John Kim: Maybe a follow up to Austin on the new and renewal. It was a little bit surprising to see that new and renewal spread compressed during April and signing a 3.5% renewal would imply, I would think maybe minus 200 basis points or so on new leases. But I just wanted to ask how you view new leases trending during the year and what you’ve seen so far at leases signed?
Scott Schaeffer : Yes, I mean, I think, that’s a good question. I think as kind of Mike was kind of highlighting, we’re very focused on driving occupancy and prioritizing occupancy and depending on how that retention rate comes out, 55, maybe a little more, we’ll continue to moderate that. If that means that we’re able to kind of get a little more, uh, renewal growth and give us that pricing power to begin to push new leases, we’re certainly going to be doing that. But I think what we’ve kind of given in terms of guidance, in terms of midpoint, we’re still very comfortable with those midpoint guidance as we continue to operate in a very balanced fashion throughout the year.
John Kim: And I think you guys mentioned that you’re looking to get bad debt down to 1.5% by year end. I just wanted to clarify that 1.75% was still your guidance of the year.
Scott Schaeffer: Yes, the midpoint of our guidance has a 1.75% average throughout the year.
Operator: Our next question comes from the line of Wes Golladay from Baird.
Wes Golladay: Regarding the Nashville asset, would that be both the views of Music City and the Crockett? And if you were to acquire it, would you pay down the debt as well?
Scott Schaeffer: The deal that we’ve exercised, our writer, our first offer is the Crockett as part of the Asheville portfolio. We have not done the music city music two yet. And then our expectation would be that, again, given the proceeds from the sale of the Birmingham asset, there would be a little extra that we’d be able to pay down some debt.
Janice Richards : We have until October of this year to exercise, the option on news Music City. We’re just going to continue to monitor the property’s lease up performance and the market and we’ll make that decision when we have to.
Wes Golladay: And then regarding the value-add program, are there any particular quarters where the value-add new leases will be a bigger part of the program? Maybe, I know there’s seasonality on new leasing, but maybe a higher percentage of new leasing would be the first-generation leases in any particular quarter.
Scott Schaeffer : Mainly, second and third quarter, that’s where the vast majority of the volume that will renovate will happen. And specifically, between those two, the third quarter, July and August are very heavy months.
Scott Schaeffer : It tracks our lease expiration schedule and the lease expiration curve is heavier or higher, if you will in the second and third quarters.
Operator: Our next question comes from the line of John Pawlowski from Green Street.
John Pawlowski : I just have a few questions on the Atlanta market. The market saw a pretty large sequential decline in revenue this past quarter. Just curious, if you look at the full year of 2024, what range of revenue growth do you think is reasonable to underwrite in your Atlanta portfolio this year?
Janice Richards : We’ve seen some benefits in March and April, where we’re starting to see progress in the Atlanta market. Even with the softening, I think the implementation of the income as well as the ID verification will help us offset some of the fraud that we were absorbing in ‘23. And we’ll continue to see that benefit as it takes three to six months throughout the year. That will help us increase that NOI for ‘24.
John Pawlowski : You did about 50 basis points, year over year revenue growth in the quarter. What do you think is roughly reasonable this year in Atlanta?
Janice Richards : I think, based on new lease rent growth, we’ll still see some challenge. We’re going towards the flat and the upside of the new lease. And it’s really going to all be dependent upon that retention that we’re able to achieve in Atlanta on whether we’re going to have the pricing power as we see occupancy stabilize. I think we’ll come in line with guidance so that we presented holistically, and we’ll see how it goes.
John Pawlowski : Final question from me. Can you just give me a sense how bad debt in your Atlanta portfolio has trended in recent quarters? What is it running as a percentage of revenue and has it gotten worse or has it gotten better?
Scott Schaeffer : Last year, for all of 2023 bad debt in Atlanta, was about 5% of the Atlanta market revenue, and that is certainly trended better so far in the first quarter, we’re down to about 4% in the first quarter. And getting better as the eviction process is kind of accelerating as well as our other things, our ID verification, income verification tools are speeding up.
Operator: Our next question comes from the line of Barry Oxford from Colliers.
Barry Oxford : You mentioned the Nashville asset with the option as possible acquisitions, what else are you seeing in the acquisition market and are cap rates at a point where you guys feel comfortable transacting?
Scott Schaeffer : I’ll take the last part of your question first and succinctly, no. There still is a disconnect between public valuations and private market valuations. The cap rates, for example, in Birmingham at 5.2 that only — that would make no sense for us to buy an asset at a 5.2 cap rate with our current cost of capital. We’re constantly looking at the portfolio as a whole and where we want to position it, and we will continue to recycle some out of some assets in and into some newer ones. But that is then you’re matching the cost of capital on the buy and the sell. We’re looking to continue, as I said to manage the portfolio for the long term. But we’re not out there just seeking to acquire unless it’s part of the recycling strategy.
Barry Oxford : Perfect. Thanks. Then going to the different markets and absorption you feel like most of the markets should be firming up as net absorption happens on the deliveries. Are there any markets that you’re concerned about when it comes to net absorption and maybe free rent might start to seep into the market?
Janice Richards : This is Janice again. We’ve definitely seen some softening in the Raleigh, Charlottes and Charleston. Luckily for us, these are some of our smaller NOI markets, but definitely have seen an impact of the concessions on our assets in those markets based on the new supply that’s going to be delivered in ‘24 and ‘25, Raleigh seems to subside. Charlotte’s going to continue for a little bit, but we’ve been able to really maintain a good NOI there as well as Charleston. So we’ll be continuing to utilize those levers to make sure that we’re prioritizing occupancy and maximizing revenue we can.
Operator: Our next question comes from the line of Omotayo Okusanya from Deutsche Bank.
