But as Chris mentioned, as we’ve talked about, we do have a lot of expirations towards the second part of the year. And with the seasonality that we saw last year are still kind of waiting to see exactly what the shape of occupancy looks like for the year, but we’re in a great place right now.
Brad Heffern: Okay. And then I noticed in the release, there were some properties that were classified as newly constructed homes to be disposed. Presumably, you’re not trying to do for sale homebuilding. So I’m just curious what those are?
David Singelyn: Yes. I think we addressed this already, but it’s just an extension of what we do in our asset management function. No different than an existing home. We look at the markets and in all of our homes in each of the markets. It’s a very small number. I think it’s 20, we delivered about 10,000 homes. We are not changing course in any way. We are not building for sale. We are selling these like we do any disposition through our disposition program. So we’ll sell them on the MLS. So there’s no change – there’s nothing that’s changed from last quarter to this quarter.
Operator: Our next question is from Jesse Lederman with Zelman & Associates. Please proceed with your question.
Jesse Lederman: Nice quarter and thanks for taking my questions. First one is on the renewal side, renewal rent growth. I saw a little bit of a step lower in April still at a really healthy level. But just curious, did that have anything to do with increased pushback or negotiation from tenants on renewals? Is that something you may quantify? Or is there anything you could point to that drove that step – that step lower from a rent or health perspective or affordability perspective?
Bryan Smith: Thank you, Jesse. This is Bryan. No, that’s not the case at all. In fact, we talked on the last call about where we’re mailing April, and you can kind of carry that consistency forward into May and June. Healthy renewal rates around 5% into the time of the year where we see a peak in expirations, some of the seasonality that we saw from last year. We felt those were steady, consistent and appropriate increases. Our revenue management team has gotten very sophisticated and is managing the seasonality of return last year very well. In terms of pushback from the residents, no change, obviously, it’s playing out nicely with the strong occupancy that we’re seeing and the good retention into 2Q.
Jesse Lederman: Great. That’s great to hear. Last question, but with more homes unencumbered, would it be fair to expect an increase year-over-year in 2024 for disposed units and maybe even into 2025 as well?
Chris Lau: Good morning, Jesse, Chris here. Good question. It ties back to some of the aspects of the disposition program and strategy we’ve been talking about the last couple of quarters. Look, we think that we’ve got tremendous opportunity to really lean into the disposition program, which is exactly what we’ve been doing. We’ve been seeing great traction. As a reminder, this quarter, we sold 471 homes. And on a full year basis, we could see ourselves selling and recycling, call it $400 million to $500 million of capital on a full year basis. I think it’s really just a reflection of the fact that our country has a major lack of housing. Our disposition supply is moving really quickly. and we’re achieving sales prices that are at or near asking prices, right.
And so I think that there’s a great opportunity there. That’s a big part of the strategy to our thought process behind paying off the 2024-2 securitization in the first quarter that unencumbered about 4,500 units. And then as our second securitization maturing this year is paid off, that will unencumber another 4,000 to 4,500 as well. So both of those will unlock opportunities for further asset management review and potential disposition. But also as we think about the timing on that, we should keep in mind that that’s not going to an immediately – being immediate overnight disposition opportunity. The way that we are exiting through these homes, is via the MLS, which means you need to have vacant units. Keep in mind, 96% plus of our homes are not vacant.
We need to let leases roll, tenants move out, and then that gives us the opportunity to work those homes through our disposition program.
Operator: Our next question comes from Michael Goldsmith with UBS. Please proceed with your question.
Michael Goldsmith: Good afternoon. Thanks for the opportunity for my questions. It seems like demand is really good right now, but wondering if there’s any indications of increasing price sensitivity or indications that you won’t be able to keep pushing rates at similar levels to what you did in the first quarter? Thanks.
Bryan Smith: Michael, this is Bryan. I’m sorry. I had a hard time. We might have a bad connection.
David Singelyn: Yes, you’re coming in very muted, and we could not understand the question. Can you repeat it, please?
Michael Goldsmith: Yes, absolutely. It seems that demand is very good, but wondering if there’s any indications of increasing price sensitivity or indications you will be able to keep pushing rate at similar levels to what you did in the first quarter?
Bryan Smith: Thank you, Michael. I got it this time. No, demand has been fantastic. As I said, it kind of peaked or started to peak – accelerate as we expected in the first quarter. It continues to be very strong into Q2. Retention is good, the feedback from our residents on renewal offers is strong, really no change from our expectations and where we ended Q1. Everything is pointing in the right direction, and we really like what we’re seeing from the demand side.
David Singelyn: Yes, Michael, it’s Dave. Let me just add a couple of items that will support that. I mean, we are today, in a country that lacks adequate housing. And the demand for our housing is significantly greater than what we can provide to residence. So we are seeing many, many qualified applications for every available house. With that said, there is – there are limits on rate increases. The other thing to keep in mind, that also gives you comfort of the longevity of it is that we are in markets throughout the country where we see population in employment growth greater than the national average. So not only do we have a housing shortage today in the markets that we’re in, that shortage is building.
Michael Goldsmith: Thank you very much for that. And my follow-up question is the turnover has been trending upwards modestly. Is this still part of the post-COVID normalization? And how might a pickup in home sales impact the portfolio? Thank you.
Bryan Smith: Yes. I think it’s just a natural course of events with some of the seasonality that we saw continuing, we’re posting really nice renewal rate growth. The pickup in the trend of increased move-outs, I don’t see it as a permanent thing. We’re looking strong into Q2. There’s nothing there that is any cause for alarm.
Operator: Our next question comes from Anne Chang [ph] with Green Street. Please proceed with your questions.
Unidentified Analyst: Hey good afternoon. Just a question on how bad debt as a percent of revenues has trended in recent quarters in Atlanta. And are you anticipating pressure on rents or occupancy in that market this year as other SFR and apartment operators work through elevated levels of eviction?
Bryan Smith: Yes. Hi Anne [ph]. This is Bryan. Atlanta is a key market for us, and as we’ve talked about in prior calls, it’s one that we’re really following closely from a delinquency resolution perspective. It’s one that we’ve had some delays both in the court systems and municipal level with this resolution. It’s important the – as a result of those delays and those slowdowns, we have seen elevated bad debt relative to the rest of the portfolio. But we think that’s going to be temporary in nature. And once those delays get worked through the system, we expect it to fall back in line with the rest of the markets.
Unidentified Analyst: Great. Thanks so much for that. And a follow-up question on, if any markets have seen a deterioration in bad debt in the recent months?
Bryan Smith: No, I think, the further – or back to Chris’ earlier remarks, we had some really fantastic collection efforts in March and some of the markets that were not affected by these municipal slowdowns that I’m referencing. So nothing negative on the bad debt side other than kind of continued things that we saw last year and some of the ones that are a little slower than historical averages.
Operator: Our next question is from Tayo Okusanya with Deutsche Bank. Please proceed with your question.
Tayo Okusanya: Yes. Good afternoon. Congrats on not [ph] paying down the securitization. I’m curious if we look out 12 months from now, could you give us a better picture of what your capital stack would likely look like?
Chris Lau: Sure. Great question, Tayo. Chris here. Look, the best way to think about it is we have one more securitization maturity this year. That technically matures in the fourth quarter. General game plan like we talked about last quarter is that we would see that being refinanced out into the unsecured bond market. Keep in mind that depending on interest rate and capital markets environment, we have the ability where we could refinance and warehouse that via combination of retained cash flow disposition proceeds, and then capacity comfortably off of our credit facility. And then we have two more securitizations that are technically 30-year maturities that have anticipated repayment date opportunities in 2025. If they’re not repaid, they’ll reprice to market pricing, but we’re able to repay those next year with the general game plan, again, like we’ve been talking about to get those refinanced into the unsecured bond market, which would move the balance sheet to a 100% unencumbered balance sheet by the end of 2025.
Tayo Okusanya: Got you. That’s helpful. And then from an external growth perspective, I mean, I get everything you’re talking about on the MLS side. I know in the past, you’ve always asked you guys, if you would be interested in doing things with developers? And I’m just kind of thinking if your thoughts around any of that has changed? And also how you also kind of feel about third-party asset management?
David Singelyn: Yes. Tayo, it’s Dave. Let me take the first being the third-party developers. You may recall going back a number of years ago that we have been historically active in using third-party developers. That’s how we started our development program working into the program that we have today. What we see today is two things. And the way we look at development and growth programs overall, is, first, our development program provides us assets and new homes that are better located and better built than we can get from national homebuilders. We are buying land that is contiguous to national homebuilders, but it’s the national homebuilder’s lots that they are using for retail sale. So it gives us just a better product, and the yields are better but we’re not paying any development fees.
We have the economies today because of the size of our program. We’re in the top 40 developers in the United States. So we’re getting the efficiencies and the economies of scale that national homebuilders get. So we’re not paying a development profit. Therefore, the investment side is much less for the same product that we would be able to buy from the national homebuilders. We don’t – we continue, and let me say it this way. We continue to look at the national homebuilders. They provide additional incremental product to us when the time is right. We can be patient and disciplined in acquiring assets. I previously indicated that – during the first quarter, we actually looked at 35,000 homes. That’s what we received from all the national homebuilders from Lennars and the D.R. Horton, Pulte’s and all of the others.
15,000 of those were in our markets. About half of those, we’ve actually seen before on tapes. So they’re kind of reiterated 7,500, 8,000 were new offerings to us. We made these bids on them, but we have to make bids to get to the yields that we are looking at being in the mid- to high 5s of a 15-plus or minus percent discount to what they’re asking. At asking price, they’re in the upper 4s, some maybe 5 or low 5s, but generally in the upper 4s. So today, we are not acquiring many homes from the national builders. I think there’s a couple of small ones that we were able to put under contract, in prior quarters that did close this quarter that met our requirements. But it’s a very, very material number that we’re acquiring. I think his last question, if I recall correctly, Tayo, was regarding third-party management.
