Operator: Your next question comes from the line of Nick Yulico with Scotiabank. Please go ahead.
Dan Tricarico : It’s Daniel Tricarico for Nick. Maybe for Brad, can you expand on the confidence in the acquisition opportunity that you highlighted in your prepared remarks? And also, what is the initial and stabilized yield on the Raleigh lease-up deal?
Brad Hill : Yes. So, the Raleigh lease-up deal is a 6% NOI yield is what we’re expecting out of that. And I’m sorry, I missed the very first part of your question.
Dan Tricarico: Just a general commentary you had in the prepared remarks on the confidence in the acquisition opportunity set.
Brad Hill : Yes. I mean I think if you look at where we sit today, as we’ve said over the last few quarters, the transaction market has been quiet for a couple of years, but the supply is up. So, we just feel like the need to transact continues to build while we’re not seeing transactions I think the difficulty has been the volatility on interest rates has really slowed the market down from transactions occurring. But I’ll tell you, just looking at our underwriting deals that we’ve reviewed, the volume is up. There’s more coming out. There’s more in the market right now. I think we — first quarter, what we underwrote was double what it was in fourth quarter. It’s still not to where it was a couple of years ago. So, we do believe that, that volume just continues to grow from where we sit today.
And I would say the other thing that gives us confidence really is just our history in the Sunbelt. Eric mentioned we’ve been focused exclusively on this region for 30 years, and we have a reputation of performance in our region of the country, whether it’s on the operating side or transaction side. So, we get a lot of looks and opportunities that perhaps others do not get. The Raleigh opportunity specifically was an off-market opportunity that we got, and I think we’ll have other opportunities like that. Our relationships are pretty strong and deep in this region of the country, especially with the merchant developers who are the largest builders in this region. If you look at what we purchased over the last 10 years, almost $2 billion, over 80% of that was from merchant developers.
So, we have a very good relationship with all of those folks. And we think that will lead to additional opportunities as we go through the year.
Dan Tricarico: Great. Thanks for that. And then just going back to the revenue outlook, the job growth numbers you talked about an initial guidance obviously seem pretty conservative now four months into the year, but no change to the revenue components in guidance. How should we be interpreting that?
Tim Argo : I think really just interpreting to the fact that we have the heavier leasing season ahead of us. Like I said, the first quarter leasing is about 19% of our leases. So, we’ll do 50% over the next four months. That’s really when driving — it’s just seeing how it plays out over the next few months, but certainly encourage where the demand side is.
Operator: Our next question will come from the line of Haendel St. Juste with Mizuho. Please go ahead.
Haendel St. Juste : Good morning. So, I’m encouraged to hear that your development pipeline is leasing up better than expected and concessions are stabilizing. But my question is, one, I guess, more so on the private market. Are you tracking how the private market to supply is getting leased up their absorption? I’m thinking back to last summer when the private guys blink and they dropped pricing late in the summer to achieve some target goals and end up obviously impacting demand and pricing on your end. So, I guess I’m curious if you’re seeing anything on the data or behavior that can give you any insight into how their progress is coming along or if we could be facing the same risk later this summer?
Brad Hill : This is Brad, and I’ll start, Tim can add to it. We do have a little bit of insight in that just via a couple of avenues. One, the comp properties all of our properties. We monitor specifically how our comps are performing. And then also, as I mentioned earlier, we just have relationships with all the developers in the market. And I would say just in general, from the information that we have, we’re seeing a more measured approach to concession usage this time this year than we did in the third, fourth quarter of last year. And we’re not seeing as much pressure from the developers at this point in terms of pushing to get ahead of the supply wave. We’re in the supply wave now. So now they’re starting to look at potentially monetizing and transacting their properties and leaning too heavily into concessions at this point.
is going to severely impact their valuation. So, they’re being a bit more measured at this time of the year than they were last year from what we can see at this point.
Tim Argo : Yes. And I’ll add to that. I mean, we do track properties in our markets that are in lease-up and how quickly they’re leasing up and that sort of thing. And right now, that would suggest any concerns from that point. I mean, certainly, as we get later in this year and you get to the fourth quarter, things can change quickly based on what they’re doing, but we’re not seeing it right now, but that is part of why we certainly dial in, particularly on the new lease side that we think it will moderate back down as you get into the fourth quarter. And even though we think supply will be less than it is today, it probably doesn’t manifest itself in terms of seeing that in the numbers probably until you get into 2025.
Haendel St. Juste: Got it. And can you remind us, you mentioned the number of good markets that are hitting peak supply this quarter. Which markets are still left to hit peak supply amongst your larger markets?
Tim Argo : Yes. I mean it’s pretty consistent, to be honest, where again, we kind of look back to when construction starts and do a lot of looks at different markets of how long it takes to that peak pressure to hit. But — and most of them are in sort of that Q2 time frame. I would say Atlanta is probably one, that’s maybe a little bit behind that curve. Charlotte is one that’s probably a little bit behind that curve. And then I would think of a market like Phoenix and we’re landing in Tampa probably a little bit ahead of that curve. But at a high level, most are within that range and certainly within a quarter, give or take, of that same range.
Haendel St. Juste: Great. My second question is just — I’m sorry if you provided this, but what’s the indicative pricing today for your June debt maturity? Curious what kind of rates you’re seeing in the market right now, what we should assume?
Clay Holder : Haendel, this is Clay. Right now, we’re seeing anywhere between 5%, 6% and 5%, 7% as we look to that maturity.
Operator: Your next question will come from the line of Adam Kramer with Morgan Stanley. Please go ahead.
Adam Kramer : Just wondering where you’ve gone out for May, June and maybe even July at this point for your renewals?
Tim Argo : Yes, for the next couple of months, and we’re just wrapping up July now, but for the next couple of months, we’re in the 4.6%, 4.7%, 4.8% range.
Adam Kramer : Got it. That’s helpful. And then just on the development starts, Look, I really appreciate the disclosure and color on kind of the couple of starts that you had in the last quarter and beginning of second quarter. And look, I think given where your balance sheet is and given I think what you’ve described as a really compelling opportunity to deliver into much less supply in ’26, ’27, ’28, what would prevent you or what would encourage you kind of drive you to do more developments today, again, given where the balance sheet is, I would think you have the capacity to start a bunch more? So maybe just walk us kind of the puts and the takes? And maybe just at a higher conceptual level, the thought process around whether to do more development, start more now to deliver into that kind of undersupply period in ’26, ’27 and ’28.
Brad Hill : Adam, this is Brad. Certainly, we have been building development as a capability and a tool for us to lean into over the last couple of years. And as I mentioned in my comments, we have a pipeline of projects that we could start and really deliver value over the next couple of years. Really what’s preventing us from doing that more broadly, has just been hitting the returns that we need on our developments. As I mentioned, the two that we’re starting in the second quarter we’re able to get some construction cost reductions out of those to get the yields to where we think, call it that 100 basis point to 150 basis point spread to cap rates puts us in that 6% to 6.5% range. And the two that we’re starting are in that 6.5% range.
So, we feel really good about those developments where they’re located. The markets, the ability to layer our platform onto those when they deliver and drive additional efficiencies long term. But we expect, as I mentioned, we’ve started — we’ll start two here in the second quarter, another one to two by the end of this year. And then we have another three that we have approvals in place and ready to go, if we’re able to get construction costs down far enough to make the numbers work at those hurdles that I mentioned. But aside from those, again, we are continuing to evaluate the land market. We’re continuing to evaluate our prepurchase opportunities. There could be opportunities that emerge in that area where a merchant developer that we have a relationship with perhaps has an equity partner that backs out or can’t raise debt or something along those lines that provides us another opportunity to lean into that area.
So, development is an area that we continue to focus on and believe strongly in terms of creating long-term value through that avenue. So, to the extent that we continue to get the returns that make sense, we’ll continue to execute in that area.
Eric Bolton : Adam, this is Eric. Just to add on to what Brad is saying. We spend a lot of time thinking about just how much development risk that we want to put on the platform. And one of the things that we centered around is the idea that we’d like to keep our exposure in forward funding obligations, if you will, no more than around sort of 5% of enterprise values, which based on sort of where pricing is today for us, that would put it at around $1 billion. Also recognizing that we’ve got a lot more of our development increasingly has been through this repurchase program where we are effectively partnering with merchant developers that we know quite well throughout the region, and it enables us to share in some of the risk and some of the downside issues that you could sometimes run into with development.
