Earnings Call: Q1 2020

May 13, 2020

Earnings release

Good morning. My name is Veronica, and I will be your conference operator today. At this time, I would like to welcome everyone to the BSR REIT Q1 2020 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer Thank you. Mr. Bailey, you may begin your conference. Thank you, Veronica, and good morning, everyone. Welcome to BSR REIT's conference call to discuss our financial results for 1st quarter ended March 31, 2020. I'm joined by Susie Kane, our Chief Financial Officer also with us are Blake Brazil, President and Chief Operating Officer and Dan Oberstein, Executive Vice President and Chief Investment Officer, who will both be available to answer questions. I'll start this call by providing an overview of our Q1 performance and other corporate developments, including our response to the coronavirus outbreak. Susie will then review the financials and I'll conclude with some comments on our outlook After that, we'll be pleased to answer any questions you may have. Before we begin, I need to remind listeners that certain statements about future events made on this conference call are forward looking in nature. Any such information is subject to risks, uncertainties and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward looking information in our news release and MD and A dated May 12, 2020 for more information. During the call, we will reference certain non IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS. Please see our MD and A for additional information regarding our non IFRS financial measures, including 4 reconciliations to the nearest IFRS measures. Also, please note that all dollar amounts execute on our capital recycling strategy. Weighted average rent at the end of the Q1 was $9.61 per apartment unit, a significant increase of 15% from $8.35 at the end of Q1 last year. That result highlights the benefits of recycling capital into primary U. S. Sunbelt markets with some of the country's strongest economies. Since our IPO in May 2018, we have completed 9 property acquisitions in primary markets that have added 2,500 and 62 apartment units to the portfolio. At the same time, we have sold 20 properties in secondary markets, comprising 3,666 apartment units. The apartments we acquired are an average of 11 years old with the ones we sold are an average of 38 years old. As a result of this turnover, the weighted average of our portfolio has declined from 29 years at the time of the IPO to 22 years today, a reduction of 7 years. And we now generate 79% of our NOI from our targeted primary markets compared to 55% at the time of the IPO. So our portfolio quality has materially improved. During the Q1, we acquired Ariza Funk Creek Apartments in Austin, Texas MSA for $55,000,000 This property was built just 2 years ago and comprises 349 Apartment Units. We now own 1189 Units in Austin, one of the most attractive markets in the country. We sold 1 non core property in Q1 2020 and we sold another 4 subsequent to the quarter end, which includes the Summer Lake property in Longview, Texas, which we sold just last week. The gross proceeds from these 5 property sales was 85.8 $1,000,000 Our capital recycling efforts are far from over. We plan to sell our 5 remaining properties in Beaumont, Longview, Blytheville and Pascagoula markets as well as certain assets in Houston and Little Rock As long as we continue to see opportunities to preserve and grow unitholder value, we will continue to rotate out of the secondary markets and expand our investments in our targeted primary markets on a tax deferred basis. As you can tell from the numbers I just provided, we have been selling assets at a faster pace than we have been buying them. That temporary reduction in our asset base impacted our Q1 results as Susie will outline shortly. Total revenue for Q1 2020 declined 0.7% compared to Q1 last year, while total NOI declined 3%. On a same community basis, revenue increased 2.9%, while NOI was up 3.9%. Those results highlight our past investments in capital redevelopment continue to generate growth in rental rates. Same community weighted average rent was $8.89 per apartment unit, an increase of 2.7 percent from $8.66 a year ago. Now obviously, the world has changed a great deal since mid March, having 2 Black Swan events. The economic disruption from COVID-nineteen and the crashing of the oil prices have been an unprecedented event and we are monitoring the impact of our business, our team members and our residents very closely. To date, the financial impact has not been alarming. We have collected 97.3 percent of April rent and 93.4% of May rent through the 11th of the month. We have received a total of 142 requests for rent deferrals in May or in April and 14 requests in May. This represents an aggregate less than 2% of our apartment units and we are working to accommodate these requests on a case by case basis. We are committed to helping all affected residents through this difficult time and have suspended all evictions and previously scheduled renewal rent increases until the crisis ends. In addition, we have made a number of common sense changes in the way we operate to mitigate the spread of COVID-nineteen. These include increased sanitization of frequently touched surfaces, a shift to emergency only maintenance, allowing team members to work from home wherever possible, the closure of apartment offices to external traffic, virtual or self guided apartment tours and contactless doorstep delivery of packages. Our liquidity position today is approximately $77,100,000 So we have a very strong financial position during this period of economic uncertainty. Now I'll turn it over to Susie to review our Q1 results in more detail. Susie? Thank you, John. As John highlighted, our same community results in Q1 were strong. Same community revenue increased 2.9% to $22,000,000 primarily reflecting a 2.7% increase in rental rate to $8.89 at March 31, 20 20, from $8.66 a year earlier. Total revenue for the quarter declined 5.7 percent to $27,500,000 from $27,700,000 in Q1 last year. This reflected the impact of property dispositions related to capital recycling, which reduced revenue by 6 $100,000 This impact was partially offset by acquisitions during and subsequent to Q1 2019, which added $5,300,000 of revenue as well as higher rental rates across the portfolio. NOI for the same community properties totaled $12,200,000 compared to $11,700,000 in Q1 last year. The 3.9% increase was due to the increase in rental rates. NOI for the full portfolio was $14,700,000 down 3% from $15,100,000 in Q1 last year. The property disposition reduced NOI by $3,300,000 which was partially offset by a 2,300,000 dollars contribution from acquisitions during and subsequent to Q1 2019 and higher same community NOI. As John indicated earlier, our capital recycling strategy continues as we successfully rotate capital into targeted primary markets on a tax deferred basis. So the more rapid pace of dispositions versus acquisitions had a short term negative impact on total Q1 2020 NOI. As we continue to recycle this capital into new acquisitions, we expect the accretive impact to be reflected in our financial results going forward. FFO for the Q1 was $5,300,000 or $0.12 per unit compared to $8,100,000 or $0.20 per unit last year. The decrease was primarily due to the lower NOI and an increase in finance costs related to a $1,600,000 loss on extinguishment of debt. G and A expenses also increased by $400,000 due to an increase in share based compensation and other payroll and benefit costs. AFFO was $6,600,000 or $0.15 per unit compared with a $7,500,000 or $0.19 per unit in dollars per unit in Q1 last year. The year over year decline was primarily due to the lower AFFO. This was partially offset by the inclusion of the debt extinguishment that I just mentioned and the inclusion of $400,000 of income related to the rent guarantee on the acquisition of Satori last year. Maintenance capital expenditures increased by $200,000 over the prior period due to the acceleration of spending during the second half of twenty eighteen, which lowered maintenance CapEx in Q1 2019. The REIT paid quarterly cash distributions of $0.125 per unit in Q1 of both years, representing an AFFO payout ratio of 84.8 percent in Q1 2020 compared with 66.5 percent last year. The higher payout ratio obviously reflected the more rapid rate of dispositions versus acquisitions to date. The rate will come down as we continue to deploy funds in the future. Turning to our balance sheet. Our debt to Brentwood value ratio at March 31, 2020 was 49.4%, below our long term target of 50% to 55 percent. Following the 4 property builds we completed subsequent to quarter end, debt to GBB has dropped to 47.1%. As John mentioned, our current total liquidity is $77,100,000 That includes cash and cash equivalents of $6,300,000 $35,800,000 of borrowing capacity under our credit facility and $35,000,000 available under a revolving line of credit. As of March 31, we had total mortgage notes payable of $405,000,000 excluding the credit facility with a weighted average contractual interest rate of 3.9 percent and a weighted average term to maturity of 9 point for the years. Total loans and borrowings at quarter end were $559,000,000 and 81% of the REIT's debt was fixed or economically hedged to fixed rates. I will now turn it back over to John for some closing comments. John? All right. Well, thank you, Susie. As you can see, we plan to emerge from the current economic health crisis in a strong competitive position. The last couple of months have been a very difficult time in the United States, but there have been some positive developments. More recently, we are encouraged to see that states we operate in are beginning to reopen their economies. However, we will not attempt to predict how long the crisis will last or how impactful it will ultimately be to the REIT. We will continue to monitor the situation very carefully and respond as needed. In the longer term, the outlook for BSR RE is highly positive. The multifamily real estate sector is an attractive asset class that has outperformed most other investments during this crisis. Our primary markets have long established strong trends of population and job growth that are well above the national average. Once this crisis ends, we believe the economies will resume a solid growth trajectory. And we will continue to increase our exposure to these primary markets through our capital recycling program in the months ahead in order to drive unitholder value. That concludes our remarks this morning. Susie, Dan, Blake and I would be more than pleased to answer any questions you may have. Operator, please open the line for questions. Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Thank you. Your first question comes from Brad Sturge with IA Securities. I guess just maybe starting out with what you're seeing in terms of market rents. Have you seen any impact so far in terms of change in market rents? And how would you compare the REITs in place rents on average to those market rents? Brad, this is Blake. Good to talk to you. As of right now, as you know, we're on LRO and RealPage, which is a system that we use for revenue management. And as of right now, if you compare since the virus, which I would say 1st April hit into right now, we have not seen a big move at all. Basically, they're flat in every MSA that we're in. So no, we have not seen a lot. I feel good about where our in place and rents are and where we've been adjusting. We look at those every day and I have not seen and our team has not seen a big adjustment. And in terms of the, I guess, the gain to lease opportunity when you're moving your in place rents to market on turn, is that still I guess was that in the sort of 3% to 5% range, if I recall correctly? For the new leases? You're talking about new leases, we're right. New leases, yes. Yes, for new leases. When we start increasing leases right now, we're not doing rental increases. You saying that when it opens up or what Yes. On a vacancy or on a turnover, what type of paying the lease can you get from in terms of the previous in place rent versus where the market rent is? Yes. Right now, we're not increasing leases. New leases. New leases right now. Okay. We've stopped that until the COVID, we see more direction about where it's heading. Okay. Makes sense. In terms of the capital recycling program, would you have assets on the market for sale right now? Or are you waiting until later in the year? I'm sorry, Brad. You cut out over here. Could you repeat that question? Do you have in terms of identifying additional assets for sale, do you have assets on the market right now being market for sale or not at the moment? As of today, I'd say that we have we've kind of shifted our position to not openly marketing assets. With that said, as we announced earlier in the year this is Dan, by the way, Brad, good to talk to you as well. As we announced earlier in the year, the company's strategic direction is to rotate out of some non core markets. In those markets, we have potential transactions in various stages. I don't see a lot of open marketed deals, and I think VSR is probably going to follow suit in, call it, March 15, maybe the next month. And just generally speaking, like from a valuation perspective, I know we're in early days here, but have you seen much of a change in terms of asking price in the market from a cap rate or a price per door perspective? We see a little bit of a pullback on asking prices, but really it's a mixed bag. When we look at acquisitions in the markets we're looking at, we're seeing buyers either underwriting perhaps a little bit lower economics on collections, with similar cap rates as pre COVID or in the alternative buyers underwriting more aggressively for year 1 year 2 year 3 rent growth and underwriting at the same cap rates. And I think that you can depict that when you look at the whole period of any multifamily transaction. The impact of a 2 to 6 month slowdown perhaps in collections or some wackiness in margin underwriting is de minimis relative to a 7 10 year hold. So with that said, we really haven't seen much movement in the economics or cap rates on the bid ask. Got it. Okay, great. I'll turn it back. Thank you. Thank you very much. Your next question comes from Matt Logan with RBC Capital Markets. Thank you and good morning. Hey, good morning, Matt. Good morning, Matt. Just following up on some of Brad's questions. Could you give us any color on the leasing velocity in April May? Maybe just sort of the quantum of move ins versus move outs and how you're adapting to contactless leasing? Sure. When you look at from April to May, it would probably be better to look at from March to April. But I will I'll give you an idea in April. We had 828 leases and 323 new and 505 of those were renewals. Compared to looking at March, we had 685 lasers and 337 of those renewed, 347 in renewals. So we had a really good uptick in our leases from March to April. And May is starting out very looking very good too also. The velocity of the leases, when you look at our move in, move out ratio, I think we stated in our press release that we had a plus of $15,000,000 for April if you take out the lease ups. And if you really look at that, what that equates to is looking at last April, we had a minus 28. And in 2018, we had a minus 9 percent in April. And we gained occupancy every month this year. It's a long street pass as we went public. And our average increase on lease ups is 17.5 per month per the month. So what we're seeing is our new prospect leads year over year of 11%. So all of these metrics that we're looking at are very positive and we continue to see a pent up what I think now that things are opening up, we're seeing a pent up demand for leases. So all these numbers added together, when you look at the number of move ins we had, which we had 311 move ins in April, All tied together is pretty positive news for us. And anecdotally, would you attribute any of that demand from tenants shifting from Class A properties to Class B properties? I don't know. I don't have enough of a sample size to be able to tell you that right now. We're looking at these numbers daily and really try to see if there's any trends or anything that we're looking at. And at this point, there probably is some of that, but I'm not willing to say that totally right now. I mean, one thing in finishing the answer to your question, we have learned is we have the technology in place to begin with to do virtual tours and self guided tours. But some interesting stats that really have kind of opened my eyes to this is that in April, we conducted 6 80 virtual tours. And we had a closing ratio on those tours of 34.9%. Well, 33% to 35% is really good in the industry. And we conducted 401 self guided tours and we had a closing ratio of those of 48.6%. And we're starting out May along the same lines. So one, we were in place, we could hit the ground running with the technology side because we kind of feel like we're trying to say it has to be curved on that. But also, it has helped our closing ratio. So interesting, it opened our eyes and we'll see if it continues. But I do think it's something that's going to be looked at internally on our side going forward. Hey, Matt, I'd like to add on to something in regard to your original question in regard to the drop down. You may have seen some of the Class A REITs that have lost some of their occupancy And BSR were primarily just had been very steady with our occupancy. And from what I would just depict from some of that is absolutely that's really one of the things that we hold dear about our workforce housing, the B plus type of apartment units is that we do believe that this is a sweet spot and a very affordable rental units that we have available. And that I'm not going to say that that is what's happened as Blake said, But I think if you just put 2 and 2 together, that's it's kind of what I would probably assess. Thanks, John. Appreciate that commentary. Maybe just looking at the margin profile going forward, do you expect any of the decline in potential turnover may offset higher operating costs from things like cleaning or other operationally intensive activities? Well, Matt, yes, this is Susie. You yes, I mean, you would see some small declines in expenses related to turnover, right? But as far as margins go, you also have to remember that we're not hoarding late fees now. So we think we will see some pressure on our margins at if this continues into the 3rd Q4 where we're not hoarding late fees with a smaller decline in turnover costs. And Matt, we monitor closely the amount of work orders that we have out and we monitor the what I'm looking at now is the difference in now we're doing emergency work on this. That's all that we're doing at the current time. So we've been comparing the actual work orders that are called in against what are completed. And that's been shrinking. We've been completing more and more, which tells us that we're not having as many emergency work orders, which in turn is not going to shrink our R and M or some of our turnover costs quite as much as on a go forward basis each month, which I'm happy with because that means that we're not going to have a lot of once this opens up and we have a little more turnover, we're not going to have a lot of deferred things that we need to do. Any sense on the quantum for potential increases in costs over the next couple of months? So no. Right now, I mean, we right now, like I said, we would expect more of a decline in operational costs if we have less turnover, which we've seen. Again, our concern more is on the revenue side and being able to continue to charge late fees, which we're not right now. Got you. And maybe one last question for me and I'll turn it back. If there's any commentary that you can provide on your high level expectations by market, whether that's Dallas, Houston or Austin, would be great. I think your high level expectations for Houston and Austin. In terms of performance in rent collections, what do you I guess maybe just bottom line, the combination of rent collections and potential increases in vacancy. Well, yes. I mean, obviously, it's hard to predict those things depending on how this COVID goes. But I will say this, I think it's pretty obvious when you look at it. I live in Dallas, as most of you know, it's one of the that along with the Texas cities that really opened up in terms of leading the way in restaurants, employment, everything that's going to be taking place. So I feel good about that. And based on where our collections are right now and what we're seeing early in May and all these factors roll together, I feel like that at this point right now, we should stay fairly stable. But with the caveat that we all know that with this COVID situation, it could that could change. But right now, all of our indicators have been positive. Well, I appreciate the commentary. That's all for me. I'll turn it back. Thank you. Thank you very much. Your next question comes from Yash Sankpal. Please start by stating which company you are with. Hi, Laurentian Bank. Good morning. Hi, Yas. Hello, Yas. So just want to think in terms of how you think about your payout ratio and leverage going up as you recycle your portfolio and at what point you think, okay, now this is how far we want to go and from here on we will try to just focus on internal growth instead of capital recycling? Hello, Yash, this is John. And we have mentioned and had said that we had approximately $350,000,000 worth of properties that we thought that we would be selling this year. The COVID situation has impacted the whole market. As Dan was saying before, things have pretty much grinded to a halt except for those deals that had been under contract that may have gone out of contract that may still be looking for some type of solution for the near term. However, Dan mentioned too that we're still end up working with our sales that we've been going through. I can't really talk too much about where we are in the process of those sales, but they are in different phases and stages within the process of selling. And we had, as Dan had mentioned, has discussed with all of us, is that we've selected buyers who have performed on all of the sales that we had contracted for in 2020. So we've had 5 properties that have come through and Dan had and his team selected the typical or the type of buyer that we felt was strong and that would follow through with their contract. And they did even in this most difficult time and environment. And in terms of the stages of where we are, we're going to continue to look to recycle and cycle our capital back into the primary markets as we go this year as planned unless things start getting worsening. Okay. Dan, do you want to add? Yes. And this is Dan. I'll add to that a little bit. So I think in the past, we've kind of discussed where we see our ideal leverage just to fall at anywhere between 50% 55%. And looking at where our leverage sits today at 46%, 47%, We think we've got a little bit of room to run, call it $100,000,000 in fair acquisition powder and AFFO generation on acquisitions levered at 50% rates to generate that GAAP in AFFO that's been created by the dispositions and the acquisitions outpacing acquisitions in the past year and a half. So you can apply that at some percentage of that $100,000,000 at some percentage of AFFO return, but that's where we see the opportunity and that's where we're going to look for opportunities looking for. Okay. Thank you. And in terms of occupancy, given what you know at this point and your gut feeling about your business, do you think your year end occupancy would be higher or lower than where it is right now? As I said earlier on that, it's a really tough question. As we look at it right now, I discussed earlier, we have missed any in the last 4 months. And obviously, I'm looking at a lot post COVID, which really starts in April for me. And we netted up and had a really good April. And we had a April compared to the last 2 years was actually higher on a same store basis. So I feel at this moment, I feel good about where we are on an occupancy basis. Now in terms of netting up, I think that's going to be totally or netting down, that's going to be a function somewhat the next phases of the COVID. If the states we're in continue at the pace they're at right now in terms of opening up, which as I said forward is ahead of many other states in America, aside from Jordan. And I would feel good about our occupancy staying the way it is or it's ending up somewhat. If we haven't turned for the worst on that, then that could be different. But right now, all our signs are pointing toward stability. Okay. That's good. And one more question for Susie. Your Q1 NOI margins, I thought last quarter you were saying that you will be shifting some of your G and A cost into your operating property operating line. Is that still true or you guys have decided to not do that? Yes. Hey, Ash. Yes, we've always included a portion of our G and A in property operating expenses. And yes, those expenses continue to increase throughout the operating expenses as we sell more properties than we're buying. But then, of course, it's going to flip the other way when we have we're a net acquirer of assets. And at that point, then the G and A starts to go down drastically. Okay. Yes. And Josh, this is Dan Overstreet. And I want to hit on the question that Blake answered previously. Because right now, I mean, it is very early to be able to determine whether BSR will experience higher occupancy in December than it experiences in March or April. But when we look at our markets and we look at the consumer behaviors right now, it's evident that the consumers are moving more to an online review, an online lease audit or lease walk and online applications. And I think it's important to note that BSR is currently ranked, I think, the 5th highest online reputation assessment score of the public REITs that operate in the United States. That's one key, I think, tailwind for BSR. And then if you dig into just supply and demand functions in our markets, if we're talking about the 3 core markets in Texas, Austin, Houston, Dallas, each of those 3 has experienced positive absorption in the past. And on a look forward, while we were somewhat concerned about the supply metrics in those markets, As can be assumed, anytime you have some event like the COVID crisis, the new developments tend to fall off by I would say 50% to 60%. And that's not uncommon to what we've seen in the past. It's not uncommon to what we're seeing in the future. So when you look at those markets and their projected, I'll say, end user migration, Each of those three markets is, I would say, in the top, I would say Dallas and Houston for sure is projected to have the number 1 and number 2 fastest growing populations between 2020 2028. Houston, I think, has been it's the 4th largest MSA. It had the 2nd highest population growth or it's projected to have the 2nd highest population growth between 20202029 at 1,200,000 people. So we're continuing to see people flood into our markets. Those markets are currently open, as Blake mentioned, and supply is dropping off. And those markets already had a gap of net absorption in the past 3 years of in Houston, it would be 30,000 units. And in Austin and Dallas, very similar numbers. So while it's too early to think about BSR and where our small town of people that go to bed with us each night, how many of those units and suites are going to be occupied in December. I think from an overall health standpoint, our 3 focused markets in Texas look fantastic right now, relatively speaking. And we see tailwinds relative to other property operators and other MSAs. Thank you. Your next question comes from Sairam Srinivas. Please start by saying what company you are with. Hey, this is Sairam from BMO Capital Markets. Hey, guys, thanks for taking the call this morning. My question is around the Satori leasing. Could you give us any color on how the leasing is going on and how it compares to your underwriting assumptions? Tory? Sure. Blake, do you want to acquired the property, it was roughly a 37% occupancy. Lisa, just want to talk. Yes. So we acquired properties. It was roughly 37% occupancy. And this enabled us to really kind of go at attack it. And what we did was we went to a philosophy, some higher rent rates. And this helped us in terms of getting the higher rates, but it did not do the leasing velocity that we wanted. So in January, we kind of changed our course and began to see higher velocity by sacrificing rates a little bit. And this really took off and the impact is now showing a more of a traditional lease up with a tire leasing velocity that we've got going right now. And at this point, we're leased at 79.66% and it's performing as we expect. We expected as of April, it was at a breakeven. And we feel like that we hit the sweet spot and actually have been able to increase the rents back on some of the floor plans in the last couple of weeks. So overall, we're pleased with the asset. Our leads and our move in, move out and have really continued to shoot up. We've got 37 pre leased units right now. So it was a matter we made a business decision on the rates going in and we changed that in January and it changed the trajectory and now we're on a really good day. Yes. And this is Dan. And that's really precisely the purpose of the rent escrow. It allows us to attack rates and confirm those higher rates and then treat the property as a traditional lease up that offers standard concessions. And as Blake pointed out, our occupancy right now is ahead, I would say ahead of our original expectations on lease up velocity and stabilization. And as a result, we were probably originally anticipating a stabilized occupancy and a kind of a claw up and burn off of concessions in October of 2020. Now I think we're prepared to push that back to more of an August date. So we like what we see. Thanks, Megan. Dan, those good color. Probably related to leasing, I had another question on something which I think Blake clarified earlier in the call and this is on the new leases. Blake, I know you mentioned that you signed about 300 new leases in April. So like were you saying that there's no rent left on the new leases? Like were they like in line with the previous rent? Yes. Right now, we are not on new leases. We are not doing rent increases right now. Okay. I just thought I wanted to clarify that. And my final question was, it's not a operational question, I guess, and that's to the late fee. I know you guys mentioned that there's no late fee right now during the pandemic. But generally, when it comes to, let's say, if a tenant goes ahead and has not paid the lease on date, how long would you consider the tenant to be on late how long would you consider tenant to be late versus a total like a default on rent? Like what is that period generally? So you're asking how long they have to pay their rent before they're assessed a late fee? I'm basically going to wonder if how long would you consider the tenant to be late versus to a point where you would say, you know what, this tenant is in default? Yes. RIN is due on the 3rd of the month, correct? So any payments made after the 3rd of the month, we would assess a late fee normally, but we're not doing that right now. Right. And let's say, would it be like, let's say, 15 days after that you would consider that this guy is in default? Or would you like would you still consider that to be late? The third day, it's in default. But it's probably a good time to say this. We are under in all of the areas we're in, we're in, we're under eviction moratorium. So we can't evict residents at the current time. And so that throws another little occurrence into it. But at this current time, that will be a bench, 24 of our units across the portfolio. So as far as being delinquent, I think we answered your question. I mean, is that correct? It did. Thanks, Blake, and thanks, Suzy, for the color as well. I'll turn it back. Okay. Thanks. Thank you very much. And your next question comes from Kyle Stanley with Desjardins. Please go ahead. Thanks. Good morning, everyone. Hey, good morning, Kyle. Hello, Kyle. So just going back to turnover, can you speak to how that's been trending over the last little while? I mean, I assume it's coming down a bit, but just to be curious to see how it is now versus kind of historical? Hey, Kyle, display. It has if you look at our preliminary April numbers, it is going down. It's the lowest it's been for us. Obviously, in the last since you can keep track. So it is going down, which is not or in the past, I would say, Kyle, it's probably about a 15% to 16% decrease in what we have been running from a historical standpoint. And that's through April, so that's very preliminary. But obviously, if you think about what I said to begin with in comparing April to March. I mean, we signed 505 renewals in April compared to 347 renewals in March. So and our occupancy is staying right on top of March, April and May is heading in the same direction. Okay, great. And this question is probably for Susie. Would you be able to speak a bit about your bad debt expense, Maybe kind of how it's trended over the past few years and any changes you've seen early on in this new COVID environment? Sure. Yes. That's something we're usually very proud to talk about and still are, normally about 1% of revenue. We don't think that changed as part of the COVID environment right now. We have set up people on deferred rent plans. I think it was 142 in April and then 14 more in May. But they're on a payment plan and they're making payments as scheduled. So we have no reason to believe we would have to write that rent off. So yes, 1% of revenue is still a great number for us. Yes. To tag on to that, we really I've been watching and keeping the operator and we've tried to be focused on how many people are really out there that have paid us that we and what Susie is saying is exactly right. I think we're on top of that and our bad debt should not be any more than that. And right now is what it shows. Because one thing I would like to add that we talked about earlier, but we collected 93.4%. But if you look at the what we collected in April, As of 11th, we collected 91.5%. So we've collected 2% more of the same store portfolio. If you just look at April to May, which is a good sign, which kind of ties into Susie's comments about the bad debt. And I think another thing that really is sticking out with me is that right now we've collected 2% more money through the 11%. And also if you look at the amount of deferrals that we've been at, that 14 is quite a bit less than what we had at this time last month. So those two factors together really play into our thinking about the bad debt. Okay. Yes, the deferral request seem to be pretty minimal so far. But are you seeing any markets or assets that are more impacted by a deferral request? No, that's the interesting thing. We really monitor that hard on a daily basis, actually, breaking down by MSA and by property. And there is not. There are frankly, the if I think back to the deferral that we had, there's not any property that is alarming or it sticks out at all. And I really that's was the first thing I would have thought, but it hasn't been up to this point. Okay, great. And just one last one for me. Are there any early indications on how municipalities, I guess, in particular in Texas, will be treating property tax assessments kind of in light of COVID? Sure. This is Dan. And I think a lot of our colleagues have made similar comments. Real estate tax assessments are made somewhat in arrears. So the our estimate for 2020 tax assessment shouldn't change. We really have no intention of changing it at this time. Where we do see I'll see the tailwinds in tax assessments in Texas would come in 2021 when those assessing bodies look at the impact more deeply to individual properties resulting from COVID and then reappraise and reassess. With that said, I'll remind the group that Texas passed their statute last year capping real estate tax increases in any municipality at around, call it, 3% to 3.5%. What we did see is some areas of Texas, particular counties try to get ahead of the effective date of that law, which was 2020, which was this year. So if I'm speaking specifically to Harris County and Houston, we saw, as far as the market is concerned, out of the, I'll say, the $20,500,000,000 of garden style apartments, that's 1 to 3 story A, B and C apartments, We saw a 17.2% increase in that field in 2019 from assessments. When we look at the assets that we sold in Longview, in Gregg County, Texas, we saw a 59% increase or 57% increase in the assessed value of those assets. So had we held onto those assets, we would see I'd say we'd have a much higher hill to climb in our appeals of any of those assessments. So with that all said, we think our estimate now is pretty sound. We don't expect much movement in 2020 positive or negative from the impact of COVID oil. Now in 2021, we would expect to play a little offense on tax appeals and assessments. Okay, great. Thanks for the color. That's it for me. I'll turn it back. Thank you very much. Just a reminder, if you're using a speakerphone, please try to keep the environment the noises around you a bit more quiet, so we can hear you very clearly. And your next question comes from Brandon Abrands from Canaccord. Hi, good morning. Hi, Brendan. Hi. Maybe just sticking with new leases over the past, call it, 8 weeks or so, have you noticed any differences in the quality of the tenant applications, let's say, in terms of income or credit scores that you're typically used to? And also just on that point, have you had to adjust your application or credit criteria just to factor that many people are out of work right now at least on a temporary basis? And is that factoring into your approval process? Good question. No, we have not adjusted our credit criteria. We just have not and it hasn't affected as of this time our ability to process applications. From a standpoint of what we're seeing, the general and I'm going to stop short a little bit on this because you're asking a question that I'm trying to get my hands around. We're not completely closed out in April. And the but I have asked this internally with our group and our VPs of operation. And they're saying they are seeing somewhat of an uptick in applications and people that are filling those out. But having said that, I'll have a better handle on that once we get April closed out and obviously into May June because I'm curious myself to see if the early returns are going to continue. Yes. Okay. That's good to know. And maybe I'll follow-up in a few weeks with you. And just quick question before I turn it over. Just to clarify, the 4 properties disposed of after the quarter, have those actually closed? Yes. Yes, those are closed. Great. Thank you very much. Thank you, Brandon. Thank you very much. Your next question comes from Matt Cormack with National Bank. Please go ahead. Hi, guys. Hi, Matt. With regards to the stimulus checks from the government, to what extent do you think that has kind of cushioned the blow for some of your tenant base? And obviously, I think there's a new proposal out to further stimulate with checks potentially going to families across the country. But how do you see government intervention at this point as being kind of a stabilizing impact? Sure, Matt. This is Dan Oberstein. So let's take Texas as a good example and Oklahoma and Arkansas and the other states are similar. But when combining the unemployment benefits with the recently announced federal unemployment benefits that were part of the CARES Act. Renters across a wide range from C to A actually are better positioned to cover monthly rent as well as daily essentials. I think what's interesting about it is an individual earning $58,000 or less who is recently unemployed and filing for unemployment in the state of Texas would receive more unemployment benefits from the combination of the federal and state unemployment benefits then they would be earning an income prior to their employment termination. Now the existing bill for federal aid, which accounts for $600 a month of that, call it, dollars 4,858 a month at that $56,000 level set to expire in July 31. And as you did mention, I believe the House came the United States House of Representatives came out with a plan yesterday to extend those federal benefits through December 31. I would say generally from a market standpoint, it's again too early to tell whether we've moved to somewhat of a subsidy. But it certainly doesn't hurt when your resident profile at, call it, dollars 900 to $1200 a month rent level is better positioned to pay rent and essentials being unemployed in the month of March or April than they were previously. Yes. No, that makes sense. Discretionary spending is down as well, if that makes sense. But I'll add on to that too is that what I was and Dan and me talk about this quite a bit and we all do internally. But I was thinking that April, obviously, it could help once the stimulus checks hit in. But after the stimulus checks were, I was thinking, okay, where will we be in May after that? And the early returns, as I've told you guys, is that our collections are ahead where we were in April. And we've had less deferrals. And the stimulus checks have run through. So or I think they've run through some. So your question is one that is, I guess, the early returns for me to say that from our standpoint, we're not able to know how many people are unemployed in our properties. But the early returns would indicate that there we are in the right spot in America right now to withstand this. Right. No, that makes sense. And also the supply destruction that you hinted at earlier, Is the view I mean presumably that's going to take a while to come back? Or is it COVID related at this point? Or is it lending? Or what's driving the ultimate reduction in supply? And if that starts, obviously, completions will happen, but maybe on a delayed basis? Yes, I think it's a little bit of both, Matt. The COVID related pullback in supply is certainly expected. I think you had somewhat of a frozen credit and equity market for a period of time. So if you didn't have your equity and your debt lined up prior to March 11 to 12, It's very I'll say it's look, it's just a matter of deployment of capital. It's impossible to move forward with your planned development to have a completion by the end of 2020. And we're seeing a lot of, I'd say a lot of early stage developments pull back, and that certainly was related to COVID. I think a little bit might have related been related to oil concerns as well. I think the one positive thing we see about just the general development environment is we were experiencing, I would say, a 2 or 3 year sustained period of labor cost increases in the range of 6% 8% a year. And on a look forward, there could be some opportunities, I'll say, to enjoy increases that aren't at 6% to 8% in the next, call it, 12 to 24 months, which certainly benefits our redevelopment platform on any of our suite improvements and our use of NOI generating CapEx. Okay. That makes sense. And with regards to and I guess this is for Susie. On the lending side and I apologize if this has already been answered, but the availability of mortgage debt LTVs, I mean you guys are in an enviable position given the duration of your mortgage debt. Debt. But how is that evolving in the U. S. At this point in spreads generally? And I know the underlying has come down, but what would all in costs be? Yes. And I can let Susie speak a little bit to how we view debt internally in our viewpoints of our termed out facility, or how we want to treat our existing facilities. I'll generally talk about the agencies and life insurance companies. When we think about the two sides of the coin, let's call it pre COVID and post COVID, pre March 12, March 11, we were looking at agency spreads of $195,000,000 to $225,000,000 over benchmarks of the, call it, the 5, 7, 10 year treasury. In a post COVID environment, those agencies are pricing out at, call it, 295 to 305, a little bit higher in some cases. So that turns into an all in rate increase of anywhere between 25 basis points to 125 basis points. So spreads have certainly credit spreads have certainly widened out. Some unique aspects of those agency debts that have changed. Number 1, in a post COVID environment, those agencies are going to put a 4 on your benchmark, let's say, a 4 on a 10 year of 75 bps, 90 bps. And that will certainly impact your all in effective rate more so than the spread increase. The next, I think, unique change that we've seen in agency debts is their requirement of reserves. In a pre COVID environment, we saw much heavier use of full term IO fixed rate debt and I'll say a smaller requirement for reserves related to taxes, insurance and replacement reserves. In a postcode environment, we're seeing quotes for 6 to 9 months of principal interest and taxes and insurance reserves. We're seeing 6 to 18 months of P and I. We're seeing 6 to 12 months of random reserves related to collections or rent deferment. And I think the one key differential that we're seeing today versus a pre COVID environment is in a pre COVID environment, in order to lock in your constant on your debt against your cap rate on your asset, you'd execute some form of an early rate lock taking volatility of interest rates off the table. In a post COVID environment, we're not seeing the agencies rate lock very far really at all other than the day of close. So you're really dealing if you're using agency debt with volatility up through and to the day of closing on a transaction. As it relates to life companies, we're seeing a different treatment at on a loan to value, but we're looking the life companies are looking more towards a debt yield closer to an 8% floor as opposed to a 7.5% floor in a pre COVID environment. That, I'd say, moves closer to probably a 60% loan to value, so a borrower is not able to maximize their proceeds on their capital stack. So and the next thing we're seeing is just across the board fixed rate pricing floors between 3.75% and 4.25% fixed for the duration. Now as it relates to the commercial banking environment, I know that you all are all well versed on the corporate paper and the commercial banking environment, but we're seeing a little bit of a pullback in conservative loan to value ranges, similar to the life insurance companies. So 50 5% to 65%. Pricing range is between 4% and 4.5%. Susie, do you want to talk a little bit about how we want to treat our current debt facility? We're leaving in the flesh. Yes, we're fine. Given the current credit environment, yes, we're fine. And presumably though Go ahead. I was just going to say, presumably though, this may pose some problems for private guys that were running at higher leverage that could result in a buying opportunity for you guys at some point given your relative leverage? Yes, certainly. I mean any perceived pullback in pricing in our markets whether it's real or not, if you have fixed high term, high levered debt to be in a pre COVID environment, it's that much more opportunistic in a post COVID environment. I would point out now because we've danced around cap rates and constants on debt. When we think about a cap rate as just a risk over index like a 10 year, we're looking at I think we're looking at a risk premium right now of about 4.50 to 4.77 basis points. That's twice the average of history since maybe 1980s when this industry started to really develop and take place. So I think when an investor is looking at an unlevered cap rate against a benchmark comparative return and seeing that 4 50 basis to 500 basis point spread on cap rates. I think there is more of an appetite for a lower leverage deal. And I think that's probably why you're not seeing too dramatic of a pullback in cap rates for multifamily. Interesting. Last question for me on a different topic with regards to Satori. How should we think of the rent guarantee and how it would shift between sort of operating performance and the guarantee? And I can't remember what the term is on that guarantee as well or at least how much you have in escrow? Yes, Matt. So we use it now. It was $1,100,000 and it's been fully recognized at this point as we're adjusting for it in our AFFO. So at this point now, I believe Blake had mentioned earlier, we're looking to have the property stabilized on small vessels. Okay, perfect. Thanks guys. Stay safe. Okay. Thanks, Matt. Thank you, Matt. Thank you very much. Your next question comes from Dean Wilkinson with CIBC. Thanks. Hi, everyone. I'll make this quick. The 4 properties that closed post the quarter, Susie, can you clarify the gross proceeds received and how much debt was on those assets? Gross proceeds for the 4 that closed at $85,000,000 is that? 85, okay. And the debt that was against those? This is Dan. Without we'll have to get back to you on that. Off top of my head, I'd say the debt was probably pegged in. How to act? Yes. We're blanking out. We're both blanking We've got a number merge on our heads right now, but we'll get back to you with that answer. No problem. And would there have been any defeasement charges or anything related with the debt or would that have just really assumed by the purchase? That's a perfect question. So when we look at the properties we sold in Longview, we didn't see any defeasance on the retirement of that debt. But specific to Westwood Village, that property carried, I want to say, a 10 year Freddie Mac loan fixed at 4.58%. That's the property in Shreveport that we sold on January 30. The buyer in that transaction assumed that debt. And at the time of close, that debt would have been out of the money, somewhat significantly rather than compared to what the buyer could have gotten. As a result, I we'd peg the prepay anywhere between $2,600,000 $3,500,000 BSR took a discount to purchase price to an all cash deal that was, I will say, a percentage of that prepay, enabling the buyer to buy that property at a lower value than their original on cash amount. And I would say saving BSR a little bit of money to advertise a higher sales price in January and a lower net proceeds number, it was a good trade for BSR. Yes. No, that makes sense. It doesn't flow through the industry. And then in terms of the recycling of the $100,000,000 capacity that Dan talked about, I guess it's fair to say that in the near term, you're probably more a net seller than you are an acquirer. Should we be thinking about that $100,000,000 theoretical acquisition capacity being sort of a Q4 or perhaps into early 2021 as a utilization on that? I'm weighing my words carefully. Depending on the markets, is it an early 2020 to dependent on or is it an early 2020 deployment of capital sitting in May of 2020? I'd say we're moving into the middle of 2020. 2020, early 2021. Should we be thinking that, that pushes out into 2021? I would say that there's no we see no signal and that the pipeline for acquisitions or the properties that we like are gone. We see a very deep market. I would say in the last 1.5 months, if I'm looking at the stats internally, our teams reviewed 21 potential transactions totaling 7,000 suites with a collective asset value of 1,400,000,000 dollars That's an average asking price of about $67,000,000 a deal. Not saying all 21 of those pencil out, but given our percentage closing rate that we talked about in the past perhaps 1 to 2 of those have worked out. And if all we need to do at a $50,000,000 to $60,000,000 purchase price is pick up 1 to 2, I would say we see markets, but we're just going to proceed with cost. That sounds fair. Okay. And then but we're just going to proceed with caution. That sounds fair. That's it for me. I had it back. Thanks, everyone. Yes. And one more thing to that, Dean. I know you finished up, but we're seeing deals and acquisitions. It's a balancing act for us because we like to defer any gains associated with our sales through the use of the United States Tax Code Section 1031. So as of right now, with the sale of Longview, We don't we see a little bit of uncovered gain. And historically, we've covered every single we've deferred every gain that we've been able to realize or look at from a disposition. So, I'll let that speak for itself. Thank you very much. Mr. Bailey, there are no further questions at this time. Please proceed. All right. Thank you very much everyone. That concludes our call this morning. And thank you for your interest in BSR REIT and we look forward to speaking to you again this summer following Q2 financial reporting. In the meantime, remain safe and we wish you all very good health. God bless. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Thank you.