Good morning, ladies and gentlemen. Welcome to the MAA third quarter 2020 earnings conference call. During the presentation, all participants will be in a listen-only mode. Afterwards, the companies will conduct a question-and-answer session. As a reminder, this conference is being recorded today, October 29th, 2020. I will now turn the conference over to Tim Argo, Senior Vice President of Finance for MAA.
Thank you, Ashley, and good morning, everyone. This is Tim Argo, Senior Vice President of Finance for MAA. With me are Eric Bolton, our CEO, Al Campbell, our CFO, Rob DelPriore, our General Counsel, Tom Grimes, our COO, and Brad Hill, Executive Vice President and Head of Transactions. Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results.
These reports, along with a copy of today's prepared comments and an audio copy of this morning's call will be available on our website. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures, can be found in our earnings release and supplemental financial data which are available on the For Investors page of our website at www.maac.com. I will now turn the call over to Eric.
Thanks, Tim, and appreciate everyone joining us this morning. Results for the third quarter were ahead of our expectations. Cash collections on rents billed in the third quarter were strong, and October trends are the same. While we still have a long way to go in capturing full economic recovery, we are encouraged by the early signs of improvement evident in our third quarter results. Leasing traffic was well ahead of prior year. On a lease-over-lease basis, new move-in rent pricing meaningfully improved as compared to the second quarter. Overall, net effective rents were 1.8% higher than Q3 of last year, and average daily occupancy remained strong at 95.6%. As a result, we captured positive sequential revenue growth in each of our markets as compared to the second quarter. Demand is strong across our footprint and growing.
While we expect new supply levels to remain elevated for the next few quarters, forecasts for new deliveries and the trends for permits for new construction suggest moderation in deliveries beginning in the back half of next year and significantly declining into 2022. We continue to make progress on our new development pipeline, with construction and scheduled deliveries on track to our pro formas. Where we are underway with initial leasing, both our leasing trajectory and rents are in line with our expectations. We are in active pre-development work on several other new development projects that we hope to start next year. We believe MAA's strategy, with a focus on the Sunbelt region, uniquely diversified across both large and mid-tier markets and serving a broad segment of the rental market, has the company well-positioned to continue to work through the challenges presented by the current economic slowdown.
As the economy begins to recover post-COVID-19, we believe our markets will continue to outperform, capturing employment trends and a demand for housing that will be well above national averages. MAA is well-positioned for a coming recovery cycle. To our team of MAA associates, thank you for your tremendous work and commitment to our mission over the busy summer leasing season. You have again exceeded expectations and as a result, have us well-positioned as we head into next year. With that, I'll turn the call over to Tom.
Thank you, Eric, and good morning, everyone. The recovery we saw beginning in May and June continued across the portfolio through our busy season. Leasing volume for the quarter was up 11%. This allowed us to improve average daily occupancy from 95.4% in the second quarter to 95.6% in the third quarter. In addition to strengthening occupancy by 20 basis points, we were also able to drive new lease pricing improvement. Effective new lease pricing during the quarter improved 140 basis points from the second quarter to the third. All-in-place rents on a year-over-year basis were up 1.8%, and turnover for the quarter was down 2.7% versus last year. These improvements were supported by an increase in lead-generating marketing spending. We're pleased with resulting improvements in occupancy and new lease pricing mentioned earlier. We saw steady interest in our product upgrade initiatives.
During the second quarter, we restarted our interior unit redevelopment program, as well as installation of our smart home technology package that includes mobile control of lights, thermostat, and security, as well as leak detection. Year-to-date, we have installed 22,000 smart home packages and completed 3,300 interior unit upgrades. As noticed in the supplemental document, collections during the quarter were strong. We've worked diligently to identify and support those who need help because of COVID-19. The number of those seeking assistance has dropped with each month. In April, we had 5,600 residents on the relief plans. The number of participants decreased over time, and it's just 470 for the October rental assistance plan. This represents less than 0.5% of our 100,000 units. October collections are running slightly ahead of the good results we saw in the third quarter.
As of October 26th, we've collected 98.6% of rent billed for October. This is a 20 basis point improvement from what we saw on average for July, August, and September for the same day of the month. Including deferred payments for COVID-19 effective resident payment plans referenced in the COVID-19 disclosure, we have accounted for 98.8% of October billed rent. Leasing volume for October is on track to exceed last year. Effective new lease pricing for October to date is - 2%, a 30 basis point improvement from the third quarter. Effective blended lease over lease pricing for October month to date is 1.3%, a 50 basis point improvement from the third quarter. A high percentage of our current residents are choosing to stay with us, and our resident renewal and retention trends are positive.
October, November, and December lease over lease renewal rates signed at this time are in the 4.5%-5.5% range. In addition to the positive leasing trends, occupancy has also strengthened. Occupancy has improved from a low point of 95.1% in May to 95.7% today. Average daily occupancy for the month is 95.6, which is even with October of last year. 60-day exposure, which is all vacant units, plus notices through a 60-day period, has dropped from a high of 9.2% in May to 6.8% in October.
This low level of exposure also matches the same time last year and has us well positioned for the slower winter leasing season. I'd like to echo Eric's comments and thank our teams as well. They served and cared for our residents and our associates well, and have grappled with the constantly changing implications of COVID-19. They've also worked diligently to adapt to new business conditions and drive our recovery. I'm proud of them and grateful for their efforts and character. Brad?
Thanks, Tom, and good morning, everyone. Third quarter transaction volume picked up from second quarter, but still remains down significantly year-over-year. We expect the volume to continue to be slow into next year. Because of the desirability of our markets, we continue to see robust buyer demand for existing assets within our footprint. This strong demand, coupled with very attractive debt rates, has further compressed cap rates, and in some cases, is resulting in pricing above pre-COVID levels despite lower NOIs. We continue to expect our best buying opportunities on existing assets to be on properties in their initial lease-up, where we believe pressure is likely to continue to build through the winter. With that said, we've only seen a few lease-up opportunities come up, and pricing trends are mixed.
All cash buyers and strong sponsors with established agency relationships remain the most aggressive bidders, while leveraged buyers are having more difficulty obtaining financing on pre-stabilized properties. We do expect cap rates within our footprint to remain at historical lows and perhaps continue to trend lower, likely making acquisitions a smaller contributor to our external growth for some time. As mentioned last quarter, we expect our in-house development and our pre-purchase platform to be significant contributors to our external growth going forward, and anticipate starting construction on a number of these projects later this year and into next. While cap rates on acquisitions have compressed, yields on developments remain attractive. Rents and occupancy are holding up in our markets, and despite cost pressure in a couple of line items, especially lumber, developments continue to underwrite to a positive spread to cap rates on stabilized properties.
As shown in our supplemental, we have six development projects that are underway and all remain on budget and on time, despite working through some minor supply chain issues. Subsequent to quarter end, we started construction on the land parcel in the northern suburb of Austin that we purchased back in January. This 350-unit project should begin leasing in the first half of 2022, when we expect leasing conditions to be significantly stronger than they are today. While early reports show 2021 deliveries in line with this year's levels, data and permitting and construction starts show a material decline since March and point to a drop in future deliveries beginning late next year and into 2022, lining up well with the expected delivery of any new development we start. That's all I have in the way of prepared comments. With that, I'll turn it over to Al.
Okay. Thank you, Brad, and good morning, everyone. We reported core FFO of $1.57 per share for the quarter, which was slightly better than our internal expectations as operating performance, corporate overhead costs, and interest costs were all better than expected for the quarter. As mentioned earlier, stable occupancy, strong built-in effective rents, and continued strong collections supported the third quarter performance, while improving pricing trends position the portfolio well for the fourth quarter. As Tom mentioned, Excuse me. We have established a reserve for bad debts at quarter end sufficient to fully cover uncollected rent from residents not working with us on payment plans, as well as for a large portion of the remaining deferral program payments, though collections experienced for those have been very good to date.
As discussed in our release last quarter, we expected some pressure in property operating expenses over the back half of the year. The majority of the increase for the third quarter was related to growth in real estate taxes, insurance, and marketing costs, as well as impact on utilities costs from the Double Play bulk internet program, all discussed last quarter. A couple of unusual items affecting the quarter were an unexpected increase in Austin tax rates related to a recent approval by the city to bring forward funding for a light rail system, which was approved during the quarter and actually goes before voters next week.
We did incur about 750,000 of unexpected storm cleanup costs during the third quarter, which also contributed to the growth. Our balance sheet remains strong, with low leverage and significant capacity from cash and remaining borrowing potential under our line of credit, combining for $980 million of capacity. We funded $50 million of development costs during the quarter, with the expectation of funding around $260 million for the full-year, including the purchase of land parcels for future deals. As Brad mentioned, the acquisition environment remains challenging, we expect the majority of investment opportunities over the next few quarters to be in-house development or pre-purchase development deals, which both have long-term funding commitments. We expect our development pipeline to increase over the next few quarters but remain well within the risk tolerance ranges we've always held.
We completed a successful bond deal early in the quarter, taking advantage of the low rate environment to issue $450 million of 10-year notes at a coupon rate of 1.7%. This funding was ultimately used to repay some secured debt maturing later this year, as well as prepay a $300 million term loan maturing in 2022. We have no remaining current maturities or future maturities with low prepayment costs, so we don't anticipate additional debt or equity funding needs for the remainder of this year.
Finally, as reflected in our release, though recent trends have been encouraging, there's still significant uncertainties remaining. Thus, we refrain from providing guidance for the remainder of the year, but plan to revisit the decision as we prepare for our fourth quarter release with the expectation of being able to provide guidance for 2021. That's all that we have in the way of prepared comments. Ashley, we will now turn the call over to you for questions.
We'll take our first question from John Kim with BMO Capital Markets. Please go ahead.
Thanks, good morning. Al, you just mentioned that there are some uncertainties remaining that basically allowed you to refrain from providing guidance for the year. Can you just elaborate on what some of those uncertainties are at this point?
Yeah, John, I appreciate that question. I think as we look at whether there's continuation of certain government programs, the recent potential rise in COVID-19 cases in our region, the timing of reopening plans that continue in our region related to these things. All of these things continue to bring risk. As we mentioned, we are very encouraged with the trends, but just given that it was one quarter remaining in the year, we felt it prudent to refrain from putting that out right now. We hope to be, and feel like we'll be in position assuming continued stability in overall marketplace and environment to put full guidance out for 2021.
With your cost of capital coming down, at least on the debt side, with your recent debt raise of 1.7%, how does this change at all as far as how you underwrite investments?
I don't know that it changes. We continue to underwrite in a similar manner. I think what it does is certainly provides the potential for very strong yields and gaps and spread capture on some of these new development deals that Brad, whether they're in-house development or pre-purchase. That's why we talked about the remaining, the capacity that we have, and also we've talked about in the past, John, that we have a potential on our balance sheet to invest an additional $750 million before really impacting our leverage levels. I think we would say that, and I talked about in the comments this morning, we do expect over the next couple of quarters our development pipeline to grow because that's where the opportunity is. As you point out, those six yields that we're putting in place compared to that 1.7% debt funding cost is very attractive.
Great, thank you.
We'll take our next question from Nick Joseph with Citi. Please go ahead.
Thanks. It's obviously been a very different operating year thus far, so I'm wondering how you're thinking about seasonality versus the normal patterns and how that impacts your operating strategy over the next few months in terms of focusing on occupancy or rate.
Yeah, Nick, it's Tom. I think what we've enjoyed thus far, frankly, is pricing that has been unseasonal, as you mentioned. Normally, our effective new lease pricing peaks late July. Thus far, it's peaked late August, or excuse me, late October with steady trends as it goes. I would expect as we move into the fourth quarter that we would see a seasonal fall off and sort of demand as we usually do, and that new lease pricing will drop modestly, and that we'll be able to hold on to in the range of our current level of occupancy.
That said, what I think will continue to grow, which are renewal rates that were effective in the third quarter or just 3.8%, I think we'll see renewal rates continue to improve as we move through the fourth quarter. That's not something that is usual, that seasonal, and that we will see those in the 4.5%-5.5% range for the fourth quarter.
Thanks. Just maybe specifically on D.C., it's a little unique relative to the rest of your portfolio. What are you seeing on the ground there, and are you seeing any concessions?
I'm sorry, Nick, I missed it. Which market you were asking about?
Washington, D.C., the greater D.C. area.
Oh, yeah, absolutely. Yeah, D.C. is a little bit different. Honestly, occupancy there is strong at 96.4, but pricing's been weak. As we go around the horn, we're seeing concession levels in D.C. proper at two months on stabilized Pentagon City, Crystal City, about two months, Tysons Corner, two months. Alexandria, pretty similar. Maryland and Northern Virginia are a little bit stronger, but both seeing a month free in those markets. D.C. is one where we're stable on occupancy, but pricing growth remains elusive at the moment.
Thank you.
We'll take our next question from Austin Wurschmidt, please, with KeyBanc. Please go ahead.
Thanks, everybody. Just curious, you referenced permitting levels declining. Fundamentals have been relatively stable and supply is expected to fall off. I guess, why do you think there hasn't been a pickup in construction activity at this point? Anything on the supply chain challenges I think you referenced or difficulty getting financing? Then just curious if there's any offsetting items from the pressure on lumber prices that Brad referenced and where you think kind of construction costs are versus pre-COVID-19 levels?
Yeah, Austin, this is Brad. I think certainly in terms of construction costs, we've seen a strong rise in lumber, but it's been pretty volatile. We've seen a strong run-up since COVID. We have seen some relief there, in the last 30 days or so, but it's still a pretty big unknown in terms of our construction costs. We're really not seeing any other line items at the moment that are providing relief or offsetting some of that. It's just not happening at the moment. In terms of not seeing construction tick up based on the permitting data we're seeing, I think financing is certainly a big part of that. When we started out of COVID, equity was a little nervous. Second quarter was tough as equity folks backed out of a number of development deals.
That's kind of since come back. Now, I think the difficulty is more on the construction side. Getting construction loans, that's very difficult for folks at the moment. I think that's giving us some additional opportunities on our pre-purchase platform just based on the way we've structured that. I think fundamentally, our markets continue to underwrite well for new development. You've got certainly the construction cost pressure a bit. We see some mitigating circumstances there being the lower supply that we're talking about at late 2021 and into 2022 that the permitting data is showing. We feel good about anything that we are developing today and putting a shovel in the ground on today. I think the financing environment for a number of folks out there is a little bit more difficult.
How robust is that pipeline of pre-purchase opportunities? Has there been any change in pricing there? Do you think as the transaction market in general loosens up, that maybe that spurs a little more activity in the construction market?
Perhaps. In terms of what we're seeing on the pre-purchase side, again, we're evaluating a lot of deals. As equity backed out in the second quarter, we had a lot come forward to us. As I said, our ability to provide the debt on our pre-purchase platform is kind of a differentiator for us. A lot of the established developers that we're doing business with, they have the capacity and the ability to go out and get debt. We just provide a better option for them. We're seeing a lot of opportunities there. We've got two that we hope to start in the coming quarters, and then others that are coming in daily for us to evaluate. We're optimistic that that platform continues to perform and to provide opportunities for us.
Austin, this is Eric. I'll add to what Brad's saying that we've got pre-purchase opportunities or pre-development opportunities, I'll say, that we're working, including both in-house and on the pre-purchase platform that Brad mentioned. We're working opportunities that we have tied up in Tampa, Raleigh, Denver, Phoenix. We're also actually looking at opportunity in a new market for us of Salt Lake City, which we hope we can start on next year. We've got a number of things we're looking at.
Great, appreciate the detail. Thanks, everybody.
We'll take our next question from Neil Malkin with Capital One Securities. Please go ahead.
Hey, good morning, guys.
Hey, good morning.
First off, congrats that your collections are remarkable, as if there is no pandemic. You guys are obviously doing something right. First question, been hearing more anecdotally about this, and I think it's increased with COVID-19, but are you seeing more inflow to your markets from California, New York, Boston into your Sunbelt, Phoenix markets? Have you noticed a tick up since April? Any commentary there on how people are choosing to live now that work remotely is more accepted and the desire to get away from the sort of densely populated areas has increased?
Sure, Neil. We didn't see much of that in the second quarter, but it's picked up in the third quarter. The majority of our move-ins come from within the Sunbelt. Keep in mind that these numbers that I'm going to throw at you represent a relatively low percentage of our total move-ins, but they are growing. Move-ins from New York is up double digits. Move-ins from Massachusetts are up about 9.2%, Pennsylvania 10%, and California almost 8%.
Then sort of anecdotally, we've s pend a good amount of time digging into the Google Analytics stuff. We're also seeing searches from those areas. For instance, if you pick a search phrase like apartments in Atlanta, that's up 44% over prior year from addresses in the New York area. Apartments in Raleigh is up 22% from our searches in the Massachusetts area. It's not a driver of our business at this point, but there's certainly evidence to suggest that this is a continuing trend.
Yeah, I appreciate that. Other question I have is on just the single-family side. Your markets are great. The one thing is that the home prices are more affordable, just wondering, given the increase in homeownership, mortgage applications, new and existing home sales, are you seeing any increase in the move-outs for home purchases or single-family rental, again, over the same sort of like since maybe April and May? Any color there would be great.
On new home buying, that's remained relatively flat at 19.5% of our move-outs. That has been steady as it goes. Move-outs to single-family rentals have stayed well below 6%. Certainly, those businesses are doing well out there. We're not seeing them drive an increase in turnover at this point. We think people are with our demographic, which is majority female, single, and not at the phase where they're making those changes. We're just not seeing a ton of shift in that direction in our move-outs.
O kay, I appreciate that. Just along, how many people answer those surveys? Those percentages you're quoting, does 10% of the people move out fill out the surveys? Is it 50%? How good of a sample size is that?
It's roughly 100%. I say roughly just because I hadn't checked the number in the last couple of days. That's not a survey that's sent after the fact. That is a when you offer a notice to us, that's a required field for them to fill out and capture. That's where we're getting that information. It is a part of our transaction for accepting the notice.
Thank you, guys.
We'll take our next question from Nick Yulico with Scotiabank. Please go ahead.
Hi. Good morning, everyone. Just a question on renewals. It's impressive you guys have been able to keep your renewals close to 5% in terms of the growth. How do you guys feel about still being able to stay in that 4%-5% range in this environment?
We're pretty confident in it. Just to reset a little bit, in Q3, the renewals came down to 3.8%, and now we're seeing them move back in the 4.5% and 5%. Honestly, our two, three-year average there is probably 6%, so we're still a little below that. We feel quite confident in our ability to continue to maintain those rates as long as we continue to do our job and create value for our residents. We feel like renewals is a place where we have the most pricing power, and that hasn't changed through this process. We feel confident in our ability to continue that.
I would add, Nick, that I think residents are a little bit more sticky right now than perhaps they've ever been, just as a consequence of COVID, and the challenges of moving have always been there. With COVID on the landscape, I think it probably helps in that regard as well. We continue to feel that now's the time to, as Tom says, if we're doing a great job on service, which I know we are at our locations, it makes sense to continue to push that to the extent that we monitor how much move-out we're creating as a consequence of that and ready to back off if we need to. At this point, no signs that we need to do that.
Okay, thanks, Eric. I think Sumit Sharma has a question as well.
Thanks, Nick. Guys, just really quickly, we've been listening to a lot of developers in your markets talk about an increase in investment. Maybe you could walk us through some of the markets where you're seeing the most supply growth, and importantly, and this might be a long-term question, but still very interested, how concerned are you on shadow supply growth, let's say, from older office buildings or retail redevelopments?
Well, this is Brad. I think in terms of the shadow development, I don't think we're seeing a lot of that in our markets at the moment. I think what we certainly see is the repurposing of retail spaces into apartments, but the retail getting torn down. I think we're doing that at our Westglenn property in Denver, where we're tearing down an older, underutilized retail space to put in apartments. I think we'll see some of that, but I don't know that we're going to see, or we're certainly not seeing right now, repurposing of hotels or anything like that within our markets at the moment. In terms of supply that we're seeing increases in Let me get my report.
I think in terms of looking forward on that, we're in the process of really going through our study. Brad's team does an unbelievable job at really diving into the markets and understanding those and what the implications are for us for 2021. We're doing our study of the market. We're doing our study of the radius of our market and exactly how it'll affect us, we'll have more on that in fourth quarter. What we are showing really is a falloff in supply in the back half of year for a range of reasons that were mentioned earlier.
All done, anyone else?
I'm sorry, we didn't understand that.
I'm sorry, we just said all done. Thank you so much.
G reat, thank you. Appreciate your question.
We'll take our next question from Alex Kalmus with Zelman & Associates . Please go ahead.
Hi, thank you for taking my question. Obviously, you have pretty strong top-line growth compared to some of your peers that we're seeing in the urban markets. Do you attribute the success, if you were to weight success, reasoning, would it be more because you're in the suburban footprint of your markets, or is this a market selection driver?
I think that if you look at our portfolio, I think that it starts with the overall Sunbelt footprint, obviously. Where we are seeing stronger performance occur is particularly in some of our mid-tier markets where the supply pressures at the moment are not quite as significant. Some of our mid-tier component of our strategy, mid-tier market component of our footprint is certainly helpful at this point. If you look at a sub-market level, we have a higher percent of our portfolio is suburban and non-urban core. That orientation of the portfolio, I think, is also a big contributor to our ability to sort of weather these downturns in a better fashion.
Got it, thank you. Turning to the smart home units, I'm assuming you're installing those on turns. There is some lease-over-lease declines in the new lease. Should we think of this $25 premium as a mitigant to the declines, or is there some sort of A/B testing that drives that $25 premium?
We're actually doing those on turns and occupied, and really, the majority, we just got back on it in the third quarter, and most of those units got completed late third quarter. When we do it on an occupied unit, we do not immediately put that price increase on it. It resets at the renewal. Then on new leases, we rent them with it, and that is a bump, but it is not a material bump in the third quarter lease-over-lease new lease numbers.
Got it, thank you.
You're welcome.
We can take our next question from Rob Stevenson with Janney. Please go ahead.
Hi. Good morning, guys. Tom, when you adjust for urban versus suburban or just looking at sort of the suburban assets, etc, any differential in operating performance between price point within the various markets? In other words, is a $2 a sq ft suburban two-bedroom leasing any differently than a $1.75? Any difference of price point between sort of same product, same market or sub-market? Then any difference in demand between larger and smaller floor plates, like the 850 sq ft two-bedroom units versus the 1,100 sq ft two-bedroom units? Any color there?
No, consistently across the board, you've touched on our suburban's running a little stronger than urban, A or higher price point is running a little weaker than B. B is strong. B suburban is the best, that plays out whether you're in the suburban or in the urban areas. On the unit types, we're majority one and two bedrooms. In terms of our current exposure level and the current lease level growth for 1s and 2s, they're incredibly consistent. 1s are slightly ahead of 2s, it's by a negligible amount.
The floor plan that is a little less popular right now is our efficiencies. They're running closer to 95% occupied on an average basis with more like 8% exposure. Not terribly surprising, to put that in perspective, efficiencies are 4% of our exposure, 1s and 2s are like 88%. The one little less favorable floor plan that we have right now is just 4% exposure.
What about bigger versus smaller within the same number of bedrooms? Are the large two bedrooms now getting more attention for people looking for that extra space than the smaller two bedrooms, people looking for that extra 100, 150, 200 sq ft?
I think that's honestly skewed a little bit by the A/ B, because our B assets and suburban assets tend to be a little bit larger. If we looked at the numbers, yes, that would be the case. I think that has to do with more the construction type and just sort of differences between our B product and our suburban product versus our A product and our urban product.
Okay. The one other one for me is, are you guys seeing any markets that appear to be deteriorating on you noticeably operationally at this point, where you expect as you head into 2021 that things are going to continue to get weaker, adjusting for whatever happens with the economy, but where today it looks weaker than it did last month?
Not a dramatic fall off. I think Houston and D.C. we're watching carefully, as well as Orlando. Those are more sort of like bumping along than falling off materially.
Okay. Thanks, guys.
Thank you, Rob.
We'll take our next question from John Pawlowski with Green Street. Please go ahead.
Hey, thanks for the time. Good morning. Tom, maybe just following up on a market question. You touched about lower supply and some of this, or maybe it was Eric, lower supply in some of the secondary markets. In the quarter sequentially, your smaller markets really outperform your larger markets. Curious if there was an outsized lift from the Double Play package or if it's just true organic demand versus supply differences versus the larger markets.
No. Double Play's really spread across the portfolio by type fairly evenly. No, Double Play is not adversely or positively affecting one market or the other on the revenue or expense on.
Okay. Al, last question from me. You talked about Austin property taxes. Nashville in recent months has increased property taxes as well. Are there any other markets you're hearing chatter across the Sunbelt where just property taxes to fund the growth of cities and infrastructure of cities is becoming more topical?
Certainly a topical conversation right now. I wouldn't say that there's any formal areas that we're seeing right now that would be the next one to be a significant increase. Certainly going into the year, Nashville and Austin both were unexpected and were significant increases. Some question that a lot of municipalities are dealing with budget issues now. We're certainly watching that and monitoring. I think it's not just us in our region, it's nationwide in many markets. I would say this year, you're not seeing valuation relief yet because people are looking backwards. Maybe as we move into next year, you get a little bit of valuation relief. The millage rates, they're still in question because of all these issues that the municipalities are dealing with. We're watching that closely, John. That's a long answer to say nothing specific, but certainly top of mind right now.
Okay. Thank you.
We'll take our next question from Rick Skidmore with Goldman Sachs. Please go ahead.
Morning, thank you. Just to follow up, perhaps I missed it, but what's driving the 2% decline in new lease rate in October? Is that just supply in the markets? It seems like you've talked about strong demand and good occupancy, just and lower turnovers. I'm just trying to understand what's happening there.
I think it's just a difference in timing and seasonality. From on an effective basis or when new lease rates that moved in in October, they're actually up sequentially. New leases signed, if you're looking at the supplemental, are down slightly, which is what I mentioned earlier. I think we'll see normal seasonal trends on pricing as we head into November, December. The odd thing is that new lease pricing climbed, honestly, from May to October, and usually it peaks in July for effective. The other thing that will be different for us in the fourth quarter in terms of pricing is that you're going to see renewal rates move back up into the 4.5% and 5% range, whereas normally they might be coming down from 7% - 6% or 5.5% in a normal seasonal pattern.
Thank you. Just a follow-up. Al, you talked about the new development pipeline and being within the historical range. Can you just frame for us what that historical range should be as some of these projects that you have are moving off being completed in 2021? What sort of scale we might be thinking, whether it's number of projects, number of units, total capital, however you might frame that new supply pipeline.
I think what I was trying to indicate was we talked about our range of tolerance we would have for our pipeline overall given our balance sheet. Typically, we've said 4%-5% of our balance sheet. Of course, an $18 billion balance sheet, that's a significant number. I think we would see, we certainly made the comment because the opportunities that Brad mentioned will be there in the development prepurchase as well as in-house. The yields are very good relative to financing costs, so we'll certainly see that increase.
We have the room in our balance sheet to use debt for a while to fund those maintaining. I put the range out there. Over the long term, we certainly want to protect and maintain our balance sheet ratios where they are 4%-5%, that gives you $800 million or so a little more that we could work with. In the long term, we would probably see that come back down into where we are now over a long period of time.
Thank you very much.
We'll go next to Amanda Sweitzer with Baird. Please go ahead.
Great. Thanks. Good morning, guys. I wanted to ask on your renovation projects, and it was certainly nice to see kind of the slight acceleration in the rent premium achieved for those units, but are there any markets today where you've paused renovations due to more challenging fundamentals? Then how are you thinking about the potential pipeline for renovation or redevelopment projects next year?
Yeah, no, thanks for the question, Amanda. Yes, there is some difference. We brought back about 80% of our units, or 80% of the properties where we're doing a redevelopment. We do A/B testing there on a regular basis, and we did not feel in the results that we're seeing on the ground that it made sense to bring redevelopment back in Houston or Orlando at this time. We'll monitor those, and those are markets we feel good about long term. One of the nice things about the redevelopment project, the way we do it is we can be relatively nimble in response to on-the-ground market conditions and just it made sense to pause those in those markets.
Amanda, we are looking at our 2021 plans at the moment and would expect to see another productive year on redevelopment. Also, we've got a number of more extensive repositioning efforts and projects that we will likely kick off next year as well.
Okay, that's helpful. Just a quick clarification on some of your earlier migration comments. Are you still seeing move-ins from outside the Sunbelt remain in kind of that 8%-10% historical range you've talked about, or is it now running ahead of that with the growth you were talking about?
It's about 11% or 12% now.
Great, that's it for me. Thanks for the time.
All right, thank you.
We'll take the next question from Rich Anderson with SMBC. Please go ahead.
Thanks. Good morning, everyone. Hey, Tom, I want to not get too nitty-gritty here, but for the October move-ins of up 4.8% on renewals and those that were signed up 5.8%, that's basically the foreshadow you're talking about in terms of renewals going up, I assume, as we kind of venture into the fourth quarter here. Is that 100 basis point spread move-in versus signed a typical spread or is it particularly high or low right now versus other years?
No, it's particularly high right now. Usually, there's not much spread at all because our renewals are pretty consistent. Because renewals came down in terms of what our renewal offers were came down in June and July, those that then moved in 60 days out are lower. As our market sort of stabilized and the picture became clearer on the impact of the economy and our market, and we were seeing people stay and felt like we had pricing power, then we began to move back to more of our normal practice. Normally, there's a pretty tight delta between those two numbers, but we're just on the incline at this point. I would think as we stabilize, then you'll begin to see that delta tighten, but the overall renewal rates will be at a pretty high level at that point.
Okay. Right, I guess I was getting signed confused with offers. Okay, that makes sense. Thanks. The second question may be big picture for Eric. Talking a lot about urban versus suburban. I bet your urban portfolio is doing better than northern cities or coastal cities. Maybe that's an obvious statement. I'm wondering if you think, is this a red state, blue state thing? I mean, not to get political because that's not the intention, but do your typical residents have perhaps a far less sensitivity factor when it comes to COVID-19, and so they're more inclined to move around and do what they have to do to get into their apartment?
Is that hard to sort of gauge and so you don't really know? My guess is you're in Trump country there, that that would be the case. Again, not a political conversation, but I'm wondering just how people think about this kind of stuff and if it's playing a role in your business.
Well, Rich, there are two questions there. One is, you're right, we are not seeing nearly the pressure on our urban product that you're seeing on urban product in San Francisco and New York. Our turnover move-outs from our urban locations are down this year versus last year. Where we see pressure on urban performance more as a function of supply coming into the market, because more often than not, at the moment, that supply is higher in price point and more urban-oriented. Yeah, our urban product is holding up relatively pretty well. The other part of your question, as you suggest, is really difficult to answer. I think that largely what we are seeing benefit of is states and cities and a broad region that just tends to be viewed as more, if you will, pro-business. Employers are bringing jobs to this region of the country.
Employers are bringing and relocating jobs out of some of these higher-cost areas of the country. This is clearly a more affordable region of the country to live in. More moderate weather challenges and just I think it has a lot of appeal. I think that the behaviors I mean, we're seeing these markets starting to open up perhaps a little quicker and in a more robust way that we have seen take place in other regions of the country. I don't know whether that's sort of a red-blue thing or whether it's just more a different mindset that's hard to really attribute to political issues or anything of that nature. I just think that it is what it is, and these cities and these states are going to be much more inclined to just move forward with business in this environment. We're seeing some benefit of that.
Great answer, Eric. Thanks. Appreciate it, everybody. That's all for me.
Thanks.
Thanks, Rich.
Looks like our next question from Jon Petersen with Jefferies. Please go ahead.
Oh, great. Thanks. Good morning, guys.
Morning.
Curious if you're seeing any new capital come into your markets in terms of competition for acquisitions or funding new developments. Just thinking, you're hearing from a lot of private guys that have basically shunned office and retail and coastal apartments, but obviously fundamentals are doing well in your markets. Just curious if you're seeing any change in kind of new capital that's chasing your property type in your geographies.
Jon, this is Brad. Certainly we're seeing a lot of capital in our market. Everybody that was interested in multifamily certainly is still interested in multifamily. Certainly in the third quarter we've seen a lot of the folks that have been on the sidelines kind of come back into the market and start looking for acquisitions, which that's one of the things that's driving and impacting pricing is there's just not a lot of deals and a lot of capital looking for it. I'd say one thing that we have seen that's changed, and has been more pronounced, is a number of investors that generally have targeted the Northeast have come into our market.
I think the way they look at some of our assets on a price per pound basis is a little bit different than what traditional Southeast investors do, and I think that is also driving pricing a bit. We've seen a lot more participation from Northeast investors in our markets, and that's really the only change that we've seen. I think international capital is down a bit in our markets, but that's more than made up for by other capital sources. Then I'd say that the private REITs are certainly very strong. They had a few months of low capital raising, which that's back up. Those folks are back aggressively in the market.
Okay. All right, that's all for me. Thank you.
Next, Zach Silverberg with Mizuho. Please go ahead.
Hey, good morning, guys. Thanks for taking my questions. My first one is about some comments you made earlier on Salt Lake City. I'm just curious what other markets you consider entering, and would your plan be to enter in some sort of scale or via opportunistic one-offs, and what do IRRs and cap rates look like versus your core Sunbelt markets?
No. Salt Lake is the only new market that we have intentionally targeted. We have been working on that opportunity for some time. We've liked that market for quite some time. The market has some challenges to get into. We think we've got a way to get there and we've actually got hopefully several other opportunities behind the one we're currently working that would enable us over time to scale up there in a sufficient fashion. We see the sort of underwriting dynamics and pricing there very similar to how we see in a number of our other Sunbelt markets. A lot of buyer interest.
That's a market that continues to track just great job growth, great quality of life, very affordable. Employers like the market a lot. We really like the long-term dynamics there. We've been disciplined about looking for the right way to get there and get into the market. We've got a pre-purchase opportunity that Brad and his team have been working on and hopefully more to follow.
Got it, appreciate that. Just one more from me. You sort of touched upon this in the prepared remarks in the press release, that you've worked with residents to stay in their homes. Can you quantify the amount of tenants who have requested assistance, and how has that trended since the start of the pandemic? Where does that sort of show up in your financials?
Yeah, it shows up in the financials on the amount of rent outstanding. We started with in April, we had 5,600 people on a rental assistance plan. In May, we had 5,100. In June, it was down to 2,000. July, 529. Then we've stayed below 500 through October. It's continued to remain steady and trend down, and the results of that are in our numbers. What we've really found, we took some risk with working with these folks, but even for a jaded landlord, it's been impressive to see how well those folks have lived up to their obligation. We gave them a little bit of time, and they've come through very strong, and they've paid us.
Gotcha. Just one quick follow-up on Salt Lake. Could you provide any sort of cap rate or IRR color if you guys have that at your disposal?
What I'd tell you, we're still in our pre-development work on that. More to come on that as we get that buttoned up, which we hope to do early next year.
Yep, awesome. Thank you, guys.
There appears to be no further questions at this time. I'll turn the call back over to you, Mr. Argo, for any additional or closing remarks.
Thank you, Ashley. I appreciate everybody joining us on the call, and please reach out if you have any more questions. Thanks.
Thank you. This does conclude today's program. Thank you for your participation, you may disconnect at any time.