Q4 2022 Elme Communities Earnings Call
[music].
Welcome to the Elm communities fourth quarter and year end earnings conference call.
As a reminder, today's call is being recorded.
At this time I would like to turn the call over to Amy Hopkins, Vice President Investor Relations. Amy. Please go ahead.
Good morning, everyone and thank you for joining us for our fourth quarter earnings call on the call with me today are Paul Mcdermott, President and Chief Executive Officer, Steve Breathy Executive Vice President and Chief Financial Officer, Steven Price that Vice President of Finance Grant Montgomery, Vice President and head of research and drew Hammond Vice President Chief Accounting Officer.
Sir and treasurer.
Today's event is being webcast through the investors section of our website at communities Dot Com and a replay will be available. This afternoon. We will have a slide presentation in conjunction with our prepared remarks and those sides of the available on a webcast replay before we begin our prepared remarks I would like to remind everyone that this conference call contains forward looking statements that 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 reconciliations 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 was distributed yesterday and it can.
And be found on the investors page of our website and with that I'd like to turn the call over to Paul.
Thank you Amy.
Morning, everyone and thanks for joining us today.
We ended the year with a strong fourth quarter performance and 2023 is off to a good start with solid operating fundamentals and favorable demand indicators.
We are reiterating our 2023 guidance, which reflects.
<unk> double digit same store NOI and core <unk> growth.
Our investment grade balance sheet is in great shape with low leverage and ample liquidity and we have no debt maturities until 2025, we feel very good about our growth.
Growth outlook, and we are increasing our quarterly dividend by approximately 6%.
The economic outlook continues to evolve and we will likely face a slowing economy. This year.
While we are not immune or bad market strategy is designed to outperform across cycles and to provide relative insulation. During downturns. One residents are more likely to trade down to a lower rent level instead of trading up.
Over the past five and 10 year periods.
Our target vintages have outperformed newer vintages in our respective markets.
Towards the end of last year, we began to see headlines surrounding job cuts for high wage technology positions due to the intentional cooling of the economy by the fed.
Over in the Washington Metro.
Heavy informational and professional scientific and technical sectors continue to grow too.
Two 7% and 2% respectively year over year.
As recently highlighted in the Wall Street Journal, a study of software engineering job postings at year end found the Washington region has more job openings in this field than the San Francisco Bay area.
The strength in these jobs is particularly evident in northern Virginia, where most of our portfolio is located and where the information sector, which includes software engineering jobs grew at a brisk rate 5.6 and 2022.
The Washington Metro is known to have the most stable employment of all gateway markets.
This stability supported very strong credit performance throughout the pandemic as we sustained 99% collection rates and we expect to continue to experience solid collection trends.
Furthermore, multifamily rent growth from Washington Metro is expected to outperform the U S average this year and nearly all of the major gateway markets.
In Atlanta, the regional economy is projected to fare well in the face of increased macroeconomic headwinds in 2023.
Maintaining job growth of over 1% According to Oxford economics.
Over the long term, we continue to believe that Atlanta is industrial mix will drive outsized job creation wage growth and net migration supporting sustained demand for apartments that are affordable to the largest segments of the Reno market.
In terms of a potential impact from new supply in a slowing economy, our price points are well below the rent levels for new deliveries.
And the Washington Metro are monthly rents are over $600 below nearby class a communities.
In Atlanta, our monthly rents are over $500 below nearby class a communities.
Furthermore, our communities are not located in areas that are receiving high supply.
Almost 88% of the new supply in the Atlanta Metro is delivering outside of L. A submarkets in 2023 and 2024.
And then Washington development is highly concentrated in the region's core versus our suburban focus with 84% of units under construction inside the capital Beltway.
Again in both markets the new supply is priced above.
Our price points for different renter cohorts.
In terms of the impact of a slowing economy on the cost of homeownership, the national cost of owning a home compared to running a single family start at home is the highest it's been in over 20 years.
The cost of owning a home in our markets has grown more than renting an apartment over the past few years and now stands at nearly $600 per month or 28% above our rents in Atlanta and over $1200 per month or 43% above our rents.
And the Washington Metro.
Even after factoring the potential for home price declines homeownership will remain an affordable for median income renters in our markets.
To summarize our portfolio offers downside protection and a slowing economy for the following reasons.
First our resident base is less exposed to job losses.
Second our price points to serve as a buffer during periods of supply pressure.
Third we do not have exposure to high supply Submarkets and lastly housing remains under supplied in our markets driving up the cost of homeownership, which is particularly impactful for median income households.
Our rent levels are affordable for the largest and most underserved renter cohorts and our communities to benefit from sustained demand for affordable rental options over the near and longer term.
We are now in the final phase of our infrastructure transformation, which includes transitioning community level operations to <unk> management of <unk>.
<unk> has been seamless thus far and we will have nearly 40% of all homes under management by next week over 50% by the end of the quarter and all communities under management by the end of the summer.
The full spectrum of operational benefits is extensive and we continued to identify opportunities to deliver operational upside once our community Onboarding process is complete.
We built an operating platform that is highly scalable and we continue to see the opportunity to deliver positive operating leverage by growing our portfolio and expanding it into the sunbelt markets.
We are confident in our investment strategy and our ability to create value through thoughtful capital allocation.
The markets that we're targeting have industries with the best long term growth prospects and a growing need for affordable rental options for median incomes.
While deal volumes remain muted we are actively underwriting opportunities.
We'll be ready to act when the time is right.
And we'll only pursue opportunities that we expect will create value for our shareholders and align with our strategy and mission.
This year, we plan to extend the rollout of smart home technology to all of our communities.
We design, our smart home initiative to improve our residents' day to day experience at investment levels that makes sense for mid market price points.
Our initial program includes smart locks smart thermostats, Mark lights, and water leak sensors overall.
Overall these technologies will provide ease of living for our residents.
<unk>, our operating expenses advance, our environmental goals and enable a better digital experience in the form of self guided tours for potential residents.
I am pleased to share that we made substantial progress on our ESG initiatives during 2022.
Delivering industry, leading ESG performance for value oriented communities is core to our goal of eligibility standards for value living.
To quickly summarize our achievements, we achieved our highest <unk> score to date.
Achieved our greenhouse gas and water goals.
Aligned our reporting with <unk> standards.
Joining the better climate initiatives.
Increased our multifamily sustainability certifications.
<unk> expanded the number of EV Chargers at our communities.
As we transition our communities to Al management, we are advancing financial inclusion by providing our residents the ability to boost their credit scores by submitting on time rent payments to all three credit bureaus at no cost.
ESG is core to our mission of delivering a superior living experience for mid market rents and we are pleased with the progress we made in 2022 and look forward to keeping you updated on our ESG goals.
Before I turn it over to Steve Ruffie to provide an update on our operating trends and to cover full year and fourth quarter performance I'd like to say a few words of gratitude.
This is Steve last earnings call with US ahead of his retirement on February 28.
I cannot thank Steve enough for the dedication that he has shown this company over the past eight years.
His leadership and vision were instrumental to our transformation and he is leaving us with a team that is well prepared to drive our company forward.
He will be greatly missed by everyone, who worked with him and we wish him the best in his retirement.
Thank you Paul.
Rightful to you and to our team for all we were able to do together I'm looking forward to the growth ahead for our company going forward.
Now starting with our operating trends the year is off to a strong start and demand indicators continue to look good through the winter months.
Year to date traffic in application volumes are up on a year over year basis, extending the trend that we experienced during the second half of last year.
Effective new lease rate growth was one 1% and the effective renewal lease rate growth was 10, 1%, which blends to five 7% for same store move ins that took place during the fourth quarter.
Thus far this year demand trends remain solid and lease rates of increase since December .
<unk> blended lease rate growth averaged four 5% for January move ins comprised of renewal lease rate growth of eight 8% and new lease rate growth of one 3%.
For February movements, so far effective blended lease rate growth increased to five 8% for our same store communities comprised of renewal lease rate growth of nine 1%.
And new lease rate growth of three 7%.
Our revenue maximization strategy prioritizes occupancy over at lease rate growth during the winter months and as such we adjusted pricing to sustain occupancy during our lightest volume months.
New lease rates are on an upward trend and we are currently signing new leases with effective rate increases of over 4% on average.
Looking forward, we expect new lease rates to continue to increase to the mid single digits in the spring and summer leasing season, followed by a decline to the low single digits toward next winter.
Renewal lease rates remained very strong and we are currently sending out renewal offers for April lease expirations with effective rate increases of over 7% on average and so far we are experiencing high renewal acceptance rates.
We expect renewal rates to trend down from the current high single digit level eventually converging to a more normalized level in the low single digits by the end of the year.
All in all we feel good about the lease rate growth, we captured during the fourth quarter and the trends that we're seeing now heading into the spring leasing season.
Lease rates tend to be weaker during the winter and while new lease rates moderated through January renewal rates remained very strong all through the winter.
The combined new and renewals that we're quoting for March and April are providing upward trending rent levels.
As we expected heading into the spring leasing season.
These are positive winter months, adding to the historically high embedded growth.
As we head into the spring months.
Occupancy averaged 95% during the quarter for our same store portfolio and has increased 30 basis points on a year to date basis.
As of the second week of February same store occupancy was 95, 6% positioning us to continue to drive rent growth and capture more of our loss to lease.
Retention was 62% during the quarter, which was a slight sequential increase as we continue to experience high renewal demand supporting very strong renewal rate growth of approximately 9% year to date.
Average effective monthly rent per home grew nine 7% in the fourth quarter compared to the prior year and seven 6% for the full year, reflecting the impact of the very strong lease rate growth we captured during 2022.
For our portfolio.
Average monthly rent grew significantly more in the second half of 2022 to provide historically high embedded growth at the end of the year.
Our current rent levels in February plus the March movements, we sign represent rental growth of approximately 5%, which is nearly 70% of the rental rate growth that we expect for the full year.
Our current loss to lease which represents the difference between current asking rents at our in place rents is approximately four 4% and we expect our loss to lease to increase into the spring given the solid demand trends that we're seeing today.
We are where we expected to be heading into the spring and summer leasing season, and our line of sight on the busiest leasing months will significantly increase over the next two to three months.
By June we expect to have locked in 90% of our total rental rate growth for the year we.
We feel good about the visibility that we have today and where rent growth is tracking compared to our expectations.
Moving on to renovations, we completed more than 300 full renovations during 2022, and then ROI of over 13%, excluding the rent growth that we achieved on comparable on renovated units.
We expect to be closer to our historical renovation run rate of approximately 600 units per year in 2023.
And for renovation led value creation to drive higher rent and NOI growth over the next few years.
Executing value add renovation at low teen cash on cash returns on average remains a key part of our growth strategy.
Now turning to our full year and fourth quarter financial results.
Core <unk> for the fourth quarter was 24 cents per diluted share representing year over year growth of over 40% driven by strong growth in rental income and the full deployment of our commercial portfolio of sale proceeds.
Core <unk> for 2022 was 88 cents per share in line with the midpoint of our guidance range.
Multifamily same store revenue grew by eight 9% for the quarter and seven 3% for the full year due to growth in rental rates lower concessions higher occupancy.
11% year over year decrease in bad debt for the full year.
Operating expenses grew 4% for the fourth quarter and four 6% for the full year driven by non controllable expenses, such as real estate taxes and utilities.
Multifamily same store NOI grew 11, 6% for the fourth quarter at eight 8% for the full year.
This represents the end of a strong year, even while executing our transformation and now we have excellent momentum carrying into 2023.
Now it is my privilege to turn it over to Steve fresh that we have great confidence in them.
Steve will cover financing updates and our 2023 outlook.
As we announced in November .
Dave is succeeding me as Chief Financial Officer. Following my retirement at the end of this month.
Steve brings extensive knowledge of capital markets strategic transactions capital allocation public company operations and financial planning.
He's been instrumental in the execution of our multifamily transformation.
I know he is going to be an excellent CFO .
He also has an excellent team that has been through all of this with us and are ready for new opportunities to create value.
Thanks, Steve you're leaving me with a great team and we are very excited for the opportunity to continue to build on everything you helped to create over the last eight years now I'll start with our balance sheet.
With an annualized fourth quarter net debt to EBITDA of four eight times over $650 million of availability on our line of credit no secured debt and no maturities until 2025, our balance sheet is in excellent shape.
And keeping with our proactive approach to managing our debt maturity ladder on January 10, we executed a new two year $125 million term loan with two one year extension options. We use the proceeds to pay down our previous $100 million term loan with no prepayment penalty and a portion of the balance.
<unk> on our line of credit.
Our new loan has a variable interest rate of adjusted Sofa, plus 95 basis points.
At a time when many banks are tightening their lending requirements, we have taken steps to ensure our financial flexibility and to increase our liquidity, we feel good about our ability to successfully navigate market volatility while executing on our strategy.
Now turning to our outlook for 2023.
We are reiterating our 2023 core <unk> guidance range of <unk> 96.
The $1.04 per fully diluted share, which implies double digit year over year growth.
Same store multifamily NOI growth is expected to range from 9% to 11%, which reflects year over year growth of 10% at the midpoint.
Further building on the double digit NOI growth achieved in the second half of 2022.
Non same store multifamily NOI is expected to range from $12 75 to $13 $75 million in 2023.
While this guidance range does not reflect the impact of potential acquisitions, we had more than $650 million of availability on our line of credit as of year end and we are running below our targeted leverage levels. We will continue to evaluate acquisition opportunities in our target markets and we will further pursue acquisitions when.
They create additional value for shareholders.
Other same store NOI, which consists solely of Watergate 600 is expected to range from 13 to $13 $75 million.
We are slightly reducing our guidance for G&A net of core adjustments through a range of $25 $75 million to $27 million, we expect G&A to decline in 2024, as we realize the full year benefits of internalizing multifamily operations and then to remain stable as.
We scale our portfolio when the time is right to do so.
Our G&A guidance excludes the impact of transformation investments, where our platform and our full integration, which we now expect to be between three and $4 million.
Interest expense is now expected to range between 29, and $30 million, which incorporates a higher anticipated future fed funds rate as the interest rate outlook has shifted since we announced our 2023 guidance last year as well as the impact of our new term loan.
The new term loan is subject to our existing swap agreement, which fixes the interest rate on $100 million at 2.16% through July 21 of this year.
We remain very confident in our NOI growth outlook and are currently within our core <unk> guidance range. However, recent fed actions have put pressure on our midpoint if expectations were to ship further we will update our interest expense guidance again, and possibly our core <unk> guidance range.
We finished 2022 with a 75% <unk> payout ratio as Paul mentioned.
And we are increasing our quarterly dividend by approximately 6%.
<unk> per share, reflecting confidence in our growth in 2023 and beyond and the strength of our <unk> growth profile, we expect our core <unk> payout ratio for this year to be at or below our mid <unk> target.
And with that I will now turn the call back to Paul.
Thank you Steve.
To conclude we are where we expect it to be at this point in the year.
We feel good about our ability to deliver double digit core <unk> groups, which will be driven primarily by rent growth as nearly 70% of that rent growth is already locked in.
We are on track to complete the transition of our portfolio to Elm management by this summer.
And to begin to see the benefits of that transition and our smart home initiatives in 2024.
Our strategy offers growth as well as relative installation during downturns and we expect to benefit from sustained demand for quality affordable runner options over the near and longer term.
And now operator, I'd like to open it up for questions.
Yes.
Certainly at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May Press Star two if you would like to be removed from the question Q.
For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys, one moment, while we poll for questions.
Your first question for today is coming from Michael Lewis with Chewy Securities.
Great. Thank you.
Steve you'll you'll certainly be missed and I wish you all the best in retirement and.
And congratulations to Steve to other Steve I've taken over the role.
Michael Thank you.
My first question I was wondering if you could provide some of the components of the same store NOI guidance.
Occupancy revenue growth or expense growth or any any details you could share.
Yes, Michael this is Steve price that and I'll take first crack at that so.
To get to our NOI guidance, we look at our revenue growth expectation of about eight 5%.
That is primarily driven by rental revenue growth, we're expecting that to be almost 7% as we talked about in our prepared remarks.
<unk>.
Captured approximately 5% of that already with our in place leases and leases signed but not yet moved in.
So we're at 70%, we're expecting that number to be 90% by June .
So that leaves about an additional 2% of additional rent growth that is expected to be captured over the remainder of the year.
The difference between the seven and the eight 5% smaller contributions from line items like other income and declines in bad debt.
On the expense side, we're expecting expenses to go up about 7% net of reimbursements.
And that's primarily driven by three.
The line items. The first is payroll, which we're seeing pressure on salaries and we're also ramping up our positions are ahead of our onboarding that we're currently going through for our communities.
Second one is taxes as we're seeing taxes reset we are seeing.
Pressure on expenses from from increased taxes.
And then the third one is utilities, we're seeing utilities higher in electricity and gas for 2023, but that's mitigated somewhat by reimbursements, where we see reimbursements at about 60% to 70%. So that that's really the buildup to our 9% to 11% NOI growth.
Yes, that's great detail. Thanks.
My second question.
How should we think about the upside from getting properties onto your internal property management platform. I don't know if you have is there an operating margin improvement that you're measuring or seeing that you can point to or how do you kind of measure and quantify.
The longer term benefits from that transition, yes, Michael This is Steve again, and I'll take that one as well.
As we said we are we have onboard as of next week, almost 40% of our communities by the end of the quarter would it be at 50%.
And have them all on board by the end of the summer.
And we think we can get there in the mall onboard that there are efficiencies that we can take advantage of.
Just examples of it or centralization better met revenue management through occupancy initiatives.
Smart buildings and ability to produce the R&M maintenance efficiencies in global contract strategy. So.
So we see.
A lot of.
Potential upside from being able to take advantage of opportunities of managing our own communities.
But in addition to that we've talked about scalability to before that we're building out a platform that is scalable.
So when we think about being able to.
<unk> doubled the unit count.
This company and keep G&A.
Essentially the same from where it is now but thats, even in an additional opportunity and an additional driver for for growth.
Great.
Try to squeeze in one more if I can.
It seems like there's more investor demand and liquidity in the market for multifamily than for some of the other property types.
For all the advantages that you spoke about.
But there is still this big bid ask spread that's kind of eliminate transaction so I'm.
Wondering what are your target returns for acquisitions today or how are you looking at potential deals given what's happened in the cost of capital and I know you.
You are still looking but.
Maybe there's a pause here as that bid ask kind of shakes out.
How are you kind of thinking about that and what might be attractive.
Well in terms of Michael our observations on what we're seeing in the marketplace right now.
First and foremost there's not a lot of product in the market on a relative basis like if you look at the year over year numbers.
What is in there a lot of the brokers that we interact with as well as the owners.
Have a large pipeline.
And we expect group like groups that are in the Odyssey funds.
They're waiting on appraisal.
From all of US and I think as you know appraisals tend to lag the markets anywhere from six to nine months. We think those appraisals are going to hit we think second quarter, we will have a lot of mark to market activity.
And we believe that we're going to we'll have a more robust second half of the year. As we've said before these are funds that are still dealing with the denominator effect and have to have to go through their own processes mark to market, but really the sellers that were seeing right now.
They are only selling either there is a liquidity requirement <unk> or they are funding other parts of their operations.
As you alluded to I don't think Theres any question that theres enough capital.
But.
We would also say in and talking to folks that are thinking.
<unk>.
Taking products to the market the ask is really coming toward the bid.
I think the gap is going to be closing and will be closing.
As we progress through the year.
In terms of kind of what we look for right now I mean look a lot of the institutional capital remains on the sidelines a lot of that private capital is the most active and they're trying to.
Take advantage of some of the in place to leverage the low leverage that.
They can utilize.
I think for us, it's going to be about it's going to be maintaining our continued discipline.
And our underwriting.
In reference to the top line.
We are and always have been I think more realistic about rent growth and about our trade outs.
Steve priced out alluded to.
We are being disciplined in how we look at expenses labor insurance property taxes utilities and I hope.
I think we are.
You have to have discipline around that that residual cap rate.
We think right now risk is being priced appropriately.
Our particular focus right now.
We're very sensitive to replacement cost, but in terms of what we're seeing out there Michael.
Our cap rates can vary depending on the amount of risk we want to we want to take on but we're seeing cores kind of in the fours to five core pluses.
For the quarter to five in a quarter and value add in that five and a quarter to five and a half and we've seen that go as high as high as the six so.
Unlevered IRR is are in the 7% range Levered IRR is around that 10% to 14% range, depending on what risk bucket you want to play in but I think as Steve alluded to also we are going to be.
Sure.
Looking at longer term value creation for our shareholders and we will price our assets appropriately. It's not just about NOI going in cap rates, it's about longer term growth and value creation for our shareholders.
That's great detail. Thanks, a lot for answering my questions.
Your next question for today is coming from Alan Peterson at Green Street.
Hey, everyone. Thanks for the time.
Just hoping you guys gets shared the breakout between the legacy mid Atlantic same store portfolio and the new 23 additions just your expectations on NOI growth between those two groups would be super helpful.
Yes, I mean, so our 23 same store pool. So there were two communities that came into the same store pool. This year.
And we are seeing growth in the Atlanta portfolio higher than that than D. C.
So but DC is.
Amy go ahead.
Amy our Atlanta communities are contributing about 60 basis points to our NOI growth for the full year.
Perfect. Thank you and in regards to the recent term loan extension I was just hoping you can provide some color around the banks and if theres any banks that are starting to close off lending or lending activity for multifamily product today.
Did you guys have any difficulty with that term loan extension versus call. It. This time two years ago.
I will say Alex can you repeat the question we lost the voices of the segment.
Yeah in regards to the term loan extension I was just hoping if you could provide any color if theres any difficulty right now getting those term loan extensions through <unk>.
Given that banks some banks may have closed off lending activity for multifamily activity today.
Yes.
Priced at.
What we've heard from the banks is that they are being more selective in this market.
They are choosing to do first off shorter term term loans.
Generally we can see here, maybe a couple a year or two ago would have been a five years.
But the banks are selecting based on relationships and based on this sector.
The company's earnings so for us being in the multifamily sector I think we had a.
Easier time then.
We had a portfolio from a year ago with office.
But what we saw was that.
Thanks, again shorter terms for two years, the pricing has not changed that much but the upfront fees.
A bit more expensive.
Very high returns.
That's helpful. Thank you and then just one more on the internalization of <unk>.
Management for the portfolio have you guys had any difficulties in retaining onsite staff are you having to go out into the marketplace and hire new personnel or are you able to transfer the staff at the property.
Pretty smoothly.
Alan We've just finished our fourth wave and we've had tremendous success.
And recruiting and getting people to change jerseys, where we're heading in the way <unk> got a lot of acceptances there.
But we also have beefed up our recruiting and we're supplementing.
The folks that are coming onboard from our third parties with people from the outside.
We obviously build our own reasonable management team and so we're making great progress and but for the most part we've been able to retain.
Incentives for people to change Jersey, sometimes darko.
Awesome I appreciate the time, guys and congrats to both of the Skus on the call.
Thanks Alan.
Your next question for today is coming from young Ku at Wells Fargo.
Great. Thank you and good morning, just wanted to get your thoughts on rent controls, which seems like a hot topic. These days it looks like there have been a couple of rent control. Most of those that are being pushed forward in Maryland to provide some color regarding vegas and potential impact. This may have on your portfolio.
Sure John .
First thing I'd say is we.
Philosophically, we don't believe rent control addresses the main issues, which are housing affordability.
History would tell you in our research tells US is it really doesn't work in the call thrive.
It does not reduce the cost of housing for those who it is intended to serve.
I think the best surrender protection.
Abundant supply of affordable housing.
Regarding the near term risk of rent restrictions.
We look at the markets that we operate in right now and I'll get to Montgomery County, but primarily where we have two assets primarily with bulk of our portfolio is northern Virginia, and Atlanta, We don't expect rent control pressure proposals over.
Near to medium term, we do have a small amount of exposure in Montgomery County, which represents 6% of our NOI.
Which is not.
Which had post pandemic rent restrictions, but.
We see proposals, but we we know that nothing is put in place, but the spread is there.
Our our job is really to.
Work with the local officials and work with the lobbyists here on the Hill.
Two.
Try to find a more.
A more palatable solution that rent control I think personally having been in the affordable business.
I think you can kind of probably should fix what they have in terms of latex voucher systems et cetera.
And.
We think it is.
As prevalent as the top priority, but right now.
We think it impacts probably the smaller part of our portfolio.
Got it. Thank you for the clarification and you guys talked about strong job postings in the Metro DC area. I was wondering if you can talk about in migration trends within.
Within that market, specifically and in Atlanta also.
Sure yes so.
We've seen strong move ins to the Washington region.
We've seen great.
Greater than 75% of the move ins are actually people coming from the Washington region.
And we've also seen.
Strong move ins.
Into our region.
I think both in Atlanta, and Washington D. C. We looked into the analysis.
That <unk> data.
And moves in versus move outs.
Outpaced by about 53%. So we're still stream strong movement into the greater Washington DC area.
There have been headlines obviously about the district.
<unk> been a little softer, but again, even within the Washington DC region. The vast majority of it is suburban with about 80% being in northern Virginia. So we're seeing good trends on that front, it's plenty of traffic.
Great. That's helpful and just finally from me can you provide some color regarding some of the credit trends within your tenant base in terms of maybe trends youre seeing on average FICO scores average income or maybe its delinquency rates within your portfolio.
Sure I think the trend that we track most closely is our rent to income ratios.
And I think we mentioned it in our prepared remarks, we've actually seen.
A decline in our rent to income ratio in our Atlanta properties that we've owned now that are entered the same store pool.
Pool is actually decreased to about 25% is as we've seen strong growth for new renters moving into that our properties and also improving the credit profile versus prior ownership.
In the Washington Metro.
Seen the numbers stay steady, which even in face of strong rent growth and were around 26%, which is in line with our long term average rent to income ratios for our assets.
Great perfect. Thank you and congrats to Steve and Steve.
Once again, if there are any questions or comments. Please press star one on your phone at this time.
Your next question for today is coming from Anthony Pallone at J P. Morgan.
Thank you and good morning, and congrats as well to Stephen Steve.
So first question is just in terms of your internalization and when you did the transformation of the company you talked about going into multiple new markets and so youre in Georgia now if you go to some other places.
On your target list will be internalization be able to handle those or we have to still use some third parties before bringing it in.
Toni This is Paul the internalization will be able to handle those we've already planned for that and I think as we alluded to when we.
Sure.
When we.
Roll out our diversification strategy, we have always planned to both geographically diversify and obviously that will be.
Accompanied by diversified management, and so we plan on having boots on the ground in the major markets that we expand into.
Okay got it and then just second one you had mentioned about 600 unit renovations for 'twenty. Three can you just remind us about how much you think youll spend on those and also.
Any color on just recurring Capex for this year either per unit or in total.
Yes, Tony this is Steve.
For the 600 units.
Thinking about $9 million.
Then related to that.
And then I'm sorry, the second part of the recurring Capex.
So we've looked at that recurring Capex and we see it is 5%.
However, our NOI.
Which again is for on the multifamily side, which is significantly less than the 20% numbers that we received.
Yeah.
Okay, great. Thank you.
And if there are no further questions I'd like to turn the floor back over to management for any closing comments.
Thank you again I would like to thank everyone for your time and interest today and we look forward to speaking with many of you over the next several weeks.
Thank you.
This.
Today's conference and you may disconnect your lines at this time. Thank you for your participation.