Q2 2024 UDR Inc Earnings Call
Hello, and welcome to Udr's second quarter 2024 earnings call. If anyone should require operator assistance. Please press star zero on your telephone keypad.
A question and answer session will follow the formal presentation.
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Trent Nathan Trujillo: It's now my pleasure to turn the call over to transfer Hill, Vice President Investor Relations. Please go ahead.
Trent Nathan Trujillo: Welcome to Udr's quarterly financial results Conference call, our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website IR Dot UDR dotcom.
Speaker Change: In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.
Speaker Change: Statements made during this call, which are not historical may constitute forward looking statements. Although we believe the expectations reflected in any forward looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met.
Speaker Change: A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC, we do not undertake a duty to update any forward looking statements.
Speaker Change: When we get to the question and answer portion we ask that you be respectful of everyone's time and limit your questions to one plus a follow up.
Speaker Change: Management will be available after the call for your questions that did not get answered during the Q&A session today.
Speaker Change: I will now turn the call over to Udr's, Chairman and CEO Tom Toomey.
Tom Toomey: Thank you Trent and welcome to Udr's second quarter 2024 conference call.
Speaker Change: Presenting on the call with me today are President and Chief Financial Officer, Joe Fisher, and senior Vice President of operations, Mike Lacey.
Speaker Change: Senior officers, Andrew Kantor, and Chris that ends will also be available during the Q&A portion of the call first half results exceeded our initial expectations provided back in February due to ongoing solid fundamentals and the core operating strategies, we continue to utilize to drive strong same store.
Speaker Change: And earnings growth.
Speaker Change: Positive fundamental drivers of our industry include first year to date employment growth of approximately one 3 million jobs has well outpaced our initial full year consensus expectations.
Speaker Change: Additionally year to date household income growth has remained robust at approximately 5%.
Speaker Change: Taken together this has driven strong demand for housing while also reinforcing healthy affordability metrics.
Speaker Change: More than 250000 newly delivered apartment homes were absorbed nationally during the first half of the year.
Speaker Change: Our near two decade record.
Speaker Change: Adding to that total housing deliveries appear stable through the end of the year.
Speaker Change: And development starts continue to decline to levels below historical norms. This dynamic bodes well for rent growth in the years ahead.
Speaker Change: And third renting an apartment is on average 60% more affordable than owning a single family home in the markets, where we operate the best level of relative affordability in two decades.
Speaker Change: These fundamental trends combined with our operating tactics that have improved resident retention led to revenue and expense growth outperformance in the first half of 2024.
Speaker Change: Drivers include more robust pricing power higher occupancy improved in the month rent collections.
Speaker Change: Higher ancillary income growth lower resident turnover and lower turnover related expenses than originally expected.
Speaker Change: And all this led us to raise our full year <unk> per share guidance for the second time. This year, while also increasing our same store growth expectations in yesterdays release.
Speaker Change: Mike will provide additional details in his remarks.
Speaker Change: We feel good about the year to date results and the opportunities ahead of us in the second half of the year. However, we also remain cognizant of the slowing growth rate and the recent employment data and the effect that may have on pricing in the face still elevated new supply. So the rest of 2012.
Speaker Change: Before.
Speaker Change: Moving on we continue to build on our position as a recognized ESG leader.
Speaker Change: With UDR recently being named a 2024 top workplace winner in the real estate industry. This achievement reflects the engaging the employee experience, we have built and solidifies our stature as an employer of choice.
Speaker Change: Key to our success is an innovative and adaptive culture.
Speaker Change: And this recognition is one that all our stakeholders should be proud of.
Speaker Change: Big picture.
Speaker Change: I remain optimistic about the long term growth prospects of the multifamily industry and UDR has unique competitive advantages.
Speaker Change: That should enhance our relative results.
Speaker Change: We have a strong culture that empowers our associates to deliver best in class service to our residents and create outsized value.
Speaker Change: With that I'll turn the call over to Mike.
Michael D. Lacy: Thanks, Tom today I'll cover the following topics our second quarter same store results early third quarter operating trends, our improved full year same store growth guidance, including underlying assumptions and regional operating trends.
Michael D. Lacy: To begin second quarter year over year same store revenue and NOI growth of 2.5% and 2% respectively were slightly above our expectations.
Speaker Change: Quarterly sequential same store results also outpaced initial forecast. These results were driven by first 2.4% blended lease rate growth, which was driven by renewal rate growth, just shy of 4% and new lease rate growth of 50 basis points.
Speaker Change: New lease rate growth improved by 300 basis points first the first quarter as concession stabilized and demand increased which resolved improved pricing power.
Speaker Change: Second 47% annualized resident turnover was 300 basis points below the prior year period, and our best second quarter retention and more than a decade.
Speaker Change: This has enabled us to increase renewal rate pricing through at least August and has led to more favorable blended lease rate growth.
Speaker Change: Third occupancy remains strong at 96, 8% supported by healthy traffic and leasing volume.
Speaker Change: New York, Boston, Washington, D C, and Seattle, which collectively constitute 40% of our same store pool were standouts, averaging higher than 97% occupancy during the quarter.
Speaker Change: And fourth other income growth was nearly 9% and was driven by our continued innovation along with the delivery of value add services to our residents.
Speaker Change: Shifting to expenses quarterly.
Speaker Change: Quarterly year over year same store expense growth of three 7% came in better than expectations and was primarily driven by reduced repair and maintenance costs as well as insurance savings.
Speaker Change: Repair and maintenance growth of less than 1% was partly due to our improved resident retention and having 500 fewer unit terms on a year ago, while insurance savings of nearly 5% was driven by lower claims activity.
Speaker Change: Moving on core operating trends have remained resilient in July and key metrics have largely followed typical seasonality first July blended lease rate growth is expected to be in the mid 2% range, which is slightly higher than June results and follows normal historical sequential rent growth trends.
Speaker Change: New lease rate growth is slightly negative on average well we have had success, increasing our renewal lease rate growth closer to 5% from 4% in the second quarter in.
Speaker Change: In terms of relative performance the east coast is showing the most strength with blended lease rate growth of approximately 4%.
Speaker Change: This is followed by the West coast at 3% on average in the Sunbelt at approximately negative 1% based.
Speaker Change: Based on current trends, we expect east coast leadership to persist through at least the remainder of the third quarter.
Speaker Change: Second resident retention continues to compare well against historical norms in July will represent the 15th consecutive month or year over year turnover has improved.
Speaker Change: Relative affordability compared to other forms of housing is a benefit to the apartment industry in total given.
Speaker Change: Given the level of home prices and mortgage rates the average cost of owning a home across UDR markets is nearly 5500 per month by contrast, the average rent for UDR apartment home is approximately 2500 per month.
Speaker Change: Thereby creating annual shelter cost savings of $36000.
Speaker Change: This disparity has led to a record low level of our residents moving out to buy a home.
Speaker Change: Furthermore, because of our ongoing customer experience project, our resident retention over the past year has improved by approximately 210 basis points relative to the peer group average.
Speaker Change: This is a testament to our team's focus and execution on our innovative data driven approach to customer service.
Speaker Change: Ultimately improved retention should drive better pricing power higher occupancy increased other income reduced expenses lower capex and margin expansion.
Speaker Change: We're still early in the innings of capturing these benefits, but believe the incremental opportunity is in the $15 million to $30 million range.
Speaker Change: Third.
Speaker Change: Occupancy remains high but has trended slightly lower to 96, 2% to 96, 3% in July due to elevated new supply coming online and typical seasonal operating trends.
Speaker Change: Markets facing heavy supply, including Nashville, Dallas, and Tampa, 16% of our NOI has seen occupancy declined by approximately 100 basis points on average compared to the second quarter.
Speaker Change: Conversely.
Speaker Change: Occupancy remains in the mid to high 96% range on average across markets facing less supply such as New York, San Francisco, and Orange County, which make up 26% of our NOI.
Speaker Change: Strategically we anticipate regaining portfolio occupancy later in the third quarter as we tactically adjust our operating approach ahead of our seasonally slower leasing period.
Speaker Change: And fourth.
Speaker Change: Other income continues to grow in the high single digit range in July similar to what we achieved in the first half of the year as a reminder, other income constitutes roughly 11% of total revenue.
Speaker Change: We remain pleased with the trajectory of other income initiatives, such as the rollout and penetration of building wide Wifi as these contribute significantly to incremental same store revenue growth.
Speaker Change: Based on our results for the first seven months of the year, we raised our full year 2020 for same store growth guidance in conjunction with yesterday's release.
Speaker Change: We are encouraged by the resiliency of various for demand indicators, such as year to date job growth and wage growth.
Speaker Change: Well, we remain somewhat cautious given the potential for macroeconomic volatility in an election year combined with elevated supply deliveries in the back half of 2024.
Speaker Change: Yeah.
Speaker Change: To provide details on our guidance increases starting with same store revenue growth, we raised our midpoint by 50 basis points, resulting in a new range of 1% to 3%.
Speaker Change: The primary building blocks to achieve the 2% midpoint include the following.
Speaker Change: First our 'twenty 'twenty four or in a 70 basis points.
Speaker Change: Second portfolio blended lease rate growth is forecast to be approximately 130 basis points in 2024.
Speaker Change: This represents a 60 basis point increase compared to our initial guidance.
Speaker Change: Given blended lease rate growth of approximately 180 basis points through the first seven months of the year. This implies a deceleration to 60 basis points on average for the remaining five months of the year.
Speaker Change: Using a mid year convention, our full year blended lease rate growth expectation should add about 65 basis points to 2020 for same store revenue growth, reflecting a 30 basis point improvement versus our prior expectations.
Speaker Change: Underlying our full year blended rate growth forecasts are assumptions of 3.5% to 4% renewal rate growth and approximately negative 1% new lease rate growth.
Speaker Change: Third we expect the combination of occupancy and bad debt to be roughly flat year over year in 2024 in line with our prior expectation.
Speaker Change: And for innovation and other operating initiatives are expected to add 70 basis points to our 2024 same store revenue growth, which is an increase of 25 basis points versus our prior guidance. The bulk of this growth should come from the continued rollout of property wide Wifi initiatives, along with a variety of other property enhancements.
Speaker Change: Yes.
Speaker Change: 3% high Anniversarying store revenue growth range is achievable through improved year over year occupancy additional accretion from innovation.
Speaker Change: Blended lease rate growth or a combination thereof.
Speaker Change: Conversely, the low end of 1% reflects full year blended lease rate growth of approximately 50 basis points some level of occupancy loss and a moderation in other income generated by our innovation.
Speaker Change: Moving on to same store expense growth, we lowered our midpoint by 25 basis points to 5% with the full year range now at 4% to 6%.
Speaker Change: <unk> was primarily driven by constrained insurance and repair and maintenance expense growth.
Speaker Change: As a reminder, same store expense growth of seven 5% in the first quarter was elevated due to comping off of a one time $3 7 million dollar employee retention credit we realized at the beginning of 2023.
Speaker Change: Absent this factor.
Speaker Change: We would expect normalized same store expense growth for the full year to be in the low 4% range or approximately 80 basis points lower than our updated midpoint.
Speaker Change: Turning to regional trends or coastal results have exceeded our expectations, while our sun belt markets are largely in line.
Speaker Change: More specifically the east coast, which comprises approximately 40% of our NOI was our strongest region in the second quarter and Washington D. C was our best performing market driven by strength in Northern Virginia.
Speaker Change: Second quarter weighted average occupancy for the East Coast was 97, 1% blended lease rate growth was four 7% and year over year same store revenue growth was three 8% with continued healthy demand and relatively low new supply. We expect this region to be our strongest throughout the rest of the year.
Speaker Change: The West Coast, which comprises approximately 35% of our NY has performed better than expected year to date.
Speaker Change: Our stabilized somewhat in the second quarter following tremendous momentum in the first quarter.
Speaker Change: We are encouraged by various employers more strictly enforcing returned to office mandates as well as increased office leasing activity from technology and AI companies, but are also cognizant of corporate relocations are influenced job and wage growth.
Speaker Change: Absolutely loved the new supply remained low at less than 2% of existing stock on average across our west coast markets.
Speaker Change: Which we expect will lead to a more favorable supply dynamic in the coming quarters.
Speaker Change: Lastly, our sunbelt markets, which comprise roughly 25% of our NOI continue to lag our coastal markets.
Speaker Change: Year to date performance was in line with our original expectations through the beginning of June.
Speaker Change: Each time, we began to see some pricing deterioration due to elevated new supply and the concessions that came with it we.
Speaker Change: We tactically decided to hold great to best set up our rent role for future quarters, which resulted in occupancy drifting lower.
Speaker Change: Our sunbelt markets broadly have more robust job growth in our coastal markets.
Speaker Change: We remain cautious on the region near term given the very high absolute levels of new supply coming online.
Speaker Change: To close our coastal markets, which comprise 75% of our NOI have performed above initial expectations, while our sunbelt markets, which comprise 25% of our NOI are largely in line with expectations are.
Speaker Change: Our diversified portfolio enables us to be surgical with regard to how we operate each market and each asset, allowing us to leverage the strong fundamentals of our industry.
Speaker Change: This coupled with continued innovation that will further expand our operating margin over time maximizes revenue and NOI growth.
Speaker Change: My Thanks go out to our UDR associates nationwide for your dedication towards meeting the challenges we face head on as we continuously innovate to drive strong results I will now turn over the call to Joe.
Joseph D. Fisher: Thank you Mike.
Joseph D. Fisher: So I will cover today include our second quarter results and our updated full year guidance.
Joseph D. Fisher: A summary of recent transactions and capital markets activity.
Joseph D. Fisher: And a balance sheet and liquidity update.
Joseph D. Fisher: Our second quarter <unk> as adjusted per share of <unk> 62 cents achieved the high end of our previously provided guidance.
Joseph D. Fisher: The one penny per share sequential increase was supported by strong same store NOI growth driven by higher than expected blended lease rate growth and lower than expected expense growth across both controllable and non controllable categories.
Joseph D. Fisher: Year to date operating results have exceeded our initial expectations, which led us to raise our same store and <unk> <unk> per share guidance ranges.
Joseph D. Fisher: Our new full year 2024, <unk> per share guidance range is $2 42 to.
Joseph D. Fisher: To $2 50.
Joseph D. Fisher: With a midpoint of $2.46.
Joseph D. Fisher: Since providing our initial guidance in February we have raised F away per share guidance twice by a cumulative four pennies per share or approximately 2% and have improved the mid points of our same store guidance ranges.
Speaker Change: Current trends suggest upside to our med points, but we believe a cautious approach is prudent given the risks of elevated new supply election uncertainty and macroeconomic volatility.
Speaker Change: Looking ahead, our third quarter <unk> per share guidance range of 61 to.
Speaker Change: The 63.
Speaker Change: The 62 cent midpoint is flat sequentially, which is similar to our historical average earnings of results from the second to third quarter and it's due to minimal expected changes across NOI interest expense and G&A.
Speaker Change: Next a transactions and capital markets update.
Speaker Change: First during the quarter, we completed construction of 101, North Meridian, a $134 million 330 home community located adjacent to another UDR community in Tampa.
Speaker Change: Due to robust demand the community is already at 40% occupied as of today, which.
Speaker Change: Which is twice the level, we expected at this point and that's lease up.
Speaker Change: When combined with attractive rental rate pricing the yield on the project is trending approximately 75 basis points ahead of underwriting.
Speaker Change: With the completion of this community we have no active development projects.
Speaker Change: However, we are evaluating up to four potential starts in the next 12 to 18 months.
Speaker Change: Second subsequent to quarter end, we went under contract to fund a $35 million preferred equity DCP investment at a 10, 75% rate of return on four communities located in Portland as part of a recapitalization.
Speaker Change: Each of the four communities has achieved stabilized occupancy and is generating positive cash flow.
Speaker Change: Therefore, the risk profile is lower than a typical new development in D. C. P project and positive cash flows allow for approximately two thirds of our contractual return to be paid in cash.
Speaker Change: And third subsequent to quarter end, we received an approximately $17 million pay down on our preferred equity DCP investment and burden Boulevard located in Queens New York.
Speaker Change: In conjunction with the Paydown, we agreed to lower our rate of return from 13% to 11% to reflect the reduced risk in our investment due to the development being completed and a more secure position and in the capital structure.
Speaker Change: Finally, our investment grade balance sheet remains liquid and fully capable of funding our capital needs.
Speaker Change: Some highlights include.
Speaker Change: First we have nearly $1 billion of liquidity as of June 30th.
Speaker Change: Second.
Speaker Change: We have only $112 million of consolidated debt or approximately 0.5% of enterprise value scheduled to mature through the end of the year and only 11% of total consolidated debt scheduled to mature through 2026, thereby reducing refinancing risk.
Speaker Change: Our proactive approach to managing our balance sheet has resulted in the best three year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multifamily peer group at three 4%.
Speaker Change: And third our leverage metrics remain strong debt to enterprise value was just 28% in quarter end, while net debt to EBITDA was five seven times.
Speaker Change: And all our balance sheet and liquidity remain in excellent shape, we remain opportunistic in our capital deployment.
Speaker Change: And we continue to utilize a variety of capital allocation competitive advantages to drive long term accretion.
Speaker Change: With that I.
Speaker Change: We'll open it up for Q&A.
Speaker Change: Operator.
Speaker Change: Thank you well now be conducting a question and answer session. As a reminder, we please ask that you ask one question. One follow up then return to the queue, if you'd like to be placed in the question queue. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if he'd like Cuba.
Speaker Change: And from the queue for participants using speaker equipment, it may be necessary to pick up your handset before pressing star one and as a reminder, please ask one question and one follow up then return to the queue. Our first question is coming from Eric Wolfe from Citigroup. Your line is now live.
Eric Wolfe: Hey, Thanks can you talk a bit more about what you saw in June and July in your coastal markets versus the Sun belt with.
Eric Wolfe: I was specifically wondering about how much occupancy fell in the sunbelt versus versus the coastal markets and if that's impacting your pricing strategy for both going forward.
Eric Wolfe: Yeah, Mike Great question <unk>.
Speaker Change: So let me try and capture all of that.
Speaker Change: First and foremost one month is not a good trend line I tend to look at it over 90 days during peak leasing from June through July we actually average right around two 5% button.
Speaker Change: There's 100 basis points over our original expectations say second to that he was so strong for us, but he also pushed our market rents.
Speaker Change: Much double compared to what we see pre COVID-19 right around 2% versus 1% on a month over month basis. So very strong trends led us to push our our rents that led us to pushing our renewals higher through <unk>, which is helping to offset new lease growth. So to that point I spend a little bit more time, just on our renewal strategy.
Speaker Change: And how it's playing out before I give you some of the numbers, but we are sending out about 5% through September at this point, we typically achieve between 20 and 30 basis points of what we send out and I'll tell you our strategy around getting more aggressive by about 100 basis points from the first half of the year.
Speaker Change: It was really stemming out of our customer experience project just given the fact that we've had closer to 900 fewer move outs through the first six seven months of the year and our turnover went down 3% year over year, along with the fact that we changed the trajectory of a relative basis versus our peer group by over 200 basis points, we want.
Speaker Change: Test that pricing strategy and right now it feels like it's playing out to your point on the occupancy.
Speaker Change: We did lose a little bit of ground over the last 30 60 days, we've seen has been wise as a whole I think it's important to size. It for us when you have call. It 10 bps lower occupancy that's 50 homes, which is approximately $100000 during the month, so while it's down a little bit of it.
Speaker Change: Not material and we're starting to see it stabilize into August.
Speaker Change: To your point just on some of the stats around the regions what I would tell you is.
Speaker Change: The East Coast in July still hovering around 96, 5% the west coast in the Sun belt, a little bit lower right around 96 point too.
Speaker Change: But on the plans, we are still seeing 4% growth on coast, 3% growth on the West coast and the Sunbelt has had somewhat stabilized in that negative 1% range similar to what we saw in May June and throughout the second quarter. So overall trending kind of as expected.
Speaker Change: Got it.
Speaker Change: That's helpful and then I guess based on your guidance for the full year. It seems like you're sort of guiding to around 9% or something around there for the back half of the year, which is I think pretty close to your original guidance. I mean would you say that that's more of a conservative placeholder or do you think it's sort of reflective of a more conservative position.
Speaker Change: Just given some of the things you mentioned just trying to understand what's what's going into that back half estimates the blended rent growth.
Speaker Change: Hey, Eric It's Joe maybe just to lead off go how we approached it.
Joseph D. Fisher: Versus original guidance, we had taken kind of consensus estimates layered in our bottoms up forecast to come up with that initial forecast like.
Speaker Change: Since that period of time, we've clearly seen jobs come on better wages coming better G. D. P come in better supply has been about as expected with developers actor and fairly rational from a concessionary perspective.
Speaker Change: And then the relative affordability piece I think is one that has been clearly a nice tailwind for us for me there are move outs to buy or just capture rate on new household formation. So.
Joseph D. Fisher: That's really what's driven kind of our year to date market rent growth.
Marguerite Fresno: Effective Marguerite Fresno.
Marguerite Fresno: On a daily basis is about 5%, which as you know under joining most wants better than we expected. Originally so that's what drove those blends in the first seven months. So as they approach kind of back half of the year and full year guidance. The way. We did it was really just takes what was put in the bank for the first seven months. So what we knew what happened here through July update our guidance.
Speaker Change: For that impact and we really love the back half assumptions alone and so the implied number for the last five months or there is only about 60 basis points and blended lease rate growth, obviously, Mike mentioned, where we're sending out August renewals.
Speaker Change: We will talk to the street once we get more visibility on news as we go into September but.
Speaker Change: But we have factored in some conservatism on that front under the view that you still have supply out there still have unknowns on the macroeconomic front and on the election front and we typically see some degree of seasonal slowdown anyway on blends as you go into the back half so yeah.
Joseph D. Fisher: Everything we're seeing today tells US we have continued momentum with that kind of mid twos blends, but I think it's still prudent to be a little bit conservative on that front as we approach guidance and then update as we move into the back half of the year.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you next question is coming from Steve Sochua from Evercore ISI. Your line is now live.
Kate: Hi, This is Kate on for Steve If he had a question around I think you guys at the end of the guidance for DCP funding from zero to 15 million can we expect more on this front and the back half of them there.
Speaker Change: Yeah. So the 15 million is really the net of a couple of items. We originally had zero in there I think everybody saw in the press release, we did the $35 million.
Andrew: Investment and a recap of the portfolio in Portland, which Andrew will give you more details on here in a second we have still got the payback on Vernon, which is part of a bigger payback for both us and our partner.
Andrew: If you can provide some more color on as well and then we had a couple of other cash pays and small prepayment so that nets to about $15 million.
Speaker Change: If we look out to the rest of the year, we really don't have much coming up on the maturity fronts I think our next maturities from our senior loan perspective, or the first part of 'twenty five so that'd be the first action, we have from our additional prepayments or potential extensions there.
Speaker Change: And on the investment front really no major discussions right now, but not to say that.
Speaker Change: We aren't looking we're just not far enough along to really commit to increasing guidance on D. C. P deployments.
Speaker Change: But as we think that next year and assume that we have additional prepayments pay offs I would expect us to be active on that front and looking to deploy that capital even if it takes place ahead of time.
Speaker Change: This is Andrew as it relates Oh go ahead.
Andrew: No no I'm good.
Speaker Change: Okay.
Vernon: As it relates to the D. C P activity for the quarter Vernon, which is D. C. P deal that we have in the story of West neighborhood of New York. Originally funded in June of 2022 that we had a partner that it was originally parry pursue with us in that transaction, who had invested $15 million.
Vernon: Next to our $40 million at the time of the redemption their accrual was $10 million and their entire amount was fully refunded. So $25 million. That's in addition to our 17 million that was refunded and.
Vernon: And as Joe said this is now a well.
Joseph D. Fisher: This is a recapitalization of a completed and stabilized development the properties 90, 596% occupied and.
Joseph D. Fisher: Then on very similar situation, we had on the Portland, DCP recap, where we we invested in for stabilized assets.
Speaker Change: One of which will close shortly but that as well as in both of these are new DCP investments are.
Speaker Change: Two thirds of our accrual will be paid current.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you. Our next question today is coming from Austin <unk> from Keybanc capital markets. Your line is now live.
Austin: Great. Thank you I wanted to hit back on the July I'm more specifically new lease rate growth churn trends, Mike you had highlighted that Nashville, Dallas and Tampa had you know, we're primarily driving down occupancy, but I'm curious if these markets also drove the moderation in new lease rate growth or were there other markets or regions that have seen it.
Speaker Change: Similar degree of new lease rate growth moderation into July versus what you saw in May and June.
Speaker Change: Yeah, Austin, it's a really good question, what's interesting obviously from May to June we saw a little bit more of a deceleration in lands and then coming in July all of that.
Austin: Uptick a bit so really the way I look at it is from May to July we saw close to a 100 basis points, let's call. It 50 to 100 basis points across all regions with the Sun belt in a little bit weaker than.
Speaker Change: Over the last 30 days or so but again, it's been pretty stable as we've gone towards the end of the month and we're still hovering around negative 1% today in terms of the new lease growth, we're still seeing negative five to negative 6% down in the sunbelt, where we're seeing upwards of 2% growth East coast, 1% on the West coast. So.
Speaker Change: On an absolute basis still strongest coming out of the coast a little bit weaker in the sunbelt I had expected.
Joseph D. Fisher: Yes, John This is Joe just to follow up on that too as you think about the occupancy number a little bit of insight beyond just the pricing strategy that Mike has talked about we've talked a lot in the past about our fraud prevention efforts and kind of the $25 million to $50 million opportunity that bad debt represents for us overtime.
Joseph D. Fisher: We've talked about starting to roll out and pilot some new AI platforms on both income and I'd verification. We're also trying to be a little bit more robust and disciplined on our.
Joseph D. Fisher: Deposit strategies on our credit scores around the portfolio. So as we continue to ramp up that we are seeing some of our denial rates increase.
Joseph D. Fisher: Which wall temporarily does impact occupancy to the negative.
Joseph D. Fisher: It's not necessarily a practical traffic, which still continues to be good apps continue to be good. It's just that we're kicking more of those individuals out of the system, taking the hit today on occupancy, but we do believe longer term that is going to get us better residents in place that stay with us longer and continue to pay.
Speaker Change: It's a longer term tradeoff to take occupancy here today get the better numbers in the future, although I'd say for bad debt, we have not factored that into our numbers were still assuming in guidance that we're plus or minus kind of flat on a year over year basis, even though we're trying to and slightly ahead at this point in time.
Speaker Change: Got it and you could partially I think answered my next question, which is really around you know BC.
Speaker Change: Besides the supplying concessions impact in July I was curious about the slowdown in traffic and any impact of these near record absorption levels, we've kind of heard about throughout the first half of the year.
Speaker Change: But maybe on top of that I guess, how have concessions trended can you kind of quantify that and then how does that stack up versus versus last year.
Austin: Sure Austin I think that's a really good point I think just stepping back a little bit just thinking about the consumer and how healthy. They are a few stats that we typically look at in addition to concessions I would tell you first of all not seeing doubling up so we still have 1.8 residents per home we've seen the single arch.
Ben: Ben go up about one 5% to 42% of our homes and we're seeing stable rent income ratio across the board at 22% with places like Boston, Dallas D C, San Francisco and Tampa, even down a little bit. We're at places like Seattle are up just slightly given the fact that we've been able to push rents so much.
Speaker Change: But to your point on concessions or right around half a week today, which is pretty consistent where we were pre COVID-19, it's kind of normal steady state today, obviously with the sunbelt being a little bit higher and then the coast being next to nothing.
Speaker Change: Great. That's all for me thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question is coming from Josh General line from Bank of America. Your line is now live.
Speaker Change #101: Yeah, Hey, guys, Mike just wanted to follow up on some comments you made in one of your answers to a question. It sounds like you feel more confident on pushing rate because of your platform initiatives related to like data on the customers.
Speaker Change: I guess when did you kind of start pushing a little bit harder than.
Speaker Change: And then you would have in the past and then how do you think about the ability to kind of continue pushing like rate renewal rate even harder from here in the future.
Speaker Change: Yeah. Thanks for the question Josh It goes back to what I was saying with what we're seeing in May and so when we had very strong dynamics in the marketplace, we're able to start driving our market rents up again about 2% compared to normal historical averages of 1% that gave us more confidence to to get it.
Speaker Change: <unk> been more aggressive as we started to price our renewals 60, 90 days out and so that's what you're seeing play out in front of us today.
Speaker Change: And in addition to that I think.
Speaker Change: It goes back to what we're seeing with that customer experience project a lot of that work's been done over the last year or so and while we looked at is when we compared ourselves to our peers on a relative basis, we were about 200 basis points below them over the last six to nine months, we've actually change that trajectory or closer to 50 basis points.
Speaker Change: Above them and so it gave us the confidence to continue to try to push in there and test a different thing if you test out our pricing strategy see if we can get a little bit more aggressive on renewals again I feel like it's playing out today, we'll know more here over the next 30 60 days, but it feels good.
Speaker Change #116: Okay. No. That's super helpful. And then just sorry, what did you what is it you're above peers on or you were blow and now you're above what what was that.
Speaker Change #129: So turnover when we compare ourselves against the peer group and turnover, we were flagging the group and that's what led us to really dive into the customer experience project to try to try to change that trajectory and we believe that we are onto something we see it playing out in front of us, but we also know that we have a long ways to go and we think that this could potentially continue.
Speaker Change: Drive call it $15 million to $30 million in value over the next couple of years by holding a sustainable lower turnover than the peer group going forward.
Speaker Change: Okay awesome, thanks for that Mike.
Joseph D. Fisher: Sure.
Speaker Change: Thank you next question is coming from Jamie Feldman from Wells Fargo. Your line is now live.
James Colin Feldman: Great. Thank you for taking the question.
James Colin Feldman: So I appreciate your commentary on you know you talked a lot about the guidance for a kind of top line revenue, but also your comments around you know you've got a lot of uncertainty the election the consumer.
Speaker Change: You know rates what are the other line items, where you would say.
Speaker Change: In your guidance do you think you have the most room you know are you there.
Speaker Change: The most conservative on or or if things go well and things don't really turned downward you could actually see meaningful uptake.
Speaker Change: Yeah, Jamie it's a good question.
Jamie: I'll tell you, where we're feeling pretty good today and you could see it in our guidance.
Speaker Change #104: Expenses and I'm seeing across the board, it's not just on our controllable as its also on the non controllable and so when we went into the year, we had a midpoint of around five and a quarter and today, we're closer to five based on everything we're seeing with the customer experience. The fact that turnover is down we're getting a little bit more aggressive with our turn vendor.
Speaker Change: <unk> people on site to do a lot of the work for US we're able to sharpen our pencil there. So we're continuing to see strength on that line item and so I'd say that that's probably the biggest one for me.
Joseph D. Fisher: And I think the real estate tax as well when I look at what we came into the year at where expected more in the 4% to 5% range today.
Joseph D. Fisher: Today, depending on what takes place with deal activity as well as I think it was some upturns in Florida to improve our numbers based off values and rates. Yeah. We think we could trend that real estate tax number down into 3% to 400% range, we've not fully factored that into our expectations yet because there are still unknowns out there, but I think real estate taxes still is an opportunity for upside.
Speaker Change: <unk> insurance, we've had really good year to date activity from a claims perspective, there are a lot of that driven by expense savings rois doing a lot of asset quality work and then a little bit of luck just coming off of higher claims activity, but we've had really good success on a year to date basis. There we have not factored that into continuing into the back after the same degree but.
Speaker Change: Yeah, if we see that trend continue we'd probably have some upside there in expenses as well. So expenses are probably good variable for us on a go forward basis.
Joseph D. Fisher: Okay.
Speaker Change: Okay. That's very helpful. Thank you.
Speaker Change: And then I guess, just kind of sitting where we are in the cycle.
Speaker Change: Everyone's talking about you know very low level of starts I guess that means a stronger 'twenty six 'twenty seven across all markets rates pulling back a little bit and we'll see what spending looks like for the different candidates out there if rates stay low but.
Speaker Change: You talked about how strong your balance sheet is.
Speaker Change: How aggressive do you feel like you need to be right now.
Speaker Change: On the investment front to kind of catch the early part of the cycle or do you think you can be patient.
Speaker Change: And just what does the landscape look like whether it's from your perspective or are you competing buyers perspective on the macro picture in putting capital to work.
Joseph D. Fisher: Yep.
Joseph D. Fisher: Jamie It's Joe Yeah.
Joseph D. Fisher: I'll kick it off just from high level perspective, how we're thinking about capital and then toss it to Andrew He can kind of talk about what we're seeing the market with buyers and sellers on cap rates today. So.
Speaker Change #149: I'd say right now it's a continued capital light strategy for US we don't have the cost of equity that is compelling today, we don't have a lot that we need to do either on the debt maturity side or the development commitment side today.
Joseph D. Fisher: From a external growth perspective going out there and acquire and utilizing balance sheet capacity is that really something that makes sense for us in terms of levering up for minimal accretion you know when you look at where cap rates are today that Andrew will talk about relative cost.
Andrew: In line to possibly even negative leverage today, and so we went out there and utilize our balance sheet capacity for that isn't overly compelling from a ethical accretion perspective. So I'd say continue with a capital light strategy. We are building up a lot of optionality within the development pipeline that we've got plus or minus core deals that could start in the next 12 to 18 months. So continued.
Andrew: Try to whittle cost out their weight for rents to come our way wafer yields in cap rates keep coming our way, but I think that's where we'll lean in as we get more conviction of the cycle and our cost of capital.
Andrew: Thanks, Joe This Andrew as Joe mentioned, we're going to continue our capital light strategy.
Andrew: We're focused on underwriting deals.
Andrew: Presenting those to our joint venture partner, but for the most part what we're seeing in the market today as.
Joseph D. Fisher: Many of the large heavyweight firms have signaled that the markets.
Joseph D. Fisher: Bottomed out.
Speaker Change: Cap rates today are in plus or minus 5% based on location.
Joseph D. Fisher: The the thing that we're seeing that's a little different than we have in the past is that rates have normalized across different markets and those with higher growth or trading lower.
Joseph D. Fisher: They're trending lower excuse me and those with slower growth or a bit higher than we're seeing that across the board and we're also seeing.
Joseph D. Fisher: Investors make decisions based on discount to replacement cost.
Joseph D. Fisher: In the markets, where there's a large disconnect between the cost to build and the cost to buy we're seeing increased activity in certain buyer groups.
Joseph D. Fisher: That's also helping on the IRR as many investors are able to push reversion values down.
Joseph D. Fisher: Okay pushed cap rates down on the reversion to push values up and their IRR up as.
Joseph D. Fisher: Some of these markets have substantial discounts to replacement cost.
Speaker Change #135: Okay. Thank you that's very helpful. Just to confirm so you're seeing the cap rates there or is.
Speaker Change: Is it.
Speaker Change #146: GAAP and cap rates between higher growth in lower growth markets like what's the delta.
Speaker Change: Between the high I mean, if you look at.
Speaker Change: Yes.
Speaker Change: I'd say that cap rates are anywhere from four and three quarters to five in a quarter for the majority of the assets that are trading today and so in markets, where you don't have a discount to replacement cost and you have low growth, you're obviously going to ask it because those assets are trading at a higher cap rate and then what markets, where you have high growth people are willing to push harder for that in that pricing.
Speaker Change: <unk> is going to be at the lower the lower cap rates.
Speaker Change #107: Okay, great. Thanks for clarifying appreciate it.
Speaker Change: Yes.
Speaker Change: Thank you next question is coming from Nick <unk> from Scotiabank. Your line is now live.
Nick: Hey, good morning team and stand out you can't go on connect.
Michael D. Lacy: For Mike with respect to the incremental 60 basis points rental rate growth for the year versus the initial guide.
Nick: Could you put some put some numbers around how that change between your different regional smokers.
Nick: Okay.
Michael D. Lacy: Yeah, Dan I think first and foremost when you think about the 60 bps what were assuming for the back half of the year as renewals being call. It the 4% range.
Speaker Change #119: So it would have to be closer to two 5% to get to that number and so when you think about what that means by region. Obviously, we're still sending out 5% through September at this point, there's not a big difference between regions I'd tell you at the low end, we're probably closer to 335% in the sunbelt.
Nick: Well, let's see.
Nick: Above that on the coast and then when you get to the newly side, what I've been seeing is negative five negative 6% in the sunbelt expectations are that could get a little bit worse as we go into the back half of the year, just given that supply is going to still be peaking and you have less demand, but with the coast, you're probably coming down.
Nick: Ardently, but not anything significant.
Nick: And then relative to kind of first half that 60 bps pick up that we saw you know we continue to see sunbelt operating about as expected the positive surprises have really been coming on the coast and I think as we've talked about before D. C has been a nice positive surprise for us as well as San Fran and Seattle picking up on the West coast.
Nick: It's really been the coast have driven the upside to that.
Nick: Blended lease rate expectation for the full year.
Speaker Change: Great. Thanks, Thanks for that John and actually just following up on D. C. Theres, obviously no. It is.
Speaker Change: Been outperforming the center has obviously been some benefits from the election and maybe the defense sector spending so.
Speaker Change: Looking ahead, what would you anticipate some level of normalization until next year.
Speaker Change #109: And are you considering a substantial change in administration.
Speaker Change: I'll take that I'd say first what we're seeing there and just kind of Cypress Martin TC has been doing tremendous over the last 60 to 90 days and again. This is a 15% of our NOI market. So very important marker for us.
Speaker Change: We're 40% urban 60% suburban.
Speaker Change: Occupancies in that 97% range today and blends were five 9% during the quarter compared to three 4% first quarter. So D. C has been a strong performer for us expectations as we move forward, we're going to have a little bit more supply down around the 14th Street corridor also along the Navy yard. So we'll continue to see a little bit of pressure.
Speaker Change #122: Are there as it relates to just demand and.
Speaker Change: And job growth there.
Speaker Change: It's too early to tell kind of how that shakes out but right now we feel good about that market.
Speaker Change: Yeah. This is to me I would tell you the election cycles, particularly presidential and the impact on D C.
Speaker Change: There's not much of a bump.
Speaker Change: Just turns out these guys put on new Jersey and go to work for somebody else and stay in the marketplace. So I think the dynamic in D. C that could change is returned to office.
Speaker Change: And if that takes root.
Speaker Change: <unk> sees a significant.
Speaker Change: Return to office, if you will so we'll wait and see how it plays out I think we know in about 97 days kind of where that one is going to play.
Tom Toomey: Thanks, Tom.
Speaker Change: Thank you next question is coming from John Kim from BMO capital markets. Your line is now live.
John P. Kim: Thank you I wanted to follow up with Mike on an answer you gave to Austin's question on new lease rates in July and I know, we don't want to focus too much on one month of data, but I.
John P. Kim: I think you mentioned that the July was down five 6% in sunbelt up 1% to 2% in coastal markets.
Speaker Change: That would basically.
Speaker Change: Imply that the the weakening of the July rates was driven by the coastal sequentially.
Speaker Change: Sunbelt I just wanted to make sure that was the case.
Tom Toomey: No John it's actually it's it's kind of across the board like I was saying when you go from May to July we saw a little bit more deceleration in the east coast and now is probably more specific to a place like Baltimore.
Speaker Change #105: New York TC They were humming right around 5% to 6% growth so they've come down a little bit.
Speaker Change #105: But for the most part it's it's.
Speaker Change #105: Across the board in terms of new lease growth and at the same time, we're seeing renewals actually a little bit higher in the sunbelt today than we were seeing back in may as it relates to some of the coastal markets.
Speaker Change #105: Words of we're pushing around 445% in July versus.
Tom Toomey: Sub 3% back in May in the Sunbelt and then I'll tell you for the coast, it's up closer to 50 to 70 basis points, so a little bit weaker on the new lease side, a little bit stronger on the guidance.
Tom Toomey: Died in the Sunbelt right now.
Speaker Change: Okay.
Speaker Change: Okay, and then Joe you mentioned looking at potentially four different development starts in the next couple of years.
Joseph D. Fisher: What kind of development yields or IRR or do you need to achieve to move forward with those and you compare that with your D. C P investments where you're at.
Speaker Change #113: Investing in 10, and three quarters or do you compare that versus acquisition yields.
Speaker Change #125: Yeah. So from a development yield perspective, I think the absolute yields that were seeing available in the marketplace today are actually quite compelling relative to history.
Speaker Change: The challenge is a little bit as a spread investor relative to either where cap rates are that 5% our own cost of capital.
Speaker Change: That's what keeps us a little bit cautious still from a new store perspective, but.
Speaker Change: What we're looking at on those deals is generally on a current basis kind of in that high fives type of number and then obviously trending higher. So you know day, one youre kind of looking at a plus or minus 75 to 100 basis point yield differential versus a comparable cap rate in that market for that product type and then growing over time. So that's kind of how we're thinking about that piece.
Speaker Change: Yes.
Speaker Change #139: We are thinking about as we've done over time I think one of the good things about our platform is by investing in a lot of different areas be it development DCP acquisitions joint ventures into the platform and the read out of whatever it might be we do tend to pivot and flux those within reason and so we are looking at cross DCP and <unk>.
Speaker Change: Acquisitions, as we compare and contrast, the returns on the risk.
Speaker Change: That said the acquisition side, we are trying to.
Speaker Change: Allocate capital there with our joint venture partner, which as you know, it's been a little bit slower D.
Speaker Change #108: D C. P. I'd say, we're a little bit more than that steady state part of the business. You know that's kind of just under 3% of the enterprise and earnings right. Now so we feel comfortable with it there. So that's probably more of a recycling piece.
Speaker Change: So a little bit less of a pivoted and compare and contrast amongst DCP in development.
Speaker Change: Great. Thank you.
Speaker Change: Thank you next question is coming from Rich Anderson from Wedbush. Your line is now live.
Rich Anderson: Hey, thanks.
Rich Anderson: So just a broader question for me when you think about the challenges that lay ahead, I know youre kind of laying out some some conservatism in your numbers for the back half of the year.
Speaker Change: But when you think of the compounding impact of supply.
Speaker Change: Some stuff that's delivered but 40 40 or 50% finished other stuff. That's just getting delivered now is maybe 10% occupied.
Speaker Change #144: Is the are the challenges ahead.
Speaker Change: Huffer than they were in the rearview mirror or do you or do you feel like you're kind of past the worst of it right now when you consider some of the jobs numbers, you mentioned and income growth and all that sort of stuff I'm, just curious where your mind is from that standpoint.
Speaker Change: I guess, maybe kicking it off and others may jump in.
Speaker Change: As you look at where we were at let's kind of fall back to last year September October November time frame, that's really where we saw that increase in concessionary activity as you know deliveries start to ramp up.
Speaker Change: We are in a very different market than where we were at that point in time right.
Speaker Change: You look at the capital environment, obviously, and we had a pretty big surge in rates.
Speaker Change: [noise] out in spreads you also had a drying up of capital availability and at that point, we were talking about cap rates potentially being in the high fives up to 6% type of level. So are very different capital environment that point in time also if you're a developer you're kind of seasonally weak period of time, plus looking up at a big stack of deliveries in the year ahead.
Speaker Change: A little bit more nervous as you face a refi and think about your rent roll. So I think we've kind of fast forward to a different environment, where we obviously to date have avoided the recession yeah supply.
Speaker Change: Supply as you look forward over the next year and over the next 12 months, it's better on deliveries and it has been over the last 12 months and the capital environment and demand for assets is much better than anticipated or at least as it was last <unk>. So.
Speaker Change: The environment definitely feels better that said, we continue to have deliveries that are kind of at levels that we saw in <unk> and <unk> and going into <unk>. So I think that's what keeps us cautious says we don't want to get out over our skis knowing that there is still macro risk out there and there's also macro opportunity if jobs keeps coming on better household formations keeps coming in better so it's kind of right to be.
Speaker Change: The cautious for now get through that seasonally weak period of time, and hopefully we put up better numbers than what we've laid out here and then we'll report back on them.
Speaker Change: Let's see how the year ends up but for now being prudent.
Speaker Change: Hey, Rich this is toomey.
Rich Anderson: It's a very provocative question and it really depends on the time horizon, you're trying to look through and my perspective. The last five years, we see more volatility and challenges in the business then we'll probably see in the future.
Rich Anderson: And this feels a lot more like fundamental blocking and tackling type business.
Speaker Change: Which is going to benefit the companies that have diverse investment base and diverse value creators. So as we think about the future.
Speaker Change: It looks like interest rates are going to settle around about a five.
Speaker Change: Going to continue to print deficits and that's a very financeable product, meaning multifamily.
Speaker Change: Supply demand fundamentals always.
Speaker Change #134: In a shortage can you tie them out the window when you get into a market. When you get out I think we've been pretty darn good at that and then it's the core can you operate it better than anybody else in the space.
Speaker Change: And we're really focused on that aspect. So we think all the value creators that we have built over time.
Speaker Change: Have an opportunity in the future and we've got to be smart about pivoting to it.
Speaker Change: Window in the short run.
Speaker Change #102: Heck I've seen supply quite a bit bigger than this in market basis. It just takes time to absorb threat price it adjust.
Speaker Change: There'll be opportunities in those markets.
Speaker Change: And then yeah.
Speaker Change #103: It is the United States It has a resilient capable.
Speaker Change: Country that always finds a way to grow so I'm encouraged about the future grateful the last five years, we're kind of in the rearview mirror for us.
Speaker Change: Very provocative answer.
Speaker Change: And the second.
Speaker Change: Second question, both EQ R&R Avalon Bay are looking at 25% exposure to the Sun belt, you're already there I Wonder you know.
Speaker Change #112: Imitation best form of Flattery, I don't I don't I don't know what to make it out is that the efficient frontier, though in your mind that balance of coastal versus sunbelt, when you've gone through what you're going through now.
Speaker Change: I think it's interesting question, Joe probably has to have a lot more thoughtful answer.
Speaker Change #110: We like our balanced presence.
Speaker Change: I like what Chris and the team have done when they look at it on an analytical basis and trying to uncover cities of the future. If you will be.
Speaker Change: We have realized 10 years ago, Nashville was kind of a warehouse of capital for us and turned out to be a dynamic.
Speaker Change: City that grew tremendously.
Speaker Change: Austin the similar type aspect so trying to find the next wave of cities that will prosper in a new economy.
Speaker Change: I think it's really kind of where we're thinking about we like the base that we're starting with.
Speaker Change: We certainly like the theory of buying the one next door, where we have a low risk high.
Speaker Change: <unk> success rate. So unlike the platform as is we'll always look at kind of what markets, we need to grow to and which markets we need to shrink, but that's a dynamic aspect that we sit back and look at.
Speaker Change: Three year Windows five year Windows in 10 years so.
Speaker Change: Okay. Thanks very much.
Speaker Change: Okay.
Speaker Change: Thank you next question is coming from Adam Kramer from Morgan Stanley. Your line is now live.
Adam Kramer: Great. Thanks, I'm just looking at the same store revenue guidance range. It looks like it's a 200 basis point kind of range low end to the high end if I compare those it appears or compare that to even kind of your own guidance range in the past and in the second quarter I think it's a bit wider than news. So just wondering if I'm thinking about kind of your comments earlier too about kind of an unchanged view.
Speaker Change #132: With regards to the second half relative to your guidance earlier in the year wondering kind of what drives that that wider range of potential outcomes for the second half of the year.
Adam: Hey, Adam.
Adam: Certain specific drivers as you go in right between occupancy volatility do we continue to have a great performance on other income as we have in the first half.
Adam Kramer: A lot of lease rates of market rent growth performance. So given the aspects of volatility that we've kind of laid out laid out there and the unknowns. It just felt prudent.
Speaker Change: I think it's not lost on any of US here on this side of the table at least that last year, we probably tried to get a little bit too tight and get a little bit more accurate as we went into the back half and we were surprised with a little bit of a swoon in activity in September October and November and I don't think anyone here has the desire to repeat that and so there's a.
Speaker Change: Wider range help with that of course.
Speaker Change: It is being conservative in the back half help with that of course, so I think it's going to be about how do we finished the race not how do we update throughout the year. So hopefully we can deliver strong and be talking about it on our third quarter call. As we can have greater visibility into closing out the year and then of course earn and into next year, which we're clearly very focused on as we push these renewals up.
Speaker Change #100: Great. Thanks, that's really helpful.
Speaker Change #124: And then just to kind of a maybe time tying back to your answer rich from from a couple of minutes ago, just thinking about kind of the cadence of deliveries you mentioned this fall obviously into next year and then you know again not asking you for a specific month or maybe even a specific quarter here, but just thinking about kind of when pricing power will return in the sunbelt.
Speaker Change #150: Kind of given that given the cadence of deliveries when do you think you'll be able to kind of push pricing kind of push market rent growth again kind of above and beyond the typical seasonal curve.
Speaker Change #134: Good question.
Speaker Change #142: And we're going to continue to monitor very closely Adam and I would say right now, it's you're not going to see new lease growth go positive here in the near term, but obviously as we turned the corner next year, you're starting to anniversary off easier comps and you're seeing us get a little bit more aggressive as it relates to renewal growth so could glenn start.
Speaker Change #106: To go up as we get into next year, I think they could but for now or <unk>.
Speaker Change #137: <unk> taken a day by day, and obviously looking at our total revenue growth as our strategy going forward.
Speaker Change #150: Great. Thanks for the time.
Speaker Change #150: Thank you. Your next question is coming from ADP program from UBS. Your line is now live.
Speaker Change #115: Hi, Thank you just one for me.
Speaker Change #152: You got a better apples to apples comparison with peers, who are seeing the same store revenue benefited from improving bad debt do you have a calculation for what you are same store revenue growth would be if you were using the same or similar accrual process disappearing.
Speaker Change #130: We do not have that.
Speaker Change #123: To be honest I don't think any of us really provide full in absolute disclosure on methodologies I think all of us try to utilize the methodologies that is most appropriate and what we believe best represents kind of the existing residents space on a or that we have and so we've been very consistent throughout.
Our approach I don't think we have necessarily the same volatility that perhaps others. Do is you have residents go in and out of different pools, but I think has worked for US I'd say, we're roughly 50% reserve today on our total AR balance, which really is meant to cover what those individuals are that are in eviction.
Speaker Change #115: Eviction at this point in time that we don't think that we're gonna be collectible. The rest is due to our typical you know slightly.
Speaker Change #115: Slightly late payers or payment plans that may be out there. So we feel good about where we're at today. Yeah. We continue to see long term delinquencies come down in the portfolio. So yeah. We had been stuck at kind of 250, or so long term delinquents I think a lot of the activity that we've had.
Speaker Change #115: From a screening perspective from a credit standard perspective, our process improvements.
Speaker Change #115: Under 200 on that front. So that's help them whittled down some of the E R and the need for reserve.
Speaker Change #106: And cash collections.
Speaker Change #106: Or the inverse of that they continue to improve a little bit on the margin. So we've seen first half bad debt come in a little bit better. So maybe it is helping the numbers plus or minus 10 bps year over year we.
We believe theres more to come in the second half as we get these long term delinquents down in some of the screen and we talked about earlier, so hopefully that is a upside to our numbers as we go forward.
Speaker Change #106: But it's hard to say what peers will be up.
Speaker Change #144: Okay. That's fair thank you.
Speaker Change #144: Okay. Thank you next question is coming from Alexander Goldfarb from Piper Sandler Your line is now live.
Okay. Thank you I'll just ask one question.
You know Theres a lot of discussion over this early peak of June versus you know what theyre going to be a double peak you guys have obviously talked about the nuance of what's going on you know leasing east coast West Coast Sunbelt, but it really seems like we're splitting hairs. I mean, yeah must give the percentages are within a few points of each other and generally.
Almost seem like normal you know sees.
Speaker Change #151: Now the volatility like normal course, so is your view that what you guys were talking about and what we're hearing from peers is really anything other than normal seasonality in normal variances or are there truly specific things that you're seeing that give you true pause.
Speaker Change #106: I don't think there is anything thats, giving us true pause today, Mike talked about.
Still being at the 1.8 residents per unit of collections the traffic.
Speaker Change #144: The volatility in our blends as Mike talked about is really the result of our pricing strategy. We felt really good in April and May with high occupancy. We are seeing good traffic, we're going into the first part of the leasing season. So if you're gonna test rents. That's the time to do it we were seeing really good numbers. So we pushed aggressively like I say, we've pushed over to X what we.
The market reacted we lost a little bit of occupancy and we've pulled back we found the equilibrium and so that's why occupancy stabilized that's why news and blends are stabilizing here. So.
That's the volatility is if we didn't do that I don't think we'd be doing our job we saw window to push we pushed at the right time of the year at the same time I think Mike's talked a lot about got a separate pricing strategy that exist on renewals, where retention and customer experience are going great and so why don't we push there and that seems to be working out so I think youre right its normal.
This volatility we're talking kind of 25 50 bps here and there.
Speaker Change #148: It's the result of what we're trying to push them.
Speaker Change #142: Pushed back a little bit.
Joseph D. Fisher: Okay. Thanks, Joe.
Alex: Thanks, Alex.
Speaker Change #150: Thank you next question is coming from Ann Chan from Green Street. Your line is now live.
Ann Chan: Hi, Thanks for the time.
Just one question from me.
Speaker Change #139: Retention improvement achieved in Q2, and it looks like most regions all around 50 bps.
Speaker Change #141: Your comment on particular markets.
Speaker Change #145: Trends by Chinese semi kept retention and growth.
Speaker Change #152: More muted relative to the other regions and how that really go for the mezzanine.
Yeah, Yeah. That's a good question I would tell you with some of these regions you do have some markets that have a little bit more volatility and for US I think we have.
Joseph D. Fisher: A lot of this has to do with all the things that we've put into the customer experience project and again, we think that this will continue to pay dividends, but Joe just mentioned and again as well would you want to test our rents as well and so we'll look at different levers to see what we can drive through this initiative, but so far so good but again west coast you have to really dive into some of them.
Markets and I think a lot of that was driven by selling us.
Speaker Change #151: Thank you.
Thank you next question is coming from Linda Tsai from Jefferies. Your line is now live.
Linda Tsai: It's a good question.
Nah Austin Austin is continuing to see probably be the lease growth and I expect that's going to continue for a little while starting to see a little bit more inflection in places like Florida for us compared to Texas until maybe we could see it in Tampa as we go into next year, but right now I'd say, Texas is probably.
Linda Tsai: A little bit more under fire, followed by Nashville, and then Florida would be third in terms of sunbelt markets.
Linda Tsai: Thanks.
Linda Tsai: Thank you.
Linda Tsai: Our next question is coming from.
Mason Gill from Baird. Your line is now live.
Thank you on the preferred equity investments that are maturing soon.
Mason Gill: What are your plans for the bathroom and all the associated stabilize.
Linda Tsai: Yes.
Currently all of the.
Speaker Change #154: Currently all of the Dcp's that are maturing and within the year have some form of extension option available. So we're talking to those developers those developers are looking at different opportunities to either recap their asset to sell their asset or to extend their asset, but each has a different conversation.
Thank you.
Speaker Change #154: Thank you we reached end of our question and answer session I'd like to hand, the floor back over to chairman and CEO, Mr. Toomey for closing comments.
Thank you operator, and thank you all for your time interest and support of UDR.
Speaker Change #154: We look forward to seeing many of you at the Evercore ISI and bank of America conferences in September.
Speaker Change #155: Enjoy the balance of your summer take care. Thanks.
And that does conclude today's teleconference. You may disconnect. Your line at this time and have a wonderful day, we thank you for your participation today.
