Q3 2023 Armada Hoffler Properties Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome.
The Armada Hoffler third quarter 2023 earnings call at this time all lines are in listen Ie made following the presentation. We will conduct a question and answer session. If at any time. During this call you require immediate to Justin piece price.
Stop here for the operator this call is being recorded on Thursday November <unk> 2023, I would now like to turn the conference over to Chelsea forests. Pease go ahead.
Good morning, and thank you for joining Armada Hoffler third quarter 2023 earnings conference call and webcast.
On the call. This morning. In addition to myself is Lou Haddad CEO.
Matthew Barnes, <unk>, CFO and Shawn Talbott.
The press release announcing our third quarter earnings along with our supplemental package were distributed this morning.
A replay of the call will be available shortly after the conclusion of the call through December 2nd 'twenty to 'twenty three.
The numbers to access the replay are provided in the earnings press release.
For those who listen to the rebroadcast of this presentation. We remind you that the remarks made herein are as of today November 2nd 2023 and will not be updated subsequent to this initial earnings call.
During this call we may make forward looking statements, including statements related to the future performance of our portfolio our development pipeline the impact of acquisitions and dispositions, our mezzanine program, our construction business, our liquidity position, our portfolio performance and financing activities as well as comments on our guide.
And outlook.
Listeners are cautioned that any forward looking statements are based upon management's beliefs assumptions and expectations taking into account information that is currently available.
These beliefs assumptions and expectations may change as a result of possible events or factors not all of which are known and many which are difficult to predict and generally beyond our control.
These risks and uncertainties can cause actual results to differ materially from our current expectations and we advise listeners to review the forward looking statement disclosure in our press release that we distributed this morning, and the risk factors disclosed in the documents, we have filed with or furnished to the SEC.
We will also discuss certain non-GAAP financial measures, including but not limited to <unk> and normalized <unk>.
Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website at Armada Hoffler Dot Com I will now turn the call over to Lou.
Thanks Chelsea.
Good morning, everyone and thank you for joining us.
Today, we reported normalized <unk> for the third quarter of <unk> 31 per share.
In line with our expectations and consistent with our full year guidance.
As you can see from our press release the portfolio continues to deliver positive growth in same store operating income and re leasing spreads while maintaining companywide occupancy in the high nineties.
We continue to prove their best in market properties yielded impressive results in most any economic climate.
Shawn and Matt will give you the details on the quarter as well as the current state of operations and financial metrics.
I'll take a few minutes to highlight just a few examples of the key advantages to having a diversified business model.
Well there is may be at the mercy of their particular sector, whether its externally under pressure or out of favor.
Our ability to adapt to changing market conditions across asset classes and business lines.
Gives us the unique ability to preserve earnings growth.
We're making the right real estate decision for the long term health of any given property versus accepting substandard outcomes and the name of preserving short term earnings.
As a case in point.
We like all landlords, who hold leases with we work have been asked to take substantial rent reductions in order to preserve their lease commitments.
As you May know, we have two leases with this tenant in the total portfolio at.
At the interlock in West Midtown Atlanta, and one City Center in Durham, North Carolina.
Both our new trophy class mixed use buildings and vibrant urban walkable locations.
We have no interest in impairing either of these prime assets with a below market lease and are very comfortable with prospects for backfill should we choose to reclaim our space.
We're always willing to help our tenants who despite good faith efforts, maybe going through a rough patch.
That's just good business.
However, we will not compromise superior locations with low yielding material leases and.
And either office or retail assets.
Due to the strength of the vast majority of our holdings as well as our construction and development Division.
We are comfortable to assert that full year 2023 guidance remains unchanged and we expect continued earnings and dividend growth next year irrespective of the we work outcome.
Or that have a handful of other smaller tenant challenges we face within a few assets.
Sean will give you an update on our robust leasing activity, we are seeing across the portfolio and a small amount of vacancy that we possess.
The second area that diversity yields significant advantages versus narrowly focused companies.
Is that a finance.
Through a decades long successful track record in multiple business lines, we've achieved a triple b credit rating and have accrued a large and growing stable of banks that continued to extend additional credit to us.
At a time when lenders are shying away from most commercial real estate.
We continue to receive increasing commitments and.
And we are successfully mitigating future risks through derivative purchases.
The end result of which is that we've been able to continue our development activities.
Initiate the $50 million share repurchase program.
And lock in a relatively low interest rates on all portfolio that for the next two years.
Matt will fill you in on the details of these transactions.
You had another major benefit comes from our construction and development operations.
With third party fee income at all time highs and an elevated level of backlog.
Our expectation is for 2023 to be our most profitable year ever and we expect similar results in 2024.
These earnings allow us to further flexibility in dealing proactively with potential issues elsewhere without.
Without endangering profit growth.
Additionally.
We expect development activities at our two harbor point joint ventures to give us a significant source of capital to reduce leverage once they are completed in about a year.
This will be especially important if equity prices remain suppressed for the longer term.
Sean will give you an update on that progress as well as the strong pre leasing activity occurring at southern post.
For years, we have been describing the advantages of our business model.
Vertical integration of the development process asset class diversification mix.
UC environments and best in class properties are all important factors in our platform as well as our value proposition.
While we understand some investors focus on single asset class rights, our ability to dominate submarkets with multi use projects is its own unique advantage.
This approach to real estate 44 years in the making.
Has produced substantial growth over the last 10 years. Despite the challenges of the pandemic and the current disfavor of the commercial real estate sector, which has impacted property values, consequently, reducing our multiple and undervalues our equity.
While this may be viewed as respectable performance by many it's by no means satisfactory to us our goal remains to demonstrate the true worth of superior assets, both property and human and.
In return the equity value to its previous highs.
Regardless of the macro environment.
While providing solid interim returns to a safe and growing dividend.
We fully intend to continue adding to earnings and dividends in 2024, as we wait for the market to recognize superior outperformance.
Over the next over the next one to two years in addition to continuing measurable growth.
We intend to make strategic moves that should further separate our trajectory versus that of our peers as well as reinforce the flexibility resiliency and foundational strength.
Of our diversified platform.
I'll now turn the call over to Sean to review the operating metrics.
Thank you Lou.
We at Armada Hoffler remained highly focused on running our playbook by developing high quality real estate safely and efficiently constructing buildings, all while operating and managing the stabilized properties with intentionality and purpose.
The combination of disciplined execution in accordance with our corporate values serves as the foundation of the Armada hoffler value creation model.
The supplemental package contains a recap of our operating highlights.
I would like to call out a few of the noteworthy metrics that are contributing to our continued growth and sustained high occupancy across the portfolio.
Quarter three year over year same store NOI was positive in all segments and was four 4% on a GAAP basis, and five 9% on a cash basis.
<unk> three year over year, releasing spreads on the commercial portfolio were positive 14, 5% on a GAAP basis, and four 9% on a cash basis.
Leasing activity was robust during the third quarter, we executed leases on over a 120000 square feet within our stabilized commercial portfolio.
It's important to note than less than that less than 3% of our six 2 million square feet of commercial space is currently vacant.
58% of which has active deals being contemplated.
Our multifamily portfolio continues to perform in a consistent and sustainable manner. As a result of the trophy quality and superior location of the assets.
Our team continues to grow NOI at a mid single digit pace, we intend to replicate this optimal performance as our footprint expands throughout the southeast overtime.
The retail portfolio is also outperforming at 98, 1% occupancy.
As I mentioned earlier in the call retail has been very active over the past few quarters.
With continued levels of elevated leasing activity throughout our 4 million square foot portfolio.
Tomorrow, Lego will hold a grand opening celebration for their new store at our flagship town Center location.
We are capitalizing on this high profile momentum and are currently in discussions with other credit tenants for space within our town center ecosystem.
Although not consistent with the broader narrative our office portfolio continues to remain highly leased and occupied.
In terms of additional leasing activity, we continue to experience strong demand for our trophy office product in the Submarkets within our geographic footprint.
This flight to quality as tangible in terms of both the occupancy of our buildings and the rents that are collected.
Ultimately, adding significant value despite headwinds present in the broader market.
The percentage of office leased sits at 96, 1%.
Led by town Center office at 98, 9% of the nearly 800000 square feet.
Our tenant watch list has remained consistent over the past few quarters Luke touched on we work earlier, so I'll focus on other notable inclusions.
The former bed Bath and beyond in Durham has also remain top of mind and discussions with a short list of suitors for that space are progressing.
As mentioned last quarter in the Virginia Beach location, we have used the opportunity cost equation to narrow their programmatic options to best fit our strategy.
We are very pleased that out of the over 700 tenants in our portfolio only 11 are on watch list status.
At Harbor point in Baltimore, we continue to make significant progress toward completion of the T Rowe price global headquarters.
<unk> to be delivered in the third quarter of 2024.
Additionally, allied.
312 unit luxury apartment project will be integrated into the harbor point ecosystem and delivered in a similar timeframe.
Couldnt be more excited to realize the benefit of completion of these projects.
In Roswell, Georgia, we're making significant progress toward completion of the southern post mixed use project.
68% of the commercial space is now leased or under LOI with a roster of high end experiential dining and retail offerings as well as high credit corporate office tenants at well above pro forma rents.
Additionally, the 137 unit multifamily project at Southern post Chandler residences is already seeing strong demand with a prospect list of over 500 people.
These high quality units are positioned at the high end of the sub market and are expected to be put in service beginning February 2024.
Our construction team is focused on delivering high quality real estate that will significantly expand our portfolio, thereby serving the long term strategy of our company and therefore our shareholders.
We have a robust third party contracted backlog.
That is currently over $500 million and our shadow pipeline looks robust.
Portfolio of preferred equity investments is progressing nicely.
And we anticipate pay off of these positions according to plan.
As discussed previously our partners are best in class in the residential space and we if given the.
<unk> would love to own one of those assets at the appropriate price, especially given their proximity to our target markets in the southeast.
I will now turn the call over to Matt.
Good morning, and thank you, Sean and the team continues to perform extraordinarily well even against the adverse backdrop, but the broader macro economy for.
For the third quarter of 2023, we recorded <unk> 31 cents per diluted share and normalized <unk>.
31 cents per diluted share in line with both guidance and analyst consensus we maintained our guidance range Accordingly at normalized <unk> of $1 23 to $1 27 per diluted share.
Our stabilized leverage metric was six two times this quarter, which is slightly above our target range due to the debt incurred in connection with our acquisition of the interlock assets earlier this year.
When our ancillary that has included leverage at seven one times consistent with last quarter.
I was articulated on the previous earnings call. This metric will temporarily increase over the next few periods until the assets in our development pipeline start producing cash flow.
The leverages antigen dissipated to decrease back into our target range as EBITDA continues to grow.
Our debt service coverage ratio and fixed charge coverage ratio was two five times and two two times, respectively with a weighted average cost of debt maintaining its level just above 4% for the quarter.
The team's continued ability to manage and execute our balance sheet strategy and these adverse market conditions will yield benefits fall past this economic cycle.
Our liquidity position continues to be strong roughly $190 million more than ample to cover the 2023 cash requirements for our remaining development pipeline and our preferred equity investments. This combined with a well structured debt maturity ladder means that we can adequately support the team and achieving our.
Our growth objectives.
On the call last quarter I discussed our 2020 for derivative maturities and indicated that we would monitor the environment to ensure the convert the variable rate debt to long term fixed rate debt and the private placement market or layer in new hedge positions when our current set of positions mature.
With interest rates expected to be higher for longer we moved ahead and replace the derivatives that are expiring in the last quarter of this year and the first quarter of next year.
With the intent to maintain that all that is close to 100% fixed or hedged in the short term.
Our intent is to continually mitigate the risk of rising interest rates in the most efficient manner.
To that end, we also entered into two short term swap locks on a portion of the construction debt associated with our joint venture partnerships and half a point.
As we mentioned earlier, we may look to exit all positions in these assets at the appropriate time as you will recall in June our board of directors authorized a share repurchase program in late September we took advantage of market conditions and initiated the program purchasing back our daily allowable limit for a seven day period.
During this time, we purchased back a total of nearly 600000 shares of common stock at a weighted average price in the low $10 range given the increased uncertainty in capital markets. We intend to continue to monitor the program against market conditions.
While stock Conservative posture is biased towards capital preservation. We appreciate our board of directors authorizing this tool to use our discretion.
I will now pass the call back over to Sean.
Thanks, Matt.
Finally.
Thank you to our talented team at Armada Hoffler.
It is a pleasure to work with a group of individuals who are harnessing the power of the team to continuously create value for our shareholders.
Behalf of our board of directors and the executive leadership team. We appreciate your focus and attention to detail that ultimately results in quality real estate that is poised to produce value for decades to come.
Thank you for all that you do.
Operator, we are ready for the question and answer session.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone you will hear from technology in your question and your question Paul.
Should you Mr decline from the pruning process. Please press the star followed by the Chi.
A speaker phone please lift the handset before pressing and Keith One amendment for the first question.
Okay.
Our first question comes from Rob Stevenson from Janney. Please go ahead. Your line is now open.
Good morning, guys, you talked a little bit about we work are they still current on their Brent.
And the current.
As of now.
Rob.
But.
Our expectation is that there is there going to be asking for.
Concessions and as I said earlier.
We're just not interested in.
And preserving that lease and those locations with the amount of activity that we're seeing.
Is there any value to you guys. I mean, you guys are.
Done this in the past.
But is there any value to letting we work play out through bankruptcy, which is in the news that's coming.
Pretty quickly here would be thrown into the unsecured pit or do you. Just go to them now ahead of that let them out of the leases and get the space back now so that you don't have to wait months and months and months for that to play out and move and just move on.
There is value in that Rob it's difficult to say, it's a very fluid situation with them as you might expect.
It's difficult to say, if that's going to be possible.
And the amount of time between now and when we believe that bill that Bill file.
In any respect assuming that they continue to operate.
Then they will continue to hold rent irrespective with bankruptcy proceeding.
So.
As I said earlier.
We're going to make the right move for those properties.
Strong properties in great locations.
And irrespective of whatever turns out with we work our expectation is for growth next year.
It may not be may not be a one size fits all for the locations Rob right. So to <unk> point, we're looking at this.
Property by property, so dynamic situation and we're all over it.
Okay. I mean is there an option for you guys directly or with some sort of local partner in those two markets.
If you get that space back to continue to operate the built out space as co working or is it likely to just be all ripped out and released as normal straight out office to multiple tenants.
Both options are on the table. However, I don't I don't believe that there's going to be a rip out option.
They are really well appointed and frankly, there doesn't seem to be anything wrong with the co working model.
Problem is unique to we work or maybe there is a couple of others, but there are several other operators.
A couple of which are in our buildings that are doing just fine. So.
So we'll see.
There may be an opportunity to.
So just keep going business as usual on the co working side, but Theres also some nice tenants in the market that are looking for trophy space. So in any respect we're confident of the outcome.
On the other side of this thing.
Okay, and Sean I think you said the construction company Shadow pipeline is robust how much of that is armada hoffler business versus stuff for other parties.
So what we're referring to in the Shadow is the third party piece.
What kind of percent of what I mentioned would be third party, we're still seeing activity out there obviously, it's not at the same level that it was two years ago for instance, but we feel comfortable.
Maintaining that strong pipeline on a go forward at least in the short run.
Okay and are any new developments, even multifamily making sense for you guys to put shovels in the ground at this point given the cost of capital or are you waiting to see what.
24 brings.
Before making those type of decisions.
Thanks for the question Rob.
You might expect we are seeing.
Countless opportunities as smaller developers and landowners are looking for any way to get their potential projects off the ground.
As you might expect we've raised the bar considerably less.
Unless something is yielding in the high single or low digit double digit.
Range, we're not going to be pulling the trigger anytime soon.
We're comfortable with the avenues, we have for growth for next year.
So I think the prudent thing is to sit tight.
But for a tremendous opportunity that you just don't want to pass up.
Okay, and then last one for me.
I think you guys touched a little bit on some of the re tenanted redevelopment plays in the portfolio sounded like that the Durham bed Bath is just going to be re tenanted, but.
The Virginia Beach, one in terms of narrowing the options is that whole scale redevelopment and some other use for that space, whether it be apartments or something else still on the table there or is that just basically.
Re tenant and it's a question of whether or not it's broken up into multiple parcel multiple tenants or just one at that size et cetera.
Two two.
Different things there as you know part of that.
Total parcel 10 acres with the bad debt piece being roughly half or a little bit over half of that the other being <unk>.
Regal cinema Regal cinema continues to go.
If at some point if that becomes available.
That would probably be a multifamily portion, but right now the program is on the bed Bath site.
We're dealing with with a few high end new to market retailers that.
That we'd like to hope to be announcing in the next the next.
Next quarter or so.
But that will be essentially retail and whether or not there is any reuse of the box thats there remains to be seen.
Okay, and what about the movie theater I'll parcel that you were thinking about doing multifamily on I think it is it Matt James Madison.
Is that still on the drawing boards is that just going to be a movie theater. How is that what are you guys thinking about that at the moment.
Again, Regal is going to take advantage of their remaining options they seem to be doing just fine.
As far as the multifamily piece of that.
Its victim right now to what we were just talking about Rob and.
That return doesn't justify us throwing.
Another $40 million to $50 million out there.
So we will.
We'll most probably just sit back and collect coupons for for the foreseeable future.
Okay and then.
I lied one just one other one on the Mezz portfolio.
Anything sort of penciling out and where do returns need to be for you guys to start a or to fund a completely new project there.
Your partners today.
So again as you might expect that bar has been raised as well.
So with our partners.
Unless they have healthy high single digit returns that we see in their pro forma that gives us the room.
To deploy our equity and ultimately.
If we can bring the project on balance sheet, then they arent going to get funded and I put that in the same boat with.
What I was saying earlier.
There is a ton of opportunities out there.
It's just with rates, where they are in costs, where they are.
The vast majority of them need to stay on the drawing board and not in our portfolio.
Okay I appreciate the time guys.
Thanks, Rob.
Okay.
Thank you.
Yes.
The next question comes from Peter Abramowitz from Jefferies. Please go ahead. Your line is now open.
Yes. Thank you I appreciate the comments on <unk>.
Essentially the yields youre, hoping for on multifamily developments I guess wanted to ask a similar question on the retail side, if youre seeing anything in the acquisition market.
And what kind of yields or irr's.
We didn't place right now and whether or not youre seeing those.
Okay.
Thanks Peter.
So cap rates have widened a bit.
But.
The kind of the kinds of retail that we'd be willing to transact on essentially high credit.
And well located grocery stores.
Those cap rates have moved somewhat but as.
As you know.
Fortunately our cost of capital has moved materially as well.
So there is probably a little bit of spread to be gotten if we if we were to transact there, but right now we're more interested in <unk>.
Capital preservation, making sure that we can continue some growth internally as well as raising the dividend.
And marginally looking at.
At new acquisitions again, much like on the development side.
<unk> appears in one of our target markets that just too good to pass up or has a redevelopment opportunity or additional.
Value add we can do that then you may see us transact, but as far as.
As far as real solid grocery anchored shopping centers of the sort that we already own.
Thank you will see us be a player.
Got it and then you've talked about potentially monetizing the T. Rowe headquarters just wondering if you've seen any relevant transaction comps and out of here.
Markets.
That type of office product.
And kind of how it impacts your thinking in terms of potentially doing a deal there.
Again, thanks for the thanks for the question.
Interesting there arent any transactions of trophy quality buildings that we see out there.
I would say there arent any maybe there's one or two somewhere but but largely antibody with.
The kinds of assets that those represent is not trying to transact right now so it absolutely the worst time.
So for us.
The obviously the fond hope is that 18 months from now.
Things have normalized a bit to where you can get real value out of that type of asset.
And alternatively there Andy.
Again don't discount the idea that.
Should our cost of capital go in the right direction and the equity price go in the right direction.
We may well bring those things on balance sheet, but.
But right now we wanted to make sure everybody understood.
If push comes to shove that's a great.
Great assets to bring cash back on the balance sheet.
Okay.
Got it and then last one for me you've had some elevated growth in on the real estate tax side, particularly in multifamily a little bit on office as well. This year are you testing any of those that could potentially be a tailwind for expenses in future quarters, and just kind of how should we think about.
Growth in real estate taxes generally yes.
Yes, I think.
I think the industry should be thinking about that generally, but yes. We are contesting nearly all of them I mean, it is our practice to assess them one by one and try to make sense of where we should apply our efforts. We have a good third party vendor that assist us in that regard and we've had a lot of success there so obvious.
Munis municipalities are different up and down.
Mid east mid Atlantic Coast down throughout the southeast, but yes, we we pushed back on those often in early and have seen relatively good success. There. So we plan to continue to do that obviously, we can't control the macro environment and we.
And that's something to watch for its something were focused on.
Okay.
Got it that's all for me thank you.
Thanks Peter.
Thank you. Our next question comes from Wes Golladay from Baird. Please go ahead. Your line is now open.
Hey, good morning, everyone can you talk about the leasing environment in multifamily a lot of the peers had some tough quarters in top outlooks, whether it's supply pressure or fraud or are you seeing any of that.
We are going to let Sean answer that specifically, but we are seeing things normalize people got used to double digit.
Double digit growth quarter over quarter for a while there.
We're seeing it normalize back into the into the mid single digits, Sean maybe specifics on that yes, I think <unk> hit the nail on the head.
We've been saying for multiple quarters now we think things go back to the mid single digits, which they are.
And Thats, when we forecast and that's where we set our trade outs in quarter three were around 4% across the board, which is good it's about where we thought we would be and I think for US. Our view is let's maintain high quality trophy assets, let's be in the best locations. As you know that's part of our Formula and there is a flight to quality.
<unk>, especially when the when the pressure turns on I think generally speaking we see strength continued.
Maybe not double digit growth, but we're we're.
We're feeling good about our location, we're feeling good about our product and our team is doing a heck of a job managing said product. So we're comfortable with what we've underwritten.
Yes, I think a lot of people would take growth at this point.
Turning to the 11 tenants that are on the watch list is there any way to quantify that as a percentage of ABR.
I'm glad you asked the question we did some work on that hoping someone would ask that question.
<unk> talked about we work, let's talk about it net of we work because thats a separate situation essentially the total ABR is about $2 5 million.
So for us that obviously over the 11 tenants. We can we can we can handle that we can manage that.
We will see some successes there and certainly some folks may not make it however, as I indicated.
A significant majority of those spaces.
At least the vacant spaces had the opportunity to kind of take up that slack. So we're we're excited about the activity both in the retail and the office frankly in our Submarkets and we feel good about.
Being able to stabilize that if in fact, it becomes an issue.
And maybe just a little bit more context, when you look at the 11th and Thats on the watch list is at about normal for the portfolio.
Adjusted for the current size versus the prior year or is it worse is that better.
Context, you'll have an 11 on the watch list.
I think we're I think we're pretty consistent with where we have been over the past few years.
Folks come and go.
We took the bed bath numbers out of our numbers, it's already removed. So we're looking at we're looking at tenants at on an individual basis are not consequential, but yes, I think I think in terms of the number in terms of the size and the magnitude thats about where we are and frankly thats about where we should be.
Peter Yes.
On that.
The total value there is in line with what we reserve for bad debt.
On an annual basis.
Really not an issue there as I said earlier.
We're going to make the right real estate decision just not interested in.
Folks limping along at paying half rent.
So hopefully.
Things will things will look up for those tenants and if not we'll be moving on.
Okay.
Thanks, everyone.
Thank you.
Thank you our next.
Next question comes from Danielle <unk> from Bank of America. Please go ahead. Your line is open.
Hi, Good morning, just one follow up on an earlier question can you expand a bit more on that.
New versus <unk>.
Existing renter dynamics, and your multifamily portfolio and what's the decline in occupancy this quarter.
More seasonal in nature or are you starting to see any changes in behavior. There. Thank you.
Yes.
Again, I'll, let Sean answer that specifically, but I do want to mention.
Part of the.
Part of the the other side of the coin.
We talk about our 90, 899% occupancy across the portfolio.
We fully expect that over time that will be back in the mid nineties.
That those kinds of rates arent just aren't sustainable.
Just because of the inflow and outflow of tenants so in terms of the Detroit.
Decrease in OXXO in multifamily somewhat is seasonal but at the same time.
We are not we are not programming in 98% leased for next year.
Believe that things will go back to the center line and again of course, the tradeoff is how much you were able to boost rents versus keeping a higher occupancies.
Yes, I think to add to that.
Income is that right.
On a on an aggregate basis and diluted point, it's very difficult to maintain 90 897 penetration in some way to maintaining that occupancy.
We use we take the emotion out and we use grant optimization software and essentially we are driving to the mid <unk> in terms of occupancy obviously with an eye toward enhancing NOI. We're seeing the NOI continue to climb the occupancy did dip we would love to have that extra 1% back we're looking for ways to do that but I.
We're pretty healthy now and there is some.
Apply demand kind of balance to ensure that we're running the property as efficiently and frankly as profitably as we can so I think we feel comfortable here, we haven't really seen the dynamic shifts other than a market macro but again you heard me say, a second ago or nearly 4% on trade out still in the last quarter and Thats.
Above where we were in the comparative quarter previously so we feel good about the continued growth.
Actually just one follow up on that point, you said youre using AI to help drive the pricing I guess of that.
<unk>.
Platform, how much of the input.
Do you have control over.
Alright, thanks outsource thank you.
We use a third party platform, we can control.
Kind of our desired occupancy level.
It uses market inputs that we do not control that our organic what's happening in the broader market and broader sub market to be more specific.
To kind of enhance where does pricing need to be to hit the occupancy target. We can certainly ratchet that up but I would imagine there's going to be a tradeoff at some inflection point.
This current market environment between what Randy can achieve and what occupancy you can achieve and we feel like in the mid <unk> is where we want to shoot for we do run sensitivity on that we're taking a look at that now and trying to understand what's the best.
Our strap how to best set the mousetrap in the better way to say it.
Thank you for the additional color.
Yes. Thank you.
Thank you there appear to be no further questions I'll return the conference back to the speakers.
Thanks, very much for your time and attention this morning.
We will.
We have further announcements between now and the end of the year end.
Everybody have a great day take care.
Thank you. This does conclude today's conference call. Thank you for participating you may all now disconnect your lines.
Thank you this does.