Q1 2023 Mid America Apartment Communities Inc Earnings Call

Disappoints will be in a listen only mode afterwards.

Company will conduct a question and answer session.

As a reminder, this conference call is being recorded today April 27th 2023.

I will now turn the call over to Andrew Schaffer, Senior Vice President Treasurer, and director of capital markets of MAA for opening comments. Please go ahead.

And good morning, everyone. This is Andrew Schaffer, Treasurer, and director of capital markets for MAA members of the management team also participating on the call with me. This morning are Eric Bolton, Tim Argo, Our Campbell, Rob Delpriore, Joe for Ikea, and Brad Hill before we begin with our prepared comments. This morning, I want to point out point out that is.

Part of this discussion company management will be making forward looking statements actual results may differ materially from our projections. We encourage you to refer to the forward looking statements section in yesterday's earnings release, and our 34 Act filings with the SEC, which describe risk factors that may impact future results. During this call. We will also discuss certain non-GAAP .

<unk> measures a presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data our earnings release and supplement are currently available on the for investors page of our website at Www Dot MAA AAC Dot com.

A copy of our prepared comments and an audio recording of this call will also be available on our website. Later today. After some brief prepared comments the management team will be available to answer questions I will now turn the call over to Eric.

Thanks, Andrew and good morning, as detailed in our earnings release first quarter results were ahead of expectations as solid demand for apartment housing continues across our portfolio.

With the trends that we've seen for the past couple of years solid employment conditions positive migration trends in the <unk>.

High cost of single family ownership are supporting continued demand for apartment housing across our portfolio.

And while new supply deliveries are expected to run higher over the next few quarters, we continue to see net positive absorption across our portfolio.

We believe that MAA is more affordable price point, coupled with a unique diversification strategy, including both large and secondary markets.

Further supported by an active redevelopment program will help mitigate some of the pressure from higher new supply in several of our markets.

As outlined in our earnings release, our team is capturing steady progress and strong results from our various redevelopment and unit interior upgrade programs.

We are on target to complete over 5000 additional unit interior upgrades. This year. In addition to completing installation of new smart home technology for the entire portfolio.

We're also making great progress with our more extensive property repositioning projects with the projects completed to date, capturing NOI yields in the high teens on the incremental capital investment.

These projects coupled with a number of new technology initiatives should provide additional performance upside from our existing portfolio.

Our new development and lease up pipeline is performing well and we remain on track to start for new development projects later this year.

Our various lease up projects have achieved rents that are close to 11% ahead of pro forma.

We did not close on any acquisitions or dispositions during the quarter, but continue to believe that transaction activity will pick up over the summer and have kept our assumptions for the year in place.

The portfolio is well positioned for the important summer leasing season total occupancy exposure at the end of the quarter, which is a combination of current vacancy plus notices to move out is consistent with where we stood at the same point last year. In addition, leasing traffic remained solid with on site visits and <unk>.

Paris into the number of exposure units that we have is actually running slightly ahead of prior year.

<unk> of new leasing tools that we implemented over the course of last year should continue to support stronger execution and our teams are well prepared for the upcoming summer leasing season.

I want to thank our associates for their hard work over the last few months to position us for continued solid performance over the balance of the year.

That's all I have in the way prepared comments I will now turn the call over to Tim.

Thanks, Eric and good morning, everyone.

Same store growth for the quarter was ahead of our expectations with stable occupancy low resident turnover and revenue performance slightly ahead of what we expected blended lease over lease pricing of three 9% reflects the normal seasonality pattern than we expected.

And while we did return to a more typical seasonal pattern in Q1.

It is worth noting.

Lisa release pricing captured was higher than our typical Q1 performance.

As discussed last quarter, we expected new lease pricing to show typical seasonality and that the renewal pricing, which lag new lease pricing for much of 2022.

We'll provide a catalyst to first quarter pricing performance. This played out as expected with new lease pricing down slightly negative <unk>, 5% and renewals increasing positive eight 6% alongside the strong pricing performance average daily occupancy remained steady at 95, 5% from the first quarter.

Contributing to overall same store revenue growth of 11%.

The various demand factors, we monitor were strong in the first quarter and continue that way into April 60 day exposure, which represents all current vacant units.

With notices to vacate over the next 60 days.

At the end of Q1 was largely consistent with prior year at seven 7% versus seven 9% in the first quarter of last year.

More in the first quarter lead volume was higher than last year and quarterly resident turnover was down driving the 12 month rolling turnover rate down 30 basis points from 2022.

April to date trends remain consistent as exposure remained in line with the prior year and occupancy has remained steady at 95, 5% blended.

Blended lease over lease pricing effective in April is four 1% with new lease pricing beginning to accelerate up 110 basis points from March at plus 2% and renewal pricing remaining strong at seven 9%.

We expect renewal pricing to moderate against tougher comps as we move into the late spring and summer, but simultaneously expect some seasonal acceleration and new lease over lease rates, we expect new supply in several of our markets to remain elevated in 2023, putting some pressure on rent growth, but as mentioned the various demand indicators.

Strong and we expect our portfolio to continue to benefit from population growth New household formations and steady job growth. In addition, we expect resident turnover remained low at single family affordability challenges support fewer move outs.

MAA is unique market diversification and portfolio strategy, coupled with a more affordable price point as compared to the new product being delivered also helps lessen some of the pressures surrounding higher new supply deliveries.

During the quarter, we continued our various product upgrade initiatives. This includes our interior unit redevelopment program, our installation of smart home technology, and our broader amenity base property repositioning program.

For the first quarter 'twenty three we completed over 1300 interior unit upgrades and installed over 18000 Smart home packages. We now have about 90000 units with smart home technology, and we expect to finish out the remainder of the portfolio in 2023.

For our repositioning program leases have been fully or partially reprice of the first 13 properties in the program and the results have exceeded our expectations with yields on cost in the upper teens. We have another set of projects that will begin repricing in the second and third quarters and are evaluating an additional group of properties to potentially begin construction later.

2023, those are all my prepared comments I'll now turn the call over to Brad.

Thank you, Tim and good morning, everyone.

While operating fundamentals across our platform have remained consistent as Tim just outlined transaction volume remains muted due to a lack of for sale inventory on the market.

For high quality, well located properties bidding is strong and available capital as aggressively competing in order to win the bid and put capital to work.

This strong relative investor demand, coupled with often favorable in place financing.

Continues to support stronger than expected cap rates on closed transactions.

Having said that we believe the need to sell increases as the year progresses, and it's likely that more compelling acquisition opportunities will materialize later in the year.

Therefore, we have maintained our acquisition forecast for the year, but it pushed the timing back a couple of months our acquisition team remains active in the market and al and his team have our balance sheet in great shape and ready to support our transaction needs.

The property is managed by our lease up team continue to outperform our original expectations generating higher earnings and creating additional long term value.

To date, our new lease up properties performance does not appear to be impacted by increased supply pressures as Eric mentioned these properties have achieved rents nearly 11% above our original expectations. During the first quarter, we began pre leasing at our novel DAYBREAK community in Salt Lake City in early leasing demand is extremely strong with the property currently.

11, 5% pre leased at rents well ahead of our expectations.

Pre development work continues to progress on a number of projects four of which should start construction in the back half of 2023.

Two in house developments, one located in Orlando and one in Denver and to pre purchase joint venture developments, one located in Charlotte and the other phase III.

West Midtown development in Atlanta.

During the first quarter, we purchased a phase II land site to our packing District project in Orlando, Florida, bringing our future development projects owned or under construction to 12, representing over 3300 units.

Over the past few months.

We have seen an increase in inbound pre purchase development opportunities due to a substantial decline in the availability of both debt and equity capital for new developments we remain.

Disciplined and selective in our review process, but we are hopeful these calls will lead to additional currently unidentified development opportunities.

Any project, we start over the next 12 months to 18 months would likely deliver in 2026 or 2027 and should be well positioned to capitalize on what we believe is likely to be a much stronger leasing environment.

Reflective of the significant slowdown in new starts that we expect to continue to see over the balance of 2023 and 2024.

Our construction management team remains focused on completing and delivering our six under construction projects and Theyre doing a tremendous job managing these projects and working with our contractors to minimize inflationary and supply chain pressures on our development costs and our schedules. We have two projects that will be delivering units during the second quarter novel.

They break and Salt Lake City, which delivered six units late in the first quarter and novel West Midtown in Atlanta.

That's all I have in the way of prepared comments, so with that I'll turn it over to al.

You, Brad and good morning, everyone.

<unk> per share of $2 28 for the quarter was <unk> <unk> above the midpoint of our quarterly guidance about half of this favorability was related to the timing of certain expenses, which are now expected to be incurred over the remainder of the year primarily related to real estate taxes operating fundamentals overall were slightly favorable to expectations for the quarter producing about a penny per share of <unk>.

<unk> and the remaining outperformance is related to overhead and interest costs for the quarter.

Our balance sheet remains in great shape, providing both protection from market volatility and capacity for strong future growth.

We received an upgrade from Moody's during the quarter, bringing our investment grade rating to the eight three or a minus level with all three agencies, we expect a favorable ratings to have a growing positive impact on our cost of capital as we worked through future debt maturities.

During the quarter. We also closed on the settlement of our forward equity agreement, providing approximately 204 million net proceeds towards funding our development and other capital needs.

We funded $38 million redevelopment repositioning and smartly and installation costs during the quarter producing solid yields. We also funded just over $65 million of development cost during the quarter toward the projected $300 million for the full year.

Brad mentioned, we expect to start several new deals later this year and early next year likely expanding our development pipeline to over $1 billion.

For which our balance sheet remains well positioned to support.

We ended the quarter with record low leverage our debt to EBITDA of three five times.

With over $1 4 billion of combined cash and available capacity under our credit facility with 100% of our debt fixed against rising interest rates for an average of seven seven years and with minimal near term debt maturities.

And finally in order to reflect the first quarter earnings performance, we are increasing our core <unk> guidance for the full year to a midpoint of 911 per share which is <unk> <unk> per share increase were also slightly narrowing the full year range to 893% 99 per share given.

Given that the majority of the Q1 same store outperformance was timing related and the bulk of the leasing season is ahead of US we are maintaining our same store guidance ranges as well as all of the key ranges for the year. So.

So thats all we have in the way of prepared comments of Colas, We will now turn the call back over to you for questions.

Of course, we'll now turn the call back over to you for questions.

Absolutely.

We will now open the call for questions. If you would like to ask a question. Please press Star then one on your Touchtone phone.

I would like to withdraw your question you May press the.

The pound key.

We will pause a moment to allow questions to queue.

And we will take our first question from.

Kim John .

With BMO capital markets. Your line is open.

Thank you.

Thank you, Eric and Tim both mentioned in your prepared remarks.

That the more affordable price.

<unk> is one of the Green light from.

Strong demand and.

I'm wondering if there's any notable difference between your.

The.

Product.

And the performance.

Yes, John This is Tim I mean, we are we are seeing a little bit of diversion not significant I would say in Q1.

Or what you might call or be more b assets were about 70 basis points or so higher on blended pricing versus more.

And so I think part of it is some of the price point and certainly.

To the extent, we see some supply pressure more and Thats again, typically in the more urban or a style types of assets.

Okay. My second question is on the premiums that youre getting on renewals.

New leases signed.

I think it was 900 basis points in the first quarter, a little bit lower than 800 basis points in the second quarter. So far.

It seems like a record amount as far as that Youre getting and I'm wondering when do you think it goes back to the norm and what level do you think.

Fair.

<unk>.

Thank you Mike.

Yes, I mean, we.

We talked about a little bit last quarter that we knew with kind of unusual circumstances of last year, where new lease pricing was ahead of renewal pricing for the bulk of 2022.

With some good comps and some opportunity on the renewal side, particularly in the first call. It five six months of 2023 and so that's that.

What we've seen I think as we get a little further and Youll see it moderates more normal I think probably get down to the 6% range over the next few months, but don't expect it to be.

Two volatile, we still think renewables will outpace new leases, but get into a little bit more normalized range.

That's great color. Thank you.

And we'll take our next question.

Austin.

Thanks.

Keybanc capital your line is open.

Hey, good morning, everybody, Yeah, Eric you have highlighted that the price point and it does provide us some interim installation as it relates to new supply.

And certainly job growth has surprised to the upside earlier this year, if we start to see job growth slow.

Does that become more concerning is supply again begins to ramp and does pricing power.

Just become more challenging for you.

Later, this year and maybe into early 2024.

Well.

And certainly if we see the employment markets pulled back in any material way.

That will have an effect on demand at some level I think that.

We've been through those periods before where the employment markets.

Get get much weaker and there is no doubt that such a scenario does.

It has an effect on demand having said that.

We're in I think a unique all these cycles have their is their own sort of unique elements to them and in this particular cycle.

What we see happening in the single family market and the.

The lack of single family affordability.

Is clearly working in our favor right now and I would also suggest to you that in the event of a recession, where there is weakness in the employment markets.

What really helps us.

So on a relative basis I think is the fact that we are oriented in the sunbelt I think these sun belt markets have demonstrated historically.

<unk> ability to weather a downturn.

More so than some of the <unk>.

Higher density coastal markets, they tend to be more dominated by.

Financial services.

Insurance and banking.

The diversification that we have an hour there is one of the slides in our presentation deck.

But you can look at the latest presentation deck that really gives some insight on the diversification we have not only a market, but also in the employment sectors that we that we cater to that our residents.

Work in and I think that diversification coupled with the sunbelt some of the other things that are relating to single family and so forth.

Well I think a recession certainly creates concern.

Wherever body.

In the apartment sector I think that.

I am confident as we have historically always done in downturns that will likely hold up better.

That's all very helpful. And then just for my follow up for projects that are in lease up today have you kind of have you seen any slowdown in the pace of lease up our absorption for those and where concessions today.

Four.

For assets in lease up thank you.

Hey, Austin this is Brad.

We really haven't seen any impact negative impact associated with with supply pressures on our new lease ups and generally thats, where you think we would see it first.

We've got six or so projects that are in lease up right now.

Concessions on those we typically model about a month free I'd say on three of those we are using some concession maybe up to a half a month free we're not using before concessions that we underwrote and we're not seeing the need to.

Just generally based on what we're seeing in the market and I would say our traffic continues to be really good on all of our lease ups.

The leases were signing.

<unk> is really really good so we're not seeing any early indications yet, but that new supply is having an impact there.

Thanks, everybody.

And we'll take our next question from Chuck.

With.

With Goldman Sachs. Your line is open.

Hi, Good morning, Thank you for taking my question.

You guys talked about in your prepared remarks that cap rates are still going strong for good quality product could you remind us where they are tracking at the moment and then as you think about your own opportunity set down the line as you think about distressed.

Opportunities emanating from the current supply situation in lending markets.

Cap rates need to be for you to be comfortable.

Buying and getting into market.

Yes. This is Brad ill certainly jump on that.

We continue to see cap rates call. It in the four seven and $4 75 range for assets that fit that description well located strong markets.

Interestingly in the first quarter I mean, we only had seven data points. So again, it's the volumes down call. It 70% year over year. So we don't have a whole lot of data points, but interestingly the band of those seven trades is pretty close together so.

Which we haven't seen that historically.

I would say for us cap rates definitely need to be over five five and a quarter five five something in that range, but I would say, it's really going to depend on the asset what the rent trajectory looks like.

We're also looking at.

The after Capex.

What it looks like in that in that nature as well, so that's pretty important to us.

And I would say where opportunities might come for us are going to be properties that are early in their lease up.

That's where some of these developers tend to get a little.

Little bit more stress.

And their underwriting and in their performance as some of the supply in our markets begins to come online.

Some of these less experienced operators that are operating some of these new lease ups could potentially struggle a bit to lease up those assets and so I do think that's going to be an opportunity for us and in fact, thats really what our acquisition forecast is built on is buying.

Assets that are in there.

So stage of lease up.

That's very helpful. Thank you and for my follow up as we think about new supply from a geographic standpoint, what are the markets, where you're seeing most pressure.

And how are you thinking about balancing occupancy versus pricing in those markets.

Thanks, Sean interest right.

Right now I'd say.

Austin is probably the number one market in terms of where we're we're seeing supply.

And Phoenix to an extent, where <unk> seen a little bit honestly, some of the higher supply markets, where sand like Raleigh and Charlotte.

Charles Center are three of the markets, where we're seeing a fair amount of supply have also been some of our best pricing market. So far this year. So.

I kind of laid out earlier, we're not seeing a lot of pressure yet from supply we are still getting the job growth and demand there is pockets here and there but.

Now as we did in Q1, we're happy to keep pushing on price, where we can our occupancy.

A stable point.

A lot of things, we monitor is kind of leading edge demand indicators, but.

Still still in a healthy balance right now.

Sure.

Great. Thanks for taking my question.

Yes.

We will go next to me.

Michael Smith.

Your line is open.

Yes.

Good morning, Thanks, a lot for taking my question.

Earlier, you talked about.

B product outperforming in product on a portfolio level.

I was wondering if we can dive into a market or two and just kind of.

Better understanding some of the dynamics of what Youre seeing.

AG products versus the <unk> product and then also within that we talked about.

The larger markets deteriorated versus the smaller markets versus.

Versus the performing differently.

The smaller ones.

Yes.

Fairly consistent I would say Atlanta is probably.

Good example, where we have quite a bit of diversification. There. We've got several assets kind of intown, Midtown buckhead and that a lot of assets outside of the perimeter and we're pretty consistently seeing.

Suburban assets performed better than those more urban assets and thats playing out relatively consistent across some of the markets. We are seeing.

What you might call our secondary markets performed pretty well I mentioned, Charles said, a moment ago Savannah Greenville. Some of these more secondary markets are holding up very well and doing really well in terms of pricing.

That's part of the strategy I mean, typically those markets arent going to get quite as much of a supply of some of these larger markets and that's playing out for us pretty well so far.

Thank you and then my follow up questions just on the.

We talked about the job market.

How the portfolio may react because then I guess my question is more related to just that.

Migration to the sunbelt.

What's that looking like versus pre COVID-19 levels and are there any markets that you are seeing.

Longer weaker in migration.

Michael This is Eric I would tell you that the migration that we saw in the first quarter with about 11% of the leases that we're writing.

Function of people moving into the Sunbelt.

Pretty consistent with where we were prior to Covid.

It began to move up a bit during 2020 late 2020 and throughout most of 2021 and then it started moderating a little bit in 2022, but right now as we sit here today rough.

That's part of the strategy I mean, typically those markets arent going to get quite as much in the supply of some of these larger markets and that's playing out for us pretty well so far.

Roughly 11% or so of the move ins that we are seeing are coming from people moving in from.

Outside the Sun belt, and that compares to 9% to 10% that we saw prior to prior to Covid.

<unk>.

From the Sunbelt the turnover, we have where people are leaving us and moving out of the sunbelt is still only about 3% to 4% of the.

Move outs that we're having are a function of people, leaving the region. So.

Net basis were pretty close to where we were prior to Covid and would expect that those trends will likely now continue at the current level going forward.

Would you say going forward does that mean for the rest of the 23 or is that kind of for the intermediate term.

I would say the rest of 'twenty three into 'twenty, four I think that.

Again.

Harking back to my earlier comments relating to the potential for moderation in the employment markets.

We've seen these trends.

Through these cycles that we've been through over the years.

Where migration trends are more positive if you will in the Sunbelt region and it's been that way for many many years.

Through recessions and through expansions in the economy that continues to be the case and so I just continue to think that.

These markets.

The strategy, we have will serve us well long term and I think the net positive migration trends that we see today.

Likely persist for the foreseeable future.

Thank you very much.

And we'll take our next question from.

Mick <unk>.

With Scotiabank.

Your line is open.

Thank you good morning, I was hoping to get a little bit of a feel for how the new lease growth.

On signings is deferring deferring by market, just sort of an order of magnitude between better versus weaker markets. If you can give a little color on that.

Yes, it's Tim.

If we think about when and where.

April .

No.

It's anywhere from call it negative one negative 2% for some of our markets.

234, 5% on some markets.

New positive in April as we've talked about we're at.

<unk>, 2% and we saw good acceleration from March to April and we kind of expect to see that typical seasonality and a little more acceleration as we move through time.

The spring and summer.

That gives you a little bit of a order of magnitude.

That's helpful. Thanks, do you mind also just maybe saying which markets are the better versus weaker in that range.

Yes.

As I mentioned before.

It also is one of the weaker ones also obtain answer to that I would point out is a little bit on the weaker side.

<unk> continues to be one of our strongest markets and then mentioned about Leon as well and we're seeing some of them are more secondary markets perform really well also Charleston, Savannah wrench men Greenville, all holding up really well also.

Thanks. That's helpful. Just last question is on Atlanta.

If you look the occupancy there is a bit lower than the rest of the portfolio can you just talk about what's.

Going on there and I guess also on packing I think you were saying that.

It's a market where suburban is doing better than urban and so I'm not sure if.

If there is any sort of supply impact there that you're dealing with on an occupancy or what what's driving that thanks.

Sure, Yes, Atlanta is a little bit of a unique situation.

Back in February we had some some winter storms.

Texas and Georgia.

We particularly saw some impact in Atlanta in Jordan, We had about 70 units in Atlanta that were down that we took out of service students storms and then brought them back kind of in late February . So you had a pretty good chunk of units in Atlanta.

To get leased up so that was that was really the occupancy story, there and we've seen it kind of bottomed out in March, but we have seen April occupancy pick up.

I think Atlanta will continue to improve and be a pretty solid market for us later in the year.

I appreciate it.

We will go next.

Peterson.

Great.

Your line is open.

Hey, everybody. Thanks for the time, Jim I was just hoping you can shed some light on your planning for sequencing that youre anticipating in some of your weaker markets, whether or not youre going to have to use concessions to maintain occupancy callout. The Austin Phoenix was of the world.

Yes, I mean, there will be pockets.

We're certainly havent seen unexpected to see.

Any sort of portfolio wide level, we look at Q1 total concessions were about 25 basis points as a percent of rent.

Our sand a little more often call it half a month up to a month and then there's areas where it is.

Lease up properties, you may see a little bit more.

Markets like Atlanta, Orlando, we're seeing no concessions, but we will say it a little bit, but I don't think any more than half a month.

More than what we're kind of sand right now don't really see it getting much different than what we see today.

Understood.

Your assets or other competing assets nearby.

More so than competing assets.

Have some as I mentioned, there is its pretty minimal and it kind of depends on the market. There are some markets where.

Frank concessions are more of more of a staying in that market, whereas others. It's more of a net pricing scenario, where you don't really see upfront concession so it kind of depends.

Similar whether it's our properties or the market in general.

We hit that Brad just one follow up on your prepared remarks about debt and equity capital starting to dry up.

The buckets of capital out there, whereas some of your private peers. Most concerned about one sourcing new financing today, what are some of the whether it be the banks or the life insurance companies.

What buckets of capital right now are the ones that are seeing the most impact there.

Yes, I mean, most of our partners use bank financing for.

Their developments and so I'd say, that's the biggest concern at this point in.

Given the last few weeks and just the restriction there in capital with banks, it's more acute than it has been first quarter. It was.

Difficult equity was difficult that was difficult and I would say that that piece has gotten even more difficult for them.

But generally there theyre going to regional banks for their banking needs.

They generally have strong relationships with these banks so they can get a deal or two.

Done with the banks, but it's a lot more difficult it takes a lot longer than what it has in the past.

And so thats really restricting.

One of the other areas thats restricting new deals getting done and I don't see that changing for the foreseeable future.

I appreciate that thanks for the time today guys.

We'll go next to Rob Stevenson.

So.

Your line is open.

Good morning, guys, Eric Brad you guys added Orlando land parcel this quarter, but overall, how aggressively you're going to be in adding.

Additional land parcels for development at this point and are you seeing any relief in terms of the costs.

Of land some of the peers have spoken about more office sites and vacant movie theaters and that such being sold for apartment development, allowing for better deals curious as to what youre seeing in terms of that.

Yes, Rob this is Brad.

As I mentioned, we have we have 12 sites now that we either own or control. So we feel like we're in a good spot in terms of building out our pipeline going forward and as Al mentioned, we think we are.

On pace for that 1 billion billion, two or so in terms of <unk>.

Projects going and we like where we're located the asset that we purchased.

In Orlando is a phase two of <unk>.

Reject that will start this year. So there was a strategic reason for that it's really a covered land play theres some leased buildings on it right now so.

I would say going forward, we will be a bit more cautious on land.

I would say, we'll continue to look for sites that have been dropped by other developers.

Look to get time, a couple of the sites. We have now as I mentioned or we control them, we do not own them. So that's our preference to have time on the on the deals and I'd say we are.

We're on the early stages. It appears that we are in the early stages of land re pricing a bit in some areas.

We've seen a 10% price reduction on some of the projects that some of the our partners are coming to us with sites for they've been able to negotiate some additional time and some cost reduction. So I think we're on the early stages of that at this point.

Okay. That's helpful and then timber al where is bad debt or delinquency today, and how does that compare to the historical periods pre COVID-19 and recent comparable periods.

On pace for that 1 billion billion, two or so in terms of projects going and we like where we're located the asset that we purchased.

Orlando is a phase two to a project that will start this year. So there was a strategic reason for that it's really a covered land play theres some leased buildings on it right now so.

Yes, Rob this is Tim so if we look at Q1 for example, all the all the rents that we build in Q1, we collected 99, 4% of that 60 basis points of bad debt, which is consistent right in line with where we were last year.

I'd say going forward, we will be a bit more cautious on land.

Factor in prior months collection any collection agency it goes down to about 50 basis points.

We will look to get time, a couple of the sites. We have now as I mentioned are we control them, we do not own them. So that's our preference to have time on the on the deals and I'd say, we're on the early stages or it appears that we are in the early stages of land re pricing a bit in some areas.

Really.

It's pretty minimal.

And is there any markets in particular that youre seeing.

Any material.

Here amounts in.

Atlanta is probably the one I would point out where it's still kind of a court system and everything going on there it's taken a little longer to move through the process and then it's our.

We've seen a 10% price reduction on some of the projects that some of the our partners are coming to us with sites for they've been able to negotiate some additional time and some cost reduction. So I think we're on the early stages of that at this point.

Highest one right now probably closer to around 1% or so, but that's really the only market where we are.

Where we're seeing that.

Okay. Thanks, guys I appreciate the time.

Okay.

Okay. That's helpful and then timber al where is bad debt or delinquency today, and how does that compare to the historical periods pre COVID-19 and recent comparable periods.

And we will go next.

Two.

Hi, Tayo.

Okay John .

Yes, Rob this is Tim.

So if we look at Q1 for example, all the all the ramps that we build in Q1, we collected 99.4% of that 60 basis points.

Hello with credit Suisse.

Hello can you hear me.

Yes.

Yes, hi, everyone.

<unk>.

Yes.

And the guidance a little bit.

Again, you kind of talked about in <unk> you had some opex.

Actor in prior months collections and any collection agency it goes down to about 50 basis points.

When that could potentially become headwinds going forward, so you're not changing same store NOI.

And is there any markets in particular that youre seeing.

We're trying to really understand what was that.

Is number one and then number.

Based on spring leasing season.

Hi.

Yes, that's a good question.

As we've talked about a little bit the first quarter, obviously, we outperformed <unk>. According to our midpoint and about half of that was timing as I mentioned, it's really some expenses. Some favorability we had in the first quarter. The bulk of that was real estate taxes.

We still think our full year guidance numbers correct, we will feel that over the year. So the three <unk> increase in <unk> was.

Okay.

And we will go next.

And the other items coming through I would say a third of that or one penny.

What's really operating performance as Tim mentioned, we were favorable particularly in pricing.

For the first of all what we expect I think we if you remember our guidance or our discussions and guidance was that our pricing expectation for the full year was 3% in this quarter first quarter was three nine just a little bit of favorability, but given that we have the bulk of the leasing season ahead of US a lot of work to be done. We just felt like our ranges in our guidance are still where they need to be there and the.

Yes, hi, everyone.

<unk>.

You can help me understand the guidance a little bit better again, you kind of talked about in <unk>, you had some opex kind of tailwind that.

Other part of the capability of the flow through where things below NOI.

Overhead.

Trying to really understand what that slide is number one and then number two.

And those things so really the same store was good that we are I would call it favorable slightly favorable to <unk>.

Based on screening meetings.

With what we expected and we will wait to see what happens over the next couple of quarters.

Guidance.

Yes, hi.

Good question.

Got it okay. That's helpful.

As we've talked about a little bit the first quarter, obviously, we outperformed <unk>. According to our midpoint and about half of that was timing as I mentioned, it's really some expenses. Some favorability we had in the first quarter. The bulk of that was real estate taxes.

Talk about kind of new spread for the quarter.

That was kind of it was negative.

Thoughts there whether it.

It really is a supply issue whether it is a bit more of a demand issue.

We still think our full year guidance numbers correct, we will feel that over the year. So the <unk> <unk> increase in <unk> was.

And how would you kind of think about that kind of especially going into late.

What's been the leasing season.

The other items coming through I would say a third of that or one penny.

Yes, Hi, this is Tim I mean, I think one thing to keep in mind.

It was really operating performance as Tim mentioned, we were favorable particularly in pricing.

New lease rates that we saw in Q1 are really pretty typical if we go back through history, you look outside of last year.

For the first quarter, we expect I think we if you remember our guidance or our discussions and guidance was that our pricing expectation for the full year was 3% in this quarter first quarter was three nine to us a little bit of favorability, but given that we have the bulk of the leasing season ahead of US a lot of work to be done. We just felt like our ranges in our guidance as to where they need to be there and the other part of that.

Kind of at lease rates, we're seeing we're pretty much in line or better frankly than most of the year as we've been tracking that so.

And was it was pretty much as expected I mean March new lease rates dropped a little bit and it's really more a function of someone who I was talking about with Atlanta earlier, where we saw leasing activity drop for a couple of weeks there in February and with some of the stores, particularly in Texas and Georgia.

Your ability of episode that flowed through where things below NOI.

Overhead interest in those things so really the same store was good that we are I would call it favorable slightly favorable to on point with what we expected and we will wait to see what happens over the next couple of quarters.

Impacted occupancy a little bit in February and then we were able to regain that occupancy in March but it did come at the expense a little bit of some of the new lease pricing, but as we've talked about with April .

Got you Okay. That's helpful and then just.

Talk about kind of new.

For the quarter.

We saw new lease spreads accelerate or move positive so from where we sit right now all the demand metrics look strong.

That was kind of it wasn't negative.

The thought.

Thoughts there with it.

He is a supply issue whether it is a bit more of a demand issue.

<unk>, where we want it leads traffic volume all of that is where we would expect I think we will.

And how would you kind of think about that kind of especially going into late.

Moving to the rest of the spring and summer a strong leasing season and see some acceleration in and see what we would typically expect out of a pretty strong supply demand dynamic.

Spring leasing season.

Yes, Hi, this is Tim I mean, I think one thing to keep in mind the new.

Lease rates that we saw in Q1 are really pretty typical if we go back through history.

Sounds good thank you.

Outside of last year.

The kind of new lease rates were saying were pretty much in line or better frankly than most of the year as we've been tracking that so.

And we will go next to handle.

Yes.

Great.

Mizuno.

It was it was pretty much as expected I mean March new lease rates dropped a little bit and it was really more a function of some of that I was talking about with Atlanta earlier, where we saw leasing activity dropped for a couple of weeks there in February and with some of the stores, particularly in Texas and Georgia.

And your line is open.

Hey, good morning, Thanks for taking my question. This is <unk> on for handheld thank God.

My first question was on property taxes, I was wondering how that was trending versus expectations.

Hey, Adam.

Relief in the back half.

Impacted occupancy a little bit in February and then we were able to regain that occupancy in March but it did come at the expense a little bit of some of the new lease pricing, but as we've talked about with April where we saw new lease spreads accelerate and move positive so from where we sit right now all the demand metrics look.

Yes.

This is al I can I can give you some color on that right now we expect that our estimates that we put out our guidance for property taxes do we looked at the same we think we still have some good good range that we've got we did have some favorability in the first quarter and property taxes as I just mentioned a minute ago, but really that's related to the timing some of the activity we had some.

<unk>.

<unk>, where we want it leads traffic volume all of that is where we would expect I think we will.

The appeals from prior year, they come in and the timing can be different year to year. We had some some wins that we achieved in the first quarter on some of our prior year Appeals that were good we got a little earlier than we thought but we still have a lot of fights both the prior year to go and all of a lot of information for this year to come in so on balance we have about 6.25% growth that we expected for this year.

Moving to the rest of the spring and summer strong leasing season, and see some acceleration in and see what we would typically expect out of a pretty strong supply demand dynamic.

Sounds good thank you.

Are we still at the midpoint of our guidance. We still think that is right I would tell you that we still charge the current year.

And we will go next to handle.

Don't have a lot of information yet we feel like we have a good deal on values, but a lot of information the stubs from the municipalities come out.

Sure.

Great.

Mizuho.

And your line is open.

Probably mostly in the second quarter. So as we're talking next quarter I should have 60% to 70% knowledge on that and then the millage rates will come more in the third and even some in the fourth quarter. So we feel like our range is good I would say that we would continue the pressures coming from Texas, Florida, and Georgia, that's continuing to be the case has been for several years I would say that as we move.

Hey, good morning, Thanks for taking my questions. This is Mary Lou on for handheld thank God.

My first question is on property taxes, I was wondering how that was trending versus expectations.

Hey, Adam.

Some relief in the back half.

Yes. This is Todd.

This is al I can I can give some color on that.

Right now we expect that our estimates that we put out our guidance for property taxes do we left at the same we think we still have a good good range that we've got we did have some favorability in the first quarter and property taxes as I just mentioned a minute ago, but really that's related to the timing some of the activity we had some.

Move forward into 2024 as Theyre looking backwards towards this more normalized year, hopefully we begin to see some moderation in that line.

Got it okay. Thank you.

Texas in particular.

Noticing a significant expense declined sequentially to 11%.

The appeals from prior year, they come in and the timing can be different year to year. We had some some wins that we achieved in the first quarter on some of our prior year Appeals that were good we got a little earlier than we thought but we still have a lot of fights both for prior year to go and all of a lot of information for this year to come in so on balance we have about 6.25% growth that we expected for this year.

And I think 6% Rothman.

All of that being driven by property tax relief or whats kind of driving that.

I think there's some property tax and that for sure, but Tim can answer as well, but I think overall, we expected the first quarter expenses for the for all categories together in the company is able to be pretty high in the first quarter really.

Are we still at the midpoint of our guidance. We still think that is right I would tell you that we still shows a current year.

For many of the groupings because of the comparisons for last year as we saw inflation kind of come into our business more in the second third and fourth quarter last year.

Don't have a lot of information yet we feel like we have a good beat on values, but a lot of the informations that into the stubs from the municipalities come out.

We expect that our properties are operating expenses to be how accurate. They were eight 3%. When we came out was favorable to our expectations. What we have said as Tim mentioned, so what we would expect to see some key items personnel repair and maintenance begin to moderate as we move back into the second third and fourth quarter of the year, which is really the outstanding points of continue.

Probably mostly in the second quarter. So as we're talking next quarter I should have 60% to 70% knowledge on that and then the millage rates will come more in the third and even some in the fourth quarter. So so we feel like our range is good I would say that we would continue the pressures coming from Texas, Florida, and Georgia, that's continuing to be the case has been for several years I would say that as we move.

<unk> pressure being taxes insurance areas primarily.

Move forward into 2024 as Theyre looking backwards towards this more normalized year, hopefully we begin to see some moderation in that line.

Does that answer the question.

Well I was.

Looking at it.

Got it okay. Thank you and if we get Texas in particular.

Clinical decline from 14.

And Fort worth.

It looks like.

Youre noticing a significant expense declined sequentially as 11%, but fort worth and 6% for awesome.

Okay.

The decline in yes.

The sequential decline all of those Texas markets.

Of that being driven by property tax relief or what's kind of driving that.

Pretty much real estate taxes, yes, just the timing of accrual.

I think there's some property tax and that for sure, but I mean, Tim can answer as well, but I think overall, we expected the first quarter expenses for the port for all categories together in the company is how to be pretty high in the first quarter really.

Settlements and all that it can be it can be pretty volatile from quarter to quarter, but normalize over the course of the year.

And Thats, where youre seeing some of those items, particularly in Texas, where we had the real estate tax appeals come in that some of that occurring.

For many of the groupings because of the comparisons for last year as we saw inflation kind of come into our business more in the second third and fourth quarter last year.

Got it.

Yes.

We expect that our properties are operating expenses to be how actually they were eight 3%. When we came out was favorable to our expectations. What we had said as Tim mentioned, so what we would expect to see some key items personnel repair and maintenance begin to moderate as we move back into the second third and fourth quarter of the year with really outstanding points of continue.

And we will go next.

To Alexander Goldfarb with Piper Sandler Your line is open.

Thank you.

Good morning down there so two questions.

First just going back to the supply just because it's a big topic that always comes up with the Sunbelt you guys articulated a lot of how your portfolio is doing would you say, it's more just your rent versus new supply or would you say, it's more just proximity meaning that your properties are less.

The pressure being taxes insurance areas primarily.

If that does that answer the question.

Well I was more.

Looking at the sequential decline from fourth here in Fort worth basin. It.

And less likely to be near where the new supply is meeting that the new supply is in other parts of the market and therefore like where you cited some supply heavy markets.

It looks like.

On the cost side.

The decline in yes.

The sequential decline all of those Texas markets.

That's pretty much real estate taxes.

Guys actually did well, it's because the proximity in general your portfolio doesn't lineup, where a lot of the new product is being built I'm just trying to understand.

Just the timing of accruals.

In settlements and all that it can be it can be pretty volatile from quarter to quarter, but normalizes over the course of the year.

Alex This is Eric I would say its both of the points that you are making that are at play here.

And Thats, where youre seeing some of those items.

In Texas, where we had the real estate tax prior appeals come in that some of that occurring.

Where we do see supply coming into a market more often than not.

Got it.

It is in some of the more urban oriented submarkets.

And we will go next.

To Alexander Goldfarb with Piper Sandler Your line is open.

And when you look at our portfolio and the footprint, we have and the diversification we have across a number of these markets, particularly the big cities like Atlanta, and Dallas, we have.

Thank you.

Good morning down there so two questions.

First just going back to the supply just because it's it's a big topic that always comes up with the Sunbelt you guys articulated a lot of how your portfolio is doing would you say, it's more just your rent versus new supply or would you say, it's more just proximity meaning that your properties are less.

Generally more exposure to the suburban markets versus the urban market. So I think there is the supply.

Proximity point that I would point to that you're that you are mentioning that probably works in our favor to some degree.

It's hard to it will vary of course by market and then the other thing that you pointed to which I think is also at play here is the price point.

And less likely to be near where the new supply is meeting that the new supply is in other parts of the market and therefore like where you cited some supply heavy markets, where you guys actually did well, it's because just proximity in general your portfolio doesn't lineup, where a lot of the new product is being built I am just trying to understand.

We have our portfolio when you look at the average effective rent per unit of our portfolio and compare it to the average rent of the new product coming into the markets. We still are somewhere in the 25% plus minus range below.

Alex This is Erica I would say its both of the points that you are making that are at play here.

Where new product is pricing and.

Where we do see supply coming into a market more often than not.

And again, it will vary a bit by market, but that certainly provides.

Some some level of protection against the.

It is in some of the more urban oriented submarkets.

The supply pressure and offers the rental market.

And when you look at our portfolio and the footprint, we have and the diversification we have across a number of these markets, particularly the big cities like Atlanta, and Dallas, We have are generally more exposure to the suburban markets versus the urban market. So I think there is a supply.

A great value play in renting from us versus something that may be down the street.

That's newer but considerably more expensive than with some of the renovation work that we're doing frankly, that's what creates the opportunity for us to do some of this renovation work and effectively offer the resident in the market.

<unk> point that I would point to that you're that you are mentioning that probably works in our favor to some degree.

<unk> like a brand new apartment on the interior, but still at a meaningful discount to what they would have to pay a rent for something brand new so there are multitude of factors at play and it varies by market, but certainly we cannot absolutely eliminate new supply pressure, but there after being in this region for 30 years.

It's hard to it it'll vary of course by market and then the other thing that you pointed to which I think is also at play here is the price point.

Broadly we have our portfolio when you look at the average effective rent per unit of our portfolio and compare it to the average rent of the new product coming into the markets. We still are somewhere in the 25% plus minus range below.

As we've learned how to do some things to help at least mitigate the pressure a little bit here and there.

Okay. Second question is on insurance, certainly a hot topic, especially in Florida, and Texas with Big premium jumps are you guys seeing opportunities where some of your.

New product is pricing.

<unk>.

And again, it will vary a bit by market, but that certainly provides.

Some of your smaller players or maybe some of the merchant.

Recent new development may have they may not have underwritten 50.

Some some level of protection against the.

<unk>, 50% type premium increases and therefore that could gin up some.

The supply pressure and offers the renter market a great value play in renting from us versus something that may be down the street.

Buying opportunities do you think that you would see that potentially.

People, having to sell because of insurance pressure.

That's newer but considerably more expensive than with some of the renovation work that we're doing frankly, that's what creates the opportunity for us to do some of this renovation work and effectively offer the resident in the market what it feels like a brand new apartment on the interior, but still at a meaningful discount to what they would have to pay it.

Yes. This is Brad I definitely think that that is something to keep an eye on.

I do think the market down there right now is extremely tough in <unk>.

Depending on where you are in Tampa, South, Florida, those insurance premiums are increasing substantially for new products. So I would say for newly developed properties in.

Amp for something brand new so there are multitude of factors at play and it varies by market, but certainly we cannot absolutely eliminate new supply pressure, but there after being in this region for 30 years, we've learned how to do some things to help at least mitigate the pressure a little bit here and there.

And those areas Tampa, Orlando, not as much but Jacksonville.

It's something for us to keep an eye on because I do think that the insurance premiums are going to be a lot higher than the developer underwrote and they expect it and I do think theres going to be some impact to.

Okay. Second question is on insurance, certainly a hot topic, especially in Florida, and Texas with Big premium jumps are you guys seeing opportunities where some of your.

The sales proceeds as a part of that and so I think as you get.

Some of the supply pressures, coupled with that and some of the leasing pressures those are areas that we.

We'll keep an eye on and then obviously, we have the benefit with our <unk>.

Some of your smaller players or maybe some of the merchant.

Broader portfolio and insurance pricing.

Recent new development may have they may not have underwritten, 50% type premium increases and therefore that could gin up some.

That definitely is a platform benefit for us.

Okay. Thank you.

Buying opportunities do you think that you would see that potentially you know people having to sell because of insurance pressure.

We will go next to.

Yeah. This is Brad.

Wes Golladay with Baird. Your line is open.

Definitely think that that is something to keep an eye on.

Hey, good morning, everyone. Just a quick question on capital allocation.

I do think the market down there right now is extremely tough and.

Your stock, you'll then low six maybe.

Depending on where you are in Tampa, South, Florida, those insurance premiums are increasing substantially for new products. So I would say for newly developed properties in those areas Tampa Orlando not as much but Jacksonville, it's something for us to keep an eye on because I do think that.

Hyatt cap so how do you view.

A potential buyback versus starting new developments at this part of the cycle.

No.

Yes. This is Eric I would tell you right now.

Believe that.

What really is important to have us.

The insurance premiums are going to be a lot higher than the developer underwrote and they expect it and I do think theres going to be some impact to the sales proceeds as a part of that and so I think as you get.

A lot of strength and capacity on the balance sheet, obviously, we're in a very turbulent.

Environment at the moment.

<unk> markets are very turbulent there's still obviously some level of risk in the broader economy.

Some of the supply pressures, coupled with that and some of the leasing pressures those are areas.

We'll keep an eye on and then obviously, we have the benefit with our.

And so we really believe that the thing to do right now is to protect capacity and keep the balance sheet in a strong position not only for defensive reasons, but as Brad alluded to we do think as we get later in the year that we may see some.

Broader portfolio and insurance pricing.

It definitely is a platform benefit for us.

Okay. Thank you.

Improving opportunities on the acquisition front.

We will go next to Wes Golladay with Baird. Your line is open.

We have.

As Brad alluded to we have four projects that we may start were scheduled to start later. This year. These are projects that will deliver in 2026 into 2027. So.

Hey, good morning, everyone. Just a quick question on capital allocation your.

Stocks, yielding low six maybe six implied cap so how do you view.

A potential buyback versus starting new developments at this part of the cycle.

I think that that level of development is something that we feel very comfortable with disease would be of course.

Well.

This is Eric I would tell you right now we are.

We're still.

Fine tuning a lot of the numbers and pricing is not yet locked in but we are seeing some early indication of some relief on some of the pricing metrics and of course by the time, we get to 26 in 2007, we think the leasing environment.

Believe that.

What really is important to have us.

A lot of strength and capacity on the balance sheet, obviously, we're in a very turbulent.

Environment at the moment capital markets are very turbulent there's still obviously some level of risk in the broader economy.

Environment is likely to be pretty strong given the supply pullback that we expect to start to see happening late in 'twenty four 'twenty five so we would anticipate that these would be some very attractive investments that we could potentially start later this year and would reconcile very nicely to even with our current cost of capital is.

And so we really believe that the thing to do right now is to protect capacity.

And keep the balance sheet in a strong position not only for defensive reasons, but as Brad alluded to we do think as we get later in the year that we may see some.

So.

We certainly understand the metrics and the math and all of this and pay close attention to it.

Improving opportunities on the acquisition front.

We don't think we're going to ramp up a lot more than that at this point in the cycle, but we feel pretty good about the four opportunities that we're looking at at the moment.

We have.

Four as Brad alluded to we have four projects that we may start were scheduled to start later. This year. These are projects that would deliver in 2026 into 2027. So.

Okay, and then maybe if we can go to that topic of distressed.

The private owners right now do you feel that there may be upside down in the banks, extending and pretending right now or do they have significant equity.

I think that that level of development is something that we feel very comfortable with these would be of course.

The capital infusion.

Yes.

I don't think that we are.

We're still.

Seeing any distress in the market right now I mean, the projects just like our portfolio. The operating fundamentals are very strong so even.

Fine tuning a lot of the numbers and pricing is not yet locked in but we are seeing some early indication of some relief on some of the pricing metrics and of course by the time, we get to 26% and 27, we think the leasing.

Some of these lease ups when they underwrote them in 2021 or so.

The leasing fundamentals are going to be a lot stronger than what they expected and even the joint venture projects that we started in 2021 cap rates were.

<unk> is likely to be pretty strong given the supply pull back that we expect to start to see happening late in 'twenty four 'twenty five so we would anticipate that these would be some very attractive investments that we could potentially start later this year.

We're in the 555 range on the valuation I mean, thats kind of where we are so so I would say that.

<unk> reconciled very nicely to even where our current cost of capital is so.

The developers have been somewhat.

Disciplined in their underwriting the last couple of years and the operating fundamentals are outperforming so.

We certainly understand the metrics and the math on all of this and pay close attention to it.

They won't get the pricing that they could have gotten a year and a half ago, but but.

We don't think we're going to ramp up a lot more than that at this point of the cycle, but we feel pretty good about the four opportunities that we're looking at at the moment.

There's still profit and a lot of these projects. So we're not seeing that yet.

Think the distress could come or projects that closed a year year and a half ago and they did some type of financing cap or something thats coming due and it's going to require a reset of paydown.

Okay, and then maybe if we can go to that topic of distressed I mean, there's a lot of that.

Private owners right now do you feel that there may be upside down in the banks, extending and pretending right now or do they have significant equity.

The capital infusion.

Pay down in order to get that loan right sized.

Yes.

Don't think that we are.

Debt service coverage rightsize, those or is it going to be the ones I think that theyre going to have a little bit of trouble.

Seeing any distress in the market right now I mean, the projects just like our portfolio. The operating fundamentals are very strong so even on some of these lease ups when they underwrote them in 2021 or so.

Great. Thanks, everyone.

Go <unk>.

Two Eric Wolfe.

The leasing fundamentals are going to be a lot stronger than what they expected and even the joint venture projects that we started in 2021 cap rates were.

With Citi. Your line is open.

Thank you Yeah, just look just a follow up to your answer there a moment ago.

You mentioned your balance sheet is.

We're in the <unk>.

Credible shape I don't think I can remember seeing carpet company, it's sort of mid three times leverage down to probably the low three times later this year.

Five five and a half range on the valuation I mean, that's kind of where we are so so I would say that.

The developers have been somewhat disciplined in their underwriting the last couple of years and the operating fundamentals are outperforming so.

My question is really sort of what would it take what type of opportunity would you need to see before you'd be willing to take leverage back up to a more normal.

They won't get the pricing that they could have gotten a year and a half ago, but but.

Sort of five times.

Amount and.

There's still profit and a lot of these projects. So we're not seeing that yet.

And I guess, if a portfolio came across that was all I can say, the five 6% or anything that would that be interesting enough.

Thank the distress could come or projects that closed a year year and a half ago and they did some type of a financing cap or something thats coming due and it's going to require a reset of a pay down in order to get that loan right sized and the debt service coverage rightsize those or is it going to be the ones that.

Allow you to take leverage back up.

Well.

Erika This is I'll start now you can jump in.

We do anticipate that over the course of the next year or two that we will see leverage probably edge back up just a little bit.

Think that are going to have a little bit of trouble.

Believing that we will if nothing else. We've got some development funding that will do and of course the funding that we're doing on our redevelopment work in repositioning work is super very very accretive and.

Great. Thanks, everyone.

We'll go next to.

Eric Wolfe.

With Citi. Your line is open.

So we will.

Thank you, yes, just a follow up to your answer there a moment ago.

Begin to.

See leverage move a little bit back, but having said that we just think right now given the uncertainty in the broader capital markets landscape.

You mentioned your balance sheet is just incredible shape I don't think I can remember seeing.

<unk> partnered company instead of mid three times leverage down to probably the low three times later this year.

And what we imagine to be.

Likely an opportunity for more distressed asset buying debt capacity right. Now is a good thing to have and so we're going to we're going to hold onto that and I do think that obviously, if we did see some.

My question is really sort of what would it take what type of opportunity would you need to see before you'd be willing to take leverage back up to a more normal.

Sort of five times.

Amount and I.

I guess, if a portfolio came across that was what I can say the five 5% to 6% range with that would that be interesting enough.

Larger opportunities come across that we felt.

It made sense for us strategically and felt like we could we could do something.

Now you did take your leverage back up.

Well.

Closer to five 5% to $6 range from a cap rate perspective that probably would certainly get our attention and all.

Erika This is I'll start now you can jump in.

We do anticipate that over the course of the next year or two that we will see leverage probably edge back up just a little bit.

Obviously, it depends on a lot of different other variables, but.

We like where the balance sheet is right now given the <unk>.

Believing that we will if nothing else. We've got some development funding that will do and of course the funding that we're doing on our redevelopment work in repositioning work is super very very accretive and.

Given the broader landscape that we have with the capital markets in the.

The transaction market.

And so we're going to be very cautious in how we put that capacity to work. We've got some known needs that they have.

And so we will begin to.

You mentioned that are very.

See leverage move a little bit back, but having said that we think right now given the uncertainty in the broader capital markets landscape.

Attractive investments and we will continue to move forward. Those we don't have any certainly you need to go attracting additional capital right now and as al alluded to the debt the debt portfolio is in terrific position.

And what we imagine to be.

Likely.

A lot of duration and it's all 100% fixed so we're going to we're going to sit tight with what we have at the moment largely.

<unk> four more distressed asset buying debt capacity right now is a good thing to have and so we're going to we're going to hold onto that and I do think that obviously, if we did see some.

I'll just add quickly that that's a very good point you make that really our target long term targets closer to four five to five times EBITDA coverage I think we are.

A larger opportunity come across that we felt.

We're providing opportunity right now as Eric mentioned.

It made sense for us strategically and felt like we could we could do something.

And hopefully they will find those mail found those and long term our target is in line with what you mentioned.

Closer to five five to six range from a cap rate perspective that probably would certainly get our attention and obviously.

Thanks for that and then just unrelated guidance question.

Three nine in terms of blended spreads in the first quarter. It sounds like you expect accelerated.

Obviously, it depends on a lot of different other variables, but.

But we like where the balance sheet is right now given the given the broader landscape that we have with the capital markets in the in the transaction market.

Through the balance of the peak leasing season.

Question is really just how does it get down to that 3% blend that's in your guidance.

And so we're going to be very cautious in how we put that capacity to work. We've got some no needs that they have.

The steep drop off later this year or just some conservatism baked in there.

I'll just start with that and Tim can you give us more details on exactly what I would say primarily is.

You mentioned that are very.

Attractive investments and we will continue to move forward. Those we don't have any certainly any need to go attract any additional capital right now and as al alluded to that the debt the debt portfolio is in terrific position.

One that we need to see that.

Bulk of leasing season happened as it comes in.

Biding option to see that get more information and were encouraged by what we saw in the first quarter.

Secondly, the biggest point would be we do expect to see that seasonality. The most acute in Q1 in the fourth quarter. That's typically when it is in a normal year, that's sort of what we're expecting so we could see that new lease pricing.

A lot of duration and it's all 100% fixed so we're going to we're going to sit tight with what we have at the moment largely.

I'll just add just quickly then that's a very good point you make that really our target long term targets closer to four five to five times EBITDA coverage. I mean, we are we're providing opportunity right now as Eric mentioned in.

<unk> be a little more negative in that fourth quarter because of the holiday season, and demand really shuts down in that period and so that's what we provided for in our forecast I think at this point, yes. Eric. This is Tom I think it will kind of boil down to new lease pricing that we see over the late.

And hopefully be able to find those spec mail found those in long term our target is in line with what you mentioned.

Spring and summer will be the ballgame in terms of whether it was better than we thought or a little worse.

Thanks for that and then unrelated guidance question.

Three nine in terms of blended spreads first quarter. It sounds like you expect it to accelerate.

Obviously, the bulk of the leases happening during that period.

And they carry for several months throughout the year so that.

Through the balance of the peak leasing season.

Certainly an outsize impact.

New lease rates accelerate more.

Question is really just how did it get down to that 3% blend that's in your guidance.

And then it probably is a little better than we thought they accelerate not quite as much probably a little less because I think.

The steep drop off later this year or just some conservatism baked in there.

And our renewals are going to be relatively.

I'll just start with that and then Tim can give some more details on exactly what I would say primarily.

And the rest of the year.

Got it.

For your time.

One that we need to see the bulk of leasing season happened as it comes.

Well go next to Jamie Feldman with Wells Fargo. Your line is open.

Obviously to see that get more information and were encouraged certainly than what we saw in the first quarter.

Secondly, the biggest point would be we do expect to see that seasonality. The most acute in Q1 in the fourth quarter. That's typically when it is in a normal year, that's sort of what we're expecting so we could see that new lease pricing.

Great. Thank you and good morning.

To go back to your comment about 11% of leases written in the first quarter were new people moving into sunbelt can.

Can you provide more color on that data point.

Be a little more negative in that fourth quarter because of the holiday season, and demand just really shuts down in that period and so that's what we provided for in our forecast I think at this point, yes, Eric This is Tom I'll take it.

Across the different market and I guess I'm thinking more about maybe some of the larger msas versus the smaller MSA.

Yes. This is Tim so 11% overall.

Probably markets you would expect in terms of.

Boil down to new lease pricing that we see over the late.

Migration Phoenix is our top markets you have about 18% of move ins.

Spring and summer will be the ballgame in terms of the winter weather.

That's better than we thought or a little worse.

Out of market going in our Phoenix Tampa was another big one at 15%.

Obviously, the bulk noises happening during that period.

<unk> was 13%.

And they carry for several months throughout the year, so that certainly an outsize impact.

Charleston, and Atlanta were pretty high in there as well and so those are the biggest drivers and that's been pretty consistent throughout the last several quarters and the ones that are benefiting the most.

New lease rates accelerated more than.

He is a little better than we thought they accelerate not quite as much probably a little less because I think.

Our renewals are going to be relatively consistent.

And the rest of the year.

Interesting and then I guess similarly, if you think about the lay up activity.

Got it thanks for your time.

They are also the markets, where you're seeing the most growth in tech jobs.

Great.

We will go next to Jamie Feldman with Wells Fargo. Your line is open.

That might be most at risk.

Can you talk at all about.

Lay up activity might be impacting.

Great. Thank you and good morning, I want to go back to your comment about 11% of leases written in the first quarter were new people living in the sunbelt.

The different types of Msas and even that statistics specifically.

And I think through the next 12 months or so.

Can you provide more color on that data point.

Yes.

We haven't seen a ton of impact yet.

Across the different market and I guess I'm thinking more about maybe some of the larger msas versus the smaller MSA.

Certainly in the technology sector is getting a lot of publicity and a lot of others might also announced there, but what do you think.

Yes. This is Tim so 11% overall.

The others other sectors are still in a net hiring position.

Probably markets you would expect in terms of.

As soon as one, particularly in north Austin, where we've seen a little bit of impact from that some of the tech jobs up in north Austin, but at the same time.

Migration Phoenix is our top markets you have about 18%.

Yes.

And out of market going in our Phoenix Tampa was another big one at 15% Charlotte was 13%.

<unk> got tests, we're still planning to expand over the next couple of years, there you've got Oracle moving their headquarters there. So certainly long term at Austin job.

Charleston, and Savannah were pretty high in there as well and so those are the biggest drivers and that's been pretty consistent throughout the last several quarters in Hawaii that are benefiting the most.

John Machine and we feel really good about that outside of that and we haven't seen a lot Phoenix entitled Little bit, but again, we've got we've got.

Property there.

It's a huge semiconductor plant coming in right here one of our properties. So there's.

There's a little bit of short term pressure over the next few quarters, but long term feel really good about that all of those markets.

Interesting and then I guess similarly, if you think about the lay up activity again.

Those are also the markets, where you're seeing the most growth in tech.

Okay. Thank you and then I know you talked about insurance and taxes on the expense side.

Or that that might be most at risk can.

Can you talk at all about.

As we think about your guidance for the year any other variable line items on the expense side that maybe you don't feel quite confident.

I'll lay up activity might be impacting.

The different types of Msas and even at <unk>.

Quickly just any kind of thing.

Maybe there could be some some changes there I know you've got youre.

Through the next 12 months or so.

Coming up in July renewal.

Yes, I mean, we haven't we haven't seen a ton of impact yes, I mean, I think certainly in the technology sector is getting a lot of illicit analyzers layoffs announced there, but what do you think.

Those are those are the two big items I mean I think.

That expense the key components of expenses for the year are personnel repair and maintenance taxes and insurance. So I think we parse too we expect to moderate as your presence as we talked about in taxes and insurance.

Any others other sectors are still in a net hiring position.

Also as one, particularly in north Austin, where we've seen a little bit of impact from that some of the tech jobs up in north Austin, but at the same time.

<unk> the biggest items that have the most unknown.

Point, so that's once we're keeping our eye on at this point.

Okay, Alright, great. Thank you.

We are still planning to expand over the next couple of years, there you've got Oracle moving their headquarters there. So certainly long term in Austin.

John Machine and we feel really good about that outside of that and we haven't seen a lot of Phoenix entitled Little bit, but again, we've got we've got properties there.

We will take our next question from Linda Tsai with Jefferies.

Sure.

Hi. This is a short follow up that last question in terms of rationale for move out top cancers and buying a new home.

Huge semiconductor plant coming in right here one of our properties.

But a short term pressure over the next few quarters, but long term feel really good about that all of those markets.

Alan.

Okay.

For SKU and any retail trends you'd highlight.

Okay.

Okay. Thank you and then I know you talked about insurance and taxes on the expense side.

I mean, it's pretty consistent one we've seen move outs to buy a house has dropped dramatically as you would expect with what interest rates have done.

Just as we think about your guidance for the year any other variable line items on the expense side that maybe you don't feel quite as confident or maybe there could be some some changes there I know you've got your insurance coming up in July renewal.

<unk> seen our move outs due to rent increase drop quite a bit as well.

The biggest reason for move outs, which is always seasonally our largest reason for me that is a change in the job and job transfer.

Those are those are the two big items, I mean, I think that the expense.

The key component of expenses for the year are personnel repair and maintenance taxes and insurance. So I think we are.

That's up a little bit but it's.

We've talked to people that onsite, it's more just moving for another job.

<unk>, we expect to moderate as year progresses, as we talked about in taxes and insurance remaining the biggest items that have the most unknown at this point. So that's once we're keeping our eye on at this point.

Any significant job losses.

Turnover that overall is down a little bit.

And some of the key the key reason that we've talked about before in.

Okay, Alright, great. Thank you.

Pretty pretty consistent across markets no matter.

Arthur markets more secondary markets.

And we will take our next question from.

Okay.

Linda Tsai.

With Jefferies.

Hi, maybe just as a short follow up that last question in terms of rationale for move out dop cancers, and buying a new home because the balance of the three.

We have no further questions I will return the call to MAA for closing remarks.

For Q.

No additional comments to add so we appreciate everyone joining us and look forward to seeing everyone at NAREIT.

Any regional trends that you'd highlight.

I mean, it's pretty consistent one we've seen move outs to buy a house has dropped dramatically as you would expect with what interest rates have done.

We've seen our move outs due to rent increase dropped quite a bit as well.

The biggest reason for move outs, which is always.

And the way our largest reason for me that is a change in the job and job transfer.

It's up a little bit, but it's as we've talked to people out onsite, it's more just moving for another job and components.

Any significant job losses.

And over that overall is down a little bit but its.

Some of the key the key reasons that we've talked about before in.

Pretty pretty consistent across markets no matter.

Orange markets more secondary markets.

Okay.

We have no further questions I will return the call to MAA for closing remarks.

Well no no additional comments to add so we appreciate everyone joining us and look forward to seeing everyone at NAREIT. Thank you.

This concludes today's program. Thank you for your participation you may disconnect at any time.

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