Q1 2025 American Homes 4 Rent Earnings Call
Greetings and welcome to the a M. H first quarter 2025 screens conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
If you require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded it is now my pleasure to introduce you to your host Nicholas from director of Investor Relations. Thank you Nicolas you may begin.
Speaker Change: Good morning, and thank you for joining us for our first quarter 2025 earnings Conference call with me today are Brian Smith, Chief Executive Officer, Chris Lau, Chief Financial Officer, and Lincoln Palmer, Chief operating Officer.
Speaker Change: Please be advised that this call may include forward looking statements all statements other than statements of historical fact included in this conference call are forward looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
Speaker Change: These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC all.
Speaker Change: All forward looking statements speak only as of today May <unk> 2025.
Speaker Change: We assume no obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise except as required by law.
Speaker Change: Reconciliation of GAAP to non-GAAP financial measures is included in our earnings press release and supplemental information package as a note our operating and financial results, including GAAP and non-GAAP measures are fully detailed in our earnings release and supplemental information package. You can find these documents as well as SEC reports and the audio webcast replay of this conference call on our website at <unk>.
Brian Smith: W. W. Dot M H dot com with that I will turn the call over to our CEO Brian Smith.
Brian Smith: Welcome everyone and thank you for joining us today.
Brian Smith: As expected we had a strong start to 2025.
Our top line metrics has sequentially accelerated each month since the start of the year driving 46 cents of core <unk> per share for the first quarter.
Brian Smith: Which represents growth of six 6% over the same period last year.
Brian Smith: A lot has happened in the broader economic environment since we exited the first quarter.
Brian Smith: Despite this recent market uncertainty our confidence in strong sector fundamentals and our proven business model remains high.
Brian Smith: First housing is a basic need and our high quality well located homes continued to be prioritized by American families.
Brian Smith: Second the supply and demand imbalance persists.
Brian Smith: The U S is still short millions of quality homes.
Brian Smith: And through our unique in House development program, we continue to deliver new inventory to an under supplied market.
Brian Smith: In fact, we were recently recognized as the 37th largest homebuilder in the country by builder magazine.
Up from 39 last year.
Brian Smith: And demand isn't flowing.
Brian Smith: As millennials continue to age into household formation years, they're driving sustained interest in our homes as they seek out the benefits of single family living without the burdens and cost of homeownership.
Brian Smith: Finally, he may just focus on the resident experience is unmatched.
Brian Smith: Our residents chose us for our prime locations high quality homes and outstanding service.
Brian Smith: This resulted in industry, leading customer experience and is reflected in our Nashville, a little score from the first quarter, a 4.7 out of five stars.
Brian Smith: Simply put a M H is well positioned for strength and resiliency because of our investment grade balance sheet.
Brian Smith: First if I its portfolio footprint.
Brian Smith: Leading operating platform and strong resident base.
Speaker Change: This brings me to our first quarter results.
Speaker Change: Same home average occupied days continued to strengthen to 95, 9%.
Speaker Change: And we delivered new renewal and blended rental rate spreads of one 4%.
Speaker Change: Four 5% and three 6% respectively.
Speaker Change: Together these drove same home core revenue growth of four 3% for the quarter.
Speaker Change: Core operating expense growth came in at 4.2% driving same home core NOI growth of four 4% for the quarter.
Speaker Change: Notably we were successful on two key revenue optimization objectives this quarter.
Speaker Change: First we began to see the results of our lease expiration management initiatives, which are designed to strategically align lease expirations with the heightened demand peak leasing season.
Speaker Change: Second we successfully grew occupancy by 50 basis points, while absorbing the timing of move outs that resulted from our lease exploration initiatives.
Speaker Change: This is a testament to the demand for our high quality well located homes and the resiliency of our resident retention.
Speaker Change: It remains in excess of 70%.
Speaker Change: Importantly, we accomplished these objectives, while also accelerating new lease rate growth each month, which continues to be at the top of the residential sector.
Speaker Change: Turning to April leasing activity continues to strengthen.
Speaker Change: Same home average occupied days was 96, 3% and new lease spreads accelerated by 170 basis points over March to three 9%.
Speaker Change: Renewal and blended leasing spreads were four 4% and four 3%, respectively, which is consistent with our expectations at the start of the year.
Turning to our investment programs the quarterly and it is expected for development deliveries and their initial yields which were in the low 5% area.
Speaker Change: As we outlined on our last call, we expect yields to increase as we move through peak leasing season, averaging to the mid 5% range for 2025.
Speaker Change: As a note.
Speaker Change: The timing in the year, we do not expect any potential impacts from tariffs to materially affect full year deliveries and their associated yields in 2025.
Speaker Change: In addition, there are no changes to acquisition expectations or the pace of dispositions this year.
Speaker Change: We are remaining patient until attractive opportunities present themselves and we will continue to lean into the disposition program for the time being.
Speaker Change: Yeah.
To close our strong first quarter performance reflects both disciplined execution and continued demand for our high quality and well located homes.
Chris Lau: With that I'll turn the call over to Chris. Thanks.
Chris Lau: Thanks, Brian and good morning, everyone.
Chris Lau: As usual I'll cover three areas in my comments today.
Chris Lau: First a review of our quarterly results.
Chris Lau: An update on our balance sheet and third I'll close with a few thoughts around our unchanged 2025 guidance.
Chris Lau: Starting off with our operating results, we delivered a strong start to the year with net income attributable to common shareholders of $110 million or <unk> 30 cents per diluted share.
Chris Lau: On an F O share and unit basis, we generated 46 cents of course F O representing six 6% year over year growth and 42 of adjusted <unk>, representing five 4% year over year growth from an investment perspective, our development program continues to perform in line with expectations.
Chris Lau: <unk> and delivered a total of 545 homes to our wholly owned and joint venture portfolios during the quarter specifically.
Chris Lau: Specifically for our wholly owned portfolio, we delivered 424 homes for a total investment cost of approximately $173 million.
Chris Lau: Additionally, consistent with our plan, we continue to lean into our disposition program selling 416 properties in the quarter generating approximately $135 million of net proceeds at an average economic disposition yield in the 3%.
Next I'd like to turn to our balance sheet at the end of the quarter, our net debt, including preferred shares to adjusted EBITDA was five three times, we had approximately $70 million of cash available on the balance sheet, and we had a $410 million drawn balance on our revolving credit facility.
Chris Lau: Additionally, as discussed on our last call, we fully repaid our 2015 deaths. So far one securitization at the end of the first quarter using cash from the balance sheet and capacity from our revolving credit facility that we expect to opportunistically refinance into the unsecured bond market over the course of 2025.
Chris Lau: And finally, I'm happy to share that S&P Global recently revised Amy just credit rating to positive outlook. This underscores a relentless commitment to prudent balance sheet management, and a continually improving credit rating profile overtime.
Chris Lau: Lastly, before we open the call to your questions I wanted to briefly touch on our 2025 outlook as.
Chris Lau: As expected the year's off to a strong start with healthy demand and strong leasing activity.
Chris Lau: That said the bulk of the spring leasing season is still ahead of us.
Chris Lau: And we remain mindful of the quickly evolving landscape of potential economic uncertainty yet with that in mind, we've left our 2025 guidance unchanged and we'd like to share a few reminders on the demonstrated strength and resiliency of image.
Chris Lau: Simply put housing is a necessity and to this day, our countries still needs more high quality options on top of that the image portfolio has been thoughtfully constructed with a strategic focus on high quality markets and intentional geographic diversification are.
Chris Lau: Our resident base has proven its durability and resiliency and the consistency and predictability of the image operating platform is on matched which we believe will continue to position us for strength and further separate image going forward and with that thank you again for your time and we'll open the call to your questions operator.
Chris Lau: Thank you we will now be conducting a Q&A session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Speaker Change: You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible. We ask that you limit yourself to one question and one follow up if you have additional questions.
Speaker Change: You may re queue and time permitting those questions will be addressed.
Speaker Change: One moment, please while we poll for questions.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Thank you. Our first question comes from the line of Jamie Feldman with Wells Fargo. Please proceed.
Great. Thanks for taking my question I wanted to I was hoping you could dig more into the mid the strength in your Midwest markets.
Speaker Change: Yeah, you have outsized rent growth there. We're curious if that's more of a catch up versus the Sun belt, given high rent growth in the sunbelt markets. During Covid. What do you think these markets could continue to outperform on a multi year outlook.
Speaker Change: And you know with that backdrop, what's your appetite to grow your land bank and your development pipeline there given most of your lands and in more southern markets.
Jamie Feldman: Thanks, Jamie.
Speaker Change: A couple of comments on the Midwest markets themselves and I'll pass to Brian for comments on potential portfolio expansion.
Speaker Change: The Midwest as you'd imagine continues to be a fantastic market for us and we saw that continue into April new lease spreads there were almost 9% a five 8% for for first quarter, So great acceleration.
Speaker Change: As far as what's driving the activity there, we really think that's because of the quality of life and the affordability of those markets.
Speaker Change: It's part of the reason why we are there and we're just continuing to see some migration patterns.
Speaker Change: Going into the Midwest.
Speaker Change: And I think.
Speaker Change: And in addition to the people that are going to.
That area. We're also seeing people, who just value the A&H platform they value our quality product they value the areas that we're in.
Speaker Change: And so I'll, let Brian comment on that.
Speaker Change: Portfolio.
Speaker Change: Hi, Jamie this is Bryan.
Speaker Change: In terms of expansion are Theres, a couple of interesting points. One if you've noticed a week, we do have a land pipeline.
Speaker Change: And the Columbus market, we're very excited about getting those those lots prepared and developed in into the system. It's been a fantastic market for us. So we're looking forward to the results there.
Speaker Change: Then another one of the benefits to the portfolio deal that we did at the end of last year. It was we got to add to.
Speaker Change: Indianapolis portfolio at a time, where it's been really difficult through other channels.
Speaker Change: Yes, we are actively looking for ways to continue to expand our footprint there, although we're doing it responsibly.
Speaker Change: Okay. Thank you for that and then can you talk about the puts and takes of the heavy presence in public builders in North, Florida and Texas.
Speaker Change: Specifically the increased competition from our build to rent supply.
Speaker Change: Also entry level single family homes with rate buy downs.
Speaker Change: And you know does it provide an opportunity for external growth or more of a headwind.
Speaker Change: Demand.
Speaker Change: Competition.
Speaker Change: Yeah, there are a number of different things that play there.
Speaker Change: Can see the effect of some of the build for rent supply.
Speaker Change: And some of the for sale supply and the performance at the San Antonio market over the past call it year or so.
Speaker Change: We're seeing in Texas, there a little bit in Austin as well the portfolio is still performing well, but the the effects of that additional supply is peaking through with regards to Florida.
Speaker Change: There's been a lot of discussion around Tampa, and North, Florida, and we're seeing pretty good activity there and despite the dynamics of the for sale market and some of the additional supply.
We believe that's going to be temporary in nature. There are good indications that that they'll try and supply may have peaked and you can see it in some of the improvements in occupancy not just in the Texas, and Florida markets, but in Arizona as well.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of <unk> with Evercore ISI. Please proceed.
Speaker Change: Yeah. Thanks, I guess good morning out there are you doing anything I guess proactively to kind of adjust the you know the leasing strategy at this point I realize the.
You know uncertainty out there as it has grown but the fundamentals on the ground today still seem to be quite strong. So I just wasn't sure. If you were kind of redirecting the field to do anything differently or is it pretty much business as usual until you see meaningful changes in the leasing dynamics.
Speaker Change: Yeah. Thanks, Steve This is Bryan.
Speaker Change: We have made some changes as I talked about in prepared remarks, and obviously, we didnt anticipate some of the things that are happening in the current environment, but we had a couple of revenue optimization initiatives that are starting to show.
Speaker Change: Notably our lease expiration management initiatives is an evolution of our revenue management objectives and.
Speaker Change: You can see that in the in the additional move outs that we saw in first quarter. The strategy. There is very simply one where we're trying to move explorations into the period of the year that it was higher demand and potential for higher rate growth. So that's been a changeover over kind of our approach historically.
Speaker Change: In terms of what's happening today and in reaction to the changes in the current market.
Speaker Change: We're seeing fantastic demand that has produced really good results accelerating April and looking great for for Q2.
Speaker Change: It hasn't let us to make any changes on the ground.
Speaker Change: Coming applicants and prospects.
Speaker Change: Quality has been consistent with what we've seen over the past four or five months.
Speaker Change: Okay. Thanks, and then as it relates to the development I can appreciate the fact that most of the pipeline for this year is built alger or commit it on price. How do you think about the price risk into next year on the Camden call. Just you know just finished up you know they talked about a very de minimis.
Speaker Change: Sort of a price increase from kind of the terrorists as they sit here today is that sort of your expectation. If if things were to play out as is that cost increases would be say sub 5% or do you feel like there's more pressure on pricing if if tariffs stayed where they are.
Speaker Change: Yeah. Thanks, Steve we're looking very closely at that and it seems to be changing quite often but.
In the event that things are sticky over the long term as they stand now.
Speaker Change: Based on our discussions with other homebuilders and are talking.
Speaker Change: Talking with the NIH b and so forth the effect on the.
Speaker Change: The tariffs on our development program in particular.
We're estimating to be in the 2% to 3% range on our total home delivered home basis. So it is it is small.
Speaker Change: And that's partly due to the fact that there's a lot of labor and there's a bunch of other components that come in and the materials that are being that are subject to tariffs represent a small small portion.
Speaker Change: If if they hold they will have the effect won't really be seen until the end of the year a lot of our pricings are already locked in for 2025.
Speaker Change: So we're talking about you know kind of further down the line and again less clarity into whether these are going to continue to stack.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Handelsbank used with Mizuho Securities. Please proceed.
Speaker Change: Hey, there guys a good morning to you maybe just to follow up on the last question from Steve. There just can you remind us what percentage of your U.
Speaker Change: <unk> cost per home are labor related.
Speaker Change: Mentioned that Theres more labor availability curious if there's a sense that there could be some relief maybe a benefit on that front. Thanks.
Brian Smith: Hey, Thanks, and Dallas as this is Brian.
Speaker Change: Inside of it.
Speaker Change: <unk> estimate, but if you think about the vertical costs roughly 55% is labor <unk> 45 per cent materials. It varies.
Speaker Change: It's a little bit here, and there, but singing and thinking about it in terms of nearly an even split and that's on vertical not including land.
Speaker Change: And horizontal costs, obviously have a larger labor component as well.
Speaker Change: Yeah.
Speaker Change:
Speaker Change: That's fair I guess, we'll monitor and see how that.
Speaker Change: That does this evolve on the labor front.
Speaker Change: My other question was that tied to the uptick in turnover in the first quarter and nominally versus your peers, but again understanding that you had the strategic initiative that you're employing here I guess I'm curious if you have a sense of how much rubber maybe would have been without the program and perhaps help us understand how much longer are we could be seeing higher turnover from this pro.
Graham Thanks.
Speaker Change: Yeah. Thanks Ando.
Speaker Change: I want to make a distinction between turnover and retention the turnover, we have higher turnover in Q1 because of the lease expiration management initiative, but our retention remained consistent remain the same as what we saw.
Speaker Change: Last year, and what our expectations were for the year. So it's really a timing issue.
Speaker Change: You saw it in the first quarter there'll be a continuation of that to a certain extent in the second quarter. As we're pulling that are kind of the ratio of explorations more heavily into the first first two quarters to match those demand levels, but yeah that the increase in turnover.
Speaker Change: It is nearly completely attributable to.
Speaker Change: So that initiatives.
Eric Wolfe: Thank you. Our next question comes from the line of Eric Wolfe with Citi. Please proceed.
Nick Joseph: Thanks, It's Nick Joseph here with Eric <unk>.
Speaker Change: It's early in the year and.
Speaker Change: The macro uncertainty, but youre seeing but just given the results through April.
Speaker Change: On same store revenue.
Speaker Change: You hit the midpoint of guidance and assume a deceleration of about 100 basis points for the remainder of the year is that just conservatism given everything that we talked about or are there headwinds in the back half of the year either on other income or occupancy or other things that we should be mindful.
Chris Lau: Yeah, Hey, next Chris here.
Speaker Change: I think you you you led kind of part of it.
Chris Lau: But part of the answer you know look no question.
Chris Lau: We are watching the economic environment extremely closely.
Brian Smith: But even if you hypothetically held that's to decide am I I would just remind everyone that it's also still early in the year right. We very much had a great start and are really encouraged by the activity and the demand we've seen along with our early spring leasing results that Brian was talking about in prepared remarks.
Brian Smith: That continue to accelerate into the peak of leasing season, but that's really the key point right. Pete peak leasing season is still ahead of us and with that in mind no different than than past years. At this point, it's just a little bit too early to be talking about the guide.
Brian Smith: But you know what that that'd be very much look forward to sharing additional updates as we progress throughout the balance of the peak leasing season, and importantly get to the end of the second quarter.
Speaker Change: Makes sense and then I know you collect a lot of data are you seeing anything from the data you collect a weakening consumer weakening demand.
Lincoln Palmer: Thanks, Eric This is Lincoln, we haven't seen any indication so far of a weakening in demand oriented consumer behavior as.
Speaker Change: As we go into April we saw.
Speaker Change: Foot traffic increase in our homes are from from first quarter into April we saw leasing improved year over year and that's on top of kind of the.
Speaker Change: Improved month over month rate growth and occupancy that we saw so we have no concerns so far.
Adam Kramer: Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please proceed.
Adam Kramer: Hey, good morning, guys. Thanks for the time here.
Adam Kramer: I think the April results are kind of showed you were able to push occupancy build occupancy at the same time good luck.
Speaker Change: Iran was wondering as you kind of sit here today kind of what's what's the priority here or is it the kind of further build the occupancy or do you feel pretty good with where occupancy is today and you kind of shift to being able to push on the newly started a little bit more.
Adam Kramer: Yeah.
Brian Smith: Yeah. Adam This is Brian Yeah, it's always a balance in revenue optimization and.
Brian Smith: The timing and the seasonality of the business really plays into that as well but.
Brian Smith: That was really the impetus for our movement with this lease expiration management program.
Brian Smith: We don't have specific targets for either but we're looking at the right balance as we get into the spring leasing season, and then once we enter that season, which we see a peak of releasing rate grows and generally a peak in occupancy I will spend the balance of the year trying to preserve that those occupancy levels and be.
Brian Smith: We're really thoughtful about about maintaining.
Brian Smith: Good strengths coming in as we exit the year so.
Brian Smith: The way we're seeing it this year is maybe a little bit of a flattening of the of the occupancy curves as to what we saw last year.
Brian Smith: But in the end net net a consistent occupancy with 'twenty 'twenty four.
Speaker Change: Great and then maybe just a higher level question here.
Speaker Change: Think about your BTR portfolio development portfolio I think you are over 10000 homes at this point.
Speaker Change: Is there any kind of noticeable difference in the demographics between.
Speaker Change: You know, they're kind of resident in the development homes versus the kind of scattered site traditional FSFR homes any kind of demographic differences be it age be a kind of number of people in the household children et cetera.
Brian Smith: Yeah. This is Brian.
Brian Smith: Surprisingly, we've seen a lot of consistency from the income incoming affluent profile.
Brian Smith: Between mill Trenton scattered side, we haven't seen.
Brian Smith: Much of a difference obviously in some cases, the the rents are a little bit higher on some of the brand new product relative to some of the older product in markets like Atlanta, So there'll be a little bit of a difference and.
Brian Smith: And income.
Brian Smith: But the ratios are stars still very strong.
Brian Smith: Our our incoming residents the age demographics. The household makeup has been remarkably consistent.
Brian Smith: Over the past decade with with the changes in income maybe slightly outpacing rent growth, so a little bit of improvement.
Brian Smith: From that side, but everything else is held pretty constant.
Brian Smith: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Jeff Spector with Bank of America. Please proceed.
Jeff Spector: Great. Thank you just to follow up on guidance April payrolls did come in stronger than expected today I guess can you talk about the potential or historical lag between the labor market weakening in and its impact on your business and demand trends.
Speaker Change: Thanks.
Speaker Change: Hey, Jeff This is Bryan.
Speaker Change: Packed on demand trends, we havent seen them.
Speaker Change: That direct of a of a reaction to any changes in.
Speaker Change: Job reports or any kind of immediate.
Speaker Change: Effects of of macro changes I think that's for a couple of reasons. One you look at our product and the fact that housing is a fundamental need and we have a supply issue and these good markets.
Speaker Change: Comprise our portfolio.
Speaker Change: Kind of the high end and then and then finally as you get down to kind of the street level. The demand backdrop is so strong we have such a depth of demand.
Speaker Change: That we leased homes as you can think of it in terms of.
Speaker Change: First in <unk>.
Speaker Change: Process, but there's a bunch of demand behind that.
Speaker Change: So we just we haven't seen any effects of movements.
Speaker Change: In either direction.
Speaker Change: The strength of the labor market may have more of an effect.
Speaker Change: On cost of labor.
Speaker Change: Increases so forth over the long run, but but nothing in the immediate.
Speaker Change: Sorry, I meant you know really just trying to get back to like thinking about the historical lag meaning.
Speaker Change: You know, it's obviously, we're seeing a lot of strength to April the jobs number came in strong. So as we again, we think about the guidance for this year and what could potentially change that or changed the trajectory of demand like what would be the lag between when we saw weakening in the labor market and an impact on your business.
Speaker Change: Is that historically you know three months six months 12 months.
It's it's difficult to put a fine point on it for a bunch of different reasons.
Speaker Change:
Speaker Change: I was talking to some of the merits of a S. F R. But one of the things that we haven't talked about on the call. Yet is just the difference in the Unaffordably of owning a home is one example, that's probably has a bigger effect.
Speaker Change: Than anything else.
Speaker Change: Think about the cost of owning similar homes to the ones that were delivering in the development program.
Speaker Change: Mortgage rates are extremely high you got the issue of insurance, which is runaway and places like Florida.
Speaker Change: Maintenance et cetera, so it's very difficult to draw a direct correlation between.
Speaker Change: Between labor.
Speaker Change: That's any stronger than what you'd see on the affordability measure.
Speaker Change: Okay.
Speaker Change: Thank you our next question.
Speaker Change: Is with rich.
Speaker Change: Sure Hi tower with Barclays. Please proceed.
Speaker Change: I'll I'll take rich tower is my queue here guys.
Speaker Change: [laughter] I.
Speaker Change: I just want to talk about Capex for a second here. So if I go to just recurring capex per home. It was up quite a lot year on year, but then obviously down quite a lot as we as we kind of look sequentially over the prior four quarters. So just maybe talk a little bit about the movement, maybe the seasonality in those figures and.
Speaker Change: How you know just looking at the age of the portfolio how that metric factors into the decision to sell a property and you know when you say you're selling at a kind of an implied three ish cap rate to an end user does that factor in you know capex youre not spending and the way you think about that metric I'm, just I'm a little more color on that.
Speaker Change: Topic.
Lincoln Palmer: Yeah. Thanks Rich this is Lincoln what Youre seeing is a mix of a couple of things. One is we're coming off of a very low comp from first quarter of last year. So that's part of the difference and then the second part is what Brian had talked about that lease expiration management program that we've initiated that is.
Lincoln Palmer: Is aligning those explorations with our demand curve on those incremental move outs in the quarter drove much of that capex.
Lincoln Palmer: And as we pointed out we round consistently models for the last several quarters and setting aside.
Lincoln Palmer: So setting aside kind of those two issues.
Lincoln Palmer: We imagine that the run rate for Capex to be in line with BARDA to turn.
Lincoln Palmer: Yes, rich this is Brian Youre exactly right, there's a very clear correlation between age and in the capex needs within our portfolio.
Lincoln Palmer: It's one of the benefits that we've talked about on the new development side, where not only are we bringing new homes into the portfolio to to help with the average age. But these are also purpose built for long term durability with extra investments into some really kind of expensive kind of heavier capex areas surrounding our HVAC.
Lincoln Palmer: Roofs as an example, so what's coming into the portfolio should have a much better long term capex profile, but certainly a dramatic did better in the near term.
Lincoln Palmer: And then when you look into the way that we're evaluating our homes through asset management evaluate them for for disposition.
Lincoln Palmer: Capex age is a factor it's one of the one one of the inputs that we do look at.
Lincoln Palmer: The there are a number of different things locations, probably the top but getting the non core assets out.
Lincoln Palmer: <unk> some homes that are old and might have kind of an expected heavy capex burden going forward would certainly be a factor.
Lincoln Palmer: And then when we talked about the three Capex, that's how we're looking at that from from the buyer's perspective.
Lincoln Palmer: More importantly are.
Lincoln Palmer: You need to understand who we're selling to and that's the end user. So it's really a difference in use.
Lincoln Palmer: We were selling homes into the market you can see by the the.
Lincoln Palmer: The disposition prices that we're getting.
Lincoln Palmer: There's not a ton of deferred capex in there, but it is a consideration when we're evaluating individual homes.
Lincoln Palmer: Alright, Thats great I'm impressed I think you guys got every single part of my multi part question there.
Lincoln Palmer: And then I think just just a follow up you know in terms of.
Lincoln Palmer: You know A&H acquiring.
Lincoln Palmer: Properties sort of in the in the open market I mean do you guys remind me do you guys buy anything directly from other homebuilders or is the fact that you have in house development somehow.
Lincoln Palmer: Theres some somehow a gating factor that would prevent that from really being sort of an active <unk>.
Lincoln Palmer: Source of of.
Lincoln Palmer: <unk> for you guys just tell me how that works.
Chris Lau: Yeah sure Rich Chris here.
Chris Lau: Over the years, we've developed and cultivated a very large network of relationships with with all of the major homebuilders out there and we very much are actively monitor and keep our finger on the pulse of all aspects of the acquisition market.
Chris Lau: To give you a little bit of color on what's going on right now we have seen a pretty notable uptick in builder inventory opportunities.
Chris Lau: Just to give you some numbers to illustrate the point this quarter through that network of national builder relationships. We screened you know plus or minus 25000 newly constructed national builder properties, which is a pretty considerable increase last quarter I want to say, we screened something more like 15000 opportunity. So it's a pretty big uptick.
Chris Lau: Quarter over quarter.
Chris Lau: But similar to our last update you know as we screen to those properties. This quarter, we found that over 80% of them or so fell outside of our disciplined by box.
Chris Lau: In terms of location quality, and then importantly single family detached property type.
Chris Lau: With the remainder of the homes that did come close to where our buy box.
Chris Lau: With yield averaging somewhere in the fours when you use our methodology for underwriting that we consistently apply to both acquisition opportunities and development, which I think really underscores the importance of the development program right. The development program provides us the ability to consistently and predictably grow.
Chris Lau: With properties, its just unmatched quality and location that you can't buy anywhere else.
Chris Lau: Okay.
Speaker Change: Thank you. Our next question comes from the line of David Siegel with Green Street. Please proceed.
Chris Lau: Okay.
David Siegel: Hi, Thank you maybe just following up on that.
David Siegel: If pricing for those assets is in the four handle range, how does that compare to you nearby suburban apartment product.
Yeah.
David Siegel: Yeah.
David Siegel: Hi, David This is Bryan I think the.
David Siegel: My understanding of cap rates for for.
David Siegel: For suburban multifamily would be consistent and that's kind of the high fours, but.
David Siegel: We watch multifamily, but we're not we're not experts in the acquisition market for that.
David Siegel: Okay.
Speaker Change: Great. Thank you and I'm curious about what you think the kind of a fair run rate occupancy is for yes, if our business since prior to the 'twenty 'twenty, you're averaging around 95% occupancy. Since then you've had a few years you know.
David Siegel: At 97 or higher.
David Siegel: She was low 96, and it sounds like you're expecting similar this year, but what do you think like the long run their occupancy level is.
David Siegel: And that's a really good question and something that we're thinking about and you can see some of the things that we're discussing this quarter.
David Siegel: The lease expiration management initiatives that are kind of addressing that I've talked about on prior calls where you're exactly right 95% was.
David Siegel: Kind of a norm a call it pre COVID-19.
David Siegel: Our expectations kind of move the bar up into the 96% range and there's a number of different reasons for that.
David Siegel: One I think theres, a greater appreciation for single family rentals, especially those that are that are professionally managed so I think there's a recognition from the consumer and then specifically to MH, our platform's improved and were starting to see a lot of appreciation for our services side of the business that convenience.
David Siegel: You can see it in our Google review scores, our customer service scores that I cited in prepared remarks. So there are a lot of good things that are working in our favor that would support long term expectations of the 96% area.
David Siegel: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Brad Heffern with RBC capital markets. Please proceed.
Speaker Change: Yeah. Thanks on the leasing spreads to start the year. It's obviously been a number of years since we've seen kind of a typical leasing trajectory can you just frame what we've seen so far this year I'm suspecting you'll say that it's above average, but how does it look compared to you know how would you you would typically expected in a normal year.
Yeah, Brad Yeah, you're exactly right that the last call. It six months or so haven't been typical when you think about the seasonality COVID-19 wasn't typically either theres been a lot of movement around.
Speaker Change: But it is common to pick up to half rate improvement as you enter the new year demand picks up strongly in January.
Speaker Change: Foot traffic picks up.
Speaker Change: The activity applications leasing everything accelerates as you get into the spring leasing season.
Speaker Change: So the normal trajectory of pick up January into call. It maybe the May June area, where you see the peak potentially April depending on the year, we're seeing that and then it's just a question of of how steep that curve is.
Speaker Change: Last year, we had really nice movement.
Speaker Change: In the beginning of the year and then and then saw some changes in the back half of the year that were there.
Speaker Change: There were a little bit different than normal expectations.
Speaker Change: Our expectation this year is to have maybe a little bit of a flatter curve.
Speaker Change: The back half of the year differently.
Speaker Change: Okay got it.
Speaker Change: And then on the development program you reiterated the five 5% yield.
Speaker Change: It does seem pretty tight to acquisition opportunities in kind of the high fours I guess, what's the premium that you need over other growth options for that program and then do you see the benefits of you know the consistency and all the other things that you talk about what that sort of offsetting maybe than normal development math that we would normally think of mic.
Speaker Change: 100, 150 basis point spread.
Yeah. Thanks, Brad there are a number of different things there I'm going to start with with what we're delivering through our development program.
Speaker Change: And in the quality and the locations.
Speaker Change: These are homes that you just couldn't buy certainly couldn't buy the locations and then when you add the fact that these are purpose built to our specifications.
Speaker Change: You're incorporating over a decade of experience from the rental side.
Speaker Change: Very very in depth analysis and to what our residents and consumers are looking for.
Speaker Change: And we've optimized that delivery not only in the way that it's designed but in the materials that we're putting in there we saw some great opportunities to come in and put an upgraded materials that are strong.
Speaker Change: From a maintenance and durability perspective, and also really appreciated by the residents. So we're building a little bit of a different house.
Speaker Change: And the.
Speaker Change: Second we're very focused on single family detached I've talked about it in prior calls and a lot of the build to rent in a lot of the other product out there as townhome in nature. So I.
Speaker Change: Remember.
Speaker Change: John Burns estimates that around 20% of adult Trent deliveries were single family detached and in some of the market. So what we're delivering is a slightly different product. The locations are outstanding it's not the same.
Speaker Change: Location or product, that's being offered by the national builders. So when you look at the yield premium.
Speaker Change: If we were to try to go out and buy what we're buying what we've got we're getting at least 100 basis point premium on top of that.
Speaker Change: And then we're also talking about the yields going in as a day one yields as those homes are being delivered in many cases into actively delivering communities in active construction sites.
Chris Lau: Brad It's Chris here just to illustrate with.
Chris Lau: A few more data points, you know probably the better way for looking to compare yields between development versus acquisition opportunities is to look at these things and opportunities that we're evaluating in the market right now right I already talked about the fact that we screened.
Chris Lau: 25000 national builder opportunities this quarter.
Chris Lau: When you look at yields on those using our measuring stick. It was yield as I mentioned there are somewhere in the fours two day as we're thinking about new land going into the development program. You know, there's a few places where were back filling land into the pipeline to refill projects that are being delivered and new land that we're looking at is is you know into the.
Chris Lau: Six area or six plus area right, so pretty meaningful difference between the two when you're using a comparable measuring stick on both sides and then the other thing that I would just remind you of is that we're thinking about the development program and the sizing of it it's really important to keep in mind the capital sourcing right in and the fact that I know.
Chris Lau: We've kind of broken record at this point, but it's a really important one is that we have the program strategically sized such that any given year of development capital needs is fundable through a combination of retained cash flow from the business recycled capital from dispositions, which right now in this environment screen very attractively.
Chris Lau: And then a modest level of debt capacity that grows each year off the balance sheet as EBITDA grows.
Chris Lau: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Daniel try Corrigo Legislature Bank. Please proceed.
Speaker Change: Yeah. Thanks for the time, Chris looking for an update on the NFL Brexit provide into Q4 at least the nonsense.
Speaker Change: From financing cost obviously, there's still some work to do on that front. So curious how you're thinking about that today, where you can issue unsecured and I'll show you. How do you anticipate your repayment date in April.
Speaker Change: 15 to 22015 dash, one, but all on the line to repay itself just curious if there's anything to read into there.
Speaker Change: <unk>.
Speaker Change: Great question, and you know I would start by saying that no real changes from a capital plan perspective or expectations are on the year.
Speaker Change: Recall that the <unk> that you pointed out Theres a couple of different pieces. There. There's a couple of pennies from just regular way growth in terms of financing cost. There is the incremental cost from the fourth quarter. Our portfolio that we acquired that's about four of the nine cents and then I think it was about three sensors. So that was in there in terms of refinancing of the secure.
Speaker Change: But as Asians Youre exactly right, we have two securitizations.
Speaker Change: We expect to repay over the course of this year as you point out one of which we repaid at the end of the first quarter. The second of which we expect to repay in the back half of this year importantly, as that second securitization for this year is paid off that's our last one which means the balance sheet will become 100.
Speaker Change: Unencumbered at that point big milestone for us.
Speaker Change: And then importantly over the course of this year as those two securitizations are paid off that will free up about 9000 homes are so they can now be freely reviewed.
Speaker Change: I'd be reviewed by our asset management and disposition program. So great opportunity there to continue to attractively recycle capital and optimize the portfolio in terms of refinancing of that was the game plan remains the same our refinancing into the unsecured bond market you know call. It one to two trips to the bond market over the course of this year is what we're contemplating.
Speaker Change: What's factored into the guide is still our expectations.
Speaker Change:
Speaker Change: As we all know April had a volatile month in terms of the bond market conditions are it does feel like the last week or so has settled down a touch there was a REIT issuer in the marketplace yesterday.
Speaker Change: It sounds like that deal went very well and so I think that that's a good sign for the market.
Speaker Change: And we're going to be very prudent and opportunistic as we think about bond market windows over the balance of this year today. If we were to issue in the market you know hard to say exactly but I I guestimate caught high fives or so in terms of new issue 10 year unsecured debt.
Speaker Change: Helpful. Chris Thanks, and I want to follow up on Steves question from earlier, Brian on the Q1 call. You you said half of the vertical and contracted labor for 25 deliveries have been spoken for ahead of the tariffs I'm curious what percentage of the remainder of 25 and 26 are spoken for today and then on the 2% to 3% impact to your you mentioned earlier.
Can you just give some more details on the you know the magnitude of increase for the bigger drivers of that.
Speaker Change: Sure Yeah, we had a rough estimate on the first call of half and I think that's been kind of pushed back till until later in the year.
Speaker Change: It's difficult to pinpoint with active developments in different stages, but I would think of it as as less than a half year effect.
Speaker Change: And what we're talking about too is the event that these terrorists stick as currently plan and shifting and adjusting.
Speaker Change: So frequently.
Speaker Change: It's difficult to really put a fine fine point on it.
Speaker Change: But if I had to just think through what I, probably shift that that have to.
Speaker Change: Affects maybe being seen towards the end of the third quarter, so quarter quarter, plus would be my guess and then as you get into 2026.
Speaker Change: It's pretty it's pretty far out there.
Speaker Change: So I hesitate to speculate too much on how much that's going to remain in the next year because there are a ton of other factors at play too.
Speaker Change: There is stickiness in these in these price increases does that effect.
Speaker Change: Builder appetite does it affects other aspects of the business. So it starts to get a little bit longer on the assumption set.
Speaker Change: Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Please proceed.
Michael Goldsmith: Good afternoon. Thanks, a lot for taking my question I think we talked a little bit earlier about the demographics.
Michael Goldsmith: Develop versus scatter site, but maybe you could talk a little bit about that.
Michael Goldsmith: Any difference in performance there and do you see any difference in rent growth or turnover or maybe said another way do people stay longer in a new home. Thanks.
Brian Smith: Hey, Thanks This is Brian.
Brian Smith: We're taking a look at well let me let me start bye bye.
Brian Smith: Going back to the development and the way that we talk about kind of initial yields and then the concept of stabilized communities, because I think theyre very different.
Brian Smith: The community is once they're stabilized the construction traffic score on the amenity centers are complete.
Brian Smith: And they start to kind of operate as you would expect from a longer term basis without the distractions of a lot of the other things. So if you take a look at those and those are comprised some of the ones that are in the same home pool for 2025.
Brian Smith: We're seeing as expected a much lower cost to maintain.
Brian Smith: They are quicker to turn the the rate growth is consistent with what the scattered side at this point, but we see the see upside in that going forward and then on the retention side, it's important that as they continue to season, we will see improvements.
Brian Smith: Some of the longer term tenants.
Brian Smith: Really stay stay in these communities.
Brian Smith: Nothing nothing dramatically different there but.
Brian Smith: Early conclusions support our thesis on the cost and the speed to turn side.
Speaker Change: Got it thanks for that and then just a quick follow up here you maintained your guidance for same store revenue and expense, but just wondering if there are any kind of under the hood changes and the bill number or assumptions, where there may be some offsetting pieces. Thanks.
Speaker Change: Michael Chris here, not particularly I would say on both sides. You know things are going pretty according to plan as we're building into the peak leasing season in terms of the topline.
Speaker Change: Building blocks, largely still an unchanged full year outlook three 5% at the midpoint.
Speaker Change: As you know, both Brian and Lincoln talked a little bit about I'm still expecting occupancy on a full year basis low ninety-six says that's pretty flat year over year, you know at this point still suddenly average realized rent growth in the high threes or so into currently bad debt in the low ones on a full year basis.
Speaker Change: So building blocks largely unchanged there and similar story on the expense side, our full year outlook still unchanged at 4% you know as we know property taxes are essentially back to long term average at this point in the 4% to 5% area. You know obviously, we'll receive more property tax information.
Speaker Change: For the balance of the year first quarter was a pretty quiet property tax information period.
Speaker Change: <unk> renewals done at this point and are you now we see the balance of expenses and controllable still being mid single digits, so fairly similar to what our expectations, where overall and the individual building blocks on a full year basis.
Speaker Change: Yeah.
Speaker Change: Thank you. Our next question comes from the line of Jesse Letterman with Zelman Associates. Please proceed.
Jesse Letterman: Hey, Thanks for taking the question.
Speaker Change: Questions on the development pipeline, but maybe thinking a little bit further out so well.
Current deliveries have been a little bit heavier in Florida in the Sun belt, obviously based on investment decisions and land that was bought several years ago.
Speaker Change: And as you think several years from now based on land you're acquiring today.
Speaker Change: Where should we expect growth in the portfolio to come from a geographic perspective.
Speaker Change: Yeah.
Brian Smith: Yeah. Thanks, Jesse this is Brian.
Brian Smith: It goes back to one of the first questions on the call there are certain areas that.
Brian Smith: We're focused on you can see.
Brian Smith: Relevant coming into Columbus are further down the pipeline.
Brian Smith: In terms of specifics, where we're constantly evaluating through our asset management program, our land holdings, and whether we're matching and allocating to the to.
Brian Smith: To the right areas.
Brian Smith: I would consider over the long run we're very pleased with the markets that we're delivering in a if.
Brian Smith: If theres any change you could probably see an acceleration into the Carolinas.
Brian Smith: Midwest is gonna be you're going to be really good going forward.
Brian Smith: But there's a bunch of different things to balance where we're matching.
Brian Smith: That investment with demand and also that was the availability of land and the types of opportunities that we see we remain very very focused on location and a specific buy box. So theres a number of different things that play.
Brian Smith: But I would expect to see continued investment in the market. So we're investing in now.
Brian Smith: Maybe a little bit of a refocus into Carolinas and potentially a slight uptick in the Midwest.
Brian Smith: Okay, that's really helpful. Thanks Seth.
Speaker Change: Second question is on the portfolio acquisition from last year, just curious how that's trending relative to your expectations. I know you were assuming some growth in the yields based on kind of assimilating that into your platform. So just curious on how that's trending thus far though it's early but any color there would be great. Thanks again.
Chris Lau: Yeah sure Thanks, Jesse Chris here.
Chris Lau: The update is fairly similar to last quarter.
Speaker Change: Youre right. It is early but things are going really well so far at this point, we're now done with our transition plan moving properties onto the <unk> platform.
Speaker Change: And were quickly getting to work as you point out bringing performance of those properties up to our standards, where we know there's a lot of opportunity to create value right.
Speaker Change: Think about opportunities to improve collections and bad debt.
Speaker Change: Overlay our best in class revenue optimization program, and then importantly implement.
Our caliber of of cost controls.
Speaker Change: All of which we see occurring over the course of this calendar year and that was the plan at the start with the portfolio really hitting stabilization by the end of this year. So punch line is going well so far everything on track.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Austin Workers Smith with Keybanc capital markets. Please proceed.
Speaker Change: Great, Thanks, and a little out there.
Speaker Change: Just curious if you guys continue to see an improvement in your cost of equity if there's any parts of the business that you'd lean into a little more from a capital allocation perspective acquisitions, obviously development and just wondering if you know the hurdle rate returns have changed at all just taking into account any greater uncertainty.
Speaker Change: And the economic backdrop.
Chris Lau: Yeah, Hey, Austin, Chris here.
Chris Lau: Look I would start by reiterating what I mentioned, a couple of minutes ago. As we think about the core of our growth being the development program. Again reminder, intentionally sized so that it does not require equity. So they then equity or incremental debt for that matter become opportunistic weapons exactly as you.
Chris Lau: Now as we think about prioritization of incremental capital opportunities. It dependents right and it's all relative to at the time, but I would say you know theres.
Chris Lau: <unk> two to potentially do more from a development standpoint, a national builder opportunities as I mentioned, we're screening a lot of those.
Chris Lau: Of course, we continue to keep our finger on the pulse of the MLS It feels like that that's a ways off but we watch it closely and then the last point that I would make is the additional portfolio opportunity side of the business right. We've talked about this before but.
Chris Lau: But we're very optimistic on the number of assembled portfolio opportunities that we know are out there right.
Chris Lau: And what we especially like about those like we were just talking about on the last question from Jesse.
Chris Lau: Is the potential to uniquely unlock value by bringing those types of portfolios onto the <unk> platform right I think the fourth quarter acquisition is just the perfect example of the value that we can create there as.
I say that.
Chris Lau: I, probably should remind that we also recognize that there is a variety and quality levels out there in many of the assembled portfolios.
Chris Lau: As everyone knows we are unwavering on our commitments to the A&H buy box, but again, we love the idea of this portfolio opportunities down the road when they meet our buy box and then importantly at the right pricing levels relative to our cost of capital.
Chris Lau: And then just pivoting a little bit to.
An earlier question about the pricing dynamics going on between Midwest versus Sunbelt. You also had some commentary on affordability gap of versus owning a home I guess, how does the affordability screen from just a rent to income perspective regionally and in some of your larger core markets.
Yeah. Thanks for the question. This is Lincoln again, it's interesting how these dynamics work across the portfolio.
Chris Lau: <unk>.
Chris Lau: For the vast majority of the portfolio.
Chris Lau: We're seeing kind of the same dynamics as we have been in the past with a continued affordability to rent versus buy.
Chris Lau: One interesting callout.
Chris Lau: And the data that we're seeing is in our Midwest markets. As an example, we had the smallest smallest delta.
Chris Lau: So it's been it's been interesting to watch and I think that's just another indication that it's a desirable place to live and there's there's still opportunity there and for families to have quality housing.
Other places where the gaps are biggest is salt Lake city as an example.
Is running around 40%.
Chris Lau: And then rest of the market is kind of averaging towards to around that 30 40 Mark.
Chris Lau: 27th place in that area. So.
Chris Lau: Overall, we were just plays with the fact that we continue to see strength. Despite some of the changes in the dynamics around the available homes, that's been a big question.
Chris Lau: From the home buying side.
Chris Lau: And we continue to see people just value a M H&R homes in our locations and come into our portfolio, especially during these times more affordability.
Chris Lau: Okay.
Speaker Change: Thank you. Our next question comes from the line of Linda Tsai with Jefferies. Please proceed.
Linda Tsai: Oh, Yes, hi, additional color you can share on your lease.
Speaker Change: Management initiative, you know how.
Linda Tsai: How much improvement we're seeing.
Linda Tsai: Or any other benefits you can quantify how long is the tail for this improvement.
Hi, Linda this is Brian.
Linda Tsai: Yeah. The benefits are pretty simple for us if you want to talk about rate.
And keep in mind this is part of it.
Linda Tsai: Really a broader revenue optimization focus that we've been talking about for a long time.
Linda Tsai:
Linda Tsai: There is upside to the program what we've implemented today.
Linda Tsai: Really applies to the way, we're treating renewals and the timing and length of those renewal options.
Linda Tsai: Ultimately, we will advance that to to initial new leases, but at this current at the current time is just focus on the <unk>.
Linda Tsai: On the renewal side of the business.
Linda Tsai: We're looking today at balances somewhere in the neighborhood of maybe 60% of the leases expiring in the first half of the year and if you look at the re leasing rate growth between kind of the peak of spring leasing season, and some of the French seasons. You can you can kind of back into some of the benefits that we would see there.
Linda Tsai: And then when those come due the following year.
Linda Tsai: Those benefits continue to accrue in the event of a move out so there's a bunch of different different.
Linda Tsai: Positive was associated with the program I don't have an exact perfect balance because it's going to be a moving target but.
Linda Tsai: Just the.
Linda Tsai: The starting point of recognizing the seasonality of the business the difference in pricing power between the months who are our target. Our residents are this is a very good start.
Linda Tsai: Is it a multiyear improvement where the benefit is larger initially.
Linda Tsai: And then you know as it grows it sort of.
Linda Tsai: Tapers down over time.
Linda Tsai: Yeah.
Linda Tsai: It's part of a broader initiatives so.
Linda Tsai: Current year, you might carry a little bit of extra vacancy during the move out period, but you make up for it.
Linda Tsai: And better right. So there are a bunch of kind of counterbalancing factors, but again part of a broader initiative.
Linda Tsai: This this matches kind of work in demand.
Linda Tsai: And timing and the other note that I haven't made yet.
Linda Tsai: This isn't something that we're forcing on our residents. This is something that's very good for our residents to we're giving them choices.
Linda Tsai: And they're selecting into this so it matches their needs as well, which over the long run will be a huge benefit too.
Tayo Okusanya: Thank you. Our next question comes from the line of Oh, My Tayo Okusanya with Deutsche Bank. Please proceed.
Tayo Okusanya: Hi, Yes. Good afternoon, most of my questions have been answered, but quick one on repairs and maintenance just curious.
Tayo Okusanya: How is that do you expect that to trend over the course of the year just given some of the concerns about you know habits and potential impact on material costs and things of that nature.
Chris Lau: Yeah sure Kyle Chris here.
Chris Lau: I touched on it a bit him when I was covering kind of the full year outlook on on expenses, but as we think about controllable overall.
Chris Lau: Look exactly as he said, we're watching the evolving tariff situation very closely.
Chris Lau: But we remain encouraged by a couple of things one just the sheer level of the proportion of work that we are able to perform in house with our own A&H personnel and then also the maturity and versatility of our supply chain that the team has worked really hard to develop.
Chris Lau: And invest into over the years.
Chris Lau: So at this point, our full year outlook on controllable still unchanged contemplates mid single digit call it 4% to 5% overall growth for.
Chris Lau: For the full year would just be one call out that you know general expectation is that we would see first half of the year running slightly above full year average given the timing of the strategic timing of move outs from our lease expiration management program.
Chris Lau: But you know we'll continue to keep everyone updated.
Chris Lau: On on tariff and supply chain over the course of the year and as we all have had more clarity.
Speaker Change: No. That's helpful. And then if I may ask another one just Washington State again, they have this proposed new rent control.
Speaker Change: Our policy, but they kind of included everyone expect single family for rent just kind of curious whether that was more from a lobbying perspective, where you guys are excluded or do you have any kind of thoughts about why exercise in particular were excluded from that initiative.
Speaker Change: Yeah, I think thanks for the follow up question. This is linking our government affairs team is constantly watching these developments across the country and in conjunction with our legal team or.
Speaker Change: Grafting adaptations to our business to make sure that we can be compliant and my understanding is that this one hasn't been signed yet although it has possible houses.
Speaker Change:
Speaker Change: The mechanics of it are essentially Ah.
Speaker Change: Rents are capped at the lesser of seven plus CPI or 10% and there is a carve out for newer homes that are built within the last 12 years, which bodes well for our development program.
Speaker Change: My understanding is that this does apply to our business outside of that so we're watching it carefully.
Speaker Change: We have been on deviating and our message that the country needs more housing.
Speaker Change: <unk> majors, where we're proud to be a part of the solution as a provider of rental housing and as the nation's 37th largest homebuilder.
Speaker Change: My best intentions.
Speaker Change: Another regulations like if you're only going to serve to discourage kind of investment in housing.
Speaker Change: Housing of all types.
Speaker Change: And.
Speaker Change: Negatively impact affordability, especially for the third of Americans that choose to rent so.
Speaker Change: We're going to continue to adapt and in the meantime, we're going to just be focused on being part of the solution.
Speaker Change: Okay.
Speaker Change: Thank you our last question comes from the line of Steve <unk> with Evercore ISI. Please proceed.
Speaker Change: Yeah. Thanks, just one quick follow up if I missed it I apologize did you guys touch on bad debt you know it was up about 18% in the quarter.
Speaker Change: And it's running maybe close to 1%.
Speaker Change: I know your peer reported a number that was probably closer to 70 basis points and there's was down year over year. So just anything going on on bad debt.
Chris Lau: Yeah, Steve Chris here good.
Chris Lau: Good question, we actually did not touch on that yet I would say as we think about general collection trends and activities. So far in the year things are feeling good and you're right first quarter bad debt landed at 1%.
Chris Lau: You know a touch above the same quarter last year, but keep in mind last year moved around a little bit Ah 20 basis points down sequentially over the fourth quarter and.
Chris Lau: The one thing that I would remind us but thinking about the year overall don't forget that collections and bad debt typically have correlation with the seasonal leasing curve.
Chris Lau: And first quarter is typically one of the lower points for bad debt over the course of the full calendar year.
Chris Lau: Zooming out a little bit more collections feeling good but.
Chris Lau: But we still havent seen much change in the past couple of months with those few remaining municipalities in court systems that we've been talking about to continue to process at lower than typical or slower than typical timelines. So we feel good about the beginning of the year, but at this point as we think about the full year our outlook in the low ones.
Chris Lau: Still feels about right for now.
Chris Lau: That's what we've contemplated in the guide.
Chris Lau: We'll continue to keep you updated as we progress throughout the second quarter.
Speaker Change: Great. Thanks, that's it for me.
Chris Lau: Thanks, Steve.
Speaker Change: Thank you there are no further questions at this time I'd like to pass the call back over to management for any closing remarks.
Speaker Change: Yeah. Thank you all for your time today I hope everyone has a good weekend and I look forward to seeing many of you next month at Navy. Thank you.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].