Well thanks Neal.
What I would tell you is that as we start to think about the next year 2023.
I'm pretty encouraged still about our ability to continue to drive topline performance, that's going to be well above our long term averages as Tim alluded to based on where we sit today, we think the earn in to next year based on the rent trajectories that we've captured over the last.
Number of months is baked in next year is going to be 6%.
And then you start to think about.
What what sort of market rent growth, we're going to get on top of that next year.
And as we sit here today and think about the drivers of demand surrounding the implement marquez the distress.
The stress of a single family affordability and these net continued positive migration trends that we see across our markets. We continues to see an expectation because I have a positive rent growth next year on top of the earn in that we're getting now there.
There is the more discussion surrounding the prospects for a recession.
I think generally the thought at the moment is that if it happens it tends to be it will likely be not particularly severe and not particularly prolonged certainly that's the hope we have and we also.
We are hearing that the idea that it's going to have a huge negative effect on the labor market and the employment market General is <unk> is not likely to occur. So you know who knows.
Exactly what's going to happen, but but.
As we sit here today.
We continue to feel pretty positive about the outlook going into next year.
And we are now a lot of things that we're doing to prepare for the potential for a more negative outlooks, particularly pushing rent growth.
It's something that we always do is we think we may be heading into a downturn of course the balance sheet is in really great shape, and we're keeping a lot of capacity available to deal with opportunities that might emerge in a more recessionary environment and we think that we're going to be well positioned for whatever.
We likely are going to see next year, but but to your question I mean, as we sit here today.
It's hard to see anything at the moment that suggests to us that any meaningful pullback on the demand trends that we're seeing or is likely to take place.
Okay, Great and then real quick did you guys give your loss to lease.
If I missed it.
Well, Neil as Tam, we talked about the 6% sort of earned in that we think we have next year. If you look at kind of I think the question, you're probably asking is sort of where are rents sit today here in September compared to our all in place rents, it's roughly three 5% from where we sit today.
Okay.
And then the other last one for me is maybe.
Maybe Brad you think about the elevated supply or delivery environment over the next 12 months plus.
You look at the much more difficult permanent financing environment, Ltvs terms et cetera.
And then you also layer on sort of the what you expect to be rising cap rates I mean.
Maybe just give a sense for like how your capital allocation priorities or playbook.
Look.
Heading into 'twenty three.
Particularly given.
The current cost of or the current share price.
Yes, well I'll certainly talk about the external piece of that.
As we sit here today as I mentioned in my comments, we have really spent a lot of time.
Developing our ability to deploy capital externally both through acquisitions.
And development and we are in a really good spot for that we control as I mentioned 3700 units both own and sites that we just have under contract. So in the land basis of those as I mentioned, we've been very disciplined in picking sites and.
We've lost out on sites because one the location wasn't the best location in a market and ones that are likely to stress more if things get a little bit.
Shaky in the in the economy or the land price was too high.
So we feel really good about where we stand today in that regard.
And so we have optionality on those those projects given the size of our balance sheet you know it's.
It's not a problem for us to continue to work those sides get to a point, where we're ready to pull permits and if the financing environment is such that it doesn't make sense for us to pull on those are our capital is better used in the acquisition market will certainly lean into that.
Just for perspective in the acquisition side of things.
You know after the last recession.
Three for a three year period 2010 to 12, we executed on almost 10000 units single transactions 9500 units and if we were able that similar type environment plays out over the next year two years three years, that's 10000 units and at today's pricing even at a discount.
$3 billion to $4 billion and so that's what we're really preparing for is for an.
<unk>, where we're able to execute on opportunities that may or may not be that size of opportunities, but to your point the amount of construction that started in 2020 2021 in our region of the country was significant and as you mentioned the cost to refinance that the cost to extend loans now.
Banks are not going to be willing to do that they want to clear these loans off their books at this point. So I think you will see as you get into next year a number of these merchant developers, we'll need to transact and I also think the basis of these developments. They went under construction in 2020 2021 still have profit in them. So I do think of Mark.
It will be made on these assets.
There'll be an opportunity for us to step in and execute in that area.
Yeah, that's awesome. Thank you very much.
And our next question.
Barb with Piper Sandler Your line is open.
Hey, good morning, good morning down there.
Just going back to Nick Joseph <unk>, a question on <unk>.
Underwriting I think you guys quoted at 17%.
Levered IRR on the transactions in the quarter. So one is I'm curious what the Unlevered IRR is and then second more importantly, you know you guys Sun belt over the past decade, or so has benefited big time from cap rate compression.
Certainly your comments just add yes.
Everyone expect cap rates to come up.
So how do you think IRR is are going to how are you underwriting the IRR over.
Over the next sort of five years of investing given that the past decade has just been incredible.
Fuel tailwind about cap rate compression and.
And rent growth. So first you know what the Unlevered IRR, where on the deal sold in the quarter and then to the latter part how you're underwriting new deals without the benefit of the compression Cowen.
I'll start with that and Eric can jump in if he needs to the Unlevered IRR on what we expect to sell this year is just under 13%. So still a really good IRR generated on those assets, which I'll also mentioned just by the way are 25 year old assets to generate those irr's.
In terms of cap rate compression I mean, yes, we benefited from that over the last few years.
And that will not obviously be the case going forward, but I think that's a indicates really a healthy environment where.
We get back to the point, where location of assets really matters and that will drive the value of an asset.
And I think that benefits us long term because I think we've got some of the best located assets in the best markets in our region of the country and I think that differentiation between cap rates based on location and markets will absolutely benefit us as we go forward from here.
Alex This is Eric.
Add to what Brad is saying there that.
No.
Cap rates in a given market and cap rates across this region a year. It's a function of two things. It's a function of obviously, what's happening with interest rates and how asset pricing is being.
Reconfigured, if you will but to some degree cap rates are also a function of sort.
The demand supply dynamic for capital investment capital wanting to deploy an apartment real estate and you get a lot of buyers in the market trying to chase a few sale opportunities is going to head downward pressure more so.
On cap rates and what I would tell you is that this region of the country that we do business in these markets continue to show very strong demand dynamics relating to job growth population growth household formation trends.
Those those variables were present before COVID-19 and they were strong during COVID-19 and so as a consequence of that I think that as you begin to think about how cap rates may change I would argue that we may not see cap rates move up as much across a number of our markets as you might think and we made a M.
I would argue that they're not going to move up as much as you might see in other markets or other regions of the country because of the rent growth prospects and the demand dynamics that we are seeing there so positive across this region of the country and then to your other point about about IRR candidly.
Is that something that we spend a lot of energy focusing on most of the modeling that we do is built on kind of a 10 year model and to try to think about what an exit cap rate would be appropriate 10 years from now is who knows.
What we're really looking to do is compare the opportunity to deploy capital create a stabilize yield on that capital that is complementary to the existing yield we're getting off the existing asset base and then also obviously look at it on an after capex basis.
So as we think about the opportunity to continue to grow the dividend.
And as we look at an opportunity in front of us at the moment certainly the development continues to make a lot of sense, we're going to be very thoughtful and careful with that as we've talked about in the past, we're not going to see our development.
Pipeline and get more than about 3% or so of our enterprise value. So we're going to keep it at a very manageable level.
But we have a lot of dry powder that we're keeping available at the moment because should the opportunity on the acquisition front really start to pick up and present itself in a big way, we'll be ready to jump on that and we've demonstrated in the past that a lot of value opportunity in that and that sort of focus.
Eric.
Helpful. The second question plays into that a lot of market talk about concerned about supply in the Sun belt. It seems that over time, the sunbelt us handily.
Handled supply yeah, maybe with the exception of like a Houston for example.
Maybe you could just talk a little bit more about some of the supply that youre seeing in the market do you see it you know.
Just sort of dispersed across your markets do you see it more concentrated in certain submarkets and are there any areas, where you could see yourself baby next summer gone, yes, this market or that market we have felt.
Supply impact.
Well you know.
Broadly speaking on the supply picture I mean, what we see right now based on the data that we're looking at suggests that 2023 deliveries are going to be very comparable to what we saw in 2022 and actually based on when you're doing the NOI weighted analysis against our portfolio is actually down just slightly and twenty-three versus 'twenty two so.
I don't think that we're not sitting here today looking at numbers that suggest to us that we're going to see a big.
Lift in supply deliveries next year relative to what we've been experiencing for the last year or two particularly last year or 22, I should say so.
Because of some of the challenges that we've seen with construction labor and materials and permitting and all that goes into pre development. We're just we just don't see supply likely picking up broadly speaking in a huge way.
Next year in 'twenty, three as compared to what we've experienced in 'twenty two the other thing I will tell you to your point, Alex says, yes, I mean, I've heard about new supply worries for 28 years since I've been here and it's and I will tell you. It's never been a problem is it can create some moderation here and there across the pool.
Palio given markets given submarkets from time to time, but it's never been.
Such an issue for us that we haven't been able to work through it and one of the things that we've always done with our strategy as we work very hard to do what we can to mitigate some of the supply pressure does occur from time to time as one of the reasons why we are diversified the way we are in both secondary as well as in large markets, we have a very.
Ari affordable price point broadly in our portfolio, the new product coming in to the market is generally running 25, 30% higher risk than what we are charging that creates some some room for us. If you will in terms of being able to weather that pressure not only that but also creates a tremendous opportunity on the redevelopment redevelopment front.
So yeah.
We're as we sit here today, we're not particularly nervous about supply levels next year as we go into 2023.
Thank you.
And we will take our next question today from Austin <unk> with Keybanc capital. Your line is open.
Great. Thanks, and good morning, everyone Eric.
Eric you and the team have reference being open to large transactions probably over a year now and have been historically and I'm. Just curious what you think the benefits of additional scale or to the company at this point and what really would you be trying to achieve strategically from a portfolio allocation standpoint.
Through a potentially larger deal.
Well.
No.
It's hard to put a number on or quantify what additional.
Financial benefits may come from scale, we feel like frankly at the point, we are at the moment that we're fairly efficient in terms of what we're able to do so.
He has he put more assets against this existing platform is theres going to be at the margin. Some additional opportunity that comes from that but it's not something that we're candidly actively.
Trying to initiate if you will right now.
For US right are our focus really is the opportunity to drive increasing scale in a very disciplined fashion through the development effort that we have and through emerging opportunity for one off acquisitions that we've done a lot of over the years.
And we think that.
With our development pipeline headed towards $700 billion of of of active construction with emerging opportunity surrounding acquisitions that we think are likely to pick up more so next year. It puts us in a position to put together a fairly meaningful levels of <unk>.
External growth that.
We think we can capture just through through those those processes that we have without the need to go out and do something more strategic in nature.
Always open to those ideas and we'll continue to monitor it but it's not something that we feel a compelling need to do in any way right now.
Got it and then I'm curious, where do you guys expect market rent growth across your portfolio to end the year and just to be clear I'm more focused on sort of your broader submarkets not the MAA portfolio, specifically and then do you think next year should be higher lower or sort of in line with with with the 2022.
<unk>.
Austin This is Tim the market rent growth, we've seen today is about 7% or so when you strip out sort of the baked in and everything else.
It's hard to say that we expect rent growth next year to be at the level that we've seen this year, which certainly has been.
Between this year and 'twenty, one then record levels, but as Eric laid out a little bit ago. You know, we don't see in the near term anything changing too much from the demand standpoint supply kind of is what it is like we've talked about so we think we're still in a period, where we can see some.
Better than average if you will but.
Likely not to the extent, we're seeing you know the last 12 months or so.
That's fair and then just last quick clarification whats embedded in the eight 3% blended lease rate.
For October between new and renewal and then presumably should we assume I think you said seven to eight for all of <unk> that you don't expect a lot of movement there through the balance of the year.
So as you say the October new leases 5.7 renewal is 10.7 and the comment we did make around the rest of the year as we're seeing on the renewal side somewhere around that 10% for what we've signed so far and I'll just follow up at the forecast that we put out does imply that 7%, 8% blended for the fourth quarter.
We don't expect it to move much number one and remember there's most of the leases have been signed in the second and third quarter already anyway awesome, Yeah of course.
No that's great. Thanks, guys.
And we will take our next question today from Nick <unk> with Scotiabank. Your line is open.
Oh. Thanks, Good morning, everyone I wanted to go back to the other 15% of move ins are relocations from the coast.
It's surprising to hear people wouldn't expect that the numbers are still a strong on that versus a year ago and so I guess, what I'm wondering is if you have any insight on whether certain markets are benefiting more within your portfolio and then from a relocation standpoint, what you've learned.
From where which coastal regions people are moving and also maybe you could talk about do you have any insight on the job profile of the people who are moving.
Yeah.
Hey, Nick This is Tim Yes, where we are at the 15% for Q3 for sort of move ins from non in a state that's been pretty consistent it's kind of ranged from that 14% to 16%.
Sort of range back to the beginning of 2021 or so.
And so we're seeing a consistent you know is coming primarily from New York, and California, something that makes sense, given they're the largest states, but particularly some of the markets that are benefiting or Dallas Tampa Nashville.
Allison Phoenix Savannah.
Those are the largest ones in that that's been pretty consistent and we are seeing you know are the quality of resident if you will and income levels have been pretty strong our rent income ratio would stay consistent now for for the last couple of years around 22%. So we are seeing you know more sort of professionals in finance and tech and that sort.
I think coming into our markets.
Is there any insight on that that's helpful. Tim any insight on whether these people are working remotely or in physical in person jobs and your cities.
It's hard to say, we haven't we haven't seen any big significant changes that we've noticed at the property level.
A little bit hard to tell but I think it's you know theres, certainly some but not probably not quite to the level, we saw like a year or so ago.
Okay. Thanks, and then just following up on some of the supply questions. I mean, as you look across your markets.
Over the next year, maybe you could just point out which markets you do see some incremental supply pressure that could be meaningful versus <unk>.
Some other larger markets, where we have.
The supply impact looks pretty manageable.
Yeah to point out a couple we think we'll be on the higher side Likelier, Austin and Charlotte would be a couple in Austin is a pretty interesting test case, it's it's had high supply now for a few years in a row and expect that to continue but it also ranks at the top in terms of job growth and migration household formation.
Population, so I think to the extent that demand side stays where it is you know we don't despite that supply. We don't think it'll have a significant impact Dallas is one where supply has been pretty light and we've seen that market come on pretty strong over the last few months. We think Dallas is one that can that can perform pretty well the rest of the markets.
It's pretty pretty evenly spread, but Austin and Charlotte being the two that will probably keep our eye on a little more.
Alright, Thanks Deb.
Sure.
And well go next to John Kim with BMO capital markets. Your line is open.
Thank you and good morning.
Wanted to understand this dynamic you have the strongest lease over lease growth rates this quarter among your peers.
We ended the quarter with the lowest loss beliefs.
Same dynamic has continued so far this quarter low loss to lease.
Rent growth.
I'm just wondering if there is.
No.
Unique way that you calculate loss to lease.
Maybe there's a timing difference.
And the philosophy of today, roughly 3% roughly where it can be lumpy going forward.
So the loss to lease of three 5% of the way that is calculated it's basically just looking at the rents. We did in September that went into effect in September as compared to all in place rents right now and that's that's three 5% and so we typically see that number that's calculated in that way, it's going to be there.
The highest in the summer when rents were strongest in the seasonality is is the strongest it'll come down a little bit as you get into the fall and likely into the winter.
Assuming you're saying that that normal seasonality so that.
In my opinion that number is pretty volatile and its going to move around and that's why one of the points. We're making is with where we expect December to be in all of our in place rents that it'll be there in December if you just carry that through to 2023, and assuming we don't get any more rent growth to hit the 6%. So to me that's the in terms of you know try.
To figure out what it's going to do to impact 2023, that's that's kind of why we focus on that 6%.
Okay. So its in place rents versus what you've signed versus.
The market, which may or may not be the same number.
Hmm.
My second question is.
The concept of rent control.
It's almost been in the overnights potential risk in Orlando and one of your top five markets.
And I'm wondering if you're concerned that this may actually past Kevin It was just put on the ballot.
A few weeks ago and he may not have enough time to educate voters on the downfalls of gun control.
Hey, John this is Rob.
Yes, I think.
If it gets on the ballot.
Okay. The one court that's actually looked at the <unk>.
The ordinance itself effectively said.
They consider that violates Florida law, so even if it passes ultimately don't think that it will be upheld is.
And effective ordinance and then if you look at it for US we've got nine properties in Orange County, seven in same store and it's about a four 4% of our.
Third quarter same store NOI, and we went back and looked at it as if it were in place in <unk>.
2022, and it would really only have an 18 basis point impact on same store revenue and about a 17 basis point impact on.
Total revenue so.
Overall, not that material to us.
As we think about it so we think it probably doesn't path and we think it is not material to us overall anyway and also that was in some of the the <unk>.
<unk> growth rate.
Rent increases that we've had over this period in Orange county, compared to until recently a relatively low CPI.
Regardless, if it passes or not does it change the way that you can look at.
How much you push renewal rates.
I mean, if it if it passes will will be guarded and how much we push renewal rates until there is.
The court decision that says that it's invalid.
And John as I think you know if it passes it's only good for one year and then they have to go through the process again, so again, we think that the.
The downside risk to us is frankly fairly small on this topic.
Got it thank you.
Okay, we'll take our next question today from Brad Heffern with RBC capital markets. Your line is open.
Hey, good morning, everybody. Thanks, So theres been a big divergence in how single family home prices have been trending you know you have some areas in the southeast had been holding up well, but then you have markets like Austin M. Phoenix further dropping significantly.
Multifamily is different than single family, but I'm curious if you're seeing any differences in apartment demand in areas, where youre seeing.
Home prices show more weakness.
Hey, this is Tim not necessarily I mean, we look obviously at the the move outs to home buying and that sort of thing and it's become a much smaller piece of our turnover and that's pretty consistent across the market. So with the with the recent move up in interest rates I think you know that.
<unk> continues.
Even if with prices have gone down interest rates have gone up so that the total cost is not any less than it really was before so right now we're not seeing any change from what we've been seeing.
Okay, well I was sort of getting at is is there any sort of like underlying demand weakness in general for housing and in a market like Austin or Phoenix, It looks somewhat now.
Yes, we're not seeing the traffic has been up across the board in pretty much all of our markets. We're not seeing any of the kind of doubling up you know are our average occupied per unit is the same whether youre looking at efficiencies one bedroom two bedroom three bedrooms, we're not we're not seeing that phenomenon of people trying to dump.
Or anything like that so as of right now all the all the trends that we look at for that kind of thing have then been pretty consistent.
Okay got it thanks for that and then on the development starts that you mentioned for this quarter can you talk about what the expected yield is on those.
Yes. This is Brad both of those are a five and a half which.
Because what we have been consistently.
Consistently underwriting recently, but I will say for.
For both of these deals we feel really really good one about the location.
Of those assets and then two just.
Just about our ability to outperform that as we.
I indicated in my comments.
The outperformance on our recent Jefferson Sand Lake project.
Certainly that's a little bit different because of the cost basis, but there are some characteristics. There that I think carryover to all of our developments and number one is that we're very conservative in our rent growth projections on these assets significantly below.
What the market rent growth projections are over the first three or four years, which gives us a level of conservatism.
Number two I would say that as we expect.
Over the next year or so costs could come down on the construction side.
Which means we are less likely to dip into contingency and things of that nature on our projects. If we are able to save those expenses on these projects. That's a call. It a 40 basis points improvement in yields on that and then I would say the third thing is that our taxes that we have underwritten on these projects are.
The above today's valuation so to the extent, we get some relief in that area, it's a lagging kind of a lagging.
Item, but if we get some relief in that area. We also will see some relief on our expense pressure on the tax side. So we feel really good about where we've underwritten those assets and our ability to really improve the yields from the conservative numbers that we underwrote.
Okay I appreciate it.
We will take our next question today from Rich Anderson with F. N B C. Your line is open.
And rich Anderson. Your line is open please check the mute function on your phone sorry about that my headset never works anymore.
First of all congrats to Tom.
I get older I think increasingly envious when I hear retirement so.
Gratulation I also hate.
<unk>.
Good good.
Uh huh.
My my first.
<unk> is somewhat related to loss to lease but not entirely we did a kind of a quick analysis of the multifamily space. Some point between second and third quarter to compare your rent versus the average rent within your markets.
Including all competitors and so on and you were you sit at about 7% above the average market rent I don't know if you agree or disagree with that but that's where we came on MAA.
I'm wondering.
If you think that in a recession being above the market average is a comfortable place to be if people start to reduce their you know their their cost structure in a in a recessionary environment and they might.
Dialed down to lower quality and so on so that they can continue to have their own apartment.
Is that a pressure that youre worried about at all you're seeing at all.
You know where you guys are operating perhaps at the cream of the crop level.
Versus some of your competition, but could could be put you in a vulnerable spot.
If we do get into a deeper type of recession.
Rich this is Eric and I would tell you I mean, frankly, we think that our price point in the markets, where we do business is exactly where we want to be I wouldn't you know, 7% above average I wouldn't call a cream of the crop cream of the crop is going to be the all the new stuff. That's been built in the last two or three years, which is going to be 20 to 30.
Sent higher than the market average, if we had a portfolio of nothing but that yeah, I'd be I'd be more nervous about it but.
What we typically see is a trade down from the really high end product to our more affordable product.
Then go significantly.
Below the market average you start to get into a different submarket and you start to get into.
Less amenities and you start to get into.
A product that is going to I think.
Not be as appealing if you will to a lot of the resident profile that we serve and I think that what we are likely to see if we find ourselves in a recession, where people are really starting to think about how they lower their housing costs as you're going to see people in the very top end of the market.
Doubling up in our properties and I think I think that that's what we've seen in the past and what we would likely see again, if we found ourselves in a in a deep recession.
Okay. Good enough and then the second question is early in the.
Calls mentioned.
To you know to your point new developments coming in.
22% rents, 22% above where you guys are which invites the opportunity to do upgrades to your portfolio, but that that strategy only works if that 22% or higher rent is actually.
Working in other words, those developments that are happening and we're coming to market.
Our leasing up effectively and quickly are you still seeing that whether it's you or somebody else's are our developments you know meeting expectations or is that starting to wane a little bit and then if that is the case maybe.
The idea of this being a an opportunity for you to upgrade your existing portfolio, maybe it takes a bit of a back seat.
Rich this is Brad I'll I'll address the part of that which is the current lease up dynamics in the market.
We're certainly not seeing pressure and struggles from the development community in terms of the lease up performance of assets that are in lease up.
Are the five properties that we have right now that are in lease up if they are an example.
The lease up velocity continues to be very very strong and those are the products by the way that are competing directly with the new supply in the market.
Velocities are strong traffic is still very good in our markets and then the rents on those assets continue to outperform so if that's a proxy for what we're seeing in the market. We're just not seeing in our region of the country struggling fundamentals yet even on the new development side. So we're not.
Seeing developers under pressure fire sailing there are leasing their properties in.
The offering multiple months concessions were not seeing that at this point everybody is pretty disciplined the fundamentals still appear to be very very strong in the lease up properties.
All I'll add one point to that.
The areas, we're actually doing some unit interior renovate this year and the ones. We're looking at for next year, it's actually a little bit wider gap kind of in that 25% to 27% range on the comps we're looking at and we're not looking to get to that rent where as you know we're kind of usually getting in that 9%, 10% range. So still creates that gap that we think we can.
Execute on.
Yep, Okay fair enough thanks very much.
And we will go next to Chonburi literal with Goldman Sachs. Your line is open.
Hi, Good morning. Thank you for taking my question I just have one how do you think about the outlook for real estate taxes next year, I mean, you talked about Florida, a little bit but last quarter, you had spoken about expectation of rollbacks in Texas.
So what are you seeing there right now and how do you do you think about real estate taxes going into 2023. Thank you.
Yes. This is this is Alex I can touch on that so as we've talked about really that in our portfolio, Texas, Florida, and even Georgia. They are the primary areas of our taxes and our pressure that we've been standout together, they're somewhere around probably a little bit over two thirds are task cost in the primary pressure comes from Texas, and Florida that you just mentioned and so for the full year.
That's certainly a Oregon, Texas is probably little over half of that two thirds. So so you can see the significance. There there's been a lot of time working on a challenging the values as we talked about when were from informal to formal so a lot of pressure on that I think as and so the change this quarter, though was really about information coming in in Florida, We've got a lot of information late and they tip.
Do that and it caused us to believe that the values were little higher than we thought they were going to be in Florida, and the millage rates, though that we're seeing rollbacks not quite what we were expecting so I would say that in general across the portfolio, we've talked about high assessments with rollbacks, that's still occurring.
And we're seeing that occur not quite what we'd expected that caused that increase that we put in the guidance as we look into next year I think it's important to think about there's two main components you've got to look at one.
<unk>, obviously, a backward looking process and so youre going to have one positive impact maybe the changing cap rate environment that we talked about that branch touch on this morning, but the other side is they're looking at a really strong topline revenue growth this year when they set the values.
And so that so both of those coming together are what we would say is.
As we look forward next year, probably looks a lot like this year with maybe a little bit of upward bias because of that strong revenue performance, but as we move into 2024.
<unk> has some of the comments Brad was saying on the on the acquisitions and development you would expect that the things settle down and what makes it a little bit of moderation at that point because of the stabilized cap rate and rent growth environments.
Got it thank you.
We will take our next question today from Rob Stevenson with Janney. Your line is open.
Good morning, guys Al wireless 16 cent range for fourth quarter <unk> per share seems wide sitting here basically November 1st with a limited number of leases rolling through year end, what drives you towards the low and high end of that range.
We ask that we narrow that Rob we certainly do that each quarter as we look at it and just just really I think it would be it would it be something significantly occupancy really at this point I mean, I think or some unforeseen item that we that we didn't anticipate so I think that to your point.
The rent pricing that is the biggest piece is pretty certain and depending on Atlanta gives me performance is pretty certain even if the pricing is moves around from that expectation on the on the tip of the spear, there's fewer leases in the fourth quarter. So that would have a less of impact it would have to be something in occupancy or in a significant surprise and expenses, we don't expect that in <unk>.
We did continue to narrow our range showing that there's a little more certainty, but just felt that was prudent to leave that at that level.
Okay and in terms of the expenses are you, having any material hurricane expenses here in the fourth quarter.
You saw in the release, we had in the <unk>.
Third quarter, we incurred about $1 $6 million of expenses for that we were very fortunate.
Portfolio, there I think.
Had minimal impact from that will have some cleanup costs and some water intrusion, some roofing things, but expense incurred $1 6 million that you solve it's not it's in non op is in operating expenses outside of same store and you see that disclosed in the press release, we have a little bit more capital items.
But together the cost can be pretty insignificant, we're very fortunate alright.
Alright, and are you seeing any uptick in the last 30, 60 days and either bad debt or delinquencies in the portfolio.
We're not I'll, let I'll, let Rob talk about the details if he wants to but but we are we are we have very good performance really going all the way back to Covid the biggest spread was.
<unk> point about 200 basis points of.
Delinquency, we have been for the last several quarters very good though we've got almost <unk> of our normal long term range, which is about 40 to 50 basis points, where call. It 60 to 70 basis points now so we've been performing very well I'm not quite to where we were pre COVID-19, but certainly performing very well.
Mm one point there one point thereof to is just our current resident receivable balances about as of September 30 is about $5 million compared to $5 3 million at June 30, So kind of as al said, I mean trending trending down in the right direction.
Alright, and then last one for me why only 658 smart homes in the third quarter versus more than 9000 in the second quarter and two to 3000 expected in the fourth quarter was it a supply of the devices issue was it something else that sort of drove the sort of lull in the third quarter on that.
Yes, there was a little bit of supply chain issues, there and getting Theres a couple of different models out there and kind of getting some of the newer ones in that we think will happen in the fourth quarter. We had preplanned everything we did in the first couple of quarters, which is why I was it was skewed that way, but we expect to get a little more normal time.
Mine here in the fourth quarter, and then certainly into 2023 as well.
Alright, Tom you'll be missed wish you all the best Thanks, guys.
Thank you Rob.
We will move next to Alan Peterson with Green Street. Your line is open.
Hey, guys. Thanks for the time I was just hoping to follow up on Eric's comments on the trade down dynamic Tim based on the conversations you're having with your field level personnel are you starting to notice that trade down occur in your portfolio and in any given market.
Not necessarily I mean, I will say actually if you look at our blended pricing for Q3.
More of our B style assets or what you might consider the <unk> the b assets in our portfolio actually did a little bit better on in terms of blended pricing. So.
We're not seeing our existing portfolio the turnover was a little higher than some of our secondary markets that have some b assets, but we're also replacing those with residents where the the rent to income ratio has not changed so I think to the extent we are seeing it here and there where we're able to quickly replace it with.
With residents that that have that strong affordability.
Awesome and then in regards to the the price sensitivity what markets are you seeing the most price sensitivity would it be those secondary markets that are seeing.
A little bit higher turnover versus the rest of the portfolio is it are there any other primary market center flashing, maybe a yellow versus a red right now.
No like I said in the secondary markets. The pricing performance has been pretty strong in <unk> and the B type assets been pretty strong I mean, we are seeing some moderation most of it's driven by seasonality Phoenix is one that's moderated a little bit but it is it has had really strong rent growth now.
Or two to three years straight but.
The demand fundamentals as we talked about our really strong supply is kind of is what it is at a similar level.
But outside of Houston in D C, which we talked about have been a little bit weaker markets. All the other ones are hanging in pretty consistently with what they've been doing.
Understood I appreciate the time guys.
Yeah.
So we will take our next question today from Wes Golladay with Baird. Your line is open.
Good morning, everyone and congratulations Tom.
Quick question on the more than private developer what are they saying today.
It had been quite volatile, but if rates were to stay where they're at today, where do you think are required yield would be for a new development and when I look at mid America, I think best in class balance sheet operations.
You trade at an implied fixed cap cost of capital maybe around 7%.
At a high level I'll pick it up if things stay where they're at it has to be in the high single digits would you agree with that.
This is Brad.
I would I would say, that's probably a little higher I mean, I think what developers are generally trying to solve for is.
Our return on cost.
A year one return on cost on their development.
Similar to what we're looking at on a stabilized yield but.
Those are trending up to over 6% at this point.
I think aside from construction costs, you know really what the developers have been hit with as interest rates have gone from.
I'd call it three and a half 4% and now they are probably double that so the interest expense has gone up tremendously.
On their projects.
Really in the from the underwriting perspective, because of the seasonality, we're seeing that we didn't see earlier this year I suspect when they go back in at this point.
Construction cost price.
Updates it may not increase quite as much as they have been.
But their rent growth when they update update those at this point is showing seasonality. So their yields are probably under pressure from that and then also just the interest expense line items. So developments I was at a conference last week with quite a few developers and there is a general sense that most projects at this point that are <unk>.
<unk> kicked off really are being pushed out land land timing is being pushed out projects are being shelved at this point. So I think there's just a just a broad recalibration going on in the market and it's hard to say what developers are looking for in the private side, but it's definitely higher than what it has.
It's been and it's going to be somewhere return on costs in the six to mid six range I suspect.
Great. Thank you for that.
We will go now to let Barry Lu from amendments to help group. Your line is open.
Good morning. This is Barry I'm on for him Bill first of all congratulations on an impressive quarter I just wanted to get some clarity on the renewal rates you cited.
I know correctly that it was five 7% in October , but expecting 10% in the fourth quarter overall.
Now the $5 seven was the new lease rate in October renewals were 10.6.
Got it okay. Thank you.
And on the typical seasonality in pushback do you see.
Weaker demand.
Nick.
Kind of.
A potential headwind in Q1.
Q2.
We have not we've not seen any any lag or any reduction in leasing traffic, we talked about our traffic in Q3 was up our leads are up so the seasonality will just be you know relative to Q2 and Q3, yeah traffic will be lower than leads will be lower than what we saw.
See in those quarters, but no different than weeks.
Typically expect to see in the winter seasons. So there's nothing to indicate anything different other than as we've talked about you know I do think the seasonal or the normal seasonality returns more. So this year certainly that we did not see last year.
Got it thanks and my second question is on just that that trends we've.
We've seen some of your coastal appears required an uptick is that kind of what you're saying.
What trend do you kind of cut out there for a second.
Just a trend in your bad debt portfolio.
Bad debt our bad debt.
I think I think.
We just talked about a moment ago I think we've had a very good performance in our in our bad debts are delinquencies for really the last year year and a half.
I think we're a little above into lengthy our long term rate, which is really low 40 to 50 basis points of rents historically, where call. It 67 to 70 basis points range, but still very strong.
Don't see I don't see any indications that says that's changing today or expect that change as we move into <unk>.
Fourth quarter next year.
Okay. Thank you.
And we will go now to Aaron Hecht from JMP Securities. Your line is open.
Yes, thanks for taking my question.
Firms relocating from the coast are those lenders typically more transient.
And.
Typically move to buy a home more quickly or encourage trend.
In terms of those coastal renters coming home.
Yeah.
We haven't we haven't seen any indications that theyre more transient.
There are certainly more transient to move back out of our footprint, we've talked about the move ins from out of footprint, bringing in that 15% range now for a while but move back out of our foot Brent is 5% and it's been that way for a long time so.
So we don't see any trends that they're moving back to where they came from so to speak in and haven't seen any significant trends in types of turnover or anything like that so no indications of it.
Okay.
You ran through that.
Now entering the market the lithium for home purchase.
Doesn't sound like it.
How is that 15%.
Right and you got this quarter comparatively pre pandemic.
Over the last couple of quarters and that increasing net dwelling.
There was I would say pre COVID-19 it rains in that 9% to 10% range. So we have seen that pick up some but it has now remained consistent like you said for the last two or three years and you're talking about just of our move and so when you think about the number of units with turnover and all that it's a relatively.
It's significant in terms of its picked up but it's still it's not driving the bulk of our demand are the bulk of our outperformance.
Alright.
And then on the property management.
Technologies.
Just wondering how you guys think boom property manager of the property.
Are they responsible for more than one so maybe there are managers theyre all the times.
And some of the advantages are.
With that format.
That's something you guys are looking at.
Yes, we are testing and looking at some you know if you want to call it pods or whatever where we have some some oversight roles that managing multiple properties, particularly ones that are within close proximity and with the new CRM. We have in place that help enable that and there are some other other things we're looking at that will help enable that but yes.
And we talked about that a little bit on the last call. That's something that we're actively engaged in right now.
I appreciate it guys. Thanks.
And we will take our final question today from Anthony Powell with Barclays. Your line is open.
Hi, Good morning, a question on the multifamily development redevelopment to get to that one of your peers said that they are maybe pulling back on that next year due to some uncertainty and some timing I'm. Just curious when do you are you going to keep your schedule in terms of that redevelopment next year and are you still seeing kind of the returns that you expect in that run rate.
Yes. This is Brad so we've got as I mentioned earlier, a number of properties between four to six that we can start next year.
Those will probably be weighted mid to late next year as my sense. So we've got a little bit of time on those really to kind of figure out.
Where the market is and frankly just to see if theres some reset on the construction cost side of these projects.
So we've got some time under our belt from that but you know.
As I mentioned in my comments, we have the ability to be patient on those.
And the discipline that we use to help us find sites and really underwriting our deals will also be the same discipline that we use in determining when when's. The right time to start construction on these asset so I'd say, it's a little early right now to to tell if that will push off at all we do have the ability.
Both from a timing perspective, and then just also the balance sheet capacity to be able to hold those assets, if we need to those land assets.
Thanks, and maybe one more for me in terms of what are you thinking in terms of land costs for new developments and you talked about cap rates and how those are moving our land cost trending and how that's impacting your ability to do deals.
Yes, I mean land is probably the last component to adjust if there if theres an adjustment on the development side.
Construction cost that takes a little while to manifest itself into the cost of the project and then land is the last thing that adjusts and at this point, we're not really seeing.
Any adjustment in land prices and it'll just take some time to really see if there's if there's anything to that.
Great. Thank you.
Yeah.
And we have no further questions at this time I'll return the call to MAA for closing remarks.
No closing March we appreciate everybody hanging with us this morning, and look forward to seeing a lot of you over the next few weeks with upcoming conferences. Thanks a lot.
This concludes today's program. Thank you for your participation you may disconnect at any time.
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Hum.
Yes.
Okay.
Hum.
Hum.
Hum.
Oh.