Mid-America Apartment Communities - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 Core FFO per diluted share was $2.20, slightly ahead of internal expectations; diluted EPS was $1.54 and rental and other property revenues were $549.3M, with Same Store revenue growth of 0.1% and NOI down 0.6% YoY.
• Same Store blended lease pricing improved sequentially by 160 bps (to -0.5%), driven by acceleration in new lease pricing; occupancy was strong at 95.6% and resident turnover hit a historically low 41.5%.
• Management maintained full-year 2025 guidance (EPS $5.51–$5.83; Core FFO $8.61–$8.93; Core AFFO $7.63–$7.95; Same Store NOI -2.15% to -0.15%); Q2 2025 Core FFO guidance is $2.05–$2.21, with a bridge reflecting seasonal OpEx and the timing of tax litigation settlements.
• Strategic positioning remains resilient despite macro uncertainties (including potential tariffs), with supply declines expected to accelerate through 2025; April trends improved further, supporting momentum into the busy leasing season.

What Went Well and What Went Wrong

What Went Well

• “First quarter Core FFO was slightly ahead of our expectations” due to stronger Same Store performance and favorable timing in overhead and taxes; management highlighted high occupancy, reduced delinquency, and improved pricing trends.
• Sequential blended pricing improved by 160 bps, with new leases accelerating by 180 bps from Q4 and renewals up 30 bps; April trends showed continued improvement, with average daily occupancy ~95.5% and lower 60-day exposure.
• Balance sheet remains strong: ~$1.0B combined cash and revolver availability; Net Debt/Adjusted EBITDAre ~4.0x; ~94% fixed-rate debt with ~7-year average maturity at a 3.8% effective rate.

What Went Wrong

• Same Store NOI decreased 0.6% YoY as property operating expenses rose 1.2% YoY; average effective rent per unit declined 0.6% YoY to $1,690.
• New lease pricing remained negative (-6.3%) on a lease-over-lease basis given residual supply pressure in markets like Austin, Phoenix, and Nashville; blended lease rates were -0.5%.
• Management maintained guidance rather than raising it due to uncertain macro factors and seasonality; Q2 Core FFO midpoint ($2.13) reflects expected seasonal OpEx and the timing shift of certain tax settlements from Q2 into Q1.

Transcript

Operator (participant)

Good morning, ladies and gentlemen, and welcome to the MAA First Quarter 2025 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, May 1st, 2025. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA for opening comments.

Andrew Schaeffer (SVP and Treasurer)

Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for MAA. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder, and Rob DelPriore. Before we begin with 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 Brad.

Brad Hill (CEO and President)

Thanks, Andrew. Good morning, everyone. As detailed in our release, first-quarter performance results were ahead of our expectations. Strong demand was evident in multiple areas of our performance, including occupancy, collections, and pricing trends. While pricing trends for new resident move-ins continue to reflect the impact from new supply delivering in several of our markets, renewal pricing remains strong and our retention rate increasing, leading to first quarter 2025 blended lease pricing that was ahead of our expectations. We are encouraged by the resilience our portfolio has displayed in the face of the unprecedented levels of new supply that we have experienced over the past year, as well as our positioning to capture continued improvement as we enter the summer leasing season.

As Tim will discuss in more detail, we are seeing encouraging signs that indicate leasing conditions are poised to support stable occupancy and improvement in blended lease rates that align with the outlook that we provided in our prior guidance, having a compounding impact on revenue performance throughout the year. While macroeconomic uncertainties have increased due to the potential tariffs, our exclusive focus on high-growth markets, lower average price point, broad diversification by market, sub-market, and price point, our operating efficiencies and scale should position MAA to weather tariff or economic challenges and allow us to take advantage of growth opportunities that may arise. Because of these portfolio characteristics, MAA has not only outperformed in previous downturns and times of uncertainty but delivered good performance over the past year in the face of a 50-year record high level of supply.

In the first quarter, we were able to increase our year-over-year occupancy by 30 basis points and produce average effective rent per unit that was only down $9 per unit from the level we achieved in first quarter of 2024. Our current metrics are indicating no material change in customer behavior. Leads and leasing traffic remain strong. Collections are solid. Migration trends are positive. The challenges of single-family home availability and affordability continue to support our strong renewal performance. Our focus on customer service is paying off, as reflected in our sector-leading Google scores, contributing to our growing retention rates. Supported by our asset management group, the teams are focused on harvesting the benefits of several leasing and reporting tools introduced over the past few years to maximize our operational effectiveness.

We continue to invest in key areas that will support future earnings growth, including various new technology initiatives that enhance efficiencies and support our centralization and specialization efforts. We are ramping up the rollout of property-wide Wi-Fi across our portfolio, and investments in our interior renovation and repositioning programs are increasing. On the external growth front, our pipeline of lease-ups and active developments stand at a combined cost of $1.5 billion. Our operating performance at these properties should benefit from a supply environment that is trending below historical levels. We continue to believe investing in new developments will produce strong future earnings growth, especially considering the declining new starts and additional headwinds from decreased equity capital available for new projects. We anticipate starting between three and four new developments this year, with a suburban development in the Charleston, South Carolina market on track to start construction during the second quarter.

Based on our expected starts and completions for the year, our development pipeline should remain in the $1 billion-$1.2 billion range, a very comfortable level given our scale and balance sheet strength. We are focused on acquiring properties where we can utilize our various platform capabilities to generate attractive long-term returns for capital. With the transaction market pretty slow, it will likely be the back half of the year before we see more compelling opportunities begin to materialize. As part of our ongoing recycling efforts to improve the earnings quality of our portfolio, during the first quarter of 2025, we exited Columbia, South Carolina with the sale of two properties with an average age of 32 years that went under contract in 2024. We expect continued recycling efforts to occur later this year.

With a 30-year performance record focused on high-growth markets and an average executive team member tenure of 16 years, we have operated through prior cycles of high supply and uncertainty. I remain optimistic about the approaching recovery cycle and our market's ability to absorb the new supply. Today, our more diversified and higher-quality portfolio, stronger operating platform, and stronger balance sheet position us to compete at an even higher level. Our high-growth markets continue to see stronger job growth, household formation, and investor demand. Through our internal and external investments, we have meaningful future value growth on the horizon as new supply deliveries decline and leasing conditions strengthen. We remain excited about the outlook over the next few years. To all our associates at the properties and our corporate and regional offices, thank you for your hard work and dedication in preparation for the busy leasing season.

Your commitment and dedication to our residents and fellow associates are greatly appreciated. With that, I'll turn the call over to Tim.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Thank you, Brad. Good morning, everyone. Following up on Brad's comments, we're encouraged by the first-quarter operating trends with blended pricing, occupancy, and collections all slightly outperforming our expectations. We entered 2025 with occupancy and exposure in a strong position that helped drive a steady increase in pricing, particularly on our new leases. The acceleration in new lease-over-lease pricing growth was greater than what we have seen on average historically, increasing 180 basis points sequentially from the fourth quarter of 2024. The resulting new lease pricing on a lease-over-lease basis for the first quarter was negative 6.3%. Additionally, renewal rates for the quarter showed strength, growing 4.5% on a lease-over-lease basis, which was a 30 basis point increase sequentially over the fourth quarter. The resulting lease-over-lease pricing on a blended basis was negative 0.5%, which represented 160 basis point improvements sequentially from the fourth quarter of 2024.

Average physical occupancy was 95.6%, up 30 basis points as compared to the same period in 2024. Collections continued to outperform expectations, with net delinquency representing just 0.3% of billed rents. These factors combined drove the resulting same-store revenue growth of 0.1% for the quarter. Many of the markets that were outperformers in 2024 from a blended lease-over-lease pricing standpoint continued to do well in the first quarter of 2025, including several of our mid-tier markets. Virginia stands out with Richmond, Norfolk, Fredericksburg, and our four Northern Virginia properties all exceeding the portfolio average. Charleston, Savannah, and Greenville also demonstrated strong pricing power. Of our larger markets, Tampa continued to show pricing recovery. Houston held steady. Encouragingly, we saw significantly improved performance from Atlanta, particularly as compared to market conditions there in the first quarter of 2024.

Austin remains the laggard as it continues to face significant supply pressure, with Phoenix and Nashville continuing to struggle with lingering supply concerns also. Touching on our lease-up portfolio, we had one property, MAA Optimist Park, reach stabilization in the quarter. Our seven remaining lease-up properties are competing well against the record new supply being delivered in our markets and ended the quarter with a combined occupancy of 71.6%. We pushed the expected stabilization date back one quarter for MAA Boggy Creek in Orlando and expect six of the seven lease-up properties to stabilize in 2025. Rents for the group continue to exceed our pro forma expectations and should result in significant value creation for this portfolio. We continued to execute on our various redevelopment and repositioning initiatives in the first quarter, and we expect to accelerate these programs over the course of 2025 and into 2026.

For the first quarter of 2025, we completed 1,102 interior unit upgrades, achieving rent increases of $90 above non-upgraded units and a cash-on-cash return of just under 18%. Despite this more competitive supply environment, these units were vacant on average nine days less than non-renovated units when adjusted for the additional turn time. We expect to renovate even more units in Q2 and Q3 with a goal to renovate approximately 6,000 units in 2025, with an even larger increase expected in 2026. For our repositioning program, we have effectively completed the repricing phase on all the legacy 2023-2024 projects, with NOI yields approaching 10%. We have an additional six projects finishing up construction that will begin the repricing phase between now and July in what we believe will be a strengthening leasing environment.

We are also now live on the four property-wide Wi-Fi retrofit projects we began in 2024 and are currently in the planning or construction phase for an additional 23 projects that we targeted for 2025. As we close out April, we continue to see encouraging trends that are aligned with our guidance. New lease and blended pricing in April improved as compared to both March and the full first quarter, with average daily occupancy for the month of 95.5%. Our 60-day exposure for April was 8.4%, 20 basis points lower than this time last year. It keeps us in a position for stable occupancy to allow for pricing power, assuming the strong demand we have seen today remains intact.

On the demand side, absorption in our markets in the first quarter was at a record level and represented the third straight quarter units absorbed exceeded units delivered, putting our markets in a good position to achieve a robust recovery as supply continues to decline. Additionally, the percentage of our residents accepting renewal offers exceeds last year's record level, with lease-over-lease growth rates on renewals accepted for May and June outpacing our strong year-to-date renewal growth rates. This lower turnover is another mitigating factor against supply pressure, with fewer units coming to market. Improving new lease rates should further help support continued strong renewal performance throughout the spring and summer leasing season. That's all the way I have in prepared comments. Now I'll turn the call over to Clay.

Clay Holder (EVP and CFO)

Thank you, Tim. And good morning, everyone.We reported core FFO for the quarter of $2.20 per diluted share, which was 4 cents per share above the midpoint of our first quarter guidance. About 2.5 cents of the favorability was due to same-store NOI performance, with an additional 2.5 cents due to favorable timing of overhead and interest expenses, partially offset by 1 cent of non-same-store NOI performance. In addition to our same-store revenue performance slightly exceeding our expectations, real estate tax expense was favorable in the quarter due to the timing of tax litigation settlements that were initially projected to be completed in the second quarter. Personnel costs, repair and maintenance expenses, and marketing costs were all generally in line with our expectations.

During the quarter, we funded approximately $67 million in development cost of the current $852 million pipeline, leaving an expected $305 million to be funded on our current pipeline over the next two to three years. We also invested approximately $17 million of capital in the first quarter through our redevelopment, repositioning, and Wi-Fi retrofit initiatives that Tim spoke of earlier. Our balance sheet remains strong. With $1 billion in combined cash and borrowing capacity under our revolving credit facility and our low net debt to EBITDA at four times, our balance sheet is well positioned to take advantage of opportunities should they emerge. At quarter end, our outstanding debt was approximately 94% fixed with an average maturity of seven years at an effective rate of 3.8%.

Finally, with much of the leasing season still ahead of us, coupled with the uncertain macroeconomic environment, we are maintaining our core FFO and same-store guidance for the year. As outlined in our release, we expect core FFO for the second quarter of 2025 to be in the range of $2.05-$2.21 per diluted share, or $2.13 per share at the midpoint. This midpoint includes the timing impact of the real estate tax litigation settlement previously discussed, along with the typical seasonality of leasing and maintenance-related operating expenses. That is all that we have in the way of prepared comments. Virginia, we will now turn the call back to you for questions.

Operator (participant)

We will now open the call up for questions. If you'd like to ask a question, please press star, then one on your touch-tone phone. If you'd like to withdraw your question, press star one a second time. In the interest of time, the company has requested a two-question limit. Our first question will come from the line of Eric Wolfe with Citigroup. Please go ahead.

Eric Wolfe (Vice President and Equity Research Analyst)

Hey, thanks. Right now, I guess we're at the beginning of May. I assume most people probably sign a new lease about a month before they move in, but correct me if I'm wrong on that. Is it just fair to say that you have a pretty good idea of where new lease spreads will be in late May or early June, or do you still not have visibility into that yet?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Hey, Eric, this is Tim. We do have pretty good visibility. Obviously, the renewal side, we have really good visibility with 60-day notice required there. To your point on the new lease side, I mean, it varies. You do get a lot of people that are looking to move in more immediately in that zero- to seven-day range, but we've put a little bit of extra focus on pre-leasing that has pushed that out a little bit. We probably have even a little more color or a little more visibility this year than we did this time last year. Yeah, we've got a fair amount of visibility. Certainly, April new leases, we know those. I would say we probably have a good handle on, call it, half of the May new leases and probably 25% or so of the June new leases.

Eric Wolfe (Vice President and Equity Research Analyst)

Got it. Yeah. I asked the question mainly because if you kind of look at the first quarter, it's tracking pretty similarly to what you saw last year. I think what people are trying to figure out is, are you seeing anything in the recent data, whether that's April, May, June, that gives you more confidence in this inflection in rent growth that companies are predicting? Because so far, the results have been a bit like last year. What kind of gives you the confidence based on recent activity that you're going to see that inflection?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah. I mean, we're continuing to see, like I said, particularly when we look at our pre-leasing activity, we're continuing to see those new lease rates accelerate. If you look at kind of where we are December through to April, we were almost negative 9% on new leases in December, and then up to negative 4.6% in April and saw a continued steady acceleration. I would expect that to continue into Q2, and typically Q3 continues to accelerate a little from there, obviously dependent on how the economic environment plays out. From what we're seeing right now, we feel pretty good where we are.

Operator (participant)

Our next question comes from the line of Nick Yulico with Scotiabank. Please go ahead.

Daniel Tricarico (Associate Director and Research Analyst)

Hey, good morning. It's Dan Tricarico. I'm with Nick. Maybe to follow up on Eric's question on maybe the confidence level of the blends, how should we think about the compared related to concessions and the burn-off impact as we get into the second and third quarters?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

I mean, certainly all the when you hear us quote lease-over-lease rates, that is net of concessions and includes us sort of spreading those concessions out. There is nothing specifically there. I would say, whether you want to call it easier comps or however you want to think about that, that is playing a part in this. We saw a struggle with new lease rates for most of 2024 and continued into the lower rates continuing into early 2025. There is combined the normal seasonality, combined declining supply pressure, and frankly, a little bit easier comps that helps give us confidence in where we're sitting today.

Daniel Tricarico (Associate Director and Research Analyst)

Great. Thanks. Then follow up on development. Is there potential to extend lease-up expectations at any of your other development properties? How should we think about the supply impact potentially being stretched out into 2026 in some of these markets that are still working through that pipeline?

Andrew Schaeffer (SVP and Treasurer)

I mean, I think in terms of this is Brad. In terms of development in particular, I mean, we feel good about the dates that we have in terms of lease-up performance in our packet. I mean, for us, one of the important things is we want to be able to protect the revenue performance of those properties and the rent performance of those properties. Given certainly our focus there, we're able to be a little bit more patient on the lease-up performance. In our packet, we have a couple of our lease-ups that have leased up a little bit slower than what we expected. The good news is the rents that we're getting from those properties continue to outperform our expectations. The yield expectations, again, outperform what our expectations are.

We continue to believe that the lease-up focus that we have will continue to perform in line with our expectations, and they're outperforming on the rent side. We feel really good about the lease-ups that we have at this point.

Operator (participant)

Our next question comes from the line of Cooper Clark with Wells Fargo. Please go ahead.

Cooper Clark (Equity Reserch Analyst)

Hi, thanks for taking the question. Could you talk about the cost side of development and how much is more or less locked in when you begin construction? If you could touch on the same thing for the redevelopment pipeline as well.

Brad Hill (CEO and President)

Yeah, this is Brad. I'll hit on development. Tim can talk about redevelopment. Normally, when we could it depends on if the development is an in-house development versus a pre-purchase development. In our pre-purchase pipeline, our development partner is giving us a construction cost guarantee. Effectively, the costs are locked in when we go to agreement. We should not face any pressure associated with those pre-purchase developments that we have ongoing. For our in-house development, normally those are, call it, 95% or so locked in. When we go under construction, the buyout from the GCs are normally done pretty quickly from when we start construction on the project. Those are generally locked in as well. We are not seeing any impact to construction costs for in-place developments to date.

For new developments that we're looking at, we're really not seeing any impact to date of potential impacts from tariffs or the immigration changes and the impact that could have on the labor side. In fact, what we're hearing from some of our contractors is given the reduction in the new starts and the supply pipeline that we're getting better pricing at the moment from many of our GCs and development partners, margins are tightening up a bit, and they're getting a little bit hungrier for new starts. We are seeing that at the moment on the new development side. Tim?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah, and I'll touch on the redevelopment. No pressure we're seeing so far, and I don't really expect any this year on that component. For one, appliances make up about 25% of our cost in terms of our overall redevelopment, and we have locked-in pricing on those through about this time next year. We have several sources and availability on countertops and other things. We pretty much source. We know how many units we're going to do, and we have a plan for those units and have a lot of that already here in place, if you will. If tariff concerns or others play on for a while, it could start to impact us late this year into 2026, but not seeing any pressure right now.

Cooper Clark (Equity Reserch Analyst)

Great. Thanks. If you could also just touch on urban versus suburban performance in some of your key markets and if it's fair to say that there's more upside to urban here over the next few years as supply normalizes, just given the higher density.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah. I mean, to answer the second part of your question, I think there's probably a little more upside potential on the more urban assets, primarily because they've tended to get more of the supply over these last couple of years. I think as that supply dies down, it probably helps out that group in general a little more. We've seen in our portfolio, we've seen the performance between urban and suburban pretty much converge. There's very minor differences now in what we're seeing with occupancy or pricing. The suburban had been outperforming probably for the last couple of years relatively significantly, and that gap has narrowed as supply pressure has started to wane a little bit. It's obviously market by market. Atlanta's one where we're still seeing better performance outside the perimeter, if you will, as compared to inside or Midtown bucket areas.

Andrew Schaeffer (SVP and Treasurer)

Generally, we're seeing that performance start to converge.

Operator (participant)

Our next question comes from the line of Jana Gallen with Bank of America. Please go ahead.

Jana Gallen (Analyst)

Thank you. Good morning. Maybe if you could talk a little bit more about that improvement that you're seeing in Atlanta. From the market data, it's still pretty weak, but that's very encouraging that your portfolio is seeing a turnaround.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah. I would say Atlanta, it's certainly on a relative basis. I'm not touting it as one of our top markets right now, certainly in terms of performance, but relative to where it was for most of 2024, it is starting to show some improvement. Our new lease pricing in Atlanta is the best it's been since going back to mid to early 2023. We've seen a little bit of occupancy recovery as well. We're about 120 basis points or so better in terms of occupancy than we were this time last year. It's certainly a relative story compared to if you look at it compared to the broader portfolio, it still lags our portfolio a little bit, but it's much improved from where it was this time last year.

Operator (participant)

Thank you. Our next question comes from the line of Adam Kramer with Morgan Stanley. Please go ahead.

Adam Kramer (Vice President and Equity Research Analyst)

Hey, thanks for the time, guys. Just wondering about the kind of level of concessions in your markets today, maybe just high level. How does that compare to whether it's early in the year when seasonally slower period or even a year ago, maybe? Just again, level of concessions today maybe versus a year ago.

Andrew Schaeffer (SVP and Treasurer)

Yeah. We've seen concessions broadly be relatively consistent the last couple of quarters and probably down a little bit from where it was this time last year. I would say the portfolio broadly or markets broadly anywhere from a half month to a month is pretty consistent. There are pockets, obviously, where it's a little bit higher. There's lease-ups probably more in that month and a half to two-month range. Broadly, we're seeing kind of half a month to a month be pretty consistent in most markets. It's a little bit lower from where it was this time last year, pretty consistent with where it was in Q4 of 2024.

Adam Kramer (Vice President and Equity Research Analyst)

Great. Just on kind of capital allocation and cost of capital here, obviously the stock's done a little bit better than some of the peers year to date. Just wondering how you kind of view your equity cost of capital, your debt cost of capital, I guess even disposition cost of capital. When it comes to kind of funding these developments, funding other sources or other uses rather, how do you kind of assess both the cost of capital and the capital allocation priorities here?

Brad Hill (CEO and President)

Yeah, this is Brad, Adam. I think given where we are in terms as Clay mentioned and given where our current leverage is at four times, I mean, we view our kind of incremental dollar at this point. The best place to pull that from is generally through debt. Really at this point, given that leverage level, we could grow our debt by $1 billion-$1.5 billion or so and still be okay within the ranges of kind of where we think our credit metrics need to be. We think that that's the best use of our capital at this point. You'll see us continue to fund through debt, anything incremental. Certainly as we continue to sell properties this year, as we did in the first quarter, we'll continue to sell some properties later this year.

Andrew Schaeffer (SVP and Treasurer)

That'll also be a source of capital for our external growth uses as well. That's where it'll come from.

Operator (participant)

Our next question comes from the line of Michael Goldsmith with UBS. Please go ahead.

Michael Goldsmith (Analyst)

Good morning. Thanks a lot for taking my questions. New lease growth was down in December by 9%. You have seen some sequential improvement in April to down 4.6%. I believe last quarter you spoke to new lease growth hitting positive at some point this year. Are you still on track to achieve this based on what you have seen so far this year, or has the environment changed to the point where maybe that is not as likely this year? Thanks.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

I'd say we still have an expectation that we could see it go slightly positive, call it mid-third quarter or so. We don't expect it to get significantly positive. We have just slightly positive and then starting to trend back down as we get into Q4. There is probably a little more uncertainty right now just given what's going on in the economy. Generally, the trends we're seeing would support that, and that's what we're expecting as of right now.

Michael Goldsmith (Analyst)

Got it. As a follow-up, you sold out of the Columbia, South Carolina market. Are there other markets that you can sell out of where you maybe do not have sufficient scale to kind of really do what you are looking to do? Are there other markets you could look to sell out of? If you reallocate those proceeds into markets where you do have scale, how much benefit can that have on expenses over time, closing down markets where you do not have scale and reinvesting it where you can?

Brad Hill (CEO and President)

Yeah, this is Brad. I mean, certainly we'll look to continue to drive efficiencies through our portfolio. I do think one way to do that is for us to continue to sell some of these markets where we may have one or two assets. We still have a few of those. We've got one in Panama City. We've got one in Gulfport or Gulf Shores. We've got two in Las Vegas. In markets where we only have a couple of assets, certainly by selling those, we can reallocate the time and energies specifically of our regional folks to other properties to drive efficiencies throughout the portfolio. We'll continue to evaluate that.

Every fourth quarter, we go through an evaluation process to look at properties that we have in our portfolio and begin to look at those and prioritize what our disposition needs are for the following year. That will continue to be a focus of ours, along with looking at properties where perhaps the growth rate is not what we desire from our portfolio or the CapEx needs are growing, and it's just not a fit for our portfolio anymore. That is a very thorough process that we go through every year.

Operator (participant)

Our next question comes from the line of Julian Blouin with Goldman Sachs. Please go ahead.

Julien Blouin (Analyst)

Thank you for taking my question. Your markets have tended to be relatively resilient during past recessions, but do you worry a recession this time around would potentially be different just given the amount of supply you're still dealing with? Vacancy is still pretty elevated. Pricing power as a starting point is weaker. Do you think maybe performance this time would be worse than in the past?

Brad Hill (CEO and President)

This is Brad. As we look at certainly the demand fundamentals in our region of the country, no. I mean, we would not think that if there were a slowdown in the economy that we would expect any type of different performance in our region of the country than we have experienced historically. Certainly, as you mentioned, if you go back to the three previous downturns that we have seen, whether it is the 2002 or 2003 tech bubble, the 2009 GFC, or 2020 COVID, the performance of our portfolio significantly exceeded what we saw out of our peers. We have every reason to believe that that continues.

Andrew Schaeffer (SVP and Treasurer)

I would say certainly when the economy slows, we have historically seen our high-growth markets hold up better than the national norms as the broad diversification of industries and employers, coupled with more affordable employment costs as compared particularly to other regions of the country, have tended to drive that resiliency you just talked about within our markets. I think for us specifically, our unique diversification by market and sub-market, our product types, our price point, and then the diversification between large and mid-tier markets has continued to provide steadier performance for us. We think that is a component that will certainly continue. The other thing that we've seen in the Sunbelt, particularly over the last five years or so, is just the Sunbelt job machine continues to outperform. We've seen numerous knowledge-based employment growth come to our region of the country.

What we also have seen that I think is very important is the local and municipal governments are stronger than they are in other regions of the country. I think that really supports the pro-business view of this region of the country. It also supports the ability to add subsidies and incentives to really support the job locations and relocations that we've seen. No, we think especially as potential onshoring continues and picks up speed, the Sunbelt's in a pretty good position to take advantage of that. The other point I would just make relative to demand, certainly job growth is a component of that. As I just laid out, we think that continues to perform quite well in our region of the country going forward.

There are other demand drivers in our region of the country that continue to perform pretty well. Migration trends continue to be positive. The single-family availability and affordability is a challenge in our region of the country. That's also a challenge that I think is a newer challenge to our region of the country. It's perhaps always existed in some of the coastal markets, but it's newer in our region of the country. I do think that's a phenomenon that's going to drive retention rates up over the long term. Today, our turnover is 41.5%. Two years ago, it was 46%. That 5% reduction is a long-term trend that I think will stay low. There are significant implications for that. Long term, we think that the Sunbelt continues to perform quite well regardless of the economic view that's out there.

We think that our portfolio, in particular for the diversification reasons I mentioned, continues to perform well.

Julien Blumen (Analyst)

Great. Thank you. That's all for me.

Operator (participant)

Our next question comes from the line of John Kim with BMO Capital Markets. Please go ahead.

John Kim (Senior Analyst)

Good morning. Based on your second quarter and your full-year guidance, you'll need to achieve about a 2.5-3% increase in SSO per share compared to what you'll achieve in the first half of the year. I'm wondering how much of that is driven by seasonality and rents, and what are some of the other factors that will contribute to rental earnings?

Andrew Schaeffer (SVP and Treasurer)

Yeah. John, I think in addition to just the seasonality factors that you pointed out, the other piece of that that should continue to benefit FFO over the course of the remainder of the year is our lease-up properties as they continue to gain some velocity and go back to the points that Brad and Tim mentioned earlier, the pricing power that those properties have continued to show are ahead of our performance. We think that there is both a pricing and also an NOI yield basis. All of that, we think, is really what is going to drive that continued acceleration in performance over the course of the year.

John Kim (Senior Analyst)

You reiterated your outlook to roll out Wi-Fi in 23 for projects this year. Can you just remind us what contribution that is to your same-store revenue for this year? What is the timing of the completion or the rollout of the remainder of your portfolio?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

John, this is Tim. It's not a huge component this year. We have the four that we completed late last year and then the 2023 that, as I mentioned, are under construction now. We're down at about between $1 million and $1.5 million combined between those 27 projects, I guess it is, for 2025, just based on the rollout and how those roll out over lease expirations and the timing of the construction. Those 27 in general, we expect would contribute close to $6 million once everything gets fully rolled out. We're doing the 2023 this year. We'll want to make sure that sort of goes as planned, and we would potentially look to accelerate that even more so in 2026.

It is going to be a multi-year project over the next four or five years would be my guess as we continue to accelerate it and ultimately look to roll it out to most, if not all, of the portfolio.

Operator (participant)

Our next question comes from the line of Wes Golladay with Baird. Please go ahead.

Wes Golladay (Senior Research Analyst)

Hey, good morning, everyone. Can you talk about maybe your markets that are surprising to the upside and to the downside versus initial expectations?

Andrew Schaeffer (SVP and Treasurer)

Sure, Wes. This is Tim. The good ones, and I mentioned several of them in the prepared comments, not any huge surprises there. The ones that have been pretty strong for the last 12 months or so continue to be strong. Tampa's one that I highlighted, I believe, in the last quarter that we could see some upside, and that has started to play out. That would be one that I would point to that's on the upcycle. I mentioned Atlanta being an improvement relative to where that one had been. Jacksonville is another where it's still a laggard in general, but it's showing some pretty good acceleration and some resilience despite some heavy supply there. That is another one that was in one of our bottom three or four markets last year that I would expect to show a little bit more strength there.

That'd probably be one that I would put in the little bit of the surprise category. I really mentioned the ones that are still laggards, Austin, Phoenix, and Nashville are the three that I would point out there that just continue to work through quite a bit of supply.

Wes Golladay (Senior Research Analyst)

Okay. For your insurance renewal that is coming up, any change in thought there?

Andrew Schaeffer (SVP and Treasurer)

Yeah. We're still kind of in the process of working through that. Still a little early on. We'll have more to say about it whenever we release second quarter earnings. Just the initial conversations we've had have been positive, and so we'll have more to come.

Operator (participant)

Our next question comes from the line of Haendel St. Juste with Mizuho. Please go ahead.

Haendel St.Juste (Managing Director and Equity Research Analyst)

Good morning. This is Mike On with Handel. My question is, can you just provide a little bit more detail on the cadence you're expecting in both your blended spreads throughout the remaining three quarters of the year and your same-store rev?

Andrew Schaeffer (SVP and Treasurer)

As far as the blended trend, I mean, pretty consistent with what we talked about last quarter and pretty consistent with what I would say is more normal seasonality. We continue to expect our blended for Q1 was negative 0.5%. We continue to expect to see that push forward in both Q2 and Q3 and then moderate a little bit in Q4. We talked about the trajectory of new lease pricing and what we're seeing there. Encouragingly, on the renewals, May and June look really strong and sending out July right now, which we expect to be strong as well. We think the renewals will continue to have a bigger part of that mix. We've continued to see the renewal accept rates be stronger than what they were last year. Obviously, the rates we're getting there.

I think the mix between new lease and renewal is probably a little heavier weighted towards renewal than what we had in right at the beginning of the year. But generally, the trends and trajectory is about the same as what we started the year with.

Haendel St.Juste (Managing Director and Equity Research Analyst)

Thank you. That's helpful. Just one follow-up. Can you give any color on potential impact of immigration policy and demand trends for the Sunbelt markets that are lagging in the second half of this year?

Andrew Schaeffer (SVP and Treasurer)

Certainly, we're keeping an eye on the immigration trends. We're frankly not seeing much of an impact on that at this point from an operating perspective. We're not seeing much of an impact either on the construction side, which is, I think, where perhaps we could see we are likely to see some impact there if it manifests itself. At this point, we're not seeing much of an impact on immigration, the immigration policy changes at this point.

Operator (participant)

Our next question comes from the line of Alexander Goldfarb with Piper Sandler. Please go ahead.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Hey, good morning down there. First question is, when do you think that you guys would have a sense of how much of the competitive supply potentially slips into next year? Just curious.

Andrew Schaeffer (SVP and Treasurer)

I mean, nothing that we're seeing right now. There's been a little bit of slowdown in some lease-ups in some parts and sub-markets. But broadly, the supply picture looks pretty much like it has or like we've thought for the last few quarters where we're continuing to see it slowly moderate. I mean, we're still obviously at a higher-than-normal delivery cadence. Even though 2025 is lower than 2024, it's still what I would call above normal. 2026, we expect that to drop pretty significantly to where it's below a long-term average. As we've said kind of all along, I think where you really start to see that strength is late 2025, which will be offset by some normal seasonality that tends to wane. 2026 is when we really expect to see that acceleration.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

The second question is, on the leasing front, you guys have spoken about good visibility out 60 days. Do you see leasing as a good, healthy leading indicator, or is your view still apartments are lagging because if there is any job disruption or any tightening of the belt, it takes a while before the renter ends up downsizing or doing something different?

Andrew Schaeffer (SVP and Treasurer)

I think leasing, one, is a better leading indicator than it has been. I think we just have more transparency and more data and more information that we look at and different cuts of it to where it talked about pre-leasing earlier. We can see what's out there. The new lease rates in particular are that nice edge. That's somebody who's out in the market. They're looking for somewhere to live. They can shop all of the comps. I think it's a leading indicator. As much or more so, things like collections and move-outs and reasons for move-outs, those can be pretty good indicators as well.

Typically, you're going to start to see, along with new lease pricing, you're going to see people having to move out perhaps before their lease term or early terms with job loss or other things, or people not able to pay their rents and see delinquency uptick. Between the three of those, those are relatively good leading indicators, but not seeing any concerns there certainly on any of those right now.

Operator (participant)

Our next question comes from the line of Rob Stevenson with Janney Montgomery Scott. Please go ahead.

Rob Stevenson (Managing Director and Senior Research Analyst)

Brad, are you seeing any meaningful changes in the acquisition volumes in your markets and pricing expectations given this market turmoil, rates, and the potential that not all the tax cuts get passed in reconciliation?

Andrew Schaeffer (SVP and Treasurer)

We've certainly seen a reduction in terms of the number of deals here in, call it, April. I mean, first quarter is hard to gauge because a lot of the deals that closed in first quarter went under contract in 2024. We did see a slight uptick in the number of deals that we tracked in the first quarter. I'd say the volume of deals on the market here in April has dropped significantly in our market. I would say the volume definitely has dropped. The pricing that we've seen, I would say, has been still pretty consistent, sub 5% cap rates in general on everything that we've seen trade. There's certainly uncertainty out there that's impacting volume, but at this point, it doesn't seem to be impacting price.

Rob Stevenson (Managing Director and Senior Research Analyst)

All right. That's helpful. Tim, what's the cadence of the comps on a year-over-year basis throughout the year? Do you get consistently easier comps on a same-store revenue basis as we move throughout the year, with the fourth quarter being the easiest? Are there pockets between now and end of the year where you had particular strength in 2024 and that the comps aren't as easy?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Certainly, as we get late in the year and the fourth quarter, those will be quote the easiest comps in terms of that's when our new lease pricing troughed. I will say even during Q2 and Q3 of last year, while that was our biggest strength on the new lease rates on a relative basis, we saw our best rates, if you will, that part of 2024. We did not see quite the acceleration in those quarters that we typically do last year. In other words, the new lease rates did not accelerate as much in Q2 and Q3 last year as they typically do. While the new lease rates were the absolute highest the middle of last year, I think they still present some decent comps in terms of where they are compared to normal.

There is a bit of comp benefit the rest of the year, but certainly the most as you get late in the year. And then you factor in, obviously, we expect to continue to see less impact from supply. So that can help to accelerate some of that in the late in 2025.

Rob Stevenson (Managing Director and Senior Research Analyst)

Okay. Thanks, guys.

Operator (participant)

Our next question comes from the line of Ann Chan with Green Street. Please go ahead.

Ann Chan (Senior Associate)

Hey, good morning. Just jumping back to the topic of lease-ups, or more specifically, can you provide some context on what issues are causing occupancy to decline at the MAA Vale lease-up in Raleigh?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah, this is Tim. I can hit on that one. I mean, certainly, we saw some slowdown just seasonally in terms of traffic and leads and the qualified traffic. There were some flooding issues there, frankly, that slowed down the lease-up as well that we have now fixed. What we've seen over the last 45 days or so is that the leads and leasing both have picked up pretty significantly. Lead volume is up 50% or so in April as compared to March. We've done 39 net leases over the last 45 days, which is about double where we were trending before. We're trending back towards 70% now. There's a little bit of uniqueness there. Combine that with the time of the year and seasonality, but I feel like it's back on track at this point.

Ann Chan (Senior Associate)

Thank you. Just a second question from me. Are there any expense line items that you expect may deviate meaningfully from your initial guidance as the year progresses?

Clay Holder (EVP and CFO)

Hey, Ann. This is Clay. No, I would say at this point in the year, we're still pretty lined up with what the expectations we had presented just a couple of months ago. No real changes across the board on really any of those line items.

Operator (participant)

Our next question comes from the line of Buck Horne with Raymond James. Please go ahead.

Buck Horne (Managing Director of Equity Reseach)

Hey, thanks. Good morning. I wonder if you could speak a little bit about the trend you saw in terms of move-outs to buy or purchase a single-family home. I think you mentioned that that hit a new record low in the quarter. Just wondering what kind of anecdotal feedback you're hearing from customers that either in their net decision process and really just wondering how sustainable you think those trends are going forward.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah, this is Tim. We did see a continued significant drop in move-outs to buy a home. It represented about 12% of our move-outs in Q1, which was down 16% or so from where it was this time last year. I think it's a combination of two things. The biggest one, obviously, is just the affordability issue of single-family home pricing. Even as rents have moderated, call it, over the last 12 to 18 months, single-family home prices have continued to go up. Mortgage rates, obviously, are pretty elevated as well. Even if you were to put a 20% down payment right now to buy a house, on average, in one of our markets it would be about 40-50% higher costs before you even consider things like tax and insurance. I think affordability continues to be the biggest thing.

I think with some of the increased uncertainty in the economy, people just tend to stay put where they are. I think that's helping to benefit our turnover and people just a little more hesitant to make big life decisions like that. Thirdly, I think there is a transition over the last few years just in terms of how many people want to buy a house or want the flexibility or the lifestyle that the apartments can provide. While I don't think it stays this low forever, I don't think it gets back to the levels that we saw in past times either.

Buck Horne (Managing Director of Equity Reseach)

Gotcha. Gotcha. You were not seeing a concurrent uptick in move-outs to rent a single-family house necessarily, were you?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

No. No. It was down a little bit as well, frankly.

Buck Horne (Managing Director of Equity Reseach)

Gotcha. Just one last quick one. Just thinking about Houston and maybe some of the Texas markets, given where energy prices are in this particular cycle, are you watching the energy sector in particular as it relates to kind of your Texas markets? How do you think job growth trends might play out in this particular cycle there?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

I mean, nothing that we are necessarily watching more than we ever do. I mean, Houston, for one, has diversified their economy quite a bit. It is still heavily energy-dependent, but has a lot of other industries that have popped up. It has continued to be a strong market for us. Supply there has been really low, about between that and D.C., our lowest supply markets, and continues to have good household formation, job growth, and population growth. No concerns there. I think all the Texas markets will continue to be huge job generators and job machines, regardless of what is going on in the energy sector.

Operator (participant)

Our next question comes from the line of Alex Kim with Zelman & Associates. Please go ahead.

Alex Kim (Senior Associate of Equity Research)

Hey. Thanks for taking my question. Just one for me here. The spread between renewals and new move-in rent growth tightened slightly from the end of last year, this quarter, and it still remains historically wide. I was just curious how renewal rent growth has remained as resilient despite the gap and what this dynamic means for your higher expectation for renewals as a percentage of signed leases.

Tim Argo (EVP of Chief Strategy and Analysis Officer)

As you said, the gap did narrow a little bit in Q1 and even more so in April. Even though on a percentage basis, it is a pretty wide gap, on a dollar basis for April, for example, it is about $130 or so gap between the absolute rents on new leases versus renewals. It is not as huge as you may think. We have had this larger than normal, if you will, gap now for six or seven quarters and continue to get in that 4.25%-4.5% range on renewals. If I look out for what we are achieving for both May and June renewals, we are in the 4.7%-4.8% range on those and continuing to get even higher accept rates than we did last year, which was record level accept rates.

I think you got to remember the process we go through and the customer service that's involved and everything that goes into renewal. It's a lot more than just what is that absolute rate maybe compared to street rents. There's a lot of other factors and costs that play into it. We do a very detailed analysis of what we are going to send out as our renewal rates. Brad mentioned in his comments having the highest Google scores of anybody in the sector. That certainly plays into it. Nothing right now we can look out even into July and still seeing strong renewal accept rates and rental rates.

Alex Kim (Senior Associate of Equity Research)

Got it. That's helpful. I guess just a quick follow-up here then. Any markets in particular where that spread is tighter than the average or even just wider than average just to provide some basis?

Andrew Schaeffer (SVP and Treasurer)

It varies a little bit here and there, but not significantly. I mean, with what we've seen in the cadence of supply being pretty consistent across most markets, the seasonality or the gaps and all that have been relatively consistent across most of our markets.

Operator (participant)

Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please go ahead.

Brad Heffern (Managing Director and Senior Research Analyst)

Yeah. Thanks. Hi, everybody. For new lease spreads, I think you said last quarter that the full-year average would be around minus 1.5. You now have a third of the year locked in. I think the math on that would be like high minus fives, and that might imply something close to zero for the rest of the year. I guess are you still confident in the minus 1.5, or is the higher renewal acceptance rate offsetting maybe a lower new lease target?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah. We tweaked our forecast a little bit in terms of that mix. I mean, generally, as we said, with our guidance, maintaining the guidance where we were, our overall expectation of blended pricing is pretty much in the same spot it was before. We did dial in a little bit heavier mix, a little bit more on the renewal side. A little bit, we tweaked our new lease expectations a little bit, not significantly, but down a little bit, just really based on the uncertainty and some of the economics and seeing how that'll play out over the next few months. Broadly, it hasn't changed a lot from where we were coming out of Q4.

Brad Heffern (Managing Director and Senior Research Analyst)

Okay. Got it. On D.C., obviously, a pretty small exposure for you guys, but I'm hoping that leads to maybe an unbiased opinion. Are you seeing anything there from D.C.? What do you expect to happen as the layoffs and buyouts sort of accumulate?

Tim Argo (EVP of Chief Strategy and Analysis Officer)

Yeah. Right now, we're not seeing anything. If I look at April and some of the more leading indicators in our D.C. market, the move-outs are down in April, even where they were this time last year. We're well over 96% occupancy in that market. To your point, it's not a huge market for us. We have one property in the district, but it's a JV property that we only own 35%. We have four Northern Virginia, two that are a little more close in, Pentagon City and Tysons Corner, and then two that are a little further out. We have four or five properties in Fredericksburg, which Fredericksburg is our best market across the portfolio right now.

Andrew Schaeffer (SVP and Treasurer)

I think Tysons, for example, any weakness we're seeing in terms of job loss is being offset by return to work and some tech jobs that are in that market that are having to return to work as well. Then we're seeing nothing really change with some of the ones that are a little further out. Long way of saying no impact as of right now on anything we're looking at and continues to be a strong, yet not a super high concentration market for us.

Operator (participant)

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

Brad Hill (CEO and President)

All right. No other comments for us. If you guys have any questions, feel free to reach out. We look forward to seeing you guys in about a month.

Operator (participant)

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