UDR - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 delivered solid operating performance: GAAP diluted EPS of $0.23 and FFOA per diluted share of $0.61; same‑store revenue/NOI growth of 2.6%/2.8% with occupancy 97.2%.
• Against S&P Global consensus, UDR posted a beat on GAAP EPS ($0.23 vs $0.14*) and a slight beat on revenue ($421.9M vs $421.0M*); management reaffirmed full‑year 2025 ranges and established Q2 2025 guidance.
• Regional strength was led by the East Coast (D.C. best market), with West Coast momentum (San Francisco, Seattle) offsetting Sunbelt supply headwinds; blended lease rates improved sequentially into April, setting up H1 to finish at the high end of plan.
• Balance sheet remains liquid (> $1B liquidity) with net debt/EBITDAre at 5.7x; transactional activity included two asset sales ($211.5M), a Riverside development start (~6% yield), and steps to consolidate the 1300 Fairmount position in Philadelphia.
• Potential stock catalysts: confirmation of sequential NOI/lease‑rate acceleration into Q2/Q3, possible guidance update in July, and clarity on Fairmount consolidation and DPE cash pay trajectory.

What Went Well and What Went Wrong

• What Went Well

  • “2025 is off to a very solid start” with same‑store revenue/NOI growth above initial expectations; momentum in occupancy, lower concessions, improving pricing power.
  • Customer Experience initiatives drove a 300 bps reduction in annualized turnover YoY; renewal growth mid‑4% and sequential improvement in new lease rates supported blended rate gains.
  • East and West Coasts outperformed: D.C. blends ~4% in April; Seattle/SF blends 4–4.5%; West Coast annual supply low (1–1.5% of stock).

• What Went Wrong

  • Same‑store NOI contracted sequentially (-0.9%) on seasonal expense timing; G&A was elevated in Q1 (timing).
  • Sunbelt continued to lag due to elevated supply; Austin remains a laggard and likely needs 2025–2026 to normalize.
  • 1300 Fairmount remained on nonaccrual with plans to consolidate; near‑term drag from funding cost and submarket challenges (mid‑80s occupancy).

Transcript

Operator (participant)

As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Vice President of Investor Relations, Trent Trujillo. Thank you. Mr. Trujillo, you may begin.

Trent Trujillo (VP of Investor Relations)

Thank you, and welcome to UDR's Quarterly Financial Results Conference Call. Our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website, ir.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Statements made during this call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors is detailed in our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

When we get to the question-and-answer portion, we ask that you be respectful of everyone's time and limit your questions to one plus a follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today. I will now turn the call over to UDR's Chairman and CEO, Tom Toomey.

Tom Toomey (Chairman and CEO)

Thank you, Trent, and welcome to UDR's First Quarter 2025 Conference Call. Presenting on the call with me today are President, Chief Financial Officer, and Chief Investment Officer Joe Fisher, and Chief Operating Officer Mike Lacy. Senior Officers Andrew Cantor and Chris Van Ens will also be available during the Q&A portion of the call. 2025 is off to a very solid start. Our first quarter's same-store revenue, expense, and NOI growth exceeded initial expectations due to a healthy fundamental backdrop combined with operating strategies we employ to create value. These trends have led to positive momentum across most key operating metrics, including lower resident turnover, higher occupancy, lower concessions, and improving pricing power. We feel good about 2025 thus far, but we have only completed the first four months of the year.

Accordingly, as is customary for UDR at this time of year, we have reaffirmed our full-year 2025 guidance and will reassess as we progress through peak leasing season. Irrespective of how the macroeconomic and geopolitical environment may unfold, we remain strategically focused on three drivers of growth that differentiate us from peers and that we control. First, innovation. We are not only leaders in idea generation, but more importantly, in execution. This is evident in the results from our value-add initiatives, which have consistently grown in high single-digit range and added 50 or more basis points annually to our same-store NOI growth. We continue to innovate and expect to drive incremental growth for many years to come. Mike will provide additional details in his remarks in this area. Second, we listen to our associates and residents and use that feedback to influence our operating tactics and long-term strategy.

One excellent example of this is UDR's Customer Experience Project. We have an ability to orchestrate an enhanced UDR living experience through more than one million daily touchpoints with our existing and prospective residents, which helps improve the retention and lower costs to drive margin expansion and cash flow growth. To enable this, we have equipped our associates with actionable data and more responsibilities, which led to higher levels of engagement on their part, more career growth opportunities as well, and higher associate retention. This, in part, led to UDR being recognized by USA Today as a 2025 top workplace, which builds on UDR's rich history as a leader in corporate stewardship. Third, we continue to execute on various forms of capital deployment to drive future accretion, including development, debt and preferred equity deployment, and joint venture acquisitions.

This activity is supported by our investment-grade balance sheet with substantial liquidity that can fully fund our capital needs in 2025 and beyond. This positions us well to take advantage of growth opportunities as they arise, which Joe will expand upon in his remarks. There are also a variety of positive short-term and long-term fundamental drivers of our industry. These include, first, demand is strong, and the chronic undersupply of housing in the United States suggests this will persist. Based upon third-party data, nearly 140,000 apartment homes were absorbed during the first quarter, which is a three-decade high for the first three months of the year. Demand is outpacing supply across many markets, which bodes well for occupancy and pricing into the future. Second, the pace of new supply is slowing.

2024 multifamily completions marked a 50-year high, but starts continue to decline due to the cost and availability of capital. A future supply pipeline that is below historical averages bodes well for rent growth in the years ahead. Renting an apartment is, on average, 60% more affordable than owning a single-family home in the markets where we operate. The best level of relative affordability in two decades. From a big-picture perspective, volatility, macro uncertainty, and their effects on interest rates and the economy and the employment market are all out of our control. However, I and the team remain optimistic about the long-term growth prospects for the multifamily industry and UDR's unique competitive advantages that should enhance that growth. We will continue to focus on what we do control, including our dynamic and innovative culture, to create value for UDR's residents and stakeholders.

Finally, I'd like to take a moment to recognize Jim Klingbill, who has decided not to seek reelection to our board. Jim has been a valued voice in the boardroom that has brought a wealth of knowledge and experience. He has helped drive UDR's transformation into a highly respected blue-chip company that we are today. Jim, I thank you for all your contributions to UDR and the real estate industry, and you leave the board in good hands. With that, I'll turn the call over to Mike.

Mike Lacy (COO)

Thanks, Tom. Today, I'll cover the following topics: our first quarter same-store results, early second quarter 2025 trends, including an update on our various innovation initiatives and how this factors into our full-year 2025 same-store growth guidance, and expectations for operating trends across our regions. To begin, first quarter year-over-year same-store revenue and NOI growth of 2.6% and 2.8%, respectively, were better than expected and driven by, first, 0.9% blended lease rate growth, which was driven by renewal rate growth of 4.5% and new lease rate growth of approximately negative 3%. Our blends accelerated sequentially by 140 basis points, which is twice as much as our historical sequential acceleration between the fourth quarter and first quarter. Second, 32% annualized resident turnover was more than 300 basis points below the prior year period and nearly 700 basis points better than our first quarter average over the last 10 years.

This has enabled us to maintain healthy renewal rate pricing and led to more favorable blended lease rate growth. Third, occupancy averaged 97.2%, which is higher than our historical first quarter average and 40 basis points higher sequentially versus the fourth quarter. This strategic decision to build occupancy during the seasonally slower leasing period helped to drive revenue and NOI outperformance to start the year and positions us well as we enter our traditional leasing season. Fourth, our other income growth from rentable items was 10%, driven by our continued innovation along with the delivery of value-add services to our residents. Shifting to expenses, year-over-year same-store expense growth of only 2.3% in the first quarter came in better than expectations. These positive results were driven by favorable real estate taxes, insurance savings, and constrained repair and maintenance expenses due to our improved resident retention.

Moving on, core operating trends have remained resilient in April, and key metrics have largely followed typical seasonality. First, blended lease rate growth has continued to improve sequentially. If this trend holds through June, our first half 2025 blends would be towards the high end of the 1.4%-1.8% range I spoke about on our last earnings call in February. We feel confident in the trajectory of rental rate growth as renewal rate growth has held steady in the mid-4% range, and new lease rate growth has improved sequentially since the start of the year. Second, occupancy remains strong and in the high 96% range today. Traffic is similar to historical norms at this time of year, and our 30-day availability is approximately 4%, which supports our expectation of occupancy remaining in the mid-to-high 96% range for the rest of 2025.

Third, resident retention continues to compare well against historical norms, and April represents the 24th consecutive month our year-over-year turnover has improved. Our full-year guidance assumes resident turnover will be 100 basis points below that of 2024. Year to date, we have exceeded this expectation by 200 basis points, which translates to approximately $7 million of higher cash flow if we maintain this outperformance for the rest of the year. Continued enhancements in how we measure, map, and orchestrate the customer experience have increased the probability of renewal, and we expect this to drive further year-over-year improvement in turnover and margin expansion in years ahead. Fourth, other income from rentable items, which constitutes roughly 11% of our total revenue, continues to grow in the high single-digit to low double-digit range.

We remain pleased with the trajectory of our initiatives and property enhancements, such as the further rollout of building Wi-Fi, further penetration of package lockers, and less fraud loss, which collectively contribute to incremental same-store revenue growth and improve the customer experience. When considering these factors, our same-store results are trending above the midpoint of our guidance expectations. However, we are cognizant of potential volatility that could affect the macroeconomic environment and pricing of our apartment homes. Accordingly, we will remain focused on executing our strategy and will provide an update to our same-store growth guidance during our next earnings call after we have additional visibility on demand trends. Turning to regional results, our coastal markets are exceeding our expectations, while our Sunbelt markets have performed largely in line. More specifically, the East Coast, which comprises approximately 40% of our NOI, was our strongest region in the first quarter.

Washington, D.C., was our best-performing market overall, and Boston results were above our expectations. First-quarter weighted average occupancy for the East Coast was an astonishing 97.5%. Blended lease rate growth was 2.5%, and our year-over-year same-store revenue growth was approximately 4.5%, which is slightly above the high end of our full-year expectation for the region. With healthy demand and relatively low approximate new supply completions, we expect this regional strength to continue. The West Coast, which comprises approximately 35% of our NOI, has performed better than expected year to date. First-quarter weighted average occupancy for the West Coast was 97.2%. Blended lease rate growth led all regions at nearly 3%, and year-over-year same-store revenue growth was nearly 3%, which is close to the high end of our full-year expectations for the region.

We continue to see positive momentum across Seattle and the San Francisco Bay Area due to return-to-office mandates, increased office leasing activity, and quality-of-life improvements. Annual new supply completions remain low at 1%-1.5% of existing stock on average across our West Coast markets, which we expect will lead to a favorable supply-demand dynamic in the coming quarters. Lastly, our Sunbelt markets, which comprise roughly 25% of our NOI, continue to lag our coastal markets on an absolute basis due to elevated levels of new supply. Positively, this supply has been met with demand and strong absorption. First-quarter weighted average occupancy for the Sunbelt was 97.1%. Blended lease rate growth was negative 2.5%, and year-over-year same-store revenue growth was slightly positive, which is in line with our original expectations for the region. Among our Sunbelt markets, Tampa and Orlando are performing the best.

To conclude, we delivered strong first quarter 2025 results. Same-store revenue, expense, and NOI growth were all better than expectations and near the high end of their respective full-year guidance ranges. The near-term operating environment presents some uncertainties, but we have a track record of successfully navigating through bouts of volatility. Our diversified portfolio, dedicated associates, and continued innovation enable us to tactically adjust our operating strategy to maximize revenue and NOI growth while we further expand our operating margin over time. I thank our teams for their ability to deliver operating excellence and improve how the industry conducts business. I will now turn over the call to Joe.

Joe Fisher (President, CFO and CIO)

Thank you, Mike. The topics I will cover today include our first quarter results, a summary of recent transactions and capital markets activity, and a balance sheet and liquidity update. Our first quarter FFO as adjusted per share of $0.61 achieved the midpoint of our previously provided guidance and was supported by same-store growth that exceeded our expectations. The modest sequential FFOA per share decline occurred as expected and was driven by the following: a one-penny decrease from same-store NOI, primarily due to higher sequential expenses attributable to normal seasonal trends, a half-penny decrease from G&A, which is also due to seasonality and the timing of associate compensation increases, and a half-penny decrease from lowered debt and preferred equity investment balances and accruals. Looking ahead, our second quarter FFOA per share guidance range is $0.61-$0.63.

The $0.62 midpoint represents a one-penny or 1.5% sequential increase and is driven by same-store NOI growth and additional lease-up NOI from recently developed communities. Next, a transactions and capital markets update. First, during the quarter, we completed the previously announced sales of two apartment communities in the New York Metro area for aggregate gross proceeds of $211.5 million. Second, we commenced development of 3099 Iowa, a 300-home apartment community in Riverside, California, with an expected total development cost of approximately $134 million and an expected yield of 6%. We continue to evaluate additional development starts for late 2025 and early 2026. Third, we increased our investment in 1300 Fairmount, a 478-home apartment community in Philadelphia, by acquiring the senior loan from the lender for $114.5 million.

This action brings UDR's total investment in the property to $183.2 million, and by acquiring the senior loan, UDR has more control over the investment and the future performance of the community. Fourth, subsequent to quarter end, we fully funded a $13 million preferred equity investment at a 12% rate of return on a stabilized apartment community located in the San Francisco Metro area as part of a recapitalization. Positive property-level cash flow allows for approximately two-thirds of our contractual return to be paid current in cash. Finally, our investment-grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include: first, we have more than $1 billion of liquidity as of March 31; second, we have only $535 million, or 9% of total consolidated debt, and approximately 2.5% of enterprise value scheduled to mature through 2026, thereby reducing refinancing risk.

Our proactive approach to managing our balance sheet has resulted in the best three-year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multifamily peer group at 3.4%. Third, our leverage metrics remain strong. Debt to enterprise value was just 27% at quarter end, while net debt to EBITDA RE was 5.7 times. In all, our balance sheet and liquidity remain in excellent shape. We remain opportunistic in our capital deployment, and we continue to utilize a variety of capital allocation competitive advantages to drive long-term accretion. With that, I will open it up for Q&A. Operator.

Operator (participant)

Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Eric Wolf from Citibank. Please go ahead.

Nick Joseph (Analyst)

Thanks. It's Nick Joseph here with Eric. Just wondering if you can talk about your confidence in the ability to see rent trends pick up in the second half relative to the first half as implied with guidance, just given the macro uncertainty and what you're seeing or what we're seeing with the consumer.

Joe Fisher (President, CFO and CIO)

Yeah. Hey, Nick, maybe I'll kick it off. I guess I would start first with the macro environment in terms of some of the tailwinds that we've talked about in the past. As we've talked about, supply is down about 20% year over year from 2024 to 2025, and that really continues to decelerate from one Q all the way through four Qs. We continue to see pressure from that front continuing to decline. The concessionary environment remains stable. We're seeing good pricing power in terms of ability to push up rents. Still seeing good traffic. Everything we see today looks good. That forward trend with supply coming down looks good. You have the relative affordability component combined with still pretty strong demand out there in terms of still seeing job growth, still seeing wage growth.

I'd say the macro backdrop, while volatile and somewhat fluid, for what we can see today, we still think we have a good avenue towards that number on a go-forward basis. I think the other thing we've kind of talked about is if you looked at the blended lease rate growth to date, and Mike can kind of get into it, but relative to where we need to be for a full year, it implies only about 3% blended lease rate growth for the rest of this year relative to the mid-two's that we're putting up in April. We only need to see acceleration versus April of about 50 basis points or $12 per unit. If we don't see that, the downside risk is relatively minimal at roughly 20 basis points to same-store revenue on a full-year basis.

We feel pretty good about the risk related to the guidance as well.

Mike Lacy (COO)

Yeah. Maybe if I could just add a couple of points here, I think it's important to talk a little bit about what we're seeing in April. I'll tell you, the trends are strong across the board. I think our strategy to drive occupancy up during the shoulder quarters really set us up for leasing season, and you can see it playing out. I'd remind the audience that we're really focused on total revenue, not just the lens. We're looking at how we leverage our occupancy, how we're driving our other income initiatives, and in total, our revenue continues to look favorable against the group. A couple of things I'd point out in April. We just finished the month. Occupancy was nearly 97%, and our blends were in that mid-2% range.

We are on track to deliver what we expected during the first half of the year. To Joe's point, when we get into the back half, we typically have blends of around 4% just from historical trends. We are only saying 3% today. We still feel comfortable about what we have put out there in the back half of the year.

Nick Joseph (Analyst)

Thanks. That's very helpful. Just on the senior loan you bought on the Philadelphia asset, to the extent that you end up owning and consolidating that, what would the initial cap rate be, and then where do you think it could stabilize at?

Joe Fisher (President, CFO and CIO)

Yep. Fair question. Just a little recap there. I think everybody remembers back in fourth quarter, we took a reserve and moved our prep equity investment onto a non-accrual status. In Q1, as the senior loan went into default, we chose to purchase that senior loan for $114 million. We did not actually recognize any income related to that. We kept it on non-accrual status. We did have to have the drag, of course, from funding that investment. That held back our Q1 result a little bit. As we move into Q2, we expect that we're going to be able to consolidate that asset and take control of that investment and get our operational team in there. That's kind of the sequence of it.

When you look at the yield on our basis of roughly $183 million, on a forward basis, we're probably going to be about a 4%. Now, that factors in some upside from getting our operational team in there, continue to see occupancy move forward, which is kind of in the mid-85% today. We need to see occupancy pick up. It's a really challenged submarket, but we do think we'll be in mid-4% in year one, and then we'll have a path to get up to around 5% on our basis over the next couple of years as we get some ops initiatives in there and see that submarket stabilize.

Nick Joseph (Analyst)

Thank you.

Tom Toomey (Chairman and CEO)

Thank you. The next question comes from the line of Michael Goldsmith from UBS. Please go ahead.

Hi, this is Amy. I'm from Michael. I'm curious, as you roll out the bulk Wi-Fi, does that at all impact your ability to push on renewal rents? If a tenant is seeing a rent increase plus an add-on, are they more likely to try to negotiate? Maybe said another way, as we lap the bulk Wi-Fi rollout, could you see more pricing power on renewals?

Mike Lacy (COO)

Yeah. Maybe a couple of things just to set the stage with our Wi-Fi rollout, just to give you an idea of where we're at. We have rolled out about 30,000 homes at this point. We do have another 10,000 to go this year. I would tell you, we do monitor new lease growth, renewal growth, where we're at with occupancy. I would tell you that that 4.5% that we're achieving today is right in line with the peer average. We do not feel like we're giving up anything there. In fact, we're seeing more of an acceleration on our blends as we go into April today. The rollout's going well, and we do not believe that it's impacting our rents in any way.

Tom Toomey (Chairman and CEO)

Amy, this is to me. I might add a little bit. One, I mean, we all realize high-speed is, in essence, not an option anymore. It is a necessity. Second, given our bulk purchase of it, we have an expanded margin over the rest of the industry with respect to we own a little bit of the action of the company. We buy it in bulk and the markup. We have better margins on that aspect of it accordingly, and I think better service at it. Joe, you were going to add something.

Joe Fisher (President, CFO and CIO)

Yeah. I was just going to say, Amy, it's not all that different from a lot of our initiatives that we have out there in terms of we're trying to find win-wins for the customer and for ourselves. The win or the value proposition here for the customer on Wi-Fi is that it is fully set up day one. You're not having to call your cable company, your Wi-Fi company, have them put the equipment in and come get it installed. You also have building-wide or property-wide Wi-Fi. If you want to walk down to the pool, walk to the gym, walk to the business center, you're going to have it everywhere throughout the community, not just in your unit. From a price perspective, we do look at all the pricing options and competitor options, make sure we price commensurate with the market.

We're giving them better value, similar speed, similar price. Really good reception on that front. That's what we found we've been able to do in a lot of the other initiatives, whether it's parking or package lockers or many of the others that Mike's talked about in the past.

Got it. Thanks. Wish my building would do that. Just a quick one on the San Francisco recap. What got you comfortable with that deal, just given some of the trouble that we've seen with some of these other DPE deals?

Yeah. I think good question. Probably first stepping back and just thinking about a couple of those troubled investments that we had within the DPE portfolio. I think you really have to rewind back in the minute that many of these were done at. These were post-COVID type of investments that were done. It started when we were running into delays from a construction schedule perspective. You had material delays in a number of them that led to cost overruns generally. In addition, the ones we've really had the trouble with have been more urban-oriented. Some of these urban areas, as we've talked about in the past, just have not come back to the same degree that the rest of the portfolio has.

Whether that's a couple of the troubled assets we had in San Francisco or the one in Philadelphia that we've talked about, I think there's some issues that historically existed that no longer exist today as we think about the go-forward environment. As we looked at the San Francisco recap deal, you've seen us do more and more of these from an exposure standpoint or de-risking of the DPE portfolio perspective, trying to do more recaps on operating assets where you know the rents, you know the income statement, you know the markets, and know how it's going to perform. We've had less and less development exposure over time. This deal is another one of those recaps where we had a chance to come into an operating asset that last dollar LTV is kind of in the mid-70s, starting kind of in the low 60s.

From a cash pay perspective, about 70% of our income is actually being paid on a current basis. That helps de-risk the cash flow and the accrual as well. We feel really strongly about the investment that we made here.

Thank you.

Tom Toomey (Chairman and CEO)

Thank you. The next question comes from the line of Austin Washmith from Key Bank Capital Markets. Please go ahead.

Austin Washmith (Analyst)

Mike, just want to hit back on some of the acceleration and blends you've discussed and really which markets you're seeing the most acceleration month to month. Just curious if you've seen any of the markets, I guess, hit a speed bump as you get into April in some of the higher expiration months.

Mike Lacy (COO)

That's a great question, Austin. I know from what we're seeing today, it's almost across the board. We've seen a little bit of a pickup from what we saw in the first quarter. Again, we're around 0.9%, right around the mid-two today. I would tell you that the most acceleration I saw in the last probably 30, 45 days was probably in the Sunbelt just in terms of what we're seeing in Texas and Florida. I mean, we're starting from a really low, low point in Austin, but we did see an acceleration of about 500 basis points there. That gives us a little bit of comfort. In addition to that, I'll tell you, DC continues to do well. We get a lot of questions about that market. I think we're around 3.5% blends in one queue, and we're right around 4% during April.

That market's picked up. Austin continues to do well for us on the East Coast. That's a market we expected to be a little bit slower to start the year, just given a little bit more elevated supply. That one's actually held up really well too. I wanted to say San Francisco is around 4% blends, pretty consistent with what we've seen over the last 90 days. Seattle's taken off a little bit more, and that market's running around 4.5% blends compared to right around 2-2.5% in one queue. A little bit of strength in all of our regions today, and we feel good about the trajectory.

Austin Washmith (Analyst)

It seems pretty upbeat, but I guess when you look across the three primary regions, despite tracking ahead here to Q4, I mean, anything you're doing from an operating strategy perspective to maybe de-risk the back half of the year in any way you can?

Mike Lacy (COO)

A couple of things we're looking at. Obviously, we've already sent out renewals through, call it, June at this point. We're starting to price July and August. Our expectation is we're going to send out between 4.5-5%. If we have to negotiate a little bit more, we will. We do feel like we have some momentum on our side. I'm starting to see new lease growth get a little bit better. In fact, it was flat in April, which is a big difference from that negative 3% I talked about in one Q. That gives us a little bit of momentum, allows us to try to drive our renewals up.

You will continue to see us, and we talk about this every year, drive our occupancy down a little bit as we go into that high demand period during the second and third quarter. It allows us to push our rates a little bit more and start to set up the back half of this year. All in all, you will continue to see us drive our rents where we have the opportunities. It is not a blanket across the entire portfolio. Every market is a little bit different, but we are going to get a little bit more aggressive as it relates to pricing.

Very helpful. Thanks for the time.

Operator (participant)

Thank you. The next question comes from the line of Jamie Feldman from Wells Fargo. Please go ahead.

Cooper Clark (Analyst)

Hey, thank you for taking the question. This is Cooper Clark on for Jamie. Joe, just wondering if you could talk about the yields you see right now across development, wholly owned acquisitions, and JV acquisitions through your LaSalle JV and how the conversations are picking up with LaSalle, whether you're underwriting more deals versus this time last year.

Joe Fisher (President, CFO and CIO)

Yep. Yeah. Thanks for that. I'd say from the joint venture perspective, we are actually showing and underwriting significantly more deals with our partner there at LaSalle. I think we mentioned in the past, their capital partner had really been kind of on hold last year as they sat back and reassessed their overall global mandates, given their exposures and movements in the yen. We really got the green light early this year to start showing them deals and moving ahead. I do think that by the time we get on this call in July, we'll probably be able to talk about a deal that we've been underwriting and pursuing, and hopefully, we'll have it closed by then. I think there'll be more to talk about by the time we get out to July.

I think for cap rates broadly, you are still seeing quite a bit of price discovery. I mean, if you look at volumes closed just in the first quarter and even going here into April, we are only slightly below where we are at pre-COVID. While volumes are down materially from kind of the 2021, 2022, 2023 period, we are still seeing good price discovery. I'd say if you are kind of a main-in-main asset, newer vintage, good fundamental trends, you are pricing well into the fours, so kind of in that mid-fours type of range. If you are a little bit more off the beaten path, a little bit older quality, less of a fundamental story, maybe facing some near-term supply, you can price up into the fives. There is some dispersion in the cap rates that you are able to underwrite.

Obviously, the levered buyer has not been there as much, so some of those B-quality assets still aren't pricing as well as they were in the past. That gives you a range of the cap rates. If you think about the development side that you asked about, you're really still seeing the market try to underwrite up into the low to mid-sixes for new opportunities. I'd say as it relates to our development pipeline, we started a deal out in Riverside in first quarter. We're underwriting that to about a 6% yield. We are trying to do a couple of things with our land pipeline. One is go out there and get that activated. We do have a larger non-income-producing asset there with our land pipeline. We'd like to see that get activated.

When you look at the starts going forward, we do have a couple of others ready beyond the Riverside deal, one in Northern Virginia, one in Dallas that we think probably later this year, early next year, will be started. We are working on a lot within the pipeline, but we are not necessarily looking for new land acquisitions at this time.

Cooper Clark (Analyst)

Great. Thanks. I guess kind of just following up on that, in the past, you talked about being in more of a capital light mode with the development start this quarter, more to come, and then some of the LaSalle activity. Does this represent a shift into more of an opportunistic approach? Is the likely funding here just going to be through capital recycling and dispositions?

Joe Fisher (President, CFO and CIO)

Yep. I think I could probably repeat your question and give it as an answer. We are much more in the capital-balanced or opportunistic mode at this point in time. With DPE, continue to deploy there as we get payoffs over time, which we've had a number of payoffs in the last part of last year and trying to forecast out what we may get in the future. We will be recycling capital there. We think timing makes sense on the development side to activate that land. We continue to see supply come down this year, but also starts are down materially down into that kind of 250,000-300,000 units per year nationally. As we lease up into that environment here in a couple of years, we think development starts make sense today. On the JV side, I think we've been pretty open.

We do want to continue to grow that joint venture platform. We've got five deals under our belt with them. Hopefully, we'll have another one to speak to in the next 90 days and multiple thereafter. We are trying to be opportunistic, figure out where we can create value on the offensive side. On the sourcing side, it really is going to be disposition. Working that through our asset management committee and understanding which assets maybe are a little bit more full from a yield perspective, from a margin perspective, from an initiative perspective, and kind of been tapped out on that front. Maybe they have some capital issues that we do not feel comfortable addressing, or maybe we just do not like the market or micro-market or kind of asset location. We are trying to be pretty thoughtful on that front with recycling capital.

Operator (participant)

Thank you. The next question comes from the line of Yana Gallan from Bank of America. Please go ahead.

Yana Galan (Director)

Thank you. Hi, everyone. Question for Mike. Appreciate you running through the improving blends from first quarter to first quarter from fourth quarter by market. The only market, though, that's breaking the trend is the Southwest region. I was curious if you could kind of talk about expectations for Dallas and Austin and if you think this quarter could potentially be the trough for new leases.

Mike Lacy (COO)

Yeah. Similar to what we've talked about in the past, we believe that Florida is probably more of a trough, and they're actually starting to see more positive momentum. For me, if I had to rank them, it definitely would go Tampa first, seeing an inflection point, seeing positive blends in that market, followed by Orlando as a close second, seeing more momentum there. Could see positive new lease growth in that market sooner than, say, Texas or Nashville. Our expectation is Nashville, maybe end of the year, maybe beginning of next year, you start to see some positive momentum on blends, followed by Austin as probably the laggard of the group today. Just to remind the audience, that's only a 1.5% NOI market for us, so relatively small.

That market does have a lot of supply that it's going to have to work through. Our expectations are it's going to be the end of this year, into next year before we start to see that positive momentum, if you will.

Yana Galan (Director)

Thank you.

Operator (participant)

Thank you. The next question comes from the line of John Kim from BMO Capital Markets. Please go ahead.

John Kim (Managing Director)

Thank you. I also want to go back to the reiteration of your blended for the first half of the year, upper half of 1.4-1.8%. I guess with renewals remaining in the mid-fours, I think that implies back of the envelope, new lease growth of 1.5-2% positive in the second quarter, and that'd be a turnaround from what you've even achieved in April. I just wanted to make sure that math is correct. I don't have all the numbers behind me.

Mike Lacy (COO)

John, I mentioned in my prepared remarks, if we can capture this 2.5-ish that we're seeing in April through the rest of the second quarter, that puts us on the top end of that 1.4-1.8 that we said at the beginning of the year that we needed in the first half. We feel like we're right on track there. As it relates to the back half of the year, we do not expect to see much of a difference in the third quarter. It is just going to depend by market, by region. Again, as we started the year, we are right on track.

Joe Fisher (President, CFO and CIO)

Yeah. I was going to focus on the new lease growth rate, just turning positive in second quarter.

Mike Lacy (COO)

That's playing out as we expected to. Our expectations were that we'd be right around flat new lease growth as we turn the corner into leasing season. I'm happy to say that's exactly how it's playing out. Renewals, again, staying in that 4.5% range. We may start to move that and push that envelope a little bit as we go into 3Q. Right now, new lease growth feels good at that flat, and ideally, it'll continue to move up as we progress through the leasing season.

John Kim (Managing Director)

Okay. The value-add services on innovation, I think the last update was $15 million incremental this year. Are you still on track to deliver that, or could there be upside to that figure?

Joe Fisher (President, CFO and CIO)

Yeah. John, hey, it's Joe. We are still on track from an other-income perspective. Contribution coming from that, we continue to see high single digits, kind of double-digit type of growth on the other-income line item. Still seeing good success on that front. Mike and I went through some of the Wi-Fi earlier, still pushing parking, still pushing package lockers, and a lot of the other initiatives that we have going there. Obviously, on the customer experience side, which really hits all line items from top-line revenue occupancy to other income to turnover expense to capital, still seeing really good success there. I think everybody saw we were down about 300 basis points year over year on turnover. Having record-low turnover here to start the year, which is doing a little bit better than expected.

John Kim (Managing Director)

I'd say everything remains on track from an initiative perspective.

Great. Thank you.

Operator (participant)

Thank you. The next question comes from the line of Rich Anderson from Wedbush Securities. Please go ahead.

Rich Anderson (Managing Director and Senior Equity Research Analyst)

Hey, thanks. Good morning out there. On the topic of turnover, this has been a recurring theme for you and for others over the past several years of it declining. I'm wondering, besides the fact that you're awesome operators, blah, blah, blah, and encourage people to stay, what is happening outside of that that's encouraging turnover? It's 32% that you're reporting today, obviously a good number, but at what point does it become too low where you start to lose an opportunity to capture some rent upside? I'm curious where we might go from here from a turnover perspective. Is turnover zero the best? I don't know. You tell me.

Mike Lacy (COO)

Rich, that's a really good question, and feel free to jump in if you guys have anything. I think for us, the way we've looked at it, and we've really gone back, and I'd tell you from about 2012 to 2019, our average turnover was just over 50%. And so we've made a lot of progress on this initiative over the last few years. In fact, last year, we were around 43%. Expectations, as I mentioned earlier in the year, is we're trying to get another 1% better. We're on track to be about 3% better. I don't think I mentioned it, but in April, we were about 4% better on a year-over-year basis. Continues to look really good.

To your point, I think for us, it's more of a transformational shift away from that transactional focus, and we are more focused on that lifetime value of the resident. So understanding who's been with us the longest, who's paying more rent than others, what kind of interactions that we have with these individuals, and just trying to change that trajectory, if you will. The teams, I mean, at this point, they've got the tools, they've got the training, the resources, they know how to rectify these bad experiences, if you will, and it's leading to a positive impact across turnover, pricing, occupancy, other income, expenses, and ultimately our margins. We're leaning into it. It's playing out, and we're excited about what's to come.

I think for this year, we've mentioned it in the past, but we are looking to allocate more capital to try to solve those problems that we've identified that are more recurring and across properties, if you will. That's issues at move-in. It's callback tickets. It's backlog of issues across the property. We're solving those things, and we're seeing it play out in our numbers. In addition to that, I'm happy to say we're about halfway through rolling out Funnel, our new CRM. We've got half the markets done. We expect to be done by the end of May with that. We believe that that's going to make us more efficient as it relates to working with our residents as well. We think there's more to come here, and we're excited about what the future has in store.

Joe Fisher (President, CFO and CIO)

Rich, this is Toomey. A couple of points of emphasis, and I'll make sure to pass it on to the rest of the operating team that they're really good at blah, blah, blah, blah, blah. In all seriousness, you have to think about we set out to change how the industry does the business, and it shows up in a lot of different metrics. I know that people isolate on blends or they isolate on turnover. It really just comes down to total revenue performance. Okay? For us, you've heard us talk about a number of initiatives over the year from bad debt. We look like we've bent the curve there, and it's closing in back to pre-pandemic levels at 1%. That's a heck of a lot of work to ensure we get high-quality people in the door.

Mike talked about how we do tours differently, how we service differently, how we have fewer days available to rent. I mean, every day that we do not have someone renting an apartment, it has lost revenue to us. Keeping people in longer, we run at a higher occupancy. We have more revenue out of that apartment community home than anyone else. We are always still trying to find ways to do it. I think just focusing on the turnover, yes, it is historically low at 32%. We would still like to see it go down, but not at the sacrifice of total revenue. Yes, we do, in essence, move our pricing dynamically to ensure we are building a total revenue picture that is optimal. Sorry about that, Rich.

Rich Anderson (Managing Director and Senior Equity Research Analyst)

Don't mean to trivialize the extraordinary operating. I just wanted to get to my question.

Mike Lacy (COO)

It's inspirational for them.

Rich Anderson (Managing Director and Senior Equity Research Analyst)

The second question for me is, I did check your work, and you have a history or tradition of not adjusting guidance in the first quarter, at least of going back a few years. I am wondering, based on what you are seeing today, had it not been for Liberation Day and all the disruptions that potentially could come from it from a consumer or recession standpoint, were you toying with raising guidance this time if not for that noise, or were you never really there and the whole tariff issue really had no interplay into your decision to not raise guidance this time? Thanks.

Joe Fisher (President, CFO and CIO)

Rich, I'd say number one, precedent in our book has really never been to raise guidance after the first quarter, which I think is generally commensurate with what we see out of the sector. Number two, I'd say we really do focus in on it's how we finish, not how we start. While we are very, very excited about the start to the year, and I think all the commentary that you hear today, we are very excited. We are trending ahead. There's still a lot of unknowns. There's still a lot of work to do. We didn't really talk about it much. We're feeling really great about the start of the year, and I think we'll give you hopefully a really good update when we get out to July and two queue.

Rich Anderson (Managing Director and Senior Equity Research Analyst)

Okay. Good enough for me. Thanks, Joe. Thanks, everyone.

Joe Fisher (President, CFO and CIO)

Thank you.

Operator (participant)

Thank you. The next question comes from the line of Haendel St. Just from Mizuho. Please go ahead.

Haendel St. Just (Managing Director and Senior Equity Analyst)

Yes.

Joe Fisher (President, CFO and CIO)

Hey, Hanedel. There you go.

Haendel St. Just (Managing Director and Senior Equity Analyst)

Yeah. I'm here. You think I've done this before, right? First question I had for you was just on the overall mezz lending conversation, the environment. I'm curious kind of what level of inbound. I'm assuming there are more that you're seeing these days as some folks grapple with rates being a bit higher, maybe macro uncertainty. I guess I'm curious, overall, the level of inbound you're getting relative, is that increasing? Perhaps if your appetite could be changing, if that could be a source of capital deployment outside this year.

Andrew Cantor (Senior Officer)

Hey, Haendel. This is Andrew. Thanks for your question. What I would say is that the number of inbound development deals is definitely declining from where it was historically. There is by far less of those type of deals coming in. As Joe mentioned, those are not the deals we're focused on. On the other hand, deals where we can go in and recap operating assets, that is increasing from where it's been historically. I would not tell you it's at the same levels of incoming calls or incoming prospects that we've had historically. It's still below that historical average.

Haendel St. Just (Managing Director and Senior Equity Analyst)

Got it. Okay. And then just quickly, haven't heard any updates recently on the CFO search. Perhaps maybe an update there on that, if we can expect an announcement by mid-year, by the fall. Just curious on where things stand. Thanks.

Joe Fisher (President, CFO and CIO)

Haendel, we're not focused on a time frame. What I would update since the February call, we've had a very robust response. We have a very, very deep pool of candidates, and we're now starting the face-to-face interviews. I feel very optimistic about the position. Joe will feel relieved when we take one of the C-suites off of him. We feel really good about it. For us, it's finding the right fit for the team and the future and our strategy. I feel really good about the position.

Haendel St. Just (Managing Director and Senior Equity Analyst)

Thanks, guys.

Tom Toomey (Chairman and CEO)

Thank you. The next question comes from the line of Alexander Goldfarb from Piper Sandler. Please go ahead.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Hey. Good morning out there, and thank you. Two questions for you. First, Andrew, on the transaction market, I've heard different things. Some folks have said that deals have gone sort of quiet just because of the disruption. Others out there have said no, deals are still active as long as interest rates are low. Just sort of curious what you guys are seeing overall in the transaction market and how buyers and sellers look at the disruption versus the tenure that's still relatively attractive.

Andrew Cantor (Senior Officer)

Yeah. Hey, it's Andrew. As you said, there's different feedback in the market on that today, and I think it's very market-specific and also very asset-specific. Overall, I would say that most buyers who are buying today, so those who are executing, are focused more on '26 and '27 after the current wave of supply has been delivered, but looking at those operating fundamentals rather than the current interest rate volatility. I would say the other thing that we're hearing a lot about is basis, right? What is the basis I'm buying this asset at, and how does that compare to replacement cost? Those that believe in those two things, A, looking beyond the current interest rate, and B, looking at basis, those are the ones that are buying. Those people are still very active.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Okay. The second question is the Riverside development. I guess not since BRE was around do we hear much about Inland Empire. Just sort of curious your thoughts on executing a development out there versus investing that capital in an infill market or in a market that may have better cost dynamics. I understand that you've owned the land for a while. Presumably, you looked at trying to sell it. Maybe you did. Maybe you didn't. Just trying to understand putting money out in Riverside versus elsewhere.

Joe Fisher (President, CFO and CIO)

Yeah. Like you mentioned, we've been involved with this project. I think going back to 2019 is when we first started working with what was then our partner on the project that we bought out over time. We've had it for a while. We've been monitoring it. As we've come through kind of some of the disruption of the last couple of years, we've been a little bit more pencils down on development, haven't had much in the way of starts. As we went through all the available parcels that we have and continued to evaluate options on all of those, this was the first one that popped up that hit our yield thresholds and that we felt most confident in the ability to move forward near term. I think I mentioned earlier about a 6% return.

The ability to get that type of return, brand new asset, it's in a good market. It's in a good location between downtown Riverside and close to the campus there. We think we got a good location. It's going to be a good basis on that deal. We moved forward on that one. I think we'll have a couple of starts that we'll have later this year that we'll be able to move forward on.

Alexander Goldfarb (Managing Director and Senior Research Analyst)

Thank you.

Joe Fisher (President, CFO and CIO)

Thanks, guys.

Tom Toomey (Chairman and CEO)

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

Adam Kramer (VP and Equity Research)

Hey, guys. Thanks for the time. Just wanted to ask about Washington, D.C. fundamentals. It's an important market for you guys, like it is for some of the peers. I know kind of seems like everything is still kind of performing well there, but obviously headlines and news a little bit more negative. Just wondering what you're seeing kind of latest real-time on the ground there and maybe in particular on the return to office trends. What are you seeing there? If you could kind of describe what inning we may be in on the kind of return to office, tailwind for demand, I think that would be helpful too.

Mike Lacy (COO)

Sure. Adam, I'll kick it off. Maybe start with a few points here. DC is about 15% of our NOI, and we are 40% urban, 50% suburban. We had a great quarter. Team did a really good job. We had 4.9% revenue growth. Occupancy was 97.7%. I think I mentioned earlier, our blends were 3.5% during the quarter. In April, we actually increased that to about 4%. That looks good. Occupancy today is still above 97%. Feels pretty good on some of the main blocking and tackling stats, if you will. That being said, we do watch a lot of different leading indicators just to make sure that the market still feels healthy. Some of those include cancel denials, notices, skips, how our vacant days are trending, traffic, concessions.

I'd tell you for the most part, they still look really good from a year-over-year standpoint within that MSA, as well as how it compares to the rest of our portfolio. DC is one that's been strong to start the year, one that we're watching very closely. Again, we will pivot as necessary as we kind of go through the year, like we do with all of our properties and all of our markets. Right now, it feels good. In terms of innings and return to the office, we are seeing a little bit more of that. I think that's definitely helped us out to some degree to allow us to drive those blends of around 4% today, allowing us to keep our occupancy above 97%. Right now, concessions across that MSA are right around one to one and a half weeks.

The return to office is definitely helping out to help mitigate anything we're seeing on job loss, things of that nature. So right now, DC is still strong.

Joe Fisher (President, CFO and CIO)

I think maybe just two other stats that we were talking about previously was on that return to office piece, you are seeing ridership on public transit up double digits relative to where we were recently. You are seeing clearly that start to develop on the ground in terms of the actual metrics. The other thing that got everybody pretty worked up was jobless claims activity back in kind of February and March in DC. You have actually seen that come right back down to a pretty normalized level, i.e., a pre-COVID type of level. We are not seeing continued elevation in jobless claims activity here in the last 30-plus days. That wave is potentially behind us.

Adam Kramer (VP and Equity Research)

Great. Thanks for the time.

Operator (participant)

Thank you. The next question comes from the line of Julien Bluoin from Goldman Sachs. Please go ahead.

Julien Bluoin (VP)

Yeah. Thank you for taking my question. Just wondering what your latest thoughts are on the Boston market. Sounds like it's been one of your markets that have outperformed your initial expectations. I guess incrementally from here, how do you think about the risks from university and research funding freezes and cuts, the headlines that continue to be out there about biotech softness, just any details you can give us?

Mike Lacy (COO)

Sure. Good question. For us, I think it's always good to frame that market. This is a relatively large one for us. So 11.3% of our NOI, 30% urban, 70% suburban. I'll tell you, it has started better than we thought. The leading markets or submarkets in Boston today start with North Shore, followed by the South Shore, and then a little bit more weakness downtown. Our expectations, and you can see it in some of the supply numbers, the North Shore should start to see a little bit more supply as we maneuver through the year. While it started off very strong, we do expect that this one will slow down a little bit throughout the year. That being said, really happy with that 4.6% revenue growth we had in the first quarter. It feels good today.

Julien Bluoin (VP)

We're going to continue to lean in and drive our rents, ideally running that 97% range. Today, concessions are relatively flat to maybe half a week. Boston's good.

Joe Fisher (President, CFO and CIO)

I do think too, Julien, just as you look at all that biotech noise or life science noise, when you look at composition of employment within the MSA, it's only about 3% or 4% of total employment within the MSA. In addition, when you look at the supply side, while Boston's a little bit elevated this year, Boston is one of the better forward markets from a supply perspective when you look at permitting activity. We think we're going into a forward environment where you have less supply. You still have relative affordability very much in rentership favor. While there's a lot of noise and headlines around life science, it is a smaller component of a pretty diversified and high-income and high-educated job base there.

Julien Bluoin (VP)

Okay. Great. Thank you. Maybe from your vantage point, having a more even balance of coastal and Sunbelt exposure, if the macro were to deteriorate from here and we were to head into a downturn, I guess which of your regions between East Coast, West Coast, and Sunbelt would be most resilient this time around, you think?

Joe Fisher (President, CFO and CIO)

Yeah. I think it depends a little bit on the driver of that demand fallout. Where does that come from? Because we've seen the GFC, more of the finance-oriented as well as the mortgage-oriented industries take a hit, which had an impact on New York, of course, plus a lot of the Sunbelt markets in Southern California. We've seen the tech rec having a NorCal focus. I think it depends a little bit on where the demand destruction in that environment could come from. I think the good thing is as we go into a lower supply environment and lower affordability, you still have an outsized capture for rentership. If you look at historical volatility, our markets like DC, Boston, Richmond, Baltimore, Philly, traditionally less volatile markets.

Same as you get into the Sunbelt with kind of the Orlandos and Dallases being a little bit less volatile. I mean, you can look a little bit at that as a proxy. I think that's why we love our diversified portfolio. We're balanced no matter what the cause of that recession may be. I think we'll be relatively insulated versus peers.

Julien Bluoin (VP)

Okay. Great. Thank you.

Operator (participant)

Thank you. The next question comes from the line of Ann Chan from Green Street. Please go ahead.

Ann Chan (Research Analyst)

Hey. Thanks for your time. Just jumping back over to the first quarter results, can you discuss whether there were any unusual sequential drags from fee income or bad debt or other initiatives in the first quarter that should normalize later in the year?

Joe Fisher (President, CFO and CIO)

Really nothing from an operational perspective is a pretty clean quarter when it comes to same-store NOI. I think the two things that from an FFOA level held us back a little bit, one was just some timing on G&A, which we expect to normalize as we go through the rest of the year. We still feel good about the guidance level for G&A. It was just a little bit elevated for a couple of reasons there in the first quarter. The other piece mentioned earlier, the buyout of 1300 Fairmount Loan, that DPE senior loan that we purchased. We did not accrue during the quarter related to that, but we did have the funding cost related to the buyout. Those two things were somewhat timing-oriented that normalize going forward and help us on a sequential pickup FFOA-wise into 2Q and 3Q.

Ann Chan (Research Analyst)

Great. Thanks. On that Fairmount Loan, could you share where does the debt service coverage stand today for that investment as well as the total loan to value on the property?

Joe Fisher (President, CFO and CIO)

Yeah. Since we took a reserve back in fourth quarter, we've reserved down to $183 million, which is what we felt and third-party appraisers felt was the appropriate value for that asset at the time. That effectively took our position to 100% levered since we took a reserve. The debt service coverage is kind of irrelevant now because we have it on non-accrual status. What I can tell you is that if you look at a roughly 4% forward return on $183 million, yeah, you're looking at kind of $6 million-$7 million of forward NOI. More upside from there as we get it from kind of mid-80s occupied up into a higher number on the forward basis, plus get some initiatives in place.

I think that's more the number to focus on is the NOI contribution going forward, which would be roughly $1.5 million-$2 million a quarter.

Ann Chan (Research Analyst)

Got it. Thank you.

Operator (participant)

Thank you. The next question comes from the line of Alex Kim from Zelman & Associates. Please go ahead.

Alex Kim (Equity Research Senior Associate)

Hey, guys. Thanks for taking my question. A lot of good ground covered in this call, just wanted to go back to something that Ann mentioned on bad debt. Seems like it trended in line. You mentioned earlier in the call that it's trending towards that pre-COVID average still. Just curious on kind of the AI screening program for bad debt. Has that resulted in any incremental improvement that you've seen thus far? Anything, I guess, related to that program would be helpful.

Mike Lacy (COO)

Yeah. I'll take that. I think there's a few things there. It's not just the ID verification, but it's also proof of income that we've rolled out pretty much across the board at this point. We're seeing it help with our bad debt. Obviously, lower write-offs, but maybe a few other things I'd point to is when we think about the people coming through the door and we're looking at credit scores, co-signers, even the average deposits, we're seeing better results, if you will. As it relates to average deposits, our deposits are up 17% on those individuals that are coming through the door. If they become a riskier tenant, we do have more money in the bank. As far as co-signers, they're up around 1%. About 10% of our applications have a co-signer, and our credit scores are up 20 points.

We are right around 730 versus right around 710 previously. Overall, it is starting to pay dividends. Again, we have rolled it out across the portfolio, and we expect it to continue to work well for us as we maneuver through the leasing season, if you will.

Joe Fisher (President, CFO and CIO)

Alex, this is Joe. Just a little bit on the results from an AR and bad debt perspective in the quarter plus go forward potential. You will see on attachment three that we do have our net bad debt reserve continuing to decline. We are seeing a good trend on that front. We are seeing AR continue to come down. We are also seeing fewer of the large balance long-term delinquents. We are having more success trying to get individuals out a little bit sooner. We still have a lot of delays in terms of court processes and eviction timelines, but on the margin, getting a little bit better on that front. That trend to pre-COVID, we are right now plus or minus 100 basis points of net bad debt expense. Pre-COVID, it is probably 40 or 50 basis points.

We still think there's a huge opportunity here as we roll out some of these AI platforms from a screening perspective that Mike talked about. That incremental 50 basis points is worth plus or minus another $9 million on top line. All the other implications to expenses and turn cost, occupancy, etc., is another probably $9 million. Just to get back to pre-COVID, you still have another $15-$20 million of bottom-line cash flow opportunity. We are laser-focused on making sure we get those rollouts done, making sure we get the right residents into our communities.

Alex Kim (Equity Research Senior Associate)

Got it. That's helpful, right? Those kind of tangential effects are something that I feel like a lot of people are missing as well. Okay. No, that's all for me. Thanks for taking the time.

Joe Fisher (President, CFO and CIO)

Thank you.

Tom Toomey (Chairman and CEO)

Thank you.

Operator (participant)

Thank you.

Ladies and gentlemen, as there are no further questions, I will now hand the conference over to Tom Toomey, Chairman and CEO of UDR, for his closing comments. Please go ahead.

Tom Toomey (Chairman and CEO)

Thank you, Operator. Thank you for all of you for your time, interest, and support of UDR. We look forward to seeing you in many of the upcoming events. With that, take care.

Operator (participant)

Thank you. Ladies and gentlemen, the conference of UDR has now concluded. Thank you for your participation. You may now disconnect your line.