Q4 2022 NexPoint Residential Trust Inc Earnings Call
[music].
Hello, and thank you for standing by my name is Regina and I will be your conference operator today at this time I would like to welcome everyone to the next point residential Trust incorporated fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a.
A question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad.
We would like to withdraw your question Press Star One again I would now like to turn the conference over to Christian Thomas. Please go ahead.
Thank you good day, everyone and welcome to next one residential Trust's conference call to review the company's results for the fourth quarter December 31, 722 on the call today are Brian Mitts Executive Vice President and Chief Financial Officer, Matt Mcgrew, Our executive Vice President and Chief investment Officer, and Don and return it.
Mcdermott, Vice president of asset and investment management.
As a reminder, this call is being webcast through the company's website at <unk> Dot next point Dot com.
Before we begin I would like to remind everyone that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 that are based on management's current expectations assumptions and beliefs.
Listeners should not place undue reliance on any forward looking statements and are encouraged to review the company's most recent annual report on Form 10-K, and the company's other filings with SEC for a more complete discussion of risks and other factors that could affect any forward looking statements.
The statements made during this conference call speak only as of today's date and as such as required by law and that he does not undertake any obligation to publicly update or revise any forward looking statements. This conference call. Also include an analysis of non-GAAP financial measures for anymore.
Complete discussion of these non-GAAP financial measures ease of companies are in the earnings release that was filed earlier today I would now like to turn the call over to Brian Mitts. Please go ahead, Brian . Thank you, Chris and welcome to everyone. Joining us today. We appreciate your time this morning.
Brian mentioned I'm joined with bi.
Greener and Bahner Mcdermott.
I'll call I'll cover our Q4 and full year results and highlights update our NAV calculation and then provide our initial 2023 guidance I'll then turn it over to Matt to discuss specifics on the lease environment metrics driving our performance.
Last year as well as our guidance into the new year and the details on the portfolio.
Results for Q4 were as follows net income for the fourth quarter was $3 8 million or 15 cents per diluted share on total revenue of $69 3 million as compared to net income of $38 8 million or $1 50 per diluted share in the same period in 2021 on <unk>.
Revenue of $38 5 million.
The fourth quarter, NOI was $41 8 million or 40 properties compared to $34 9 million for the fourth quarter of 2021 on 39 properties, which represents a 19, 8% increase in NOI.
For the quarter same store rent increased 17, 3% and same store occupancy was down 20 basis points to 94, 1%.
This coupled with an increase in same store expenses of 15, 3%, which was accentuated by higher year over year comps on R&M turnover costs increased.
But to an increase in same store NOI of 14, 4% as compared to Q4 2021.
For the fourth quarter of 2022 on the same store portfolio were up two 1% quarter over quarter.
We reported core Q4 core SSO and $19 5 million or <unk> 75 per diluted share compared to 69 per diluted share in Q4, 2021, or an increase of 9% per share basis year over year.
We continue to execute our value add business plan by completing 481 full and partial renovations during the quarter and leased 442 renovating units achieving an average monthly rent premium of $184.
Which represents a 23, 1% ROI during the year.
<unk> today is in the current portfolio as of 12 31, we have completed 7633 full and partial upgrades 4718 kitchen laundry appliance installations.
10191 technology package installations, resulting in $149 $47 $45 average monthly rent increased per unit.
Which represents 2% 66, 9% and 37, 2% respectively.
Results for the full year 2022 were as follows.
Net loss for the year ended December 31 was a negative $9 3 million or a loss of <unk> 36 cents per diluted share, which included a gain on sales of real estate of $14 7 million and $97 6 million of depreciation and amortization expense.
This compared to net income of $23 million or income of 89 per diluted share for full year 2021, which included a gain on sales of real estate of $46 2 million and $86 9 million of depreciation and amortization expense for.
For the year NOI was 157 4 million or 40 properties as compared to $128 8 million or 39 properties for the same period in 2021, representing an increase of 22, 3%.
For the year same store rent increased 17, 8% and same store occupancy is down 20 basis points to 94, 1%.
This coupled with an increase in same store expenses of 11, 1% led to an increase in same store NOI of 16, 2% as compared to full year 2021.
We reported core <unk> of 2022 of $81 8 million or $3 13 per diluted share compared to $2 43 per diluted share for 2021, which is an increase of 28, 9% on a per share basis since inception on a diluted CAGR basis core episodes inquiry.
<unk>, 11% annually.
For our NAV based on our current estimate of cap rates in our markets forward NOI, we reported NAV per share range as follows.
$67 46, and the low end $78 15 says on the high end and $72 80 at the midpoint.
These are based on average cap rates ranging from 5% a low end to five 3% on the high end, which has increased approximately 65 basis points last quarter, and 148 basis points year to date to reflect the rise in interest rates and observable cap rates in our markets for.
For the fourth quarter, we paid a dividend of <unk> <unk> per share on December 30th since.
Since inception, we've increased our dividend 103, 9% for 2020, our dividend was two times covered by <unk> with a payout ratio of 49, 8% of core <unk>.
Finally, before we get to guidance I'd like to touch on some of our recent activity with dispositions refinancings and some subsequent events after year end.
On December 29, we completed the sale policy place in Houston for gross proceeds of $36 8 million, representing a cap rate of 437%.
The gain on sale of $14 7 million and the net proceeds of $36 $5 million were used to pay down our corporate credit facility.
During the fourth quarter the company completed a cash out refinance on 19 of its properties for refinance decrease the spread on 17 and refinance properties that were previously variable rates by an average spread of approximately 14 basis points and transitioned to properties that were previously fixed rate mortgages to floating rate mortgages with a spread of one.
25%.
While completion of the refinancing the company paid down approximately $265 million on our corporate credit facility in the fourth quarter.
Additionally, on January 31, 2023, we refinanced the venue, our camelback, which effectively push the maturity date of the mortgage.
July one 2024% February one 2033 two days later on February 2nd the company paid down $17 5 million on our corporate credit facilities.
These new strengthen our balance sheet lowered our financing costs increased maturity of our portfolio and pay down our corporate credit facility, which represents our most expensive capital today the average spread on floating rate debt is one 5% to 6% over sofa, our average maturity of the portfolio of six five years as of today the balance on our <unk>.
Corporate credit facilities $57 million.
Currently have two properties old farm in Stone Creek at Old farm, both located in Houston under contract that we expect to close in the first half of the year.
The estimated net proceeds of $63 4 million will be used to pay down.
The corporate credit facility to zero.
Turning to guidance for 2023, we're issuing initial guidance as follows.
<unk> per diluted share of $3 27 on the high end $2 92 to the low end $3 nine at the midpoint.
Same store revenues are 11, 9% on the high end nine 9% on the low end and 10, 9% of the midpoint.
Same store expenses, we estimate at 10, 3% on high end 11, 2% on a low end the midpoint of 10, 7%.
For same store NOI, we are guiding to 13% on the high end, 9% on the low end and 11% at the midpoint.
So with that let me turn it over to Matt.
Thank you Brian let.
Let me start by going over our fourth quarter same store operational results Q4 same store NOI margin improved to 61, 6% that's up 46 basis points over the prior year period effective rents showed 11, 5% or greater growth in all markets. While same store average effective rent growth reached 11, 5%.
Raleigh, Charlotte Las Vegas, and Atlanta should somewhat more modest rent growth and the 11, 6% to $13 two range, while we saw stronger year over year growth in Phoenix, Dallas, Nashville, and our Florida markets with average effective rent growth in these markets achieving a COVID-19, 7%.
Tampa was our effective rent growth leader for the quarter of 23, 3%.
Fourth quarter same store NOI growth was again outstanding with their portfolio, averaging 14, 4% driven by 13, 8% growth in rental revenue and 13, 5% growth in total revenues, even though experience expense inflation across the board.
Operationally leasing activity and revenue growth showed sustained momentum in the fourth quarter with nine out of 10 same store markets achieving revenue growth of eight 2% or better the top five being Tampa at 18, 8% South Florida at $17 six Atlanta, $16, two Phoenix $14 nine in Nashville $2014 four.
Renewal conversions were 47% for the quarter 49, 6% for the year with seven out of 11 markets executing renewal rate growth of at least 5% and know markets were under two.
The leaders, where Tampa at $10, one Orlando at $9 nine South, Florida, eight eight DFW at $8, three and Raleigh Durham at seven six.
On the occupancy front, we're pleased to report that Q4 same store occupancy remained over 94% positioning us well for 2023 and as of this morning. The portfolio is 96, 3% leased with a healthy 60 day trends of 92%.
For the full year same store NOI margin improved by 112 basis points to 60% same store average effective rents and revenues each increased by 17, 9% and 14%, respectively and NOI held strong across most of the portfolio in 'twenty two with eight of them eight out of our nine same store market is growing.
By at least 11, 2% notable same store NOI growth markets for South, Florida, Nashville, and Tampa at 23, 821, 2% and 24% respectively.
Operationally the portfolio experienced exceptional revenue growth in 'twenty, two with all of our markets achieving growth of at least 8%, 8% or better the top the top five or camp at $18 four south four to $16 eight Nashville at $15 nine Phoenix of $15 four in Orlando at $14 7 million.
Turning to our acquisition activity for 2022.
On the buy side, we acquired two assets in April of last year. The Adair, its 80 screens, Georgia and our states on Maryland in Phoenix, Arizona. These purchases added 562 units to our portfolio for a total purchase price of $143 4 million and provided further opportunity for our rehab pipeline in two of our best performing Mark.
That's further enhancing our next four years of growth and earnings profile.
On the disposition front as Brian said, we saw at Hollister on December 30th of last year generating a 13, 5% Levered IRR for two times multiple on investment and approximately and approximately $21 million of net proceeds used to pay down the balance on the credit facility.
And as previously reported as Brian just mentioned, we are under contract to sell a farm in stone Creek for $135 million.
These sales will generate a 24, 8% levered IRR of two 9%.
$2, 9% multiple on investment and proceeds of $63 4 million to pay the remaining balance on this credit facility down to zero.
Turning to 2023 guidance as Brian said, we're excited to guide to 9% to 13% in same store with a midpoint of 11%.
Cross our same store properties were forecasting a 10, 5% to 12 six rental income growth comprised of the following components.
The $93 five to $95, one physical occupancy with peak occupancy model for Q2, Q3, and Q4 of <unk>.
Five 9% earn and benefit from the outstanding growth in trade outs, we achieved in 2022.
For a 4% to 5% market rent growth in 2023 with $2 three.
3% realized this year.
And an additional one 4% topline growth attributable to value add capex spending.
This equates to $9 nine to 11, 9% total revenue growth on.
On the expense side, we're forecasting a seven 5% increase in controllable expenses comprised of a three 8% increase in R&M and turnover cost a 10, 7% increase in labor of three 9% increase in <unk>.
Advertising, a four 9% increase in G&A.
And for non controls, we're forecasting an increase of 10, 3% to 11, 2% comprised of a three 2% increase in utilities.
$17 seven increase in insurance.
And a 12, 1% increase in real estate taxes.
From a geography from a geographical perspective, we're experiencing and we're expecting particular strength across the following markets notwithstanding real estate tax headwinds in most of them.
We expect Raleigh to grow same store NOI by 16, 5% to 18, 5% due to 13, 13% to 15% budgeted revenue growth and an interior renovation plan for 132 units targeting $240 rent premiums at a low twenty's ROI.
We expect south Florida to grow same store NOI by roughly 16% to 18% driven by 12% to 14% budgeted revenue growth and a continued value add execution with 242 full interior unit upgrades planned targeting $260 written premiums at a mid to high teens ROI.
We expect Tampa to grow same store NOI by roughly 15, 5% to 17, 5% driven by 13% to 15% budgeted revenue growth.
Many value add execution with 112 full and partial interior unit upgrades planned targeting $62 rent premiums here in the low thirties ROI on predominantly lower spin partial brito.
We expect to Orlando to grow same store NOI by roughly 15% to 17% driven by 13% to 15% budgeted revenue growth and a continued value add execution with 107 upgrades planned 217, averaging $200 $215 average written premium and a 20% ROI.
And finally, we expect Las Vegas to grow same store NOI by roughly 40% to 16% driven by 11% to 13% budgeted revenue growth. Our continued value add execution on 162 unit upgrades planned generating $140 average written premium and a high teen ROI.
All of our other markets are expected to see NOI growth between seven 5% to 11, 5% and we see the same economic tailwind as described in our top performing markets.
As you know we continue to be an internal growth business at our core and to that in our guidance includes the following assumptions regarding our value add programs.
We expect to complete 1370 full interior upgrades at an average cost of $13100 $150 per unit generating $214 average monthly premium or approximately 19, 5% return on investment.
We expect to complete 871 partial interior upgrades at an average cost of $5250 per unit generating a 91 average $91 average monthly premium or 18, 6% 18, 6% ROI.
We expect to complete 844 washer dryer installs at an average cost of $1030 per unit generating a $51 average monthly premium or 47% return on investment.
We expect to complete 3150, additional smart home technology packages generating a 40 to $45 average monthly premium and.
And a 48, 8% return on investment.
Now for a brief overview of our 2023 acquisition and disposition guidance, we're assuming zero zero to $250 million in acquisitions.
Obviously as widely reported with institutional capital largely remaining on the sidelines there has not been many attractive buying opportunities.
<unk> plus given our cost of capital, we prioritize balance sheet cleanup stock repurchase repurchases and internal growth over external growth pursuits.
On the disposition front that we fit a few times here with the Houston market exit well on its way again, we expect to complete the disposition of old farm ins to increase of $135 million.
Gross proceeds in an early Q2.
Disposition activity could reach the higher end of our range later in the year. If we're able to identify assets that can be accretively added via tax efficient capital recycling strategy that you guys have seen us do over the past few years.
As Brian mentioned, we remain transparent on our NAV.
We have adjusted.
Downwards to a midpoint of $72 83 per share that's using a five five cap rate on 2023 NOI at the midpoint.
So in closing so far in 2023, we're off to a good start we are expecting to see continued strength and resilience in the middle market rental housing.
And as we enter as we enter this year. We are optimistic that 2023 will be another year of strong performance, we feel we're positioned to both withstand a downturn.
Still poised to growth that's all I have for prepared remarks I appreciate our team's work here at <unk> to FERC for the execution.
Great. Thanks, Matt.
Let's go ahead and turn it over for questions I think we got a couple of our to queued up.
At this time I would like to remind everyone in order to ask a question simply press Star then the number one on your telephone keypad. Our first question will come from the line of Sam Choe with Credit Suisse. Please go ahead.
Hi, guys I'm on for Tayo today.
Just wondering if you could share your thoughts on how when you guys framed out the guidance how.
How you think about the economic outlook in the leasing environment that went into the higher high end and low end.
The guidance range.
Yeah, I'll take it as Hey, Sam.
The economic environment.
As largely the NOI assumptions, so we think that the range of nine to now.
9% to 13% is fairly tight and represents our view of the strength in the middle market housing and any weaknesses, we'll see will be on the lower end. The variability that you see in the core <unk> numbers are largely based on interest expense and the wide range is due to the fact that we shocked each side by 50.
Base points on the surfer curve and we just felt that given the volatility in the current environment that we'll have over the next quarter or so with.
With the fed meetings that that was appropriate now as we go.
Forward throughout the year, we'll be able to tighten that we expect that we will be able to tighten it.
Hopefully achieve the higher end.
Yes.
Got it got it maybe switching gears to the leasing side.
On the renewable side.
What have the conversations been like with the residents.
Seeing more pushback from these people some people are noting financial hardship.
Anecdotally that's interesting might be.
I would love to hear that.
Not so much.
The conversations I think are fairly easier than they were in the second and third quarters of last year.
When.
You're increasing residents in the teens and even low 20, so we're sending out notices in the.
Mid to high single digits on the renewals today.
Yes, when they're largely being absorbed without.
Joe without any pushback.
Okay got it thank you.
You bet.
Your next question will come from the line of Michael Lewis with <unk> Securities. Please go ahead.
Thank you.
The same store growth guidance, obviously is very high.
Just wondering if there was anything notable driving that such a.
Change in composition of the pool.
Units coming back online that were may be out of service the impact of the of the unit upgrades.
Or maybe a better question is how much a unit upgrade program is contributing to that same store revenue growth.
Okay.
Yes, it's about.
About 2% Michael.
From from additional Capex spend.
<unk>.
The other I think strength in the numbers comes from our earn in the stronger the strong increases throughout the year of last year that number has been reported through our peer group to be in the.
Four to five range, we're just a little bit higher.
Just short of six.
With that benefit and tailwind behind us.
Throw some capex on it and then just.
Dearth of affordable housing we feel like this is.
This is appropriate.
Gotcha, and then you talked about this a little bit but any color you can provide on January and February so far. So I think you said occupancy was up to 96, 3% today I think that was 94, 1% for Q.
So that's a really big move any color on.
What's happening there and I think you talked about rent spreads a little bit so we cover that.
Yes, you bet.
96, 3% number was the least percentage the occupancy is still in the low 90 fours.
Sorry, if that wasn't clear.
Blended numbers for for Q1, so far has been pretty strong off a little bit from from Q4, but in the mid 4% to 5% range, 40% to 5% range excuse me.
Perfect. Thank you very clear I think yes, I think you did.
Thats My thought and then just lastly.
And you're probably not able to I don't know if youre able to comment on cap rates on the two properties under contract to be sold you already gave a lot of details on that but my question. I guess is more about it sounds like there is still strong investor demand for your assets, even though we heard a lot about transaction market slowing due to wide bid ask spread sounds like youre not seeing that week.
And pricing.
For the year.
Comment on the transaction environment I know you've adjusted your cap rates in your <unk>, a little bit, but what are you seeing kind of on asset pricing.
Yes.
I think that for.
We can we can comment on the on the pricing for the final two those restructured about a 49.
<unk>.
I think that we caught we caught a little bit of the the oil revival in some interests. When there was probably a scarcity premium.
I don't think that that number hits today I, just we just don't see any any sort of transactions at all right now that are.
That are out there that are attractive and the ones that are out there are that are attractive often often have.
789 years of in place Assumable debt.
That was put on in the lower time since <unk>.
Yes to the extent, we see one of those will we'll check it out but there is that they're just not I mean, I would say that the volumes are down.
60, 70% year over year in the first quarter. So.
I think that we'll see some some capitulation from sellers at some point in Q2, hopefully that comes in line with the fed meeting and where they see that where they see interest rates going in a mid a pivot or a pause.
But I think until that time.
You just won't be able to price that.
You will be able to price that in.
What we need just need certainty of a range.
And the debt markets.
And until we get that I don't think we'll have a lot of activity.
Okay makes sense, thanks, a lot.
You bet.
Your next question will come from the line of Tayo Okusanya with credit Suisse. Please go ahead.
Hi, yes.
Good morning, everyone.
So the.
Any of these again I appreciate all the transparency to give on that the five five cap rate that you are applying.
Can you just talk walk us through a little bit, but again as you mentioned has done a lot of transaction activity, but how do you kind of come up with.
That is kind of the appropriate cap rate because again it does indicate some cap rate decompression versus the last time, you provided us that number but just curious how you got comfortable with that.
Yes, you bet.
I think it's best informed by by the brokerage community even as imperfect as it is we are still getting <unk> on our assets and so really it's a calculation tayo of of what a new buyer in the brokerage community.
In the brokerage community's view.
Would need in terms of a return.
For free.
Free they're levered IRR Unlevered IRR basis.
And.
Today, if thats, probably six 5% to 7% Unlevered IRR.
Which equates.
Basically with with with cash flow and using a reasonable terminal cap rate exit in a five year hold equate.
Equates to about a five to 553.
Yes.
Maybe that's overly simplistic but.
These are these are coming from the still the CBRE is the <unk> of the world.
They're on the front lines up transactions, notwithstanding theres not many of them, but that's.
That's their view.
I tend to agree with it.
Gotcha Thats helpful.
And then.
From a rent control perspective, again, a lot of conversations and a lot of CBD markets about this I mean on the margin maybe that sums up in Orlando, Florida, but just curious in your market.
<unk> Bubbling under any potential impact it could have on your portfolio.
Yes.
Not really.
We're fairly we think we're fairly still insulated from for most of it given the geographical footprint of the portfolio. Yes. We are we are monitoring the.
The Florida legislation or the La Florida proposals.
Pretty carefully, but I think those have a long way to go and sort of in October .
I've told battle.
We also are aware of the white house's proposals and what have you.
Across our all of our businesses I think the lightening stick or the lightning Rod. If you will is more focused on single family rental right now than.
And then multi so.
It's something we're aware of and monitoring, but we don't see it impacting our portfolio as it sits right now.
Great. Thank you.
You bet.
Your next question will come from the line of Buck Horne with Raymond James. Please go ahead.
Hey, Thanks, good morning, guys.
Just wonder if you could talk a little bit about the capex budget for the coming year and also just the spending that was particularly the maintenance capex side of things you guys gave great detail on kind of the rehab expenditures, but.
Far as maintenance Capex during the numbers were up pretty big this year and just kind of wondering what you guys are thinking about for next year and this year I'm sorry.
Okay.
Yes, Paul you would take out.
Yeah, Bob I'll take that so as we look at this year I think going in year over year, we see roughly the same in terms of the ROI generating capex for interiors, we've got an assumption on all of the.
38 assets exited the two Houston deals we have activity at each each property in every market.
In terms of where we see I think the.
Year over year recurring Capex, I think we see that number being pretty stable.
I think.
Really 2022 was a kind of returned to normal post COVID-19 environment for R&M and turn costs we've seen.
As Matt mentioned about 50% retention, so we had a little bit higher.
Year over year turn cost then I believe 2021, we're more in the kind of 56% range return.
Our term retention sorry so.
I think that where we see things today, we're doing what we can to control the expense side of the equation. We're also seeing.
Given I think the elevation in construction costs.
Kind of shut off of the supply pipeline there given the cost of capital in the market, we are seeing a little bit more ability to negotiate price with vendors and thats been helpful. There isn't a larger availability of workforce now to help us out. So we feel like the outlook is good we have a healthy free cash flow.
Number I think that as you look at the year, we're we're targeting roughly 25% or $25 million of free cash flow after.
All of the all the Capex and we expect to use that to the extent that.
There is an opportunity to buy back stock to deleverage et cetera. So we feel good about the outlook overall.
Okay. That's helpful.
In terms of the stable just to clarify when you're talking about stable.
Recurring.
Capex does that include.
I guess you guys have a category called nonrecurring maintenance Capex do you think that stable as well or any other kind of nonrecurring items, we should be aware of.
We do we do you think thats sustainable.
As Matt also mentioned talking about acquisition and disposition activity for the year.
As is kind of a tradition for us we look at the <unk>.
Bottom, 10% of the portfolio that may have some of that greater kind of deferred maintenance and nonrecurring capex and those are typically the assets that we'll look to to the extent that there's a bid out in the market that we like take advantage of so as to avoid.
That kind of seven to 10 year deferred maintenance capex in the big ticket items, so where it doesn't conscious of that we think that.
The majority of the portfolio is done through the kind of repositioning phase and we've taken care of a lot of that deferred and we look to manage that effectively but yes, I think that the.
Capex outlook for this year is pretty stable year over year.
Capex, we continue to hit those 20% ROI targets.
We continue to get get the premiums I know we've seen some elevation in the cost of full interior upgrades, but I think that that really speaks to our ability to attract a higher demographic. So we're spending more but we're.
Florida market generating 300 cost dollars premium on those upgrades. So the end justifies the means.
Yes.
Scott just to add to that.
The R&M capex.
The increase that we're modeling for this year increase.
Increase just the recurring numbers five 1% as our as our increase there.
Got it alright.
Alright, perfect. That's very helpful. One other one for me if I can sneak it in is just thinking through the again going back to the same store revenue guidance.
The details you provided there, but it sounds like.
Blended lease rates, new and renewals is that you're still kind of seeing a sequential deceleration.
Again, you were kind of in the.
Low six range and during the fourth quarter it sounds like it's down to between four and 5% through February .
Which is kind of now in line with what Youre thinking market rent growth for the year is it going to be kind of curious do you think that.
What's giving you the confidence that market rates are going to stabilize in that four to five range and not continue to decelerate.
<unk>.
The difficult year over year comps and potential supply pressure out there.
Yes, it's a good question.
One that I think we're we're prepared for.
The market does.
Submarkets were in notwithstanding the fact that the.
The markets, we're in you're right. They do have a ton of supply.
So.
The other guys in the team dug down a little bit a little bit better and Doug Doug.
Dug into the Submarkets in our Submarkets, whether it's Atlanta.
Atlanta that has.
8% inventory growth and 23000 deliveries, there's only 286 and our sub market.
In Marietta in Sandy Springs, So that's.
That's an example, and then there is let's call it let's take Dallas for example, which is historically high.
<unk> 36 40000 deliveries.
Our submarkets are cumulatively cumulatively seeing deliveries this year.
3700, so we're largely suburban largely affordable the recurring resident burden is still at a delta between class a and SLR that's $4 five $600.
Away from us so.
I don't think its too much to ask for too much to underwrite that Florida, 4% to 567%.
Okay, Alright, thanks, guys.
You bet.
Your next question will come from the line of Michael Lewis with <unk> Securities. Please go ahead.
Okay. Thanks.
I'll jump back in the queue, because I was really right in our note. This morning I have been critical about your leverage or at least concerned about what it's going to mean for your earnings growth and we're seeing some of that in your 2023 guidance.
So maybe this isn't the right way to think about it but more than half of year 2023, <unk> is going to be coming from interest rate swaps.
Fortunately a lot of those swaps don't burn off until 2026, and Youre, obviously doing a lot of good work to address this drag.
Higher interest expense is going to be but I guess.
Do you think it's going to be possible to grow earnings over the next 10 full years when those hedges expire.
What if anything else beyond what you've already done.
Are you looking at doing to kind of position yourself between now and then.
Yes, I think it's a good question.
Yeah, we think about it a little bit differently and it's the way we've always thought about it and this isn't the first.
Run up in interest rates.
That we've been through and I think the system the fastest that it's been.
Tinsley in history so.
We should be a little bit of the benefit of the doubt there.
Our view has always been that were in internal growth and capital recycling company, we're going to fix it we're going to we're going biotechs, and we're going to solid and recycle the capital and grow NOI that way and in our experience the.
The best way to do that is to put on flexible interest rates are.
Our flexible debt that allows us to sell and not have a bunch of transaction or defeasance or yield maintenance cost.
In our experience that having having fixed rate debt like that is.
Eroded a lot more value or as much value.
As we've seen elsewhere so.
That's just our philosophy and to the extent that you are in 2024 2005 2026.
New buyer, whether it's on an individual asset or the company or portfolio.
They will dictate their own financing and we just think that that's valuable that's just more valuable it provides more flexibility more optionality.
The marketplace and in the meantime, we're going to do our best to continue to hedge the near term interest rates.
The best we can.
Okay. Thank you.
I will now hand, the conference back over to management for any closing remarks.
Now thankfully they produce quality questions I appreciate everybody's participation involvement.
We'll stay in touch.
Sure.
Thank you. Thank you.
Ladies and gentlemen that will conclude today's meeting. Thank you all for joining you may now disconnect.
[music].
Yes.
[music].
Yes.
[music].
Sure.