And normally, that’s around 20 to 30. So, both front door and backdoor has elevated a little bit, but still will drive that occupancy in the high 96%. So we feel pretty good about where we’re at.
Michael Goldsmith: Just to clarify the factor that’s related to lease renewals, correct?
Mike Lacy: Correct. And I’ll tell you, we’ve been very focused on our renewals as of late. And over the last six months, we have seen our turnover go down just by putting a flashlight on that. So even though we are negotiating a little bit more, and again, it’s not that much more, we are still achieving above 4% on our renewals. We’re still sending out around 4% rest of this year, and we’re going to continue to try to drive our retention up.
Michael Goldsmith: Got it. And then as my follow-up question, just going back to the As and Bs, is this an issue in relative pricing in that the relative — the gap between As and Bs have come down as new supply as get to concessions, or is this like more of an absolute issue where As have come down to the price, where at a certain price that there’s more utility at that price and sort of like the gap between the As and Bs is less relevant. And just at that price, there’s more interest in that new supply. Just any thoughts around that?
Joe Fisher: Yes. I think it’s more of the relative piece. So, if you look at traditional delta between our B quality portfolio and the new deliveries, you’re usually looking at a 20% to 30% delta and price point. But when you throw two months concessions on there or roughly 16%, will you end up with is, call it, a 10% delta effectively between that B and that brand new product. So 10% on our type of rent, you’re talking about $250 a month. And so positively, you’re seeing the consumer say, okay, I can afford $250 incremental a month. So it speaks to the strength, cash position and kind of where with all of them. So they’re getting a better quality asset or a little bit more cash. I think what will be interesting is when we get 12 months from now and to the extent that those concessions begin to burn off that’s where you start to recreate that wider delta A and B product.
It will be interesting to watch what happens to that consumer 12 and 18 months from now, if they come back down into that B space. But that’s a little bit further down the road for now that dynamic we’re seeing is the ability to upgrade for that B quality consumer.
Operator: Our next question is from Steve Sakwa with Evercore ISI. Please proceed.
Steve Sakwa: Great. Thanks. Just one question, Joe, on capital allocation. You talked about the share buybacks, I think, around $40, and obviously, the stock is appreciably lower than that today and stock’s probably trading around a 7 cap. I’m just curious what the appetite is to maybe sell more assets either into JVs or outright asset sales even if they’re at higher cap rates than what you’d normally dispose at and use some of those proceeds to buy back stock at these levels?
Joe Fisher: Yeah, we did do the buyback when we had identified source of capital locked in at that lower level. And so it’s generally been our MO in the past is to do it and smaller scale if we have that identified source. I think right now, we will take a look at exposing additional assets to the market to see where they price over the next several quarters. Just to continue to shore up liquidity, present ourselves with some more optionality and of course, look at redeploying into some opportunities, be it the JV, DCP or potentially buybacks. But I think right now, the priority definitely is trying to find JV opportunities instead of the buyback side of the equation. And while — if we’re trading in the mid to high sixes that may seem like a wider spread versus a mid to high fives, on the acquisition market.
I think when you capture that upside that we can get from a below average operator, if you will, and bringing it onto our platform, plus throwing that recurring fee stream on and then adding scale to the enterprise versus shrinking scale from the enterprise. The delta really isn’t that wide in terms of, call it, the final NOI yield or stabilized FFO yield between the two options. So we’d prefer to deploy with our JV partner in this environment.
Steve Sakwa: Okay. And then just one quick follow-up on the development, I think you mentioned 6.5% was the targeted yield. I guess why is that the right level if I know bond yields may come down, but we’re sitting close to 5%. Spreads would certainly tell you you’d probably be issuing in the mid-sixes. Cap rates might be in the high fives to sixes. So why would a 6.5% to percent development yield makes sense?
Joe Fisher: Yes. That’s a fair question. I’d say, number one, we are definitely on pause on that front. So I wouldn’t expect anything here, definitely not the rest of this year and even probably at least through the first part of next year. Maybe by the time we get later into the year, if dynamics change, then we’ll be able to take a much harder look at what is the required yield relative to what the source of capital is that we have at the time. I’d say that 6.5% right now on current that should stabilize out higher than that if we were able to start a 6.5%, because usually we’re looking at current rents and stabilized cost. And so that 6.5% becomes a 7% over time as we lease that up. That 7% would compare to that 5.5% to 6% cap rate in the market today.
And so you get a brand-new asset stabilized at, call it, 125 basis point spread to the source of capital or market cap rates. And so that’s why we think it makes sense if we get to that point in time. We’re not at that point in time yet where we have starts available at those levels. And I think we’re still in a macro environment where we want to wait and see and stay capital-light.
Operator: Our next question is from John Kim with BMO Capital Markets. Please proceed.
John Kim: Thank you. Other markets, your other markets have been a drag on lease growth rates. And when you look at some of the markets that compose this, it doesn’t seem like they have a lot of supply pressures. I know, Joe, you mentioned that supply is broad-based, but can you just remind us, are these assets typically older in nature, or is there one particular market that’s kind of dragging down this performance?
Mike Lacy: Hey, John, it’s Michael. This goes back to what I was talking about a little bit around concessions and what we’ve experienced over the last few months, places like Denver and Philadelphia. They fall in our other market category, and that’s where we’ve seen concessions pop over two to three weeks in that period of time. So partially due to a lot of supply, those properties in those markets are typically a quality computing with that supply.
John Kim: Okay. And Mike, you mentioned in your prepared remarks, the focus on improving retention and that you’ve identified that 50% of turnover is controllable. At the same time, it’s been mentioned many times on this call that people can price shop and make more information to move around. I guess, my question is how much confidence do you have that you could improve retention meaningfully in this market?
Mike Lacy: Quite a bit of confidence. And part of it, I had mentioned in the prepared remarks, we haven’t done a great job with us over the last two years. When you just compare us versus our peers and so we think there’s 3% just to get back to average. And the things that we’re putting in place today, we think, are going to drive us above average. And for example, I mentioned it a little bit in my prepared remarks, but just having these dashboards to score interactions from every interaction that’s coming through the door and being able to see exactly what’s happening to change those trajectories. We’re arming our associates in the field with that as well as our centralized teams. And it’s starting to play out, as I mentioned, six months rate of turnover coming down, we’re just now scratching the surface.
