The operator welcomes participants to MAA's First Quarter 2024 Earnings Conference Call and informs them that the call will be recorded. Andrew Schaeffer, Senior Vice President, Treasurer and Director of Capital Markets, will make opening comments and introduce the rest of the management team. He also reminds participants that forward-looking statements will be made and encourages them to refer to the forward-looking statements section in the earnings release and SEC filings. Non-GAAP financial measures will also be discussed and a presentation can be found on the company's website. After prepared comments, the management team will answer questions. The call will be available for later access on the website.

In the first quarter, performance trends were as expected and new supply in some markets affected pricing for new resident move-ins. However, renewal pricing remains strong and there has been a 100 basis point improvement in blended lease-over-lease pricing. The company is well-positioned for the summer leasing season and expects stable occupancy, strong renewal pricing, and revenue results in line with previous guidance. Leasing traffic remains strong and the company's technology capabilities and resident services contribute to high retention rates. With new supply deliveries tapering off later this year, the company remains optimistic for an improvement in leasing conditions in early 2025.

The company remains optimistic about its ability to navigate the current supply cycle in high-growth markets and sees potential for growth in the future. They have a strong portfolio, operating platform, and balance sheet, and are focused on efficiency and redevelopment opportunities. The external growth pipeline is also expanding. The company is pleased with its performance in the current quarter and has started construction on two new projects in Charlotte, North Carolina and Phoenix, Arizona.

The company is expecting to deliver two new projects by mid-2026 with a mid-6% NOI yield. They have a development pipeline of 2,617 units at a cost of $866 million. Transaction volume is low due to interest rate volatility and tight credit conditions, but the company has an off-market acquisition opportunity for a 306-unit property in Raleigh. Despite pressure from new supply, their four actively leasing developments are performing well and achieving rents 18% above expectations. They expect to achieve an average stabilized NOI yield of 6.5% for these projects. The company is also making progress on predevelopment work for other projects.

The company expects to start construction on one to two more projects later this year, with the potential for more as construction costs decline. The development pipeline currently consists of 10 sites, with the option to start projects at a later time. The company is also evaluating additional land sites and prepurchase development opportunities. Despite pursuing external growth opportunities, the existing portfolio is well-positioned for the upcoming leasing season due to its broad diversification.

Despite the high level of new supply, there is still solid demand and absorption, leading to improved occupancy and strong collections. New lease pricing was impacted by new supply deliveries and slower traffic patterns, resulting in a negative 6.2% lease-over-lease pricing. Renewal rates remained strong and blended lease-over-lease pricing improved by 100 basis points from the fourth quarter. Average physical occupancy was 95.3% and collections outperformed expectations. Larger markets such as Washington, D.C., Houston, and Nashville showed improvement.

The mid-tier metros in our portfolio, such as Savannah, Richmond, Charleston, and Greenville, continue to perform well and balance out the overall performance of our portfolio. Nashville, despite facing new supply, is also performing well due to our submarket diversification strategy. We completed over 1,100 interior unit upgrades and 94,000 smart home upgrades in the first quarter of 2024. We have four active repositioning projects and plan to begin six more later in 2024. In April, we saw improving trends in both pricing and occupancy compared to the first quarter and March, with a 0.4% decrease in blended pricing and improvements in both new lease and renewal pricing.

The paragraph discusses the occupancy and exposure rates for April, as well as the impact of new supply on pricing. The company expects demand to increase in the spring and summer, but job growth to moderate in 2024. However, job growth is still expected to be strongest in the Sunbelt region. The company also notes that resident turnover is declining and fewer residents are moving out to buy homes. The paragraph concludes with a statement from Clay Holder.

In the first quarter, the company reported core FFO of $2.22 per share, which was $0.02 above expectations. This was mainly due to timing of real estate taxes and other expenses. Same-store operating performance was in line with expectations, with higher revenues from strong rent collections. The company has $202 million left to fund on its development pipeline over the next two years, and plans to continue growing its pipeline. The balance sheet is strong with $1.1 billion in cash and borrowing capacity, low leverage, and mostly fixed debt with a long average maturity.

In January, the company issued $350 million in 10-year public bonds at a 5.1% rate, using the proceeds to pay off commercial paper. They have a $400 million maturity coming up in June at a 4% rate, with the next scheduled bond maturity in the fourth quarter of 2025. They are reaffirming their core FFO guidance for the year and maintaining their same store and other key guidance ranges. The company plans to focus on lease rate growth and occupancy in the upcoming months, with a balance between new and renewal leases based on individual property factors. They are comfortable with their current occupancy levels and will continue to push for higher pricing where possible.

In the first quarter, there was a mix of new lease renewals, with a slightly higher percentage of renewals. This trend is expected to continue in the next few quarters. In March, there was a slight decrease in demand, possibly due to a focus on occupancy. However, April has shown an increase in both pricing and occupancy. In April, there was an uptick in leasing, but it was not significantly different from January and February. It is unclear if there has been a significant increase in traffic in April.

Tim Argo is surprised that the leasing spreads didn't increase more sequentially, but he believes that traffic and leads have picked up, showing a positive trend. He also mentions that the company will reprice 50% of their leases in the next few months, which will have a bigger impact on the year. In terms of the leasing environment, Brad Hill explains that the high level of supply is a result of cheap financing in the past and that this trend is likely to change in the future.

The speaker discusses the supply and demand environment in the real estate market, predicting that supply will be below average in the next couple of years but could improve in the long term. They also mention that concession usage, which is the offering of incentives to attract tenants, has remained stable with some variation in different markets such as Charlotte, Austin, and Atlanta.

The quarter was generally in line with expectations, but demand was unseasonably strong. The company does not believe that demand needs to stay at these levels to hit the high point of their guidance going forward, but it does need to remain at consistent levels.

The speaker discusses the consistent demand for housing in their market and the expected increase in demand during the peak leasing season. They also mention the potential for leasing spreads to narrow and renewals to be negotiated at a lower rate due to lower turnover. Overall, the speaker is optimistic about the demand for housing and expects it to remain at a high level.

The company expects new lease pricing to accelerate in the next few months and then moderate in Q4, but it will still be negative for the full year. They do not expect it to reach zero or become positive until the spring or summer of 2025. The difference in rent between new leases and renewals is only about $150, and they believe this spread will narrow over the spring and summer. They do not have any concerns about this spread and do not see it affecting their ability to achieve their renewal pricing performance. In order to hit their blended spread guidance for the year, they would need around 1.7% to 1.8% blended growth. It is unclear when they will reach this level.

Tim Argo and Eric Wolfe are discussing the blended spread and new lease thinking for the rest of the year. Tim explains that Q2 and Q3 will represent the strongest period for leases, with a heavier weighting on renewals. They expect renewal rates to be around 4.5% to 5% and new leases to stay negative but accelerate from current levels. Tim also mentions a quick turnaround in rental performance later this year or next year, but does not specify which markets will see the fastest turnaround.

Tim Argo, during a market analysis, predicts that certain markets will continue to perform well, such as D.C., Houston, Charleston, Richmond, Savannah, and Greenville. He also notes that Orlando, Tampa, and Nashville are showing signs of improvement and could potentially benefit from increased supply. During a Q&A session, Brad Hill mentions a recent acquisition in Raleigh with a 6% NOI yield and expresses confidence in the current acquisition opportunities. The transaction market has been quiet for the past few years, but supply is increasing.

The speaker believes that the need for transactions in the market is increasing, but the volatility of interest rates has slowed down the market. However, they have seen an increase in underwriting deals and believe that the volume will continue to grow. They have a strong reputation and relationships in the Sunbelt region, which has led to opportunities like the off-market Raleigh deal. The revenue outlook is conservative due to the upcoming heavy leasing season.

The speaker, Brad Hill, discusses the leasing progress and concessions in the development pipeline. He also mentions that they are monitoring the private market's leasing progress and behavior. They have noticed a more measured approach to concession usage this year compared to last year. There is less pressure from developers to push for concessions and they are focusing on monetizing their properties.

The speaker discusses the current state of the rental property market and how it compares to last year. They mention that they track properties in lease-up and are not currently seeing any concerns, but they expect the market to moderate in the fourth quarter. They also mention which markets are expected to hit peak supply in the second quarter. The speaker also briefly mentions the pricing for a debt maturity in June and asks for clarification on the rates in the market.

Clay Holder, Haendel, and Adam Kramer are discussing the company's current maturity rates and upcoming renewals. Tim Argo mentions that they are seeing rates in the 4.6-4.8% range for the next few months. Adam Kramer asks about the potential for more development starts, given the company's strong balance sheet and the opportunity to deliver into a period of undersupply in the future. Brad Hill responds that they have been building up their development capabilities, but the main factor preventing them from starting more projects is the need to hit their required returns.

The company has started two developments in the second quarter, with the goal of achieving a 100-150 basis point spread to cap rates and a 6-6.5% range. They are also evaluating the land market and prepurchase opportunities for potential future developments. The company is cautious about taking on too much development risk and aims to keep their exposure in forward funding obligations at around 5% of enterprise values.

The company is discussing their development strategy of partnering with merchant developers to reduce risk and increase their pipeline. They feel confident in expanding this approach given their strong balance sheet. In response to a question about acquisition cap rates, the company states that they have not factored in below-market debt and the current spread is wider than in the past, averaging in the low 5% range. Debt rates are currently in the high 5% to almost 6% range.

The speaker discusses their assumption that underwritings are based on a potential increase in fundamentals or a future refinancing, and states that their company is not willing to transact at current market levels. They also mention their record low turnover rates and attribute it to the difficulty in buying a home and the high cost of moving.

In the first quarter, there were higher expenses due to storm damages at some properties, but the company is still confident in their guidance for the rest of the year. They are still gathering information on larger expense line items, such as real estate expenses, but are confident in their projected growth of 4.75%.

The company expects personnel costs, repair and maintenance costs, and other expenses to continue as expected for the rest of the year. They are unsure about real estate taxes and insurance expenses and will provide more information in the second quarter call. The company plans to focus on high-growth regions for future investments.

The company is focused on both larger and mid-tier markets for growth, with a focus on buying new properties in lease-up. Rent growth outlook varies by market, but generally remains flat in 2024 and increases in 2025 and 2026. Jobs have been stronger than expected.

Eric Bolton, CEO of a real estate company, is asked about the unexpected strength of the job market in Sunbelt markets. He explains that they use various sources to predict job growth and were not surprised by the employment market. However, the decline in residents leaving to buy homes has been a surprise and has had a significant impact on demand. The interviewer also asks about the transaction market and whether there was a belief that assets would be dumped onto the market, to which Bolton does not provide a clear answer.

The paragraph discusses the changes in the lending practices of banks and developers in recent years. It is suggested that bank regulators may be more lenient with banks, allowing them to extend loans and avoid foreclosures. Additionally, developers are able to secure longer construction loan terms, giving them more time before being forced to sell. These factors contribute to a decrease in forced transactions in the real estate market.

The speaker discusses the current buying environment and compares it to past cycles, noting that demand has remained strong and there is a lot of capital ready to invest in the multifamily market. They also mention some marketing strategies they are using, such as updating their website and utilizing social media, to drive traffic in higher supply markets.

The speaker discusses their efforts to drive traffic to their website and improve the experience for potential residents. They mention using technology and social media to achieve this goal, as well as implementing initiatives for automation and efficiency. They highlight a few specific initiatives, including a bulk internet program and a smart home initiative, and mention potential opportunities for cost savings in the future. The call ends with a reminder to reach out for any further questions.

This summary was generated with AI and may contain some inaccuracies.