Mid-America Apartment Communities - Q1 2023

Transcript

Operator (participant)

Good morning, ladies and gentlemen, welcome to the MAA First Quarter 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterward, the company will conduct a question and answer session. As a reminder, this conference call is being recorded today, April 27th, 2023. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA for opening comments. Please go ahead.

Andrew Schaeffer (SVP, Treasurer, and Director of Capital Markets)

Thank you, Corliss. Good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team also participating on the call with me this morning are Eric Bolton, Tim Argo, Al Campbell, Rob DelPriore, Joe Fracchia, and Brad Hill. Before we begin with our prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our '34 Act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures.

A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures, can be found in our earnings release and supplemental financial data. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Eric.

Eric Bolton (Chairman and CEO)

Thanks, Andrew, and good morning. As detailed in our earnings release, first quarter results were ahead of expectations as solid demand for apartment housing continues across our portfolio. Consistent with the trends that we've seen for the past couple of years, solid employment conditions, positive net migration trends, and the high cost of single-family ownership are supporting continued demand for apartment housing across our portfolio. While new supply deliveries are expected to run higher over the next few quarters, we continue to see net positive absorption across our portfolio. We believe that MAA's more affordable price point, coupled with a unique diversification strategy, including both large and secondary markets, further supported by an active redevelopment program, will help mitigate some of the pressure from higher new supply in several of our markets.

As outlined in our earnings release, our team is capturing steady progress and strong results from our various redevelopment and unit interior upgrade programs. We are on target to complete over 5,000 additional unit interior upgrades this year, in addition to completing installation of new smart home technology for the entire portfolio. We're also making great progress with our more extensive property repositioning projects, with the projects completed to date capturing NOI yields in the high teens on the incremental capital investment. These projects, coupled with a number of new technology initiatives, should provide additional performance upside from our existing portfolio. Our new development and lease-up pipeline is performing well, and we remain on track to start four new development projects later this year. Our various lease-up projects have achieved rents that are close to 11% ahead of pro forma.

We did not close on any acquisitions or dispositions during the quarter, but continue to believe that transaction activity will pick up over the summer and have kept our assumptions for the year in place. The portfolio is well positioned for the important summer leasing season. Total occupancy exposure at the end of the quarter, which is a combination of current vacancy plus notices to move out, is consistent with where we stood at the same point last year. In addition, leasing traffic remains solid, with on-site visits in comparison to the number of exposed units that we have is actually running slightly ahead of prior year. A number of new leasing tools that we implemented over the course of last year should continue to support stronger execution, and our teams are well prepared for the upcoming summer leasing season.

I want to thank our associates for their hard work over the last few months to position us for continued solid performance over the balance of the year. That's all I have in the way of prepared comments. We'll now turn the call over to Tim.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Thanks, Eric. Good morning, everyone. Same store growth for the quarter was ahead of our expectations with stable occupancy, low resident turnover, and rent performance slightly ahead of what we expected. Blended lease-over-lease pricing of 3.9% reflects the normal seasonality pattern that we expected. While we did return to a more typical seasonal pattern in Q1, it is worth noting that the blended lease-over-lease pricing captured was higher than our typical Q1 performance. As discussed last quarter, we expected new lease pricing to show typical seasonality and that the renewal pricing, which lagged new lease pricing for much of 2022, would provide a catalyst to first quarter pricing performance. This played out as expected with new lease pricing down slightly at negative 0.5% and renewal pricing increasing positive 8.6%.

Andrew Schaeffer (SVP, Treasurer, and Director of Capital Markets)

Alongside the strong pricing performance, average daily occupancy remained steady at 95.5% for the first quarter, contributing to overall same store revenue growth of 11%. The various demand factors we monitor were strong in the first quarter and continue that way into April. 60-day exposure, which represents all current vacant units plus those units with notices to vacate over the next 60 days.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

At the end of Q1 was largely consistent with prior year at 7.7% versus 7.9% in the first quarter of last year. In the first quarter, lead volume was higher than last year, and quarterly resident turnover was down, driving the 12-month rolling turnover rate down 30 basis points from 2022. April to date trends remain consistent as exposure remains in line with the prior year, and occupancy has remained steady at 95.5%. Blended lease-over-lease pricing effective in April is 4.1%, with new lease pricing beginning to accelerate up 110 basis points from March at +0.2% and renewal pricing remaining strong at 7.9%.

We expect renewal pricing to moderate some against tougher comps as we move into the late spring and summer. Simultaneously expect some seasonal acceleration in new lease over lease rates. We expect new supply in several of our markets to remain elevated in 2023, putting some pressure on rent growth. As mentioned, the various demand indicators remain strong. We expect our portfolio to continue to benefit from population growth, new household formations, and steady job growth. In addition, we expect resident turnover to remain low as single-family affordability challenges support fewer move-outs. MAA's unique market diversification and portfolio strategy, coupled with a more affordable price point as compared to the new product being delivered, also helps lessen some of the pressures surrounding higher new supply deliveries. During the quarter, we continued our various product upgrade initiatives.

This includes our interior unit redevelopment program, our installation of smart home technology, and our broader amenity-based property repositioning program. For the first quarter of 2023, we completed over 1,300 interior unit upgrades and installed over 18,000 smart home packages. We now have about 90,000 units with smart home technology, and we expect to finish out the remainder of the portfolio in 2023. For our repositioning program, leases have been fully or partially repriced at the first 13 properties in the program, and the results have exceeded our expectations with yields on costs in the upper teens. We have another seven projects that will begin repricing in the second and third quarters and are evaluating an additional group of properties to potentially begin construction later in 2023. Those are all my prepared comments, so I'll now turn the call over to Brad.

Brad Hill (EVP and Chief Investment Officer)

Thank you, Tim, and good morning, everyone. While operating fundamentals across our platform have remained consistent, as Tim just outlined, transaction volume remains muted due to a lack of for-sale inventory on the market. For high-quality, well-located properties, bidding is strong and available capital is aggressively competing in order to win the bid and put capital to work. This strong relative investor demand, coupled with often favorable in-place financing, continues to support stronger than expected cap rates on closed transactions. Having said that, we believe the need to sell increases as the year progresses, and it's likely that more compelling acquisition opportunities will materialize later in the year. Therefore, we have maintained our acquisition forecast for the year but have pushed the timing back two months.

Our acquisition team remains active in the market, and Al and his team have our balance sheet in great shape and ready to support our transaction needs. The properties managed by our lease-up team continue to outperform our original expectations, generating higher earnings and creating additional long-term value. To date, our new lease-up properties performance does not appear to be impacted by increased supply pressures. As Eric mentioned, these properties have achieved rents nearly 11% above our original expectations. During the first quarter, we began pre-leasing at our NOVEL Daybreak community in Salt Lake City, and early leasing demand is extremely strong, with the property currently 11.5% pre-leased at rents well ahead of our expectations. Pre-development work continues to progress on a number of projects, four of which should start construction in the back half of 2023.

two in-house developments, one located in Orlando and one in Denver, and two pre-purchased joint venture developments, one located in Charlotte and the other a phase II to our West Midtown development in Atlanta. During the first quarter, we purchased a phase two land site to our Packing District project in Orlando, Florida, bringing our future development projects owned or under construction to 12, representing over 3,300 units. Over the past few months, we have seen an increase in inbound pre-purchase development opportunities due to a substantial decline in the availability of both debt and equity capital for new developments. We remain disciplined and selective in our review process. We are hopeful these calls will lead to additional currently unidentified development opportunities.

Any project we start over the next 12 to 18 months would likely deliver in 2026 or 2027 and should be well positioned to capitalize on what we believe is likely to be a much stronger leasing environment, reflective of the significant slowdown in new starts that we expect to continue to see over the balance of 2023 and 2024. Our construction management team remains focused on completing and delivering our six under-construction projects and are doing a tremendous job managing these projects and working with our contractors to minimize inflationary and supply chain pressures on our development costs and our schedules. We have two projects that will be delivering units during the second quarter, NOVEL Daybreak in Salt Lake City, which delivered six units late in the first quarter, and NOVEL West Midtown in Atlanta. That's all I have in the way of prepared comments.

With that, I'll turn it over to Al.

Al Campbell (EVP and CFO)

Thank you, Brad. Good morning, everyone. Reported Core FFO per share of $2.28 for the quarter was $0.06 above the midpoint of our quarterly guidance. About half of this favorability was related to the timing of certain expenses, which are now expected to be incurred over the remainder of the year, primarily related to real estate taxes.

Operating and fundamentals overall were slightly favorable to expectations for the quarter, producing about $0.01 per share of favorability. The remaining outperformance is related to overhead and net interest costs for the quarter. Our balance sheet remains in great shape, providing both protection for market volatility and capacity for strong future growth. We received an upgrade from Moody's during the quarter, bringing our investment grade rating to the A3 or A- level with all three agencies. We expect the favorable ratings to have a growing positive impact on our cost of capital as we work through future debt maturities. During the quarter, we also closed on the settlement of our forward equity agreement, providing approximately $204 million net proceeds toward funding our development and other capital needs.

We funded $38 million of redevelopment, repositioning, and SmartRent installation costs during the quarter, producing solid yields. We also funded just over $65 million in development costs during the quarter toward the projected $300 million for the full year. As Brad mentioned, we expect to start several new deals later this year and early next year, likely expanding our development pipeline to over $1 billion, for which our balance sheet remains well positioned to support. We ended the quarter with record low leverage. Our debt to EBITDA of 3.5x with over $1.4 billion of combined cash and available capacity under our credit facility, with 100% of our debt fixed against rising interest rates for an average of 7.7 years and with minimal near-term debt maturities.

Finally, in order to reflect the first quarter earnings performance, we are increasing our Core FFO guidance for the full year to a midpoint of $9.11 per share, which is a $0.03 per share increase. We're also slightly narrowing the full year range to $8.93-$9.29 per share. Given that the majority of the Q1 same-store outperformance was timing related and the bulk of the leasing season is ahead of us, we are maintaining our same-store guidance ranges as well as all other key ranges for the year. That's all we have in the way of prepared comments. Corliss, we will now turn the call back over to you for questions. Corliss, we'll now turn the call back over to you for questions.

Operator (participant)

Absolutely. We will now open the call for questions. If you would like to ask a question, please press star then one on your touch tone phone. If you would like to withdraw your question, you may press the pound key. We will pause a moment to allow questions to queue. We will take our first question from John Kim with BMO Capital Markets. Your line is open.

John Kim (Managing Director)

I'll take it. Thank you. Eric and Tim both mentioned in your prepared remarks that the more affordable price point is one of the reasons why you have such strong demand. I'm wondering if there's any noticeable difference between your A and B product as far as demand or performance.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah, John, this is Tim. I mean, we are seeing a little bit of a diversion, not significant. I would say in Q1 what you might call our B, more B assets were about 70 basis points or so higher on blended pricing versus the more A. I think, you know, part of it's some of the price point and certainly to the extent we've seen some supply pressure, more of it's been in, typically in the more urban or A-style types of assets.

John Kim (Managing Director)

Okay. My second question is on the premiums that you're getting on renewals versus the new lease, new leases signed. I think it was 900 basis points in the first quarter, a little bit lower than 800 basis points in the second quarter so far. It still seems like a record amount as far as that premium you're getting, I'm wondering when you think it goes back to the norm and what level do you think is, you know, fair, premium on renewals?

Al Campbell (EVP and CFO)

Yeah, I mean, we talked about a little bit last quarter that we knew with kind of the unusual circumstances of last year where new lease pricing was ahead of renewal pricing for the bulk of 2022, that that set us up with some good comps and some opportunity on the renewal side, particularly in the first, you know, call it five, six months of 2023. That's, that's definitely what we've seen. I think as we get a little further in, you'll see it moderate to more normal. I think, you know, probably get down to the 6% or so range over the next few months, but don't expect it to be too volatile. We still think renewals will outpace new leases but get into a little bit more normalized range.

John Kim (Managing Director)

That's great color. Thank you.

Operator (participant)

We'll take our next question from Austin Wurschmidt with KeyBanc Capital. Your line is open.

Austin Wurschmidt (Senior REIT Analyst)

Hey. Good morning, everybody. Yeah, Eric, you have highlighted, you know, that the price point, you know, does provide you some insulation as it relates to new supply, certainly job growth has surprised to the upside, you know, earlier this year. If we start to see job growth slow, does you know, does that become more concerning as supply begins to ramp? Does pricing power just become more challenging for you later this year and maybe into early 2024?

Eric Bolton (Chairman and CEO)

Well, you know, Austin, certainly if we see the employment markets pull back in any material way, that will have an effect on demand at some level. I think that, you know, we've been through those periods before, where the employment markets get much weaker and there's no doubt that such a scenario does have an effect on demand. Having said that, You know, all these cycles have their own sort of unique elements to them. In this particular cycle, the what we see happening in the single-family market and the and the lack of single-family affordability is clearly working in our favor right now.

I would also suggest to you that in the event of a recession where there is weakness in the employment markets, what really helps us, at least on a relative basis, I think, is the fact that we are oriented in the Sun Belt. I think these Sun Belt markets have demonstrated historically an ability to weather downturn more so than some of the higher density coastal markets that tend to be more dominated by financial services, insurance and banking. The diversification that we have in our...

There's one of the slides in our, in our presentation deck, that you can look at, the latest presentation deck that really gives some insight on the diversification we have, not only in markets, but also in the employment sectors that we cater to, that our residents work in. I think that diversification coupled with the Sun Belt, some of the other things that, you know, relating to single family and so forth, while I think a recession certainly creates concern for everybody in the apartment sector, I think that I'm confident as we have historically always done in downturns that we'll likely hold up better.

Austin Wurschmidt (Senior REIT Analyst)

No. That's all very helpful. Just for my follow-up, you know, for projects that are in lease-up today, have you seen any slowdown in the pace of lease-up or absorption for those? Where are concessions today, for, you know, yeah, assets in lease-up? Thank you.

Brad Hill (EVP and Chief Investment Officer)

Hey, Austin, this is Brad. You know, we really haven't seen any impact, negative impact associated with supply pressures on our new lease-ups. Generally, that's where you think we would see it first. You know, we've got, you know, 6 or so projects that are in lease-up right now. Concessions on those, we typically model about a month free. I'd say on three of those, we're using some concession, maybe up to a half a month free. We're not using the full concessions that we underwrote, we're not seeing the need to, you know, just generally based on what we're seeing in the market. I'd say, our traffic continues to be really good on all of our lease-ups. The leases we're signing, the velocity is really, really good.

We're not seeing any early indications yet that new supply is having an impact there.

Austin Wurschmidt (Senior REIT Analyst)

Thanks, everybody.

Operator (participant)

We'll take our next question from Chandni Luthra with Goldman Sachs. Your line is open.

Chandni Luthra (Lead Analyst)

Hi. Good morning. Thank you for taking my question. You guys talked about in your prepared remarks that cap rates are, you know, still going strong for good quality product? Could you remind us, you know, where they are tracking at the moment? As you think about your own opportunity set down the line, as you think about distressed, you know, opportunities emanating from the current supply situation and lending markets, where would cap rates need to be for you to be comfortable, buying and, you know, getting in the market?

Brad Hill (EVP and Chief Investment Officer)

Yeah. This is Brad. I'll certainly jump on that. You know, we continue to see cap rates call it in the 4.7, 4.75 range for assets that fit that description, well located, strong markets. You know, interestingly, in the first quarter, I mean, we only had seven data points. Again, it's, you know, the volume's down, you know, call it 70% year-over-year. We don't have a whole lot of data points. Interestingly, the band of those seven trades is pretty close together, so which we haven't seen that historically. You know, I would say for us, you know, cap rates definitely need to be over five and a quarter, five and a half, something in that range.

I would say it's really gonna depend on the asset, what the rent trajectory looks like. We're also looking at, you know, the after CapEx, you know, what it looks like in that, in that nature as well. That's pretty important to us. I would say where opportunities might come for us, are gonna be properties that are early in their lease-up. You know, that's where some of these developers tend to get a little bit more stress in their underwriting and in their performance. As some of the supply in our markets begins to come online, you know, some of these less experienced operators that are operating some of these new lease-ups, could potentially struggle a bit to lease up those assets.

I do think that's gonna be an opportunity for us. In fact, that's, you know, really what our acquisition forecast is built on, is buying, you know, assets that are in their initial stage of lease-up.

Chandni Luthra (Lead Analyst)

That's very helpful. Thank you. You know, for my follow-up, as we think about new supply, you know, from a geographic standpoint, what are the markets where you're seeing most pressure, and how are you thinking about balancing occupancy versus pricing in those markets?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Hey, Chandni, this is Tim. You know, right now, I would say Austin is probably the number one market in terms of where we're seeing supply. Phoenix to an extent, we're seeing a little bit. You know, honestly, some of the.

Supply markets we're seeing like Raleigh and Charlotte, Charleston are three of the markets where we're seeing a fair amount of supply, have also been some of our best pricing markets so far this year. As Eric kind of laid out earlier, we're not seeing a lot of pressure yet from supply. We're still getting the job growth and demand. There's pockets here and there, but, you know, right now, as we did in Q1, we're happy to keep pushing on price where we can. Our occupancy is at a stable point. You know, there's a lot of things we monitor as kind of leading edge demand indicators, but still in a healthy balance right now.

Chandni Luthra (Lead Analyst)

Great. Thanks for taking my question.

Operator (participant)

We will go next to Michael Goldsmith with UBS. Your line is open.

Michael Goldsmith (US REITs Analyst)

Good morning. Thanks a lot for taking my question. Earlier, you talked about the B product outperforming A product on a portfolio level. You know, I was wondering if we could dive into a market or two and just kind of better understand some of the dynamics of what you're seeing in the A product versus the B product. Also within that, can we talk about kind of like the larger markets that you're in versus the smaller markets, and if A versus B is performing differently in the large ones versus the smaller ones? Thanks.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah. It's fairly consistent, I would say. You know, Atlanta's probably a good example where we have quite a bit of diversification there. We've got several assets kind of in town, Midtown, Buckhead, and then a lot of assets outside the perimeter. We're pretty consistently seeing the suburban assets perform better than those more urban assets. That's playing out relatively consistent across some of the markets. We are seeing, you know, what you might call our secondary markets perform pretty well. I mentioned Charleston a moment ago. Savannah, Greenville, some of these more secondary markets are holding up very well and doing really well in terms of pricing. That's part of the strategy.

I mean, typically, those markets aren't going to get quite as much of the supply as some of these larger markets, and that's playing out for us pretty well so far.

Michael Goldsmith (US REITs Analyst)

Thank you. My follow-up question just is on the... You know, we talked about the job markets and how the portfolio may react to that. I guess my question is more related to just like the in-migration to the Sun Belt and what's that looking like versus pre-COVID levels, and are there any markets that you're seeing where you see stronger or weaker in-migration?

Eric Bolton (Chairman and CEO)

You know, Michael, this is Eric. I would tell you that the in-migration that we saw in the first quarter, with about 11% of the leases that we are writing a function of people moving into the Sun Belt, that's pretty consistent with where we were prior to COVID. You know, it began to move up a bit during 2020, late 2020, and throughout most of 2021. It started moderating a little bit in 2022. Right now to, you know, as we sit here today, roughly, you know, 11% or so of the move-ins that we are seeing are coming from people moving in from outside the Sun Belt. That compares to 9%-10% that we saw prior to prior to COVID.

Move-outs from the Sun Belt, of the turnover we have where people are leaving us and moving out of the Sun Belt, it's still only about 3%-4% of the move-outs that we're having are a function of people leaving the region. You know, on a net basis, we're pretty close to where we were prior to COVID and would expect, you know, that those trends will likely now continue at the current level going forward.

Michael Goldsmith (US REITs Analyst)

When you say going forward, does that mean, you know, for the rest of 2023, or is that kind of for the intermediate term?

Eric Bolton (Chairman and CEO)

I would say, you know, the rest of 2023 into 2024. I think that, you know, again, harking back to my earlier comments relating to the potential for moderation in the employment markets, you know, we've seen these trends through these cycles that we've been through over the years, where migration trends are more positive, if you will, in the Sun Belt region. It's been that way for many, many years, through recessions and through, you know, expansions in the economy. That continues to be the case. I just continue to think that these markets and the portfolio strategy we have will serve us well long term. I think the net positive migration trends that we see today will likely persist for the foreseeable future.

Michael Goldsmith (US REITs Analyst)

Thank you very much.

Operator (participant)

We'll take our next question from Nick Yulico with Scotiabank. Your line is open.

Nick Yulico (Managing Director)

Thank you. Good morning. I was hoping to get a little bit of a feel for how the new lease growth on signings is differing by market, just sort of an order of magnitude between, you know, better versus weaker markets, if you can give a little color on that.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah, Nick, it's Tim. If we think about where April is, you know, it's anywhere from, call it -1%, -2% for some of the lower markets, up to 3%, 4%, 5% on some markets. You know, it moved positive in April. As we talked about, we're up at 0.2%, and we saw a good acceleration from March to April.

We kind of expect to see that typical seasonality and a little more acceleration as we move through the spring and summer. That gives you a little bit of a order of magnitude.

Nick Yulico (Managing Director)

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

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah. I mean, as I mentioned before, Austin. Austin's one of the weaker ones. Austin and Phoenix are two that I would point out as a little bit on the weaker side. Orlando continues to be one of our strongest markets. Mentioned a moment ago as well, we're seeing some of our more secondary markets perform really well also. Charleston, Savannah, Richmond, Greenville, all holding up really well also.

Nick Yulico (Managing Director)

Thanks. That's helpful. Just last question is on Atlanta. You know, if you look, the occupancy there is a bit lower than the rest of the portfolio. Can you just talk about what's, you know, going on there and I guess also on Packing? I think you were saying that, you know, that's a market where suburban is doing better than urban, so I'm not sure if there's any sort of supply impact there that you're dealing with on occupancy or what's driving that. Thanks.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Sure. Yeah. Atlanta's a little bit of a unique situation. You know, back in February, we had some winter storms. It affected Texas and Georgia also, but we particularly saw some impact in Atlanta and Georgia. We had about 70 units in Atlanta that were down, that we took out of service due to the storms and then brought them back up kind of in late February. You had a pretty good chunk of units in Atlanta that we had to get leased up. That was really the occupancy story there. It kind of bottomed out in March, but we have seen April occupancy pick up. I think Atlanta will continue to improve and be a pretty solid market for us later in the year.

Nick Yulico (Managing Director)

Appreciate it.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Sure.

Operator (participant)

We will go next to Alan Peterson with Green Street.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Hey, Alan.

Operator (participant)

Your line is open.

Alan Peterson (Equity Research Analyst)

Hey, everybody. Thanks for the time. Tim, I was just hoping you can shed some light on your planning for peak leasing and if you're anticipating in some of your weaker markets whether or not you're gonna have to use concessions to maintain occupancy? You know, call out the Austins or the Phoenixes of the world.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah, I mean, you know, there will be pockets. You know, we certainly haven't seen, don't expect to see it at any sort of portfolio-wide level. If we look at Q1, total concessions were about 25 basis points as a % of rent. We are seeing a little more in Austin, you know, call it half a month up to a month. There's areas where if there's lease-up properties, you may see a little bit more. You know, markets like Orlando, we're seeing no concessions. You know, we'll see it a little bit, but I don't think any more than half to a month more than what we're kind of seeing right now. Don't really see it getting much different than what we see today.

Alan Peterson (Equity Research Analyst)

Understood. That's on, your assets or other competing assets nearby?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

More so on competing assets. I mean, we have some. As I mentioned, it's pretty minimal, and it kind of depends on the market. There's some markets where, you know, upfront concessions are more of a staying in that market, whereas others it's more of a net pricing scenario where you don't really see upfront concessions. It kind of depends, but, you know, similar whether it's our properties or the market in general.

Alan Peterson (Equity Research Analyst)

Appreciate that. Brad, just one follow-up on your prepared remarks about debt and equity capital starting to dry up. Across the buckets of capital out there, where are some of your private peers the most concerned about, when sourcing new financing today? What are some of the whether it be the banks or the life insurance companies, what buckets of capital right now are the ones that are seeing the most impact there?

Brad Hill (EVP and Chief Investment Officer)

Yeah, I mean, most of our partners use bank financing for their developments, I'd say that's the biggest concern at this point. You know, given the last few weeks and just the restriction there in capital with banks, it's more acute than it has been. First quarter, you know, it was difficult. Equity was difficult. Debt was difficult. I'd say the debt piece has gotten even more difficult for them. Generally they're going to regional banks for their banking needs. You know, they generally have strong relationships with these banks, so they can get a deal or two done with the banks, but it's a lot more difficult. Takes a lot longer than what it has in the past.

That's really restricting, you know, one of the other areas that's restricting, new deals, getting done. I don't see that, you know, changing for the foreseeable future.

Alan Peterson (Equity Research Analyst)

Appreciate that. Thanks for the time today, guys.

Operator (participant)

We'll go next to Rob Stevenson with Janney. Your line is open.

Rob Stevenson (Managing Director and Head of Real Estate Research)

Good morning, guys. Eric or Brad, you guys added a Orlando land parcel this quarter, overall, how aggressively are you gonna be in adding additional land parcels for development at this point? Are you seeing any relief in terms of the costs of land? Some of the peers have spoken about more office sites and vacant movie theaters and that such being sold for apartment development, allowing for better deals. Curious as to what you're seeing in terms of that?

Brad Hill (EVP and Chief Investment Officer)

Yeah, Rob, this is Brad. You know, as I mentioned, we have 12 sites now that we either own or control. You know, we feel like we're in a good spot in terms of building out our pipeline going forward. As Al mentioned, you know, we think we're on pace for that $1 billion-$1.2 billion or so in terms of projects going, and we like where we're located. The asset that we purchased in Orlando is a phase two to a project that will start this year. There was a strategic reason for that. It's a really a covered land play. There's some leased buildings on it right now. I'd say going forward, we'll be a bit more cautious on land.

I would say, we'll continue to look for sites that have been dropped by other developers. We'll look to get time. A couple of the sites we have now, as I mentioned, are we control them. We do not own them, so that's our preference to have time on the, on the deals. I'd say we're on the early stages, or it appears that we're in the early stages of land repricing a bit in some areas. We've seen a 10% price reduction on some of the projects that some of our partners are coming to us with sites for. They've been able to negotiate some additional time and some cost reduction, so I think we're on the early stages of that at this point.

Rob Stevenson (Managing Director and Head of Real Estate Research)

Okay, that's helpful. Tim or Al, where is bad debt or delinquency today, and how does that compare to the historical periods pre-COVID and recent comparable periods?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah, Rob, this is Tim. If we look at Q1, for example, all the rents that we billed in Q1, we collected 99.4% of that, 60 basis points of bad debt, which is consistent, right in line with where we were last year. If you factor in, you know, prior month collections and any collection agency, it goes down to about 50 basis points. Really remains pretty minimal.

Rob Stevenson (Managing Director and Head of Real Estate Research)

Is there any markets in particular that you're seeing, any material, higher amounts in?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Atlanta is probably the one I would point out where it's, you know, just still kind of the court system and everything going on there. It's taking a little longer to move through the process. It's our highest one right now, probably closer to around 1% or so. That's really the only market where we're seeing that.

Rob Stevenson (Managing Director and Head of Real Estate Research)

Okay. Thanks, guys, appreciate the time.

Brad Hill (EVP and Chief Investment Officer)

Sure.

Rob Stevenson (Managing Director and Head of Real Estate Research)

Thank you.

Operator (participant)

We will go next to Omotayo Okusanya. Let's see.

Omotayo Okusanya (Managing Director)

Hello.

Operator (participant)

With Credit Suisse.

Omotayo Okusanya (Managing Director)

Hello, can you hear me?

Brad Hill (EVP and Chief Investment Officer)

Yes.

Omotayo Okusanya (Managing Director)

Yes. Hi, everyone. Al, hoping you can help me understand the increase in guidance a little bit better. You kind of talked about in 1Q, you had some OpEx kind of tailwinds that could potentially become headwinds going forward, so you're not changing same store NOI. Trying to really understand what that slide increase is, number one. Number two, it sounds like based on spring leasing season, you could reassess guidance again.

Al Campbell (EVP and CFO)

Yes. That's a good question. As we talked about a little bit, the first quarter, obviously, we outperformed $0.06 according to our midpoint, and about half of that was timing, as I mentioned. It's really some expenses, some favorability we had in the first quarter. The bulk of that was real estate taxes, you know, we still think our full year guidance number is correct, so we'll feel that over the year. The $0.03 increase in Core FFO was the other items coming through. I would say a third of that, or $0.01, was really operating forms. As Tim mentioned, we were favorable, particularly in pricing. It was, you know, for the first quarter, what we expect.

I think if you remember our guidance or our discussion in seeing guidance was that our pricing expectation for the full year was 3%, this quarter, first quarter was 3.9%. That's a little bit of favorability. Given that we have the bulk of the leasing season ahead of us, a lot of work to be done, we just felt like our ranges and our guidance are still where they need to be there. The other part of the favorability of FFO that flowed through were things below NOI, overhead, interest and those things. Really, the same store was good, that I would call it favorable, slightly favorable to on point with what we expected, we'll wait to see what happens over the next couple of quarters.

Omotayo Okusanya (Managing Director)

Gotcha. Okay, that's helpful. You just talked a bit about the kind of new lease spreads for the quarter. Again, that was negative. Just kind of curious the thoughts there, whether it really is a supply issue, whether there's a bit more of a demand issue, how would you kind of think about that kind of especially going into like your core spring leasing season?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah. Tayo, this is Tim. I mean, I think one thing to keep in mind, you know, the new lease rates that we saw in Q1 are really pretty typical if we go back through history. You know, you look outside of last year, the kind of new lease rates we were seeing were pretty much in line or better, frankly, than most of the years we've been tracking it. It was pretty much as expected. I mean, March new lease rates dropped a little bit, and it was really more a function of some of what I was talking about with Atlanta earlier, where we saw, you know, leasing activity drop for a couple of weeks there in February with some of the storms, particularly in Texas and Georgia.

That impacted occupancy a little bit in February, and then we were able to regain that occupancy in March. It did come at the expense a little bit of some of the new lease pricing. As we talked about with April, where we saw new lease spreads accelerate and move positive. You know, from where we sit right now, all the demand metrics look strong, exposures where we want it, leads, traffic volume, all that is where we would expect. I think we'll, you know, move into the rest of the spring and the summer, strong leasing season, and see some acceleration and see what we would typically expect out of a pretty strong supply-demand dynamic.

Omotayo Okusanya (Managing Director)

Sounds good. Thank you.

Operator (participant)

We will go next to Haendel St. Juste with Mizuho. Your line is open.

Barry Luo (REITs Equity Research Associate)

Hey, good morning. Thanks for taking my questions. This is Barry Luo on for Haendel St. Juste. My first question was on property taxes. I was wondering how that was trending versus expectations and, since cadence, and some relief in the back half and so forth.

Al Campbell (EVP and CFO)

Yeah. This is Al. I can give you some color on that. Right now, you know, we expect that our estimates that we put out, our guidance for property taxes, we left that the same. We think we still, that's a good range that we've got. We did have some favorability in the first quarter on property taxes, as I just mentioned a minute ago. Really that's related to the timing of some of the activity. We had some, you know, the appeals from prior year, they come in and the timing can be different year to year. We had some wins that we achieved in the first quarter on some of our prior year appeals that were good. We got them a little earlier than we thought.

We still have a lot of fights both from prior year to go and a lot of the information for this year to come in. On balance, we have about 6.25% growth that we expected for this year. At the midpoint of our guidance, we still think that is right. I would tell you that we still, in terms of current year, don't have a lot of information yet. We feel like we have a good beat on values, but a lot of the information's, you know, the stubs from the municipalities come out at probably mostly in the second quarter. As we're talking next quarter, I should have 60%-70% knowledge on that, and then the millage rates will come more in the third and even some in the fourth quarter.

We feel like our range is good. I would say that, you know, we've continued the pressures coming from Texas, Florida and Georgia. That's continuing to be the case, has been for several years. I would say that as we move forward into 2024, as they're looking backwards toward this more normalized year, hopefully we begin to see some moderation in that line.

Barry Luo (REITs Equity Research Associate)

Got it. Okay. Thank you. Just looking at Texas, in particular, noticing a significant expense decline sequentially, 11% for Fort Worth and I think 6% for Austin. Is some of that being driven by property tax relief or what's kind of driving that? Thanks.

Al Campbell (EVP and CFO)

I think there's some property tax in that for sure, I mean, Tim Argo can answer as well. I think overall we expected the first quarter expenses for all categories together and the company as whole to be pretty high in the first quarter. Really for many of the groupings because of the comparisons for last year, as we saw inflation kind of come into our business more in the second, third and fourth quarter last year, we expected our property, our operating expenses to be high. Actually, they were 8.3% to where we came out, was favorable to our expectations, what we had said, as Tim Argo mentioned.

What we would expect to see is some key items, personnel, repair and maintenance begin to moderate as we move back into the, you know, second, third or fourth quarter of the year. With really the outstanding points of continued pressure being taxes, insurance areas primarily. If that was... Does that answer the question?

Barry Luo (REITs Equity Research Associate)

I was more at looking at the sequential decline from 4.2 in Fort Worth versus 1.2 in Fort Worth. Looks like there's some relief on the third side.

Al Campbell (EVP and CFO)

The decline

Tim Argo (EVP and Chief Strategy and Analysis Officer)

I think, the sequential decline, all those Texas markets I think was pretty much real estate tax related.

Al Campbell (EVP and CFO)

Yeah.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Just the timing of accruals and settlements and all that. It can be pretty volatile from quarter to quarter, but normalizes over the course of the year.

Al Campbell (EVP and CFO)

Yeah. That's where you're seeing some of those items, particularly in Texas, where we had the real estate tax, prior appeals come in. That's some of that occurring.

Barry Luo (REITs Equity Research Associate)

Got it. Thank you.

Operator (participant)

We will go next to Alexander Goldfarb with Piper Sandler. Your line is open.

Alexander Goldfarb (Managing Director)

Thank you. Morning down there. Two questions. First, just going back to the supply, just because it's a big topic that always comes up with the Sun Belt. You guys articulated a lot of how your portfolio is doing. Would you say it's more just your rent versus new supply, or would you say it's more just proximity, meaning that your properties are less, you know, end up less likely to be near where the new supply is? Meaning that the new supply is in other parts of the market and therefore like where you cited some supply-heavy markets where you guys actually did well, it's because just proximity in general, your portfolio doesn't line up where a lot of the new product is being built. I'm just trying to understand.

Eric Bolton (Chairman and CEO)

You know, Alex, this is Eric. I would say it's both of the points that you're making that are at play here. Where we do see supply coming into a market more often than not, it is in some of the more, you know, urban-oriented, submarkets. When you look at our portfolio and the footprint we have and the diversification we have across a number of these markets, particularly the big cities like Atlanta and Dallas, we have our generally more exposure to the suburban markets versus the urban markets. I think there is a supply, proximity point that, you know, I would point to that you're, that you're mentioning that probably works in our favor to some degree.

It's hard to it'll vary of course, by market. Then the other thing that you pointed to, which I think is also at play here, is the price point that broadly we have our portfolio. When you look at the average effective rent per unit of our portfolio and compare it to the average rent of the new product coming into the markets, we still are somewhere in the 25% plus or minus range below where new product is pricing. You know, and again, it'll vary a bit by market, but that certainly provides some level of protection against the supply pressure and offers the renter market a great value play in renting from us versus something that may be down the street that's newer but considerably more expensive.

With some of the renovation work that we're doing, frankly, that's what creates the opportunity for us to do some of this renovation work and effectively offer the resident and the market, what it feels like a brand-new apartment on the interior, but still at a meaningful discount to what they would have to pay in rent for something brand new. There are a multitude of factors at play, and it varies by market. Certainly, you know, we cannot absolutely eliminate new supply pressure. There after, you know, being in this region for 30 years, we've learned how to do some things to help at least mitigate the pressure a little bit here and there.

Alexander Goldfarb (Managing Director)

Okay. Second question is on insurance. Certainly a hot topic, especially in Florida and Texas with big premium jumps. Are you guys seeing opportunities where some of your smaller players or maybe some of the merchants, you know, recent new developments may have, they may not have underwritten 50% type premium increases and therefore that could gin up some buying opportunities? Do you think that you would see that potentially, you know, people having to sell because of insurance pressure?

Brad Hill (EVP and Chief Investment Officer)

Yeah, this is Brad. You know, I definitely think that that is something to keep an eye on. You know, I do think the market down there right now is extremely tough. Depending on where you are in Tampa or South Florida, those insurance premiums are increasing substantially for new products. I would say, for newly developed properties in, you know, in those areas, Tampa, Orlando, not as much, but Jacksonville, it's something for us to keep an eye on because I do think that the insurance premiums are gonna be a lot higher than the developer underwrote and they expected, and I do think there's gonna be some impact to the sales proceeds as a part of that.

I think as you get some of the supply pressures coupled with that, and some of the leasing pressures, those are areas that we'll keep an eye on. Obviously we have the benefit with our broader portfolio in insurance pricing. That definitely is a platform benefit for us.

Alexander Goldfarb (Managing Director)

Okay. Thank you.

Operator (participant)

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

Wes Golladay (Senior Research Analyst)

Hey, good morning, everyone. Just a quick question on capital allocation. You know, your stock's yielding low 6% to maybe mid-6% implied cap rate. How do you view a potential buyback versus starting new developments at this part of the cycle?

Eric Bolton (Chairman and CEO)

Well, Wes, this is Eric. I would tell you right now, we believe that what really is important to have is a lot of strength and capacity on the balance sheet. You know, obviously we're in a very turbulent environment at the moment. Capital markets are very turbulent. There's still obviously some level of risk in the broader economy. So we really believe that the thing to do right now is to protect capacity and keep the balance sheet in a strong position, not only for defensive reasons but as Brad has alluded to, we do think as we get later in the year that we may see some improving opportunities on the acquisition front. You know, we have four...

As Brad alluded to, we have four projects that we may start, we're scheduled to start later this year. These are projects that would deliver in 2026 into 2027. You know, I think that that level of development is something that we feel very comfortable with. Of course, you know, we're still fine-tuning a lot of the numbers and pricing is not yet locked in. We are seeing some early indication of some relief on some of the pricing metrics. Of course, by the time we get to 2026 and 2027, we think the leasing environment is likely to be pretty strong given the supply pullback that we expect to start to see happening late in 2024 and 2025.

We would anticipate that these would be some very attractive investments that we could potentially start later this year and would reconcile very nicely to even where our current cost of capital is. you know, we're certainly understand the metrics and the math on all this and pay close attention to it. We don't think we're gonna ramp up a lot more than that at this point in the cycle, but we feel pretty good about the four opportunities that we're looking at at the moment.

Wes Golladay (Senior Research Analyst)

Okay. Then maybe if we can go to that topic of distress. I mean, a lot of the private owners right now, do you feel that they may be upside down and the banks are just extending and pretending right now, or do they have significant equity that maybe need a capital infusion?

Eric Bolton (Chairman and CEO)

Yeah. I mean, I don't think that we are.

Seeing any distress in the market right now. I mean, the projects, you know, just like our portfolio, the operating fundamentals are very strong. Even on some of these lease ups when they underwrote them in 2021 or so, you know, the leasing fundamentals are going to be a lot stronger than what they expected. You know, even the joint venture projects that we started in 2021, you know, cap rates were in the, you know, 5-5.5% range on the valuation. I mean, that's kind of where we are. I would say that, you know, the developers have been somewhat disciplined in their underwriting the last couple of years, and the operating fundamentals are outperforming.

They won't get the pricing that they could have gotten a year and a half ago. But they're still profit in a lot of these projects, so we're not seeing that yet. Where I think the distress could come are projects that closed a year and a half ago, and they did some type of financing cap or something that's coming due, and it's going to require a reset of or a pay down in order to get that loan right-sized and the debt service coverage right-sized. Those are going to be the ones, I think that are going to have a little bit of trouble.

Wes Golladay (Senior Research Analyst)

Great. Thanks everyone.

Operator (participant)

We will go next to Eric Wolfe with Citi. Your line is open.

Eric Wolfe (Director and REIT Equity Analyst)

Thank you. Yeah, just to follow up to your answer there a moment ago. You know, you mentioned your balance sheet is just in incredible shape. I don't think I can remember, you know, seeing, partner company at sort of mid three times leverage down to probably low three times later this year. My question is really sort of what would it take, what type of opportunity would you need to see before you'd be willing to take your leverage back up to a more, more normal, you know, sort of five times amount? I guess if a portfolio came across that was like in, say, the 5.5%-6% range, would that be interesting enough to allow you to take your leverage back up?

Eric Bolton (Chairman and CEO)

Well, Eric, this is, I'll start, Al, you can jump in. I, you know, we do anticipate that over the course of the next year or two, that we will see leverage probably edge back up just a little bit. Believing that we will if nothing else, you know, we've got some development funding that we'll do. Of course, the funding that we're doing on our redevelopment work and repositioning work is super, you know, very, very accretive. So we will begin to see leverage move a little bit back up.

Having said that, you know, we just think right now, given the uncertainty in the broader capital markets landscape, and what we imagine to be likely an opportunity for more distressed asset buying, that, you know, capacity right now is a good thing to have. We're gonna hold on to that. I do think that, you know, obviously, if we did see some larger opportunity come across that we felt made sense for us strategically and felt like, you know, we could do something in, you know, closer to 5.5-6 range, from a cap rate perspective, that probably would certainly get our attention. You know, obviously depends on a lot of different other variables.

We, we like where the balance sheet is right now given the given the broader landscape that we have with the capital markets and the and the transaction market. We're going to be very cautious in how we put that capacity to work. We've got some known needs that I've just, you know, mentioned that are very attractive investments, and we'll continue to move forward with those. We don't have any certainly need to go attract any additional capital right now. As Al alluded to, the debt, the debt portfolio is in terrific position, and, you know, a lot of duration and it's all 100% fixed. You know, we're gonna sit tight with what we have at the moment, largely.

Al Campbell (EVP and CFO)

I'll just add just quickly that that's a very good point you make that really our long-term target is closer to 4.5 to five times on the EBITDA coverage. I mean, we're providing opportunity right now, as Eric mentioned. Hopefully we'll be able to find those, expect to be able to find those. Long term, our target is in line with what you mentioned.

Eric Wolfe (Director and REIT Equity Analyst)

Thanks for that. Just on a related guidance question, you did the 3.9 in terms of blended spread first quarter. Sounds like you expect it to accelerate through the balance of the peak leasing season. My question is really just how does it get down to that 3% blend that's in your guidance? Is there just a steep drop off later this year or just some conservative baked in there?

Al Campbell (EVP and CFO)

I'll just start with it. Tim can give some more details on it. What I would say primarily is, one, that we need to see the bulk of the leasing season happen as it comes. We're providing opportunity to see that and get more information. We're encouraged certainly by what we saw in the first quarter. I think Secondly, the biggest point would be we do expect to see that seasonality in the most acute, if you would, in the fourth quarter. That's typically when it is in a normal year. That's sort of what we're expecting. We could see that new lease pricing be a little more negative in that fourth quarter because, you know, the holiday season and demand just really shuts down in that period.

That's what we provided for in our forecast, I think at this point.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah. Eric, this is Tim. I mean, I think it'll kind of boil down to new lease pricing that we see over the, you know, the late spring and summer will be the ball game in terms of whether it ends up a little better than we thought or a little worse. You have obviously the bulk of the leases happening during that period.

They carry for several months throughout the year. They have a certainly an outsized impact. If those new lease rates accelerate more then, you know, it probably is a little better than we thought. If they accelerate not quite as much, probably a little less because I think, you know, renewals are gonna be relatively consistent through the rest of the year.

Eric Wolfe (Director and REIT Equity Analyst)

Got it. Well, thanks for your time.

Operator (participant)

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

Jamie Feldman (Managing Director and Head of REIT Research)

Great. Thank you and good morning. I wanna go back to your comment about 11% of leases written in the first quarter were new people moving into Sun Belt. Can you provide more color on that data point across the different markets? I guess I'm thinking more about maybe some of the larger MSAs versus the smaller MSAs.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

Yeah, this is Tim. 11% overall and, you know, probably markets you would expect in terms of in-migration. Phoenix is our top market. You have about 18% of move-ins out of market going into Phoenix. Tampa was another big one at 15%. Charlotte was 13%. Charleston and Savannah were pretty high in there as well. Those are the biggest drivers, and that's been pretty consistent throughout the last several quarters as the ones that are benefiting the most.

Jamie Feldman (Managing Director and Head of REIT Research)

Interesting. I guess similarly, if you think about the layoff activity, I guess those are also the markets where you've seen the most growth in tech jobs or jobs that might be most at risk. Can you talk at all about, you know, how layoff activity might be impacting, you know, the different types of MSAs and even that statistic specifically? Just trying to kind of think through the next 12 months or so.

Tim Argo (EVP and Chief Strategy and Analysis Officer)

I mean, we haven't, we haven't seen a ton of impact yet. I mean, I think certainly the technology sector is getting a lot of publicity and a lot... there's layoffs announced there. I do think, you know, a lot of the other sectors are still in the net hiring position. Austin's one, particularly North Austin, where we've seen a little bit of impact from that with some of the tech jobs up in North Austin. At the same time, you've got Tesla still planning to expand over the next couple of years there. You've got Oracle moving their headquarters there. Certainly long term in Austin, you know, it's a job machine. We feel really good about that. Outside of that, we haven't seen a lot.

Phoenix has had a little bit, but again, we've got, you know, we've got properties there, which, you know, is a huge semiconductor plant coming in right near one of our properties. You know, there's a little bit of short-term pressure over the next few quarters, but long term feel really good about all of those markets.

Jamie Feldman (Managing Director and Head of REIT Research)

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

Brad Hill (EVP and Chief Investment Officer)

Those are the two big items. I mean, I think the key components of expenses for the year are personnel, repair, maintenance, taxes, and insurance. I think the first two we expect to moderate as the year progresses, as we talked about. Taxes and insurance remaining the biggest items that have the most unknown at this point. That's the ones we're keeping our eye on at this point.

Jamie Feldman (Managing Director and Head of REIT Research)

Okay. All right, great. Thank you.

Operator (participant)

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

Linda Tsai (Senior Analyst of US REIT Team)

Hi. This is a short follow-up to that last question. In terms of rationale for move-out, job transfers, and buying a new home, has the balance of these reasons shifted since 4Q, and any regional trends you'd highlight?

Tim Argo (EVP and Chief Strategy and Analysis Officer)

I mean, it's pretty consistent. One, we've seen move-outs to buy a house has dropped dramatically as you would expect with what interest rates have done. We've seen our move-outs due to rent increase drop quite a bit as well. You know, the biggest reason for move-outs, which is always consistently our largest reason for move-out, is just a change in the job and job transfers, and that's up a little bit. it's, you know, as we've talked to people out on site, it's more just people moving for another job as opposed to any significant job losses. you know, turnover overall is down a little bit, but it's the, you know, some of the key reasons that we've talked about before and pretty consistent across markets no matter, you know, larger markets or secondary markets.

Operator (participant)

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

Eric Bolton (Chairman and CEO)

Well, no additional comments to add, so appreciate everyone joining us, and I look forward to seeing everyone at Nareit. Thank you.

Operator (participant)

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