UDR, Inc. (NYSE:UDR) Q1 2024 Earnings Call Transcript

UDR, Inc. (NYSE:UDR) Q1 2024 Earnings Call Transcript May 1, 2024

UDR, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to UDR’s First Quarter 2024 Earnings Call. [Operator Instructions]. As a reminder, this conference 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: 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 are 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 on the call today. I will now turn the call over to UDR’s Chairman and CEO, Tom Toomey.

Thomas Toomey: Thank you, Trent, and welcome to UDR’s first quarter 2024 conference call. Presenting on the call with me today are President and Chief Financial Officer, Joe Fischer; and Senior Vice President of Operations, Mike Lacy; Senior Officers, Andrew Cantor; and Chris Van Ens will also be available during the Q&A portion of the call. 2024 is off to a very solid start. Due to better fundamental backdrop than initially expected and the operating strategies we continue to employ to outgrow competitors in our markets. Positive fundamental drivers for our industry include. First, year-to-date employment creation of approximately 800,000 jobs has already exceeded initial full-year economist consensus growth expectations. Second, more than 100,000 newly delivered apartment homes were absorbed during the first quarter.

The strongest first quarter in over two decades. Adding to that, total housing deliveries remained stable and development starts continue to decline. This bodes well for rent growth in the years ahead. And third, renting an apartment is on average 60% more affordable than owning a single-family home in the markets where we operate. A cycle best level of relative affordability. These trends, combined operating tactics we utilize have led to positive momentum across all key operating metrics. This includes more robust traffic, higher leasing activity, lower turnover, lower concessions, higher occupancy and better pricing power than originally expected. In all, this translates to what I would characterize as green sprouts. Mike will provide additional details in his remarks.

However, as we only have completed the first four months of the year, we remain wary of the volatile and elevated interest rate environment and the effect it may have on pricing and concessions of lease up communities, given the heightened new supply the industry faces in 2024. We feel good about 2024 thus far, but we would like to see more evidence of continued operating momentum as we progress through a peak leasing season before revisiting our full-year guidance. Big picture, I am optimistic on the long-term growth prospects of the multi-family industry and UDR’s unique competitive advantages that should enhance that growth. We have a strong culture, a talented team with a robust track record of performance, and we continue to invest in our associates and embrace technology to create value for all of UDR stakeholders.

Finally, I’d like to take a moment to celebrate the upcoming retirement of Senior Vice President and Chief Investment Officer, Harry Alcock who will soon be transitioning to a consulting role with a focus on sourcing transactions. Harry and I have worked together for approximately 30 years, and he has been a trusted partner through all of it. He helped UDR grow via a thriving $20 billion enterprise we are today while also grooming our next wave of talented investment and development professionals. Harry, thank you for all your work and we all look forward to working with you in your new role. With that, I will turn the call over to Mike.

A – Michael Lacy: Thanks, Tom. Today, I’ll cover the following topics. Our first quarter same-store results, early second quarter 2024 trends and how they factor into our full year 2024 same-store growth guidance. An update on our various innovation initiatives and expectations for operating trends across our regions. To begin, first quarter year-over-year same-store revenue and NOI growth of 3.1% and 1.2%, respectively, and 0.4% sequential same-store revenue growth were slightly above our expectations. These results were driven by: first, 0.8% blended lease rate growth, which resulted from nearly 4% renewal rate growth and new lease rate growth of negative 2.5%. New lease rate growth improved 260 basis points versus fourth quarter results as concessions decreased by approximately half of a week on average.

Second, 35% annualized resident turn was 400 basis points better than the prior year. The 630 basis point delta between new and renewal rate growth when combined with higher retention led to a favorable outcome. And third, occupancy remained strong at net 7.1%, supported by healthy traffic and leasing volume. New York, Washington, D.C., San Francisco and Seattle, which collectively constitute 36% of our same-store pool for standouts, averaging nearly 98% during the quarter. Shifting to expenses. Year-over-year same-store expense growth of 7.5% in the first quarter was in line with our expectations and inflated by a tough comp against the onetime $3.7 million payroll tax credit we recorded and disclosed in the first quarter of 2023. After excluding this credit, our year-over-year same-store expense growth would have been a more reasonable 4%.

Moving on, strong core operating trends have continued into the second quarter and every key revenue metric is exceeding our expectations through the first four months of the year. First, blended lease rate growth continued to accelerate from approximately 1% in March to roughly 2% in April, with concessions stabilizing at lower levels than the fourth quarter of 2023. All regions have demonstrated sequential blended lease rate growth improvement versus March. With our West Coast and mid-Atlantic regions showing the most strength at approximately 3.5%. Based on current trends, we expect May blended lease rate growth to demonstrate further sequential improvement. Second, resident retention continues to compare well against historical norms. Due in part to our customer experience project, which I will touch on later, April retention is 400 basis points above prior year levels, representing the 12th consecutive month our year-over-year turnover has improved.

Third, occupancy is holding firm in the high 96% range. Strong demand from continued job and wage growth has allowed us to simultaneously operate with high occupancy and push rental rate while maintaining rent to income levels in the low 20% range. And fourth, other income continued to grow at approximately 10% in April, similar to what we achieved in the first quarter. As a reminder, other income constitutes roughly 10% of our total revenue. We remain pleased with the trajectory of our other income initiatives such as the rollout and penetration of building-wide Wi-Fi, which contributes significantly to incremental same-store revenue growth. Looking ahead, we reaffirmed our full year 2024 same-store growth guidance in conjunction with our release.

We are encouraged by the strength of macroeconomic indicators, such as year-to-date job growth and wage growth and the effect those demand drivers have had on our key performance indicators thus far. But we remain somewhat cautious given the volatile and elevated interest rate environment combined with peak supply deliveries yet to come. Turning to regional trends. Our coastal results have been above our expectations, while Sunbelt markets are in line and trending better. More specifically, the East Coast, which comprises approximately 30% of our NOI, was our strongest region in the first quarter. Boston, Washington, D.C. and New York all performed well with weighted average occupancy of 97.5%. Blended lease rate growth was nearly 2.5%, and same-store revenue growth was 4.25%, which is slightly above the high end of our full year expectations for the region.

We expect this regional strength to continue. The West Coast, which comprises approximately 35% of our NOI has performed better than expected. At the beginning of the year, we anticipated San Francisco and Seattle would lag our West Coast markets. While revenue growth results in the first quarter show this to be true on an absolute basis, both markets saw new lease rate growth improved by nearly 900 points compared to our fourth quarter results. The momentum in these markets has exceeded our expectations due to various employers, more strictly enforcing return to office mandates as well as increased office leasing activity from technology and AI companies. Lastly, our Sunbelt markets, which comprise roughly 25% of our NOI, continue to lag our coastal markets due to elevated levels of new supply, but have performed in line with our expectations.

Better drop growth in these markets appear to be bolstering demand and absorption. And similar to other regions, we have seen Sunbelt concessions stabilize. Sequential blended lease rate growth accelerate and retention improve. We remain cautious on the Sunbelt in the near term but have been pleasantly surprised by its recent trajectory. These regional dynamics reinforce the value of a diversified portfolio across markets and price points that allow us to pivot our short- and long-term operating strategies to maximize revenue and NOI growth. Moving on, we continue to make progress on various innovation projects that will benefit same-store growth in 2024 and beyond. One example of this is our customer experience project. We have consistently outperformed the public and private markets on NOI and margins over time due to the focus on our leading operating platform and innovative culture, which has historically driven all aspects of income growth, operating efficiencies and contained our cost structure.

We are now turning to the next phase of our platform which focuses on customer experience and retention. Through our proprietary data hub and the millions of data points we have accumulated over the last seven years, we have found that 50% of resident turnover is controllable. In that, those residents with positive experiences and scores were new at a rate, 20% higher than those with bad experiences. Knowing this, we see an opportunity to improve retention by 5% to 10% versus the industry average of 50%, resulting in a $15 million to $30 million incremental NOI opportunity. To capture this upside, we now track and score every interaction with our residents. This has allowed us to make a transformational shift in the way we do business with a move from being transactional in nature to a focus on the lifetime value of our customer.

We are equipping our UDR team members with tools, training and the ability to prevent or rectify bad customer experiences which we believe over the coming two to three years will materially improve in experience and our relative turnover. This should positively impact pricing occupancy, other income, expenses and margin as well. My thanks go out to the UDR associates nationwide, they remain committed to delivering on our strategic priorities. You rightfully deserve credit for embracing our innovative culture and improving how we conduct our business. I will now turn over the call to Joe.

Joseph Fisher: Thank you, Mike. The topics I will cover today include our first quarter results and our updated full-year guidance, 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 revenue and NOI growth that was slightly above our expectations. The modest sequential FFOA decline was driven by an approximately $1.05 decrease from same-store NOI, primarily due to higher expenses attributable to seasonal patterns and approximately $0.005 decrease from higher interest expense and G&A. Looking ahead, our second quarter FFOA per share guidance range is $0.60 to $0.62 with a $0.61 midpoint flat compared to the first quarter due to nominal expected changes across NOI, interest expense and G&A.

Year-to-date, operating results are trending above our initial expectations. But with macro uncertainty and peak leasing season ahead of us, we have reaffirmed our full-year 2024 same-store growth guidance ranges and plan to revisit them in the future. However, we did increase our full-year FFOA per share guidance range by $0.02 due to the joint venture successful refinancing of its senior construction loan at our DCP investment in Philadelphia with no additional investment from UDR. Having addressed this risk, there are no remaining DCP senior loan maturities until 2025. In addition to the Philadelphia investment, there remain three additional DCP investments totaling approximately $50 million on our watchlist with no material changes since the fourth quarter.

Beyond this, our remaining $440 million of DCP investments are performing well as they were primarily 2021 and 2022 vintage developments, which have not encountered material construction cost overruns or delays and are performing in line to above pro forma on rents. Next, a transactions and capital markets update. First, in alignment with our capital light strategy, we made no acquisitions, new DCP investments or development starts during the first quarter. We remain active in evaluating potential acquisitions through our joint venture with LaSalle and are optimistic on the ability to complete additional accretive deals coming quarters. Second, during the quarter, we completed construction of a $54 million 85-unit townhome community in Dallas, Texas.

This community adds density to our existing Addison portfolio while offering residents a complementary living option. Our current development pipeline consists of just one community in Tampa, Florida, totaling 330 homes at a budgeted cost of $134 million with 94% of this cost already incurred, thereby limiting our forward funding commitments. And third, during the quarter, we completed the previously disclosed sale of Crescent Falls Church, a 214 home apartment community in the Washington, D.C. area at a mid-5% buyer’s cap rate for proceeds of approximately $100 million. Finally, our investment-grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include: first, we have nearly $1 billion of liquidity as of March 31.

Second, we have only $115 million of consolidated debt or approximately 0.6% of enterprise value scheduled to mature through the end of the year and only 11% of total consolidated debt scheduled to mature through 2026, thereby reducing future refinancing risk. Our proactive approach to manage on our balance sheet has resulted in the best three year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multi-family peer group at 3.4%. And third, our leverage metrics remain strong. Debt-to-enterprise value was just 30% at quarter end, while net debt-to-EBITDAre was 5.7x, which is approximately a half turn better versus pre-COVID levels. 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?

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions]. Your first question comes from Nick Joseph with Citi. Please go ahead.

Nick Joseph: Thank you. Maybe just starting on the same-store revenue. Obviously, the first quarter was a bit better than what you expected, but hoping you could actually quantify kind of what your expectations were versus the 3.1% that you put up.

Michael Lacy: Hey, Nick, it’s Mike. I’ll take the first crack at it. What we’re looking at, and as a reminder, we had 70 basis points of blends for the year. And I would tell you our blends right now in the first quarter, running about 20 basis points higher to start the year. But April, May trend even higher, I’d say about 100 basis points higher than what we had in our original business plan going into the year. So to quantify that, if we were able to sustain that 1%, that equals to about $8 million and for us on our revenue line, that’s about 50 basis points. So again, it’s early in the season right now. We want to see how the next 30, 60 days play out, but right now we feel really good about where we’re trending.

Nick Joseph: Thanks. That’s helpful. And how about on the occupancy and the other income side relative to initial expectations?

Michael Lacy: Occupancy in the first quarter was about 10, 20 basis points higher than we expected. And over the last 30 days or so, we brought that down. So we’re running right around 96.9% [ph] today. expectations are, we’ll continue to see that probably migrate down maybe 10 or 20 bps as we continue to push our blends a little bit higher. So overall, I’d say occupancy is pretty much on target through the first four months or so. Other income, though, great. I mean I’ll tell you, we were 10% above last year to start the year. April is trending in the same direction. That’s probably 200 to 300 basis points higher than we originally thought. And a lot of that has to do with the success from the teams and really driving these initiatives home.

So right now, other income feels really strong. And a lot of this just point back to our strategy, and we’ve talked about this over the last couple of months. It’s start the year with high occupancy, start to push our blends, test the water as we have demand, and it’s all starting to play out for us today.

Nick Joseph: Thanks. That’s helpful. And then you touched on the prepared remarks about the benefits of the low turnover that continues to drive lower the high retention. When you look at the renewals you sent out for May and June, I guess. First of all, where are those renewals going out? And then is there anything from a take perspective or a negotiating perspective that gives you any indications that turnover won’t continue to stay low or even trend lower from here?

Michael Lacy: Mike, again, good question, Nick. Right now, we’re sending out around, it was around 3.8% through June on renewals. And then in July, we just sent out about 4.5% growth. So we are getting a little bit more aggressive on renewals, but at the same time, we’re really pushing our market rents. So we’re trying to compress the new and renewals. And I think what you saw from us in the first quarter was about a 600 basis point difference between new and renewals. My expectations — that’s going to come down to around 300 to 400 basis points as we move throughout the second quarter. And that’s really setting us up to drive total blends, which is equating to total revenue growth a little bit ahead of our expectations.

Nick Joseph: Thank you.

Operator: Next question, Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

Austin Wurschmidt: Great. Thanks. Mike, you commented — I want to hit back on the leasing trends about May, lease rate growth improving versus April. You talked about how things have kind of trended. I think, through the first quarter into April relative to expectation. But which markets are really driving that improvement into May? And maybe where are you becoming a little bit more aggressive on the renewal rate growth. And then do you think you can kind of keep retention or keep occupancy high while pushing a little bit harder?

Michael Lacy: Yes. Great question, Austin. We are seeing more strength based on our own expectations coming into the year really out of the West Coast. Right now, we’ve talked a little bit about what we’ve experienced in Seattle and San Francisco. And we’ll certainly do the same thing coming out of the East Coast, New York is really picking up as demand picks up. So a lot of strength coming out of our coastal markets, and that’s where we’re seeing on an absolute basis, the highest rents. And I’ll tell you the one that’s benefit price as of [indiscernible] and thankfully, it’s 15% of our NOI is D.C. It’s really starting to come on strong, starting to see blends in that plus 4% to 5% growth. And a lot of that has to do with getting more aggressive to your point on renewal, seeing that they’re very sticky, and it’s allowing us to drive our market ramp up as well and it’s translating into positive new lease growth.

So overall, the costs feel very strong. But in addition to that, Sunbelt’s hanging in there. And what I’m experiencing today is momentum on a month-over-month basis, seeing positive trends coming out of those parts of the country as well. So overall, things feel very positive today.

Austin Wurschmidt: So yes, my follow-up kind of wanted to dig in a little further on sort of the positive surprise or seemingly like you’re — I feel fairly good about the Sunbelt relative to expectations. So I mean, would you be willing to say that the worst is behind you in the Sunbelt and that potentially the benefit of better job growth and maybe easier comps in the back half of the year could lead to continued acceleration? What are sort of the updated thoughts on the outlook through the balance of the year?

Michael Lacy: Yes, Austin. That’s been getting a lot of questions on the Sunbelt. So maybe let me step back a second, just give you a little bit more color. And as a reminder to the group, that’s about 25% of our NOI. And to your point, we know supply is — it’s a certainty. And it’s in front of us. Peak deliveries are still right around the corner, but at the same time, it’s during peak demand. So that’s a positive, and we’re seeing stronger job growth as well as demand is a little bit stronger. And a lot of that has to do with record absorption. So overall, while it feels good, we’re cautiously optimistic just given that supply is still coming. But just to give you a little bit more color on what we’re seeing on the ground, I think things that we look at, first and foremost are your concessions.

And I would point to, in Texas today, we’re seeing 1.5 weeks. And in Florida, it’s about a half a week of concession on our portfolio, which is a pretty significant improvement over the last six months and lower than what we’re seeing from some of the comps in those areas. In addition to that, occupancy in the Sunbelt, we’re running around 96.5% to 96.7% today. So still very healthy occupancy. And again, we’re seeing blends improving on a month-over-month basis. And just to give you a couple of stuff. In April, we were negative 1.5% in the Sunbelt for blends. That compares to negative 2.2% during the first quarter. And I’d tell you, May is shaping up to be even better. So overall, blends continue to improve. But where I’m most excited is our other income.

And we’ve been driving home some of our initiatives in the Sun Belt, I think specifically bulk internet rollout that’s really taking hold. It’s allowing us to drive our other income above 10% in that part of the country, and it’s allowing us to drive our total revenue. So again, cautiously optimistic given that peak supply is in front of us. But it’s a much better position knowing that demand is also coming at the same time.

Austin Wurschmidt: And then can you just clarify, did you guys underwrite 5% other income growth for the year?

Michael Lacy: We were between 5% to 7% growth on our other income line. And again, we’re holding around 10% today. So that’s a 200 to 300 basis points improvement from what we originally expected.

Austin Wurschmidt: Great. Appreciate your thought. Thank you.

Operator: Next question is Steve Sakwa with Evercore ISI. Please go ahead.

Steve Sakwa: Yes, thanks. Mike, I appreciate all the comments on some of the trends by market. I’m just curious in the Sunbelt, given that we’ve got heavy deliveries coming over the next four quarters. Is it your expectation that the better trends continue? Or is this maybe been either a little bit of lull in supply or maybe stronger demand? And like, I guess, how are you thinking about those concession trends maybe over the next several quarters?

Michael Lacy: Yes, Steve, we still think that peak supply is — it’s going to hit us here in the next couple of quarters. So we’re going to continue to watch that, lean into the things that we control. And again, that’s where we’re hitting our other income and driving our results against the peers on a relative basis. But we do expect that we’re going to continue to take the headwind just given supplies in front of us for the next six to 12 months in that market.

Thomas Toomey: Hey, Steve, this is Tom. Just to add some more color, and I think we had it in our prepared remarks. Record absorption in the first quarter, high for two decades. The jobs number, I think, has surprised us all through the balance of the year. If that continues, the Sunbelt has a pretty good path, if you will and absorb it. I’m not sure betting on the jobs market going into an election cycle is a very strong bet on that piece of equation. Second, we’re still a little raw from last September, October when we saw interest rates spike and we saw a developer’s panic and go to a heavy concession template in that supply type market, setting. And I think we just will kind of be prudent for us to just play it through and see how it falls.

I wouldn’t get overly optimistic or pessimistic. It’s just easier for us to say we’re going to play it month-by-month and see what the traction is with respect to new and renewals. But right now, after four months, added into the [indiscernible] feel better than we expected.

Steve Sakwa: Okay. And then maybe one for Joe. Just as you think about maybe any opportunities for capital deployment. I know you probably don’t like where your stock is trading, but how are you thinking about any kind of investment opportunities, whether it’s DCP or land purchases for future developments? Like just kind of where are the current opportunities? Where is the opportunity set today?

Joseph Fisher: Yes. Steve. So I’d say number one, balance sheet remains in a phenomenal position. So liquidity-wise, maturities sources and uses all look to be in a really good position. So we’re able to kind of sit back and be in this capital environment and wait to pivot to offense. I’d say opportunity wise, the transaction market was finding — putting there in terms of agreement on where cap rates were and by ourselves were coming together. Obviously, this recent surge in rates creates a little bit more of an unknown in that environment. And so we’re kind of sitting back trying to see where valuation starts to settle out here a little bit. But where we probably tried to target today two different areas. One is on the JV acquisition side.

JV that we put together with LaSalle last year, we’d, of course, like to continue to deploy with them as we did in the fourth quarter. So trying to find deals in our existing markets, deals down the street and then get the additional upside from the fee stream that comes off of that. So continue to show them a lot of transactions to help to get some things done here in the coming quarters with them. The other area is within the DCP pipeline, while we’re not seeing much on traditional DCP given that we’re not seeing a lot of new starts and activity there. We are seeing a little bit more on the recap opportunity side. And so as we look ahead to potential paydowns or payoffs that may come out of that DCP pipeline in the next 12 months, we’re starting to evaluate some opportunities for redeployment to put some capital out there on that front.

On the development side, you mentioned that we’ve got a really good land pipeline right now with a lot of deals that are show ready. And so that team has just continued to work out cost and monitor the market and wait to see where we get on some of those yields before we start some of those. But we’ve got a really good opportunity to hit that hard as well once the market kind of comes into our favor.

Steve Sakwa: That’s it for me. Thanks.

Operator: The next question, Josh Dennerlein with Bank of America. Please go ahead.

Josh Dennerlein: Hey guys. Just wanted to hit on some of the expenses. I was looking at attachment. There’s a couple of markets where you had some pretty big jumps year-over-year like Seattle, Boston, Monterey Peninsula. Anything going on in those markets that we should be aware of on the expense side?

Michael Lacy: Yes, Josh, I would say, first and foremost, you have to remember the CARES, we’re anniversarying off of that. So as a whole, that had about call it 350 basis point growth rate. So if we didn’t have that, we would have been 4% overall. But specific to some of these markets, Seattle, as an example, we had taxes go up about 9%. So that droves a little bit more growth there, a place like Monterey Peninsula, utilities were up 7%. So you have some of these other factors that are in play in addition to what we’re anniversarying off of given the CARES Act. So that’s driving some of the higher growth if you will.

Joseph Fisher: Just to add to that because we did get a couple of questions overnight on the expense number. I think we did a great job of telegraphing what was going on there with the CARES Act comp in 1Q. And I think a lot of notes noted that, but that was in line to slightly better than we had expected. So that 7.5% overall expense growth number was definitely not a surprise to us. And so as it relates to the range for the rest of the year, we definitely see the path to see that year-over-year number come down here for the next three quarters. And when you look at the initiatives around that, be it additional automation of leasing, more no staff properties, some of the stuff we’re doing with sweet spot maintenance, some of the purchasing. We still got a lot of initiatives out to keep that expense number controlled as we have in the past. So I would not let 1Q scare you in terms of is that going to be a recurring issue for us.

Josh Dennerlein: Okay. I appreciate that. And then back on other income, just kind of curious what’s driving the outperformance in the other income line? You mentioned the building-wide Wi-Fi. Is that like people can sign up any time? Or I kind of thought is that like lease renewal or when there’s a new lease signed. So any color there would be great.

Michael Lacy: Yes. So let me give you a little bit more color just again more notably other income, it does make up over 10% of our total revenue. And so on our stack, we’re looking at about, call it $40 million and one-fourth of that growth came from the rollout of our bulk Internet. And so we did see about $1 million benefit during the quarter compared to about $100,000 last year. So the majority of it is coming from rolling out that initiative. In addition to that, I’d tell you, the team is doing a really good job just driving some of our other initiatives as it relates to running out common area spaces or adding parking in terms of more sign spots there. We’re pushing up some of our short-term furnished rentals and then will continue to lean into some of the packaged locker. So you put all that together and you’re looking at about a 10% increase on a year-over-year basis. And again, April, May look like they’re tracking the same.

Josh Dennerlein: Okay. I appreciate that. Thanks for the time.

Operator: Next question, Jamie Feldman with Wells Fargo. Please go ahead.

Jamie Feldman: Great. Thanks for taking the question. I was hoping you could talk a little bit more about how Class A versus B is performing across the markets, across your portfolio?

Michael Lacy: Sure. I’ll take that. So B is outperformed or A as on a blended basis at the portfolio level by about 50 basis points. So what we saw was 1% growth versus 0.5%. And I’ll tell you the Sunbelt deviated from the recent trends we talked about last year, these were underperforming needs across the board. And this does suggest that the supply dynamics are impacting As. More than Bs across the Sunbelt, which is more in line with traditional supply dynamics. So overall, it feels like it’s normal steady state today, and these are doing a little bit better.

Jamie Feldman: Okay. Thanks for that. And then you talked broadly about the Sunbelt, but can you just get a little bit more granular on the trends? You mentioned Texas, but as Dallas different than Austin and then even Florida or Tampa or Orlando, and then Nashville, which, of course, it’s not Florida. But can you just talk more granularly about those markets? Or are they all pretty much doing exactly what you said in your broader Sunbelt comments?

Michael Lacy: Yes, I can give you a little bit more color on the makeup of those regions and what we’re seeing today. I think first and foremost, starting with Florida. Florida makes up about 10% of our NOI, and it’s really split between Tampa and Orlando. I’d tell you, Tampa, we have about 20% urban, 80% suburban portfolio. We’re seeing concessions around 0.3 weeks today. Occupancy is running in that mid 96% range, and Orlando is very similar. So we’re seeing about 0.3% weeks concession. Occupancy is a little bit higher at 96.9%. Bonds are still slightly negative, but they continue to improve. And so Florida feels like it’s on track with our original expectations for the year, specific to Texas, similar in the sense that Texas is about 10% of our NOI, but the majority of this is coming out of Dallas.

So Dallas is 8% of our NOI market were 15% urban, 85% suburban. We are seeing elevated concessions around 1.5 weeks today, but that has improved from 2.5 weeks about 60 days ago. And we’re able to run occupancy in that mid-96% range. So overall, pretty decent numbers coming out of Dallas. Austin, probably one of the weaker-performing markets today for us. And again, this is only 2% of our NOI. So it’s a relatively small market, seeing concessions in that two week range, which is probably the highest in our entire portfolio, and that’s where we’re facing the majority of our supply. But we’re still running 96%, 97% occupancy. You can see in here, bonds are still negative, but they are improving. So again, cautiously optimistic on a lot of these Sunbelt markets.

But today, they’re performing at expectations.

Jamie Feldman: Okay. Great. Thank you.

Operator: Next question is Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone: Thanks. Maybe, Mike, for you. I mean you talked about how high the retention is and just the strength of the renewal rates. And so I’m just wondering, like is there a loss to lease in the portfolio still? Or as we look over the course of the year, does — do you think this flips to like a gain to lease, or how should we think about that and that divergence between new and renewal spreads?

Michael Lacy: Yes. Tony, what we’re seeing today is a loss to lease right around, call it 2% to 2.5%. Typically, that grows as you go through the demand period over the next three to six months, and then it starts to trail off towards the end of the year. But right now, our loss to lease is hovering right around that 2% to 2.5% range today. And I got to tell you, I’m really excited about what the team has done with the customer experience project. And I gave a lot of high level information in my prepared remarks. But I think it’s important just to dive into some of the things that we’re doing. And I think, first and foremost, our intention was to capture millions of data points. And by that, I mean, we captured every voice mail, text message, e-mail, surveys, service requests, every personal interaction.

And so secondary to that was to develop these proprietary resident community-specific dashboards that chronologically align interactions. I think that’s the keyword. It’s chronologically putting these in order, so our teams know exactly what’s happening at any given time. And I’ll tell you finally taking all this information and scoring each experience to gauge real-time cinema to orchestrate a better leading experience has been huge for us. And so while it doesn’t go unnoticed that people aren’t moving out to buy homes as much as they were, say last year or the year before, this is a big dial mover for us and something that our teams are really leaning into.

Joseph Fisher: Hey, Tony, just one other thing too, in terms of kind of that momentum and that loss to lease question. I think probably one of the things we’re most excited about on a year-to-date basis, when you look at the combination of our gross rents and that concessionary number coming down since the start of the year, we’re actually up plus or minus 3% on effective rents on a year-to-date basis, which through the first 120 days is a really good result relative to historical averages. Obviously, that’s being led by east and west coast doing a little bit better. But even Sunbelt, as Mike talked about, we’re seeing market rents move higher there. And so when you worry about that gain to lose, the fact that market rents continue to move higher at the same time that we’re pushing our blends both on renewal and new base is higher. We feel pretty good about that trajectory in terms of — as a forward indicator.