Q4 2022 American Homes 4 Rent Earnings Call
Greetings and welcome to the M H fourth quarter 2022 earnings conference call.
At this time all participants are in a listen only mode a.
A brief question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Nick from director of Investor Relations. Thank you Mr. Frank you may begin.
Good morning, Thank you for joining us for our fourth quarter 2022 earnings Conference call with me today are David Thank Glenn Chief Executive Officer, Bryan Smith, Chief operating Officer, and Chris Lau Chief Financial Officer.
Please be advised that this call may include forward looking statements all statements other than statements of historical facts included in this conference call are forward looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
These risks and other factors that couldn't Berkeley affect our business and future results are described in our press releases and in our filings with the SEC.
All forward looking statements speak only as of today February 24 2023.
We assume no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.
A reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package.
Of note, our operating and financial results, including GAAP and non-GAAP measures are detailed in our earnings release and supplemental information package you can find these documents as well as he reports and the audio webcast replay of this conference call on our website at Www Dot A&H dot com with that I will turn the call over to our CEO David <unk>.
Thanks, Nick and welcome everyone and thank you for joining us today.
To start I would like to highlight our company wide rebranding that was announced last month. Our goal has always been to make leasing a high quality home easy. So our residents can focus on what really matters to them in life or.
Our rebranding embraces a simplified modern look representing our commitment to continued innovation, including an updated website and enhanced mobile experience.
But this is just one part of the equation.
The single family rental sector is constantly evolving and we plan to further solidify our market leadership by continuing our investment in customer service and maintenance delivery. This year through an initiative, we named the resident 360 program.
Investments. This year will include a combination of added resources to our property management platform continued system in innovation and bolstering our various supporting functions.
In a few moments, Brian and Chris will share details on our operational plan and the financial impacts of this very important initiative.
Now turning to the quarter and full year.
We closed out 2022 strong, resulting in 13% core <unk> growth per share for the year.
This represents the second consecutive year of double digit growth, which is a testament to the a M H team platform and portfolio.
As we look ahead to 2023, we recognize the landscape is changing as the economy cools and inflation continues to pressure consumers and businesses alike.
With that in mind, our 2023 outlook contemplates our topline to remain resilient with growth stronger than historical norms, even with some moderation from 2022.
This strength and resiliency is due to long term fundamental tail winds in our industry.
First there is an under supply of housing and current building permits project a significant decline in new housing inventory.
Second housing affordability significantly favors renting according to the latest John Burns data it has more than 20% more affordable to rent versus own across our top 20 markets.
And finally, our portfolio is concentrated in high quality of life market with the majority of our households, consisting of dual incomes that are employed in resilient sectors with some of the most common professions for our residents being nurses.
Your fighters and other first responders.
Shifting gears to the investment front, we continue to benefit from our a M. H development program. The backbone of our growth currently our traditional and national builder channels are largely on pause as today it remains difficult to acquire properties in an accretive and responsible manner with expected returns.
At today's pricing still too low to clear our required return thresholds.
But channels will reopen one day, but we do not have a crystal ball showing us the exact timing as such our investment guidance reflects no material activity across these two channels in 2023 updates will be provided should market conditions change.
A key benefit of our three pronged growth strategy is that unlike others, we do not rely solely on open market acquisitions to grow.
In 2022, we continue to have consistent and predictable growth through our a M. H development program that delivered 2183 homes consistent with our 2022 plant.
We expect another year of consistent growth in deliveries during 2023.
Similar to commentary from our last earnings call. We are seeing signs of reduced development labor and input cost and many of our markets.
Well the deliveries in the fourth quarter reflect peak pricing today, we are seeing those prices decline.
As an example today lumber is one third the cost of its peak pricing in may of 2022.
We expect to see further price reductions in vertical input cost for the balance of this year.
Please keep in mind that the vertical development phase is six to nine months, resulting in today's cost reduction benefits showing up in yields in late 2023 or 2024.
With respect to asset management, we continue to be focused on optimizing our existing asset base specific like we anticipate another active year on the disposition front to capitalize on current market pricing opportunities by selling homes that do not align with our long term objectives.
This can already be seen in the fourth quarter, where we sold approximately $130 million of homes, bringing the full year total to nearly $300 million the.
The vast majority of these homes were sold to individuals.
In closing as we head into 2023.
Our resilient asset class strong tenant base and one of a kind development program positions us well during these uncertain economic times.
Our resident 360 program as well as long term favorable rental demand tailwind pave the way for consistent value creation for many years to come.
And now I'll turn the call over to Brian for an update on our operations Brian .
Thank you Dave.
2022 was another great year for M H.
Our team posted strong operating results and an impressive nine 1% same home core NOI growth for the full year.
Before I get into our results I'd like to recognize the team for delivering on key technology initiatives.
Set the stage for a resident 360 program.
First we launched our upgraded website last month, which is a key step in delivering the modern resident experience.
With a focus on mobile our new website makes leasing more convenient than ever before.
New functionality includes simplified home searches streamlined functions and an even easier showing process.
This new website as a key platform for future resident experience improvements.
Second we've made great progress on our next generation maintenance services platform.
Which includes system enhancements to our logistics scheduling and communications functions.
Most importantly, these initiatives allow us to capture even more data our prospects and residents, which is already driving our analytics engine.
Moving onto operating results fourth quarter demand was in line with our expectations.
Although we saw some seasonality demand metrics continue to exceed pre pandemic levels.
Same home average occupied days was 97%.
New renewal and blended rental rate growth was eight 5% seven 9% and eight 1% respectively.
Which drove seven 3% same home core revenue growth for the quarter.
Core operating expense growth was 10, 5%, primarily driven by the Texas property tax true up that we discussed last quarter.
All of this resulted in five 7% same home core NOI growth for the quarter.
Turning to the current year 2023 is off to a great start with strong demand for our homes continuing into January and February .
So far this year, we are seeing increased website traffic and then by leasing inquiries.
Driving a 20% increase in distinct showings per rent ready property when compared to our long term averages for the same period.
But the month of January same home average occupied days was 97%.
New and renewal spreads were seven 2% and seven 6% respectively.
This resulted in blended rate growth of seven 5% for the months.
On a full year basis, our same home core revenues growth outlook of 6% at the midpoint.
This is primarily driven by forecasted growth and average monthly realized rent in the six 5% area.
Which includes a low 4% earn in from last year's leasing activity and the partial year contribution from 'twenty to 'twenty three blended rate growth expectations.
This was partially offset by small year over year movements in occupancy and fees.
Our expectation for a modest 35 basis point increase in our bad debt percentage.
This expected increase can be attributed to a small cohort of lingering COVID-19 impacted accounts, taking longer to resolve than expected.
Looking ahead to core property operating expenses next year same home growth outlook of $9 seven 5% at the midpoint.
Flex another year of elevated property taxes and insurance.
Chris will speak to in a moment.
For all other expenses, our outlook contemplates general inflationary pressures and proactive investments into our resident 360 program.
Today, our platform provides the best customer service in the industry, which has allowed us to differentiate ourselves from our competition.
Resident 360, <unk> expands our platform's capabilities, which will benefit resident retention provide for greater cost control and strengthen our position as the market leader in customer service over the long term.
I can't wait to see resin at $3 60 come to life.
We have a great operational platform and team already in place.
And our market, leading customer service will only get better as this program is fully rolled out.
With that I'll turn the call over to Chris.
Thanks, Brian and good morning, everyone.
I'll cover three areas in my comments today first a brief review of our year end results second an update on our balance sheet and recent capital activity and third I'll close with an overview of our 2023 guidance.
Beginning with our operating results, we closed out 2022 with another strong quarter of consistent execution with net income attributable to common shareholders of $87 $5 million or 25 cents per diluted share and 40 <unk> of course, a vote per share and unit, representing six 7% year over year growth in Peru.
Full year 2022, we generated net income attributable to common shareholders of $258 million or <unk> 71 per diluted share and $1 54 of course I vote per share and unit, which was in line with the midpoint of our most recent 2022 guidance. Additionally.
Additionally, given our continued strong growth in taxable income after year end, our board of trustees approved a 22% increase in our quarterly distribution to <unk> 22 per share as a reminder, our distribution increases have been outsized in recent years as we burned off our remaining net operating losses now that our net operating loss.
<unk> have been materially utilized we expect future distribution increases to trend similar to earnings growth overtime.
From an investment standpoint during the quarter, we delivered 701 total homes from our <unk> development program, which was modestly better than our expectations of our total deliveries 415 homes and 286 homes were delivered to our wholly owned and joint venture portfolios respectively.
On the acquisitions front, our programs continue to remain largely on pause as we patiently look for further stabilization in home values in the capital markets. During the quarter, we acquired a modest 74 homes, which are largely consisted of pre existing national homebuilder contract closings.
Next I'd like to turn to our balance sheet and recent capital activity at the end of the year, our net debt, including preferred shares to adjusted EBITDA was six times, we had $69 million of cash available on the balance sheet and our one point to two 5 billion revolving credit facility and a $130 million drawn balance.
Subsequent to year end, we settled the remaining 8 million class a common shares from last year's forward equity sale agreement, receiving net proceeds of $298 $4 million, which was partially used to pay down our credit facility with remaining proceeds funding a portion of our 2023 capital plan that I'll discuss more in a couple of minutes.
Additionally, recognizing the continued uncertainty in the public capital markets. We recently agreed to increase the total capital capacity of our existing joint venture with institutional investors advised by JP Morgan asset management to approximately $900 million is provides nearly $300 million of additional joint.
Venture capital capacity that will be used to target incremental land and development opportunities, notably this increased J D capital capacity enables us to remain opportunistic while also ensuring that our wholly owned development pipeline remains strategically sized it to be fundable without the need for additional common equity.
Next I'd like to share an overview of our initial 2023 guidance for full year 2023, we expect core <unk> per share and unit of $1 58 to $1 64, which at the midpoint represents year over year growth of four 5% and some additional color at the midpoint our expectations contemplate.
Same home core revenues growth of 6%, which Brian discussed a few minutes ago, along with same home core property operating expense growth of 975% driven by property tax growth in the 9% area. As we have now completed our year end property tax forecasting process and believe that 2023 property tax growth will likely remain at the <unk>.
<unk> peak levels as last year, driven by the impact of multi year revaluation states continuing to capture backwards looking home price appreciation.
On a positive note we are beginning to see modest deceleration in certain of our annual revaluation States supporting our view that property tax moderation is still to come in future years. Additionally, we expect 10% to 11% combined growth on all other expense line items, reflecting the general inflationary environment.
<unk> property insurance market and the incremental costs associated with the resident 360 program.
And putting together our same home portfolio revenue and expense growth expectations. We expect 2023 same home core NOI growth of 4% at the midpoint.
From an investment standpoint, given ongoing market conditions, our 2023 investment expectations do not contemplate any material acquisitions through our traditional or national builder channels and although we expect these channels to eventually reopen in the future we cannot predict when which as a reminder, underscores the consistent and predictable value.
From our <unk> development program. Despite the currently constrained acquisition environment, we still expect to attractively deploy one to one point to $2 billion of total capital. This year, adding between 20 220 400 newly constructed image development homes to our wholly owned and joint venture portfolios.
Specifically, our wholly owned portfolio at the midpoint of our ranges, we expect to invest approximately $900 million of Amish capital consisting of $650 million or 1850 homes added from our development program, along with $250 million of combined investment into our wholly owned development pipeline pro.
<unk> share of JV investments and property enhancing capex programs from a funding standpoint, we expected this year $900 million image capital plan to be funded through a combination of retained cash flow $2 million to $300 million of recycled capital from dispositions net proceeds from our forward equity shares settled last month in March.
Just leveraged capacity utilization from a balance sheet, leaving a couple of hundred million dollars of dry capital capacity to take advantage of additional growth opportunities should market conditions change.
That brings us to the end of our prepared remarks before we open the call to your questions I'd like to remind you that our asset class diversified portfolio footprint and investment grade balance sheet position us for resiliency. During these uncertain economic times. Additionally, our operating platform is further bolstered by resident 316, along with our one of a kind image development.
Liam position us for continued long term value creation and with that thank you again for your time and we'll open the call to your questions operator.
Thank you we will now be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
A confirmation tone will indicate that your line is in the question Kim.
You May press Star two if you would like to remove your question from the camp.
For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
We also ask that you limit yourself to one question and one follow up.
One moment, please while we poll for questions.
Thank you and our first question is from Nick Joseph with Citi. Please proceed with your question.
Thank you I completely understand the capital allocation plan, but what would get you more interested in acquisitions going forward from here and then maybe just where where do you see cap rates today.
Yeah, Nick it's Dave good afternoon.
The capital plan and the investment plan are intertwined and it's really about where is your cost of capital today and where is the.
Gross opportunities.
Today, what we are seeing is a the acquisition market as well as the national builder market.
The yields at the current pricing.
<unk> are in the mid fives and if the mid fives are they are not attractive to us we look at our.
Our acquisition program or our investment.
Program, having three channels and the development program gives us the best assets and in the long term the best yields in the acquisition channels are the opportunistic today, we need to see another 50 basis points or more increase.
Before we would be entering into that market.
You.
Can see or heard from the prepared remarks, we don't have any material acquisitions plant, but that's a if the market changes are we will be ready to acquire in an opportunistic manner.
<unk>.
Thanks, that's very helpful. And then just maybe on the expense growth guidance, obviously real estate taxes continue to have an impact do you view that as a 2023 catch up from all the home price appreciation or is that something that we should kind of expect.
And the next over the next two or three years, just given how different municipalities handle real estate tax assessments.
Yeah, Nick it's Chris here. Good question and you know look I would actually tie back to some of our commentary from last quarter.
And as we all know.
Home price appreciation, which is one of the primary drivers of property taxes hit an inflection point, you know somewhere around middle of last year or so.
And as a result, as we've shared before our expectation is that property taxes will will hit an inflection point as well, but you.
Given the property taxes are backwards looking and also the fact that about a third or so of our property taxes are paid in states that revalue on a multiyear basis, meaning that they are still capturing multiple years, a backwards looking record home price appreciation at this point our expectation is it 2023 property tax growth, we'll see.
They'll remain similar to 'twenty two in that 9% area.
As I mentioned in my prepared remarks, we are beginning to see some green shoots in a couple of our annual revaluation markets.
Notably, we talked about them, a decent amount last quarter and last year in Florida, and Georgia, rather than the mid teens increases we saw last year, where we're seeing those cool into the low teens or so this year and then notably in Texas, We're still expecting 2023 to run higher than average, but given that home price.
<unk> there has moderated as well when it's likely now below the homestead exemption cap, we're not expecting to see a repeat of last year's disproportionate to treatment. If you want to call back to non home owner occupied properties, but like I said you know these are good leading indicators are unlikely property tax trajectory into the future.
They're just not material enough yet to change the complexion of this year's property tax growth, which is being anchored by those backwards looking multi year revaluation states.
Thank you and our next question is from Juan Sanabria with BMO capital markets. Please proceed with your question.
Well good morning, I'm, just hoping you could spend a little time talking about.
Resident 360 program and what that may be doing the operating cost expense guidance as well as.
The implications for G&A and how we should think about return on those investments going forward.
Yeah. Good morning, one it's Dave let me go through and really kind of frame what the resident 360 program is and then Chris might pick it up and go through a little bit of a numbers.
Yeah.
Specifically the three the rest of the 360 program is an enhancement of our current platform and enhancements of that platform around resident communications and further improvements and enhancements in our maintenance delivery program.
Today, we're proud of our leadership in customer service and maintenance programs as evidenced.
By a third party surveys that you see and some that we have commission.
And those that we've commissioned also give us commentary as to what residents are looking for as improvements from a residential institutional landlords, whether they'd be single family, whether they'd be American homes, whether you'd be multifamily and that's really around those two elements.
It's communications as well as maintenance delivery.
So we listened to our residents and being a leader doesn't mean that we can't improve so that's the initiative how does it benefit us.
Well like the other investments that we have made there and that others make you know theres a little.
Bit of an investment time period, and then a benefit time period that benefit time period.
Comp, what we will see and we know this because we did pilot this program over 'twenty 'twenty. Two is that we will see improvements in customer satisfaction and our where we have tested it has led to better retention that leads to better turnover.
Our reduced turnover cost and we also have seen better execution in the maintenance platform better execution, allowing us to do more internal work.
That improves the quality of the work, but it also keeps the costs down so there's going to be a little bit of an investment in 2023, those benefits will start seeing towards the end of the year, but probably more importantly in 2024.
Talking about the components of expenses I'll turn it over to Chris Yeah, one the primary place youre going to see the investment this year will be in the property management line.
For reference what's contemplated in guidance is about a 12% increase this year on property management and.
And it reflects a couple of different considerations one of course, just a general inflationary environment.
Two we did have some modest understaffing in the first quarter of last year that will compare somewhat a little bit on favorably on a year over year basis into this year and then the balance of this year will be represented by the investments into our resident 360 program.
Great and then if I could just switch gears to our bad debt. It increased sequentially you kind of called it out at the top just curious if there's any.
Particular parts of the country or regions or the type of customer that you're seeing caused that and when do you think we'll get past that kind of COVID-19 noise. If you will.
Yep.
One Chris here again, a good question, let me start I'll frame things a little bit and then Brian can can probably share some more thoughts as well you know generally speaking we would characterize collections is continuing to hold strong full year 2022 bad debt landed in the low 1% area, which was very consistent with our expectations.
<unk> that were contemplated in guidance.
The one aspect that has played out slightly different than our initial expectations.
Brian previewed this a little bit weak.
We have a small subset of residents that are taking a little longer to work through COVID-19 resolution given that some of the court systems are still moving a little bit slower than normal and then Additionally, we've seen a few more households are that appeared to be back on their financial feet. After the expiration of rental.
Assistance that we're really excited about that unfortunately weren't able to sustained permanently without assistance.
So that is what you saw drive our fourth quarter bad debt in the one 4% area.
And given just a slow moving timeline on some of these final resolutions.
At this point, we've conservatively assumed that our current level of bad debt in the one 4% area continues over the course of 2023.
But you know our hope is that we may be able to do better than that but just given some of the aspects of that timeline that are out of our control. We wanted to make sure. We started the year with a conservative and prudent view on that timeline.
And Juan this is Brian to answer the second part of your question, we're really seeing it.
It can be divided into really two areas that specific cohort.
A couple of the impacted accounts.
First there are some procedural procedural requirements in Washington that are causing significant delays.
The most concentrated area.
As Chris mentioned, there's really just CT backlogs and the process has been elongated significantly in some other states such as Georgia and North Carolina.
We're working through it as quickly as we can I would hope that we could get it we would have it resolved by now but.
But we are we are continuing to to process and the state of Washington was one of the Washington D C and just for reference.
Thank you. Our next question comes from Josh <unk> with Bank of America. Please proceed with your question.
Yeah, Hey, guys. Thanks for the time.
I guess I wanted to kind of touch base on maybe some of the underlying assumptions in our same store expense guidance.
Just hoping that you guys can elaborate on what your expectations for churn is in the portfolio and then what's embedded as far as turnover cost.
Yeah, Hey, good morning, Josh Chris here.
I don't.
Unpack the pieces just to put all of this in context, and then I'm sure. Brian has some thoughts on a few more of the assumptions of what we're thinking about.
But in terms of major components of the expense guide remember, we're expecting 9% property taxes at the midpoint, which we talked about couple of minutes ago.
And then that comes to about 10% to 11% or so on everything else <unk> driven by a couple of different key considerations first about 20% or so on insurance our insurance renewal, it's still in process of being finalized we're not quite there yet, but it but as we all know the property insurance market is.
It's very challenging right now and we want to make sure we have that factored into our expectations on the year.
Two as I mentioned, a minute ago, a 12% on property management as I mentioned that reflects the inflationary environment the year over year Comping of some of last year's under staff missed at the very beginning of the year and then the investments into our resident 360 program.
And then inflationary like increases on R&M and turn costs are in H O ways in call. It the 7% area or so all of which gets you to the midpoint of $9 75 per cent, but before Brian shares any other color just wanted to remind everyone. When we're thinking about expenses in 2023 don't forget that.
Because our Texas property taxes were under accrued for the first nine months of 2022, which were true up in the fourth quarter of last year. Our 2023 expense growth is going to be lumpy. This year with higher growth in the first nine months, which will then normalize in the fourth quarter into our expected guidance range.
Yes, Josh further regarding our expectations on.
Turnover costs and turnover rates for 'twenty, three we expect occupancy to be similar to 2022.
We're pushing a number of initiatives that Dave mentioned, some operationally to see if we can improve on that turnover rate, but growing at our expectation.
As to be similar to 2022 from that perspective.
A turnover costs, we are still seeing some cost pressures on the capex side and.
Some of those Covid related accounts, maybe more costly to turn there.
And then the normal turns within the portfolio. So those are built into our expectations as well.
Alright, I appreciate that and maybe stepping back this year.
Thinking about it seems like margins on the same store pool are going to shrink is or do you think we're at kind of peak margins or is there additional opportunity to expand my margins in the future across the portfolio.
Yeah, So Sam it's Dave.
So when you look at our 2022 2023 and margins are shrinking a number.
Fair amount of it can be attributed to timing timing of property taxes, where we've seen significant growth in revenues and HPA in prior years and property taxes. As we know he was a lagging measurement tool. So that's a little bit of a catch up tool when you.
Look at margins going forward and one other item I would talk about for 'twenty, two and 'twenty. Three is what you just brought up.
We've already talked about and that is the temporary adjustment to our expectations on bad debts moving forward I would expect bad debts to go back in line to 2019 levels.
The initiatives that we are embarking upon today consistent with all other initiatives that we have done in our history have had a cost upfront and benefits on the back side, whether it's been prior.
Prior enhancements in the early days of our operating platform, whether it is been our development program.
There is an investment cost upfront and then the benefits will accrue to us in the future. So I I see our margins are you know what you are looking at in 'twenty, two and 'twenty three shouldn't be trended are down.
For future years, I would expect that we will see you.
Going back to 2018 19, those trend lines from there taking out the COVID-19 years are being much more consistent way of looking at life.
Okay.
Thank you. Our next question comes from the line of Sam Choe with Credit Suisse. Please proceed with your question.
Okay Sami their tickets online are you on mute.
Oh I'm sorry, Yeah I was on mute can you guys hear me now.
Yeah, Yeah, we can.
Our commitment to technology and resident 360 is pretty much a testament to that I guess, just when you are planning technology initiatives. I know you guys think about the long term. So when we have a backdrop like 2023, when there's an inflationary batch.
Backdrop, I guess more there's some concerns about rolling resident 360 out because I've spent a lot of excitement with what this can do to get there.
But just wondering if you had any concerns about the timing.
Yeah. Thank you this is Brian .
Our resident 360 program is really.
A testament to our long term outlook.
And as Dave mentioned.
Earlier in the call. This is a program that we tested we tested as markets. We really liked the results and we didn't want to wait to roll it out nationally.
The quicker we can get it out the quicker we can optimize it and make sure that those benefits will start to show up on the expense control and retention on.
On the on the technology side.
We have a really good feedback loop within our system within our company, we're listening to what the residents are saying and we're trying to match those needs in those requests with enhancements that we can make to our platform and many times the opportunities lie on technical improvements.
An example is the improvements that we're making and logistics program.
Ties in with how we communicate that with the resident which ties in with our communications initiatives. So we're constantly innovating.
The technology piece is a very important part.
Is it at $3 60.
In direct response to what our residents are asking for.
So we didn't want to wait on it.
Theres really no no better time than to start now.
Got it that's really helpful color and then just looking at your January metrics that you provided I mean, it just shows a lot of resiliency I guess when I'm thinking about the same store revenue guide.
What kind of economic.
Assumptions did you make.
Adding to the high end lows.
For that range.
Sam Chris here in terms of levers to the high and the low range.
I would say, let me, let me take a step back and remind and just kind of unpack some of the components driving the revenue guidance.
Brian touched on this but we're expecting average monthly realized rent this year to grow about 6.5%.
Remember that's driven by last year's earn in and then partial year contribution from this year's leasing spreads, which we expect to be in the 5% to 6% area on a full year basis.
And then on occupancy we see full year 'twenty three being in the 97% area, which is still really really strong just a touch below last year's 97, two that translates into rent revenue growth in the low 6% area add to that about 20 basis points from a contribution from our growing ancillary income programs and about <unk> <unk>.
40 basis points of bad debt drag that we talked about a couple of minutes ago and that'll get you to a midpoint of 6% as I think about you know levers and opportunities up from there.
97% occupancy that that's pretty full that's close but that's pretty close to structurally full occupancy so to us we see the opportunity for upside being on spreads.
Naturally as we've been talking about there is uncertainty in this year ahead 2023 is going to look different in 2022. So we want to make sure that we're starting to here with a prudent level of conservatism in our expectations and recognizing that there'll probably be some level of moderation this year.
Hopefully, we're able to do better than where we're starting the year and if we don't see as much moderation that would naturally be a lever to the upper end of the range and then as I talked about a couple of minutes ago, as well, where we're taking a conservative view to two bad debt at the start of the year as well and so if we're able to to work through some of those remaining resolutions and do better than that.
One 4% or so that's contemplated in guidance at the start of the year that would be another lever to the upper end as well.
Got it thank you.
Thanks Sam.
Thank you. Our next question is from Steve Sochua with Evercore ISI. Please proceed with your question.
Great. Thanks, I guess Bryan could you maybe just talk about what your expectations are for leasing spreads. This year are kind of new renewable blended and how that might trend over the year and Dave could you just maybe re clarify that margin improvement are you, suggesting that that will take place in 'twenty four or could there still be.
I guess expense pressures next year that kind of keep that margin from maybe improving until 'twenty five and beyond.
Yeah, Thanks, Steve I'll start on the rate side.
Our expectations for the full year or for re leasing and renewal.
Spreads to grow in the five to six range.
Pretty close to being in step we had an excellent start to January .
Where we've we've exceeded that of the.
The the guide contemplates.
A little bit of a slowdown as we proceed through the year.
Going to continue to push those rates as much as we can but we're also being conservative in light of the current economic environment.
So five to six for the year blended with known renewals being consistent.
Yeah, Steve It's a to your second question on the resident 360 program in margins and cost pressures. It based on what we saw in the pilot program. It takes about one year to get the program rolled out get the individuals' trained.
Get some of the redundancies that do occur when you rollout initiatives like this behind you. So I would expect that we will start seeing benefits maybe in the fourth quarter, but we would see benefits in 2024 Ah I I don't expect we would see it.
Any material incremental cost from this program in 2024, maybe a little bit of trailing cost at the beginning of the year, depending on how fast it gets rolled out.
But based on what we saw in the pilot program. It took us about one year to start enjoying.
And Jordan enjoying are seeing the benefits of the initiative.
Okay and just one other question on Capex, Chris I don't know if maybe I missed it but did you talk about just what maintenance Capex would be I mean, I know that that's kind of been trending up for us.
You and some of your peers and I'm just wondering what your expectations are for maintenance Capex in 'twenty three.
Yes.
Steve.
I can share thoughts into Brian wants to add any color.
We didn't comment on it in guidance.
But generally speaking you know that the primary driver to two capex is the inflationary environment and as we've talked about before.
You know the highest and best use for our internal labor.
Is is more on the maintenance and turn side not the full system replacement type of work, which is more represented in in Capex, which means that line item is a little bit more susceptible to third party labor and full material inflationary pressures, which is why we saw it in the 20% area in <unk>.
<unk> two.
We'll probably see something like that again in 'twenty three given that we continue to expect another year of strong inflationary pressures in terms of third party labor and materials.
But we're doing everything we can to maintain it and mitigate it and.
Brian can comment as well as resident 360 continues to roll out expanding our focus on maintenance delivery capabilities and bandwidth.
One of the areas of potential benefit there is being able to do more on the capex side as well.
Yeah, Steve This is Dave let me add a couple of things one is.
Our asset management program, which.
Includes our development deliveries and.
As you saw we sold about 1000 homes this year.
The whole thing focuses on many many variables, but one of the variables that you get three year development program is keeping the average age of your portfolio to be younger and that has a benefit on maintaining.
Expenses and capital expenditures as well.
If you look back over the last five years or so I think our E. F. F O as a percent of F. F. O has been 80, 889% very consistent you're right you're in and you're out and I would expect that to be materially the same this year.
With the inflationary impacts impacting our capex.
So.
Yeah.
Our next question comes from Hendel St Juste with Mizuho. Please proceed with your question.
Hey, I guess good morning to you guys out there.
I guess a couple of quick questions from me here of course, you had mentioned the preferred on your list of potential uses for this year are yielding I think over 6%. How are you thinking about that any scenario in which you'd contemplate buying those in this year.
Yes. Good question Hendi ill look at it as something that we watch very closely is something we were watching throughout last year and and and yes. You are correct. There are a couple of theories that.
Or either callable or will become callable.
It is a simple function of relative considerations are comparing to current cost of capital.
Given.
You know some of the volatility in the capital markets currently and where new issue pricing is.
Is you know I think it's probably lower likelihood that we would be calling those and but keep in mind that that is one of the great aspects of preferreds is that they are truly perpetual capital.
With one way optionality to redeem them after we get past call dates and so we will watch it closely the Optionality doesn't go away and when we find the right time in the marketplace relative to our current capital market pricing considerations will look for the best opportunity to take those out.
Got it got it appreciate that.
I wanted to ask you a follow up on the development you guys mentioned, the lower cost in lumber and the expected improvement in yields and timeline. Later this year next year, where are you underwriting new development deals for new starts today versus the 6% bogey you guys have talked about in the past.
Yeah. So today, when we are underwriting new acquisitions, and new developments, where you look at our cost of capital today, and so we would be underwriting in the high sixes or 7%.
Keep in mind, if you look at 2022 fourth quarter.
You'll see that we are being patient and disciplined and I believe that we acquire one lot or one.
One track of land I believe it's 180 lots.
That's because.
At this point, our underwriting we need to get land land development cost and vertical cost in line we extended.
Many many land contracts, we've renewed attempted to renegotiate many land contracts, we obviously did on one.
To get it into an acceptable price range. Let me just just so there's clarity on this these numbers. So we don't have this expectation.
The land that we are developing today that delivers in 2023 that land was acquired in prior years. The land development was done in prior years that cost is incurred what we are seeing in vertical cost on lumber who's one of the items that you mentioned, but also all the other vertical costs we have.
Seen benefits in the last few months, especially from peak pricing back in the second quarter lumber.
Lumber have peak pricing in May.
Lumber pricing was $12 50 today, it's in the low four hundreds per thousand board feet in the futures on random lengths expect that to continue throughout the year.
However.
The way development works is that it's about a six month five to six month time period to do vertical construction, but your contract for your suppliers your labor et cetera. Prior to that so it's about a six to nine month time period. So what we delivered in the fourth quarter of this year would have been a peak pricing that's the stuff that was contracted for.
In may of this year, what we will see going into 2023 has benefits on vertical costs scale in over the year land and land development or already baked in those happened in prior years.
The deliveries this year will not be in the high sixes or low sevens or seven and they will be five and a half scaling up to six is throughout the year, they will get benefit overtime of vertical.
Vertical development pricing benefits.
But it takes time for those to factor in so.
The ones that we deliver at the end of the year will be much greater.
So that.
Wanted to make sure that we don't expect that deliveries that we are doing tomorrow or based on what we're underwriting today.
What we're underwriting today is based on the capital that we employ today.
And we will deliver those probably in 2025, one last point.
But to your question Hondo is that the deliveries that we're doing today the ones that are five and a half to six that capital is in the bank.
So we raise that capital.
When we made the investment decisions.
The equity component of the.
Capital.
So there was some match funding that occurred.
Okay.
Our next question comes from Adam Kramer with Morgan Stanley . Please proceed with your question.
Hey, guys. Thanks for the question.
Wanted to ask about maybe where loss police stands today look certainly recognize there's probably not nearly as it was kind of robust as it was.
Points in 2022, but wondering where were lost or we stand today I think.
Kind of a related question is maybe just kind of on the sequential trends in market rents for new lease growth you know.
Whether it's for came into January for keywords in January into February , but wondering just kind of given normal seasonal impacts, which I think returned in the fourth quarter, what are kind of the sequential trends in market rent growth that you guys are seeing.
Hi, Adam Thanks for the question this is Brian .
We're estimating our loss to lease to be in the 5% to 6% range today.
And in terms of our expectations for new lease growth, we had a really good start to the year.
We see we have a lot of pricing power.
The occupied in great demand.
I'm, hoping that that continues what we've contemplated in our guide is a moderation off of the sevens that we started with.
Finishing the first quarter on re leasing.
<unk>, 7%.
And then a graduate moderation towards the back half of the year.
We're going to do our best to continue to push those new lease rates.
I'm, hoping that demand continues to stay as strong so I'm, hoping to beat that but that's the expectation right now from a conservative perspective.
Great that's really helpful. Thanks, Brian .
Is this kind of a JV kind of side of things I know you kind of expanded this relationship with Jpmorgan and that group I'm, just wondering overall kind of the desire or ability to kind of go further down the JV path, but that's something that you're thinking about looking at are there opportunities there.
Or maybe maybe less so.
Yep, Hey, Adam.
Chris Here simple answer is yes, there are.
Plenty of opportunities, but let me just take a step back.
For more of a higher level strategic standpoint.
As we've shared many times before given the right attractive and accretive opportunities our focus is to prioritize growth on the balance sheet as much as possible.
But with that said, we also believe that our mix of joint venture capital is strategically very important giving us additional opportunity to leverage our platform.
In fixed costs over a larger base of assets with compensation through fees.
Jb's create really unique opportunities for attractive longer term economics via our promoted interests and then very importantly during times of public capital market uncertainty and volatility like right now date strategically provide access to high quality long term forms of capital.
Exactly that thought process and strategy behind the recent agreement to upsize, our joint venture with J P. Morgan asset management, which as a reminder, provides nearly $300 million of increased JV capital capacity that enables us to remain opportunistic on incremental land and.
Belmont opportunities that might not make sense right now relative to our current our on balance sheet cost of capital.
Yeah.
Thank you so much for the time appreciate it Chris.
Thanks, Adam.
Our next question is from game Karl with Wolfe Research. Please proceed with your question.
Thanks for the time guys you know I know, it's touched on a little bit earlier, but as we enter peak leasing season, just kind of curious how demand compares both the last year and pre pandemic levels. You know it was touched on about website traffic and home visits, but maybe where you're at where applications out and kind of how do they compare to previous periods.
Thank you Kian.
We looked at kind of year to date that I've talked about it in the prepared remarks, one of our key metrics as our check ins.
Per rent ready so those are distinct shoppers going into our homes and as I mentioned that was up.
Around 20% compared to a rolling historical average.
That's one component of it and then getting those those check ins to to applications is the next piece. So far this year the application activity and our leasing activity.
Activity has been fantastic.
We're very pleased that how it started continuing through to February we've had.
Good absorption.
Homes into the portfolio.
I'm optimistic that that's going to continue and if it does we'll have really good pricing power coming into the spring leasing season.
One thing that I would expect to see this year potentially as kind of a return to.
More normal sequence, where peak leasing season.
We're allowed to push re leasing rates.
And then really in the first and fourth quarter of the year you see more strength, maybe on the renewal side just to kind of match the way it used to look historically.
But as it sits right now demand is continues to be really strong across all metrics.
The new website has made it easier to navigate especially from the mobile perspective, So we're getting really good feedback from our prospects from that side there.
Onto the website and staying longer and getting to the relevant check in an application pages quicker than they did under the old website. So thats been real positive and we're going to hope to continue to see those benefits as we enter the busy season.
Keegan, it's Dave let me just add a couple maybe more macro thoughts.
But of the marketplace today are nothing has changed from prior periods and that there are still many many households that are looking for high quality housing in this country remains under supplied.
That said a couple of things have changed.
One is that the homebuilders.
The velocity and pace at which they were building new homes has slowed and so the ability to meet that demand has waned a little bit as well. The second is the affordability of a brand new house the mortgage the.
The other ancillary costs that go with homeownership versus the affordability of our rental while they were pretty much in equilibrium for a significant period of time.
Today, if you look at some data out there are you know primarily the John Burns data that we've looked at.
You'll see that it's significantly more affordable to date to rent so it's greater than 20% more affordable, which is a very very significant change from where we were all of that is pretty significant.
Keep significant demand for rental product in the marketplace.
Now keep in mind, we're also in volatile and uncertain times and a little bit of you know.
Pricing pressures on households, but the demand is there and so it's it's just incumbent upon us to capture that demand.
And then shifting gears right now I feel like this is discussed on every call, but it seems like there's just more and more chatter in regulation, yet so far space. Most recently in North Carolina, just kind of curious you know how are you guys thinking about.
Not just the broader regulatory environment, maybe even on a state by state basis, and how that impacts your decisions.
Yeah well.
Keegan I think.
You're probably right that there is a little bit more leased awareness of the political side.
Yeah, and I would say North Carolina, just wanted the states, but there it's not the only state so we see it in Georgia, we see it.
In California, we see it in the state of Washington.
We've been very proactive on the government affairs side, we started a year and a half for about a year and a half ago. A government appears department, we have a government affairs people on our staff.
We invest time at the executive level Torquay too.
Government officials at the federal state and local levels and when you look at a lot of the rhetoric that has come out through <unk>.
Government officials or even in the newspapers.
You will see that we may be listed in the article is in another player in the single family rental industry, but there's not much that has been targeted at us directly.
And that is really having those those good relationships.
Out there and so we will continue to.
Pursue and have those discussions each and every year.
Part of resident 360 <unk> will.
I'll address some of that.
As well not the primary focus, but maybe a secondary ancillary benefit of that program.
So yes. There is there is at least the rhetoric.
At the federal level that is the most visible it's more theater.
Then it is at the local levels, where it's more action. So yes, we have a ground game as well as we're very focused at the federal level as well.
Yeah.
Our next question is from Alan Peterson with Green Street. Please proceed with your question.
Hi, everyone. Thanks for the time I'm, Chris are you able to talk about the appeals process from the assessment you got late last year right. Now does your current expense guide does that assume that you win any of the appeals process that you're currently engaging in.
Yep.
Chris.
Great question.
You know what we've talked about this for years.
We are we are one of if not the most active appeal or a property tax values across the country. We are very very active.
Each and every year a couple of updates last year, we filed 12 to 13 12 to 14000 individual property tax value Appeals.
We had a pretty successful year I think our our actual success rate last year was about 70%.
Our 4% to 5% value reduction based on the successful appeals that we won.
There are still I would call. It a couple of hundred or so open appeals that are rolling from last year into this year I think we've got a pretty good idea of where those were going to land in and largely all of that has been captured into our 'twenty two.
Actuals and.
And as we're heading into 'twenty three we absolutely expect to lean into the Appeals machine again.
And you know hopefully we have another year of good success. There in terms of how we contemplated in our guidance no different than any other year, we always start the year.
With our conservative.
Expectation or a conservative.
Consideration of of likelihood of success, we don't want to be caught on the wrong side of that and so we've got like I said, a conservative estimate factored into 2023, hopefully we can do better than that.
But again, that's not something that we really hear back on until the second half of the year and we'll have to provide updates as we get through the process.
I appreciate that and maybe just following up on your response to Adam's question on the development pipeline I know that Jack had mentioned a couple of years ago that the development program could ramp to 3000 4000, new deliveries on a yearly basis.
The current guidance of 2300 homes is that a capital allocation considerations today or are there any other factors limiting your ability to scale construction.
To that new delivery target.
Yeah.
It's a good question Theres a number of factors. The first answer is three.
<unk> 4000 homes is very doable from an infrastructure and a demand standpoint.
With respect to actually executing on the deliveries.
What we have experienced over the last three years is a.
<unk> slowed down through the Covid years of getting inspectors out to be able to earn and permitting.
At the municipal level of the horizontal or land delivery.
The land development process.
And you need to develop the land in order to be able to.
Do vertical buildings so.
We were set back a little bit on the 'twenty three 'twenty four delivery plan.
Not because of what's happening in 'twenty, three 'twenty four but what happened in 'twenty.
2021 'twenty, two with respect to land development and getting the <unk>.
Sections of that work done.
<unk> into 'twenty five.
Again this is not necessarily COVID-19. This is more the economic and interest rate changes that we saw late 'twenty two.
Which has slowed down our land acquisition pipeline, we're going to grow in a disciplined and controlled way you know we can be patient if we need to we don't need to grow just for adding numbers to you know a infrastructure line.
So what we have seen in 'twenty two as I indicated earlier, we only acquired one parcel in the fourth quarter because of the pricing and what we're seeing in the changing environment. So what we're experiencing today you know probably one of the greatest economic adjustments in a short period of time to me.
That doesn't reflect the long term viability or long term benefits, it's a short term impact.
However in development short term is multiple years, it's not a single day single month, or even a single year and so I think that the opportunity is there I know the opportunity is there to get to three and 4000 homes and maybe even a little bit more.
In the short term a couple of things have happened along the way.
Okay.
Our next question is from Brad Heffern with RBC. Please proceed with your question.
Yeah. Thanks, So how does the supply picture look for build to rent product and are you seeing increasing competition as we sit here today either in terms of elevated listings or anything else that you track.
Yeah on the actual building of build to rent.
I actually see.
That significantly slow.
The the number of people looking to do build to rent, including some of the national builders that we're getting into build to rent have pulled back a little bit.
A lot of the build to rent was a private equity small smaller projects, where they would be doing one or two projects.
One is I think their initial models were a little optimistic.
But the.
The other piece is the economics.
You know that we have talked about that we have worked through and we have economies of scale, we have a vendor rebates et cetera, we're in a different place than they are.
They got impacted so they have slowed we've seen slowing on that side. We have had inquiries from those that are doing build to rent as to whether we would like to partner or acquire those build to rent projects in some cases.
In mid flight the <unk>.
<unk> there is there if we can find the pricing.
To make that an attractive opt.
Opportunity for us.
And then I'm sorry, the other I think there was another part to your question that I may have.
Gotten.
Yeah, just the supply today are you seeing anything like increased listings or that suggest that maybe the competition is more intense right now.
Yeah well.
I don't do increase listings when I hear that.
Brad I think of the MLS market and the MLS market. We are not see we are seeing increased listings from.
A couple of months ago, but the the listings are not at the historical norm levels.
What youre seeing is today there are a number of individuals' households that are over the last couple of years have acquired very favorable mortgage notes loans.
Maybe in the 2% range so their mobility, if they're a homeowner to move and list their homes has been challenged so there's less inventory on the market today.
Today pricing is still a little.
A little higher than I would meet our our yield and an investment targets.
But we are seeing some movement.
And those prices are coming down, but they have a ways to go before they.
They are viable opportunities for us.
Okay. Thank you.
Spread.
Our next question is from Linda Tsai.
Jefferies. Please proceed with your question.
Hi.
Some of it being 20% more affordable to rent and how much does that vary by market.
Oh, it definitely varies by market that 20%.
That we quote is it's actually a little north of that I think it's 24% is the average of our top 20 markets, but obviously it does vary they all are more affordable, but they do vary.
And I don't have the range on my hands Linda.
Got it and then what percentage of your residents are dual income and would you consider tightening your credit standards in the current environment.
Yeah, Linda the majority of our of our residents are I don't know the exact number but it is significantly more than half.
Dual income families.
In terms of tightening the credit requirements were really pleased with.
Our collections, especially when you look at that when you take away the COVID-19 affected residents and Theyre in line with historical norms, So I wouldn't anticipate making any adjustments there.
<unk>.
The residents who have moved in the last couple of years R. R.
Paying and have bad debt, that's very consistent with what we saw pre COVID-19. So I don't think any changes there are necessary.
Thanks, and then just one last one in terms of pushing those new lease rates, where would you like to be occupancy wise ideally if you're at 97%.
And we think 97% is very healthy for the way that we're.
Returning home the speed with which we're able to re tenant them I think it matches the demand.
We're comfortable at that level, where just a reminder, too we look at the revenue line Holistically we're managing.
To maximize revenue across so there's just a little bit of push and pull on rate and occupancy, but I think 97% occupancy.
Is a good target for us this year.
Thank you. Our next question is from Austin, Austin, where Schmidt with Keybanc capital markets. Please proceed with your question.
Great. Thank you and good morning, everybody on the breakdown of development. This year is tilting more heavily towards the wholly owned projects versus last year.
Significant shifts and increase in your funding commitment, but I guess, if the capital markets remain volatile.
Cost of capital isn't where you'd like it to be.
Presumably you won't have the benefit of that accessing equity proceeds that.
You know you guys fortuitous when he did last year. So just how do you think about future funding to keep your share of development funding commitments.
Ramping into future years to get ship moving closer towards that three to 5000 home goal that you referenced earlier.
Yes.
Good morning, Austin, Chris here. Good question, one of my favorite topics a couple considerations here is is one.
You know part of this is is the rationale and thought process behind agreeing to expand our joint venture with Jpmorgan asset management.
Bringing in incremental JV capital capacity to make sure that we're remaining opportunistic on incremental land and development opportunities, but we're as we are existing as we're thinking about the existing wholly owned pipeline as we've talked about many times before we strategically size that to date to be fundable.
Without the need for equity and so if you think about the development of the existing pipeline this year or next year et cetera.
Building out the land that we already have is fundable via a combination of retained cash flow from the business recycle capital a little bit of recycled capital from dispositions and modest leverage capacity off of off of the balance sheet.
With again no need for equity to build out what we have on the balance sheet for our wholly owned pipeline and then expanding going forward will be a consideration relative to current cost of capital considerations and looking for the right sourcing of capital, whether that's on balance sheet or via our joint ventures.
No that's helpful. Chris and then Dave you referenced cap rates in the mid 5% range or 50 basis points inside where they become more attractive to you, but I'm just curious who are the most active buyers you see today at that mid 5% level are you seeing deals get re traded at all and what do you think changes to push pricing in your direction.
As you know today, I think you're on a spot basis in and around or just inside that mid 5% level.
But yeah, just curious about your thoughts there. Thank you.
Yeah, so the the actual buyers today, an institutional level.
Significantly gone to the sidelines most half.
There are a couple of private SF are companies that have started repurchasing at a very reduced level from what they were acquiring at previously.
What we are seeing in the pricing as we are starting to finally see some of that pricing coming down.
The asset values coming down now that that's an interesting statement because it is a very volatile market and we have also seen the pricing of the national builder programs been coming down and then in the last week or two it looks like they've EBIT either moderated flatline.
Or maybe even gone the other way so it continues to go up and down.
This is where you need to be patient. This is where you need to continue.
Continue to underwrite and in all of our markets. This is a diverse why a diversified portfolio being in.
The number of markets that we're in more than 30 markets gives us.
A lot more opportunity.
But we don't need to press to to buy.
And so we need to be patient, we need to be disciplined and those opportunities are closer today than they were our last call <unk>.
90 days ago, or maybe a little more than that.
But.
There is still not there.
And.
And the cost of capital is also a variable that is not constant either it's volatile and and.
Ever changing as well so you got to continually matched the two of them up and evaluate to between the two.
On a month to month basis, we are closer, but we're not that close today.
Thank you. Our next question comes from Daniel <unk> with Scotiabank. Please proceed with your question.
Thanks. Good afternoon question on the development platform following up on hand, Dallas question. So you're guiding to about 1850 wholly owned deliveries. This year at an average 350000 home that's based on a $650 million capital investment guidance, how much of the vertical cost softening that you mentioned eight does that imply bursty.
The stuff that's being delivered today.
Yeah. So the stuff that is delivered today.
Defining today as the fourth quarter of <unk> sure.
Yes. It is.
The vertical the total cost of the deliveries is about 300 in $50000.
And it's about 250000 of that is in.
Vertical I don't have the exact specific numbers, but that's directionally.
Directionally correct, what we are seeing on the vertical cost reductions from peak.
As you know today, we're probably in that 10%, 10% to 15% on vertical alone.
<unk> to get to maybe 20, but keep in mind that doesn't mean that youre going to see a 20% reduction to things that you have to factor in you have to factor in the fact that there's land and land development, so you're going to see.
40.
Oh, I'm, sorry, yes about $40000 of benefit.
Coming through we already are seeing in our acquisition of lumber today about 17 to $18000 of benefit just on the lumber line of what we were contracting nine months ago.
And then other lines throughout the entire development platform.
We have some savings now and we expect to see more savings in a number of those lines.
Overall, we will expect to probably see a 10% reduction on home costs between fourth quarter of last year and what we delivered fourth quarter of next year as long as you comp in and make sure that you are looking at comparable markets. So market mix will have an impact land is more expensive in the west than in the south.
East and so as long as we are looking at a market by market and not to the average of our entire company, it's about going to be about a 10% reduction.
Quarter to fourth quarter.
Yeah.
That's really helpful. Dave. Thank you, Chris a quick follow up how much rental assistance and you received last year and I.
I guess, what's left for if anything for 2023.
It is it's definitely tapering down and last year I'm, just doing some quick math, let's see a less than call. It.
$16 million to $18 million or so for last year.
And that's tapered from call it five to 6 million per quarter.
In the first half of last year down to I think we got about $3 million or so in the fourth quarter.
Hard to predict exactly where it's going to taper to into the first couple of quarters of 'twenty three I would expect us to still be receiving some.
But you know glide pathing down over the course of the year.
Yeah.
Alright, thank you.
Thanks, Dan.
Yeah.
There are no further questions at this time I would like to turn the floor back over to Mr days, England for closing comments.
Thank you operator.
Thank you to all of you for your interest this quarter are kind of a marathon call for US are we will see you next quarter.
Have a great day take care bye bye.
Yes.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.
Yes.
Sure.
Yeah.
[music].
Sure.
[music].
Yeah.
Okay.
Yeah.
Yeah.
[music].
Okay.
[music].
Uh huh.
[music].
Yes.
[music].
Uh huh.
Yeah.
Yeah.
[music].
Hum.
Hum.
Hmm.
[music].
Okay.
Okay.
Yeah.
[music].
Yeah.
[music].
Yes.
Uh huh.
Yeah.
Uh huh.
[music].
Yeah.
Okay.
Yeah.
[music].
Okay.
Okay.
Okay.
Yeah.
Okay.
[music].
Okay.
[music].
Okay.
Yeah.
Uh huh.
Uh huh.
[music].
Okay.
[music].
Yes.
Sure.
Hum.
[music].
Okay.
Yes.
Okay.
[music].
Yeah.
Okay.
Mhm.
Yeah.
Hum.
Mhm.
[music].
Okay.
Yeah.
Okay.
Okay.
Yes.
Yeah.
Hum.
Yeah.
Okay.
Yeah.
[music].
Okay.
[music].
Okay.
[music].
Yeah.
[music].
Okay.
[music].
Okay.
[music].
Uh huh.
Okay.
[music].
Yeah.
Yeah.
Yeah.
[music].
Yeah.
[music].
Yeah.
[music].
Yeah.
[music].
Yes.
Hmm.
[music].