Good morning, ladies and gentlemen. Welcome to the MAA First Quarter 2019 Earnings Conference Call. During the presentation, all participants will be in a listen only mode. Conference call. As a reminder, this conference is being recorded today, May 2, 2019.
I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA. Please go ahead.
Thank you, Chris, 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 Tom Grimes, our COO and Rob Del Priore, our General Counsel. 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, 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 segment. I'll now turn the call over to Eric.
Thanks, Tim, and good morning. We're off to a good start for the year as the Q1's growth and effective rent is the highest that we've captured over the past 8 quarters. Resident turnover remains at historically low levels and rent growth on renewal transactions continue to be strong. Points ahead of the performance in Q1 of last year. We are of course just now entering the important spring and summer leasing season, But we certainly like the trends that we are capturing as the compounding benefit of steady rent growth continues to make a growing and positive impact.
Strong expense control continues to be evident, particularly in the areas of repair and maintenance costs and utility expenses. Quarter. Our property and asset management teams continue their record of innovation and expanding use of new technology, While also continuing to leverage the benefits of the larger scale of our platform. Beyond these encouraging trends with the same store portfolio, Our new development portfolio, our current lease up property portfolio and our redevelopment pipeline all continue to come online and we'll make increasing contributions to FFO over the next couple of years. Our high growth Sunbelt markets continue to capture steady job growth and solid demand for apartment housing.
As pressure surrounding high housing costs and related cost of living challenges continue to influence population growth and migration trends across the country. We continue to favor our regional focus. Across our portfolio, average rent as a percentage of monthly income continues to hover in the 20% range, a very affordable relationship. We believe that through the full cycle, our regional markets will drive job growth and resulting demand for apartment housing that will outperform other regions of the country. Form.
We believe that MAA is now even stronger and better positioned. We're excited to now be fully focused on capturing the opportunities associated with the enhancements that were made. We look forward to continued positive momentum over the coming year. With that, I'll turn the call over to Tom.
Thank you, Eric, and good morning, everyone. Our operating performance for the year started off well with continued momentum in rent growth, strong average daily occupancy and improving trends. Effective rent growth per unit was 3.1% for the quarter. This is the 4th straight quarter of improving ERU growth. For perspective, in the Q1 of 2018, this number was 1.4%, 1.7% in the 2nd quarter, 2.1% for the 3rd quarter, 2.4% in the 4th quarter and now up 70 basis points sequentially.
Said another way, in the last year, we've doubled and A. Our effective rent growth rate. We are pleased with the positive trend of this steady compounding driver of long term revenue growth. This, of course, is led by a steady momentum in blended lease over lease pricing. Blended lease over lease rents for the quarter were up 3.9%, which is 2 40 basis points better than this time last year.
Average daily occupancy remained strong at 95.9%. Expense performance was steady for the Q1, up just 2.1%. Marketing growth rate stands out in our report, segment. That was a result of a credit in last year's numbers. Adjusting for this anomaly, marketing expenses would be flat with prior year.
Quarter. As a reminder, our annual operating expense growth rate since 2012 has been just 2.4%, well below the sector average. The favorable trends continued into April. We're on track for another month of strong blended lease over lease pricing. April blended lease over lease rents were up over 4%, which is well ahead of the 2.8% posted in April of last year.
Average daily occupancy for the month continued at a strong 95.9%. Our 60 day exposure, which represents all vacant units and move out notices for a 60 day period is 8.4%, which is in line with last year. On the redevelopment front, In the Q1, we completed about 1700 units, which keeps us on track to redevelop 8,000 units in 2019. This is one of our best uses of capital. On average, we spend $6,100 per unit and achieve an additional 11% in rent, which generates a year 1 cash on cash return quarter in excess of 20%.
Our total redevelopment pipeline now stands in the neighborhood of 16,000 units to 17,000 500 Units. The latest market delivery information is aligned with our prior forecast. Job growth in our markets is quarter. We expect to be 2.1% versus 1.6% nationally. As long as demand remains strong, we Act of positive rent growth will continue to build.
Our teams are pleased to have the work of 2017 2018 in the rearview mirror. Call. We're encouraged with the momentum in rent growth and excited to have our transformed platform fully operational. Al?
Thank you, Tom, and good morning, everyone. I'll provide some additional commentary on the company's Q1 earnings performance, our balance sheet activity and then finally on updated guidance for the remainder of the year. FFO of $1.58 per share for the Q1 was $0.11 per share above our guidance for the quarter. Excluding 2 items not included in our forecast, gain on the sale of the land parcel and the preferred share adjustment, which we'll discuss more in just a moment. FFO for the quarter was 1 point $0.51 per share, which was still $0.04 per share by the midpoint of our guidance.
Operating results were $0.02 per share favorable to our prior forecast with positive contributions from both same store revenue and expense performance during the quarter. A continued strong occupancy supported the favorable rental pricing trends outlined by Tom, While favorable repair and maintenance and utilities costs offset continued pressure from real estate taxes during the quarter. The real estate tax expense growth of 6% for the quarter includes the impact of some filing of appeals and we still expect our total cost to grow in the range of 3.75% to 4.75% for the full year. Favorable performance for interest expense and other income during the quarter, primarily related to our recent bond deal and casualty gains combined to add the remaining $0.02 per share to FFO for the quarter. We also sold a small land parcel located in Atlanta during the quarter, which was acquired in the post merger.
The parcel was not a viable development for us and was sold as an alternative use. Given significant uncertainty regarding ultimate closing of the sale, the gain of $0.08 per share was not included in our original guidance for the year. In addition, we incurred non cash expense of about $0.01 per share during the quarter related to the market to market adjustment of our preferred shares, which consistent with our practice was also not included in our forecast. During the quarter, we completed a significant portion of financing plans for the full year with issuance of $300,000,000 in new 10 year public bonds and effective rate, including the impact of settled swaps of 4.24 percent and with the closing of an additional $191,000,000 of fixed rate mortgages priced at a very attractive 4.43 percent for 30 years. Proceeds were used to pay down our unsecured line of credit, which we used to provide the majority of financing needs for the remainder of the year.
We also continue to make progress on our development pipeline funding $15,000,000 during our construction cost during the quarter. We expect to fully complete 2 communities this year and also likely start additional projects as quarter of our $100,000,000 to $150,000,000 total projected funding for the full year. And we continue to expect the combined stabilized NOI yield on our development pipeline to be in the 6% to 6.5 set range. Our balance sheet remains strong. We ended the quarter with low leverage with 32.6 percent debt to total assets with over 85 percent of our debt fixed or hedged against rising interest rates at an increased average maturity of 8 years.
At quarter end, we had over $967,000,000 of cash funding capacity under our line of credit and our current forecast is leverage neutral. Finally, we are revising our FFO guidance for the full year to reflect Q1 performance as well as our updated projections for transaction and debt financing plans for the remainder of the year, which are now expected to reduce FFO by about $0.03 per share compared to our previous forecast. Also just as a reminder, we do not forecast any future non cash adjustments to the valuation of our preferred shares. FFO for the full year is now projected to be $6.11 to 6 $35 or $6.23 per share at the midpoint, which is an $0.08 per share increase of our previous guidance. We also now expect net income per diluted common share to be $2.19 to $2.43 per share for the full year.
We're certainly encouraged with the strong Q1 performance, but we still have a very important leasing season ahead of us, busy leasing season ahead of us and our comparisons do become a bit more challenging over the remainder of the year. We are maintaining our previous same store guidance and we plan to revisit these projections with our Q2 earnings release. So That's all that we have in the way of prepared comments. So Chris, we'll now turn the call back over to you for questions.
Certainly. Question. And our first question comes from Nick Joseph with Citi. Please go ahead.
Thanks. Ella, you mentioned the current development pipeline has NOI yield of about 6% to 6.5%. How does that compare to the new starts expected this year and then the recent Land acquisitions.
You're talking about the new Phoenix deal that was a prepurchase that we announced, Nick? Is that what the comparison of that?
No, the development starts for later in the year and then the land that you acquired in Orlando, are you also underwriting the 6% to and a half for that.
Right, right. And that was the intent of the comments to say really we've got the current deals we have underway as well as the ones we plan to start later this year. All of those will be In the range of 6% to 6.5% in general and the total pipeline then would obviously be in that range as well. So none we see below that low end at this point.
Perfect. How does that compare to cap rates in those markets today?
I would tell you, Nick, for the quality of assets that we're looking to develop, I mean, Those cap rates are going to be 4.75 percent, 4.5 percent to 4.75 percent is routinely what we're seeing today.
Thanks. Eric, you mentioned the strength in the markets. I'm wondering if you're seeing from new residents, and I'm sure you track where they're moving from any population flows or any change in trends from the Northeast or other high tax states just driven by the change in tax laws?
I'm going to let Tom answer that.
I mean, Nick, sort of the best I mean, certainly, we're seeing some shift and change, and we're seeing strength in the Sunbelt. Honestly, the best explanation I've seen of this is a third party firm Tracks U Haul Rentals and it costs 25% less to move back up north than it does to move to the Sunbelt. But we are We don't have specific information on exactly that, but it is the trends are positive.
I would tell you, Nick, that we continue to I think Nashville is going to continue to see some migration inflows, if you will, coming out of the Northeast, particularly as the Weinstein move begins to shape up. I think the Raleigh area continues to attract a lot of particularly technology based jobs both from the Northeast, West Coast, of course Austin has been doing that for some time. So I think that we don't particularly track exactly as Tom says where people come from necessarily, but just anecdotally based on the information, the conversations we're having with residents, We are seeing growing evidence that folks are moving out of some of these higher cost areas of the country.
And then in Phoenix, we see Phoenix, Denver, Dallas, Austin. We see inflows from California as you would expect.
Thanks. And our next question comes from Trent Trujillo with Scotiabank. Please go ahead.
Hi, good morning. Thanks for taking the questions. So within the last month, a roughly $1,500,000,000 suburban Class A Sun Belt portfolio traded for what looked like a high 4 cap rate. How interested were you in that portfolio? And how do you view the pricing with respect 2, I guess, 1, other transactions you're seeing in the market and 2, perhaps as a validation of the value of your portfolio.
Well, I mean, honestly, Trent, we didn't look at it. That's not really what the asset quality that we're looking to add to the portfolio for the kind of growth rate we want to achieve, organic growth rate we want to achieve going forward. This is older portfolio than typically we take a look at. Having said that, certainly based on the pricing that we are seeing, that pricing is in line, maybe a little bit aggressive. I mean, routinely, the new product that we're looking at still in lease up or just recently stabilized in the markets Throughout our region are trading anywhere from 4.5 to 4.75 cap rates.
So a high 4, call it a 5 five for that portfolio was probably about right in line with the market. It just depends on frankly what sort of upside opportunity they saw in the portfolio from either a CapEx redevelopment or operating perspective.
Thank you for that. And quick follow-up. So I think we all appreciate the year over year and even sequential improvement in rate growth, which is grade at a fundamental level, but it doesn't seem to be translating yet into accelerating same store revenue growth at least sequentially. So maybe if you could talk about how the improved pricing will flow to the bottom line and then considering some persistent supply pressures in some of your larger markets. How confident are you that this improving spread can persist and what that may imply for the rest of the year?
Thanks.
Well, I mean, we feel pretty good about the ability for these rent growth trends to continue based on everything that we're seeing. Supply levels, while they remain high in a number of markets, they don't appear to be getting any higher, if you will. And I would suggest that we're at a point broadly where supply levels are likely to show stability to slight moderation over the next, call it, couple of years. As long as the job growth continues to be as robust as it is, I think that sets up for the ability to Stain, the kind of trends that we are seeing. The ability for that rent growth trend to ultimately make its way to the overall revenue line, if you will, is a function of also the other two variables and how they're performing, namely occupancy and Fees or Other Income.
And we saw occupancy, effective daily occupancy trade off a little bit from last year. As we contemplated in our guidance for the year, we think that's the right trade off to be making at this point in the cycle and are comfortable with that assumption and comfortable with what we're seeing. I think that as we get later in this year and particularly into next year, The occupancy performance likely starts to stabilize on a year over year basis and therefore The rent growth trends start to drive more directly to the bottom line. To some degree, the other area that we've seen underperform in terms of rent level or in terms of growth year over year in the revenue area, this is other fees and the fee area in general. And because turnover is so low and people are staying put, we're not seeing termination fees and other kinds of related fees associated With the move ins and move outs like we've seen in the past.
So the occupancy variable year over year and the fee variable year over year It has worked against, if you will, the rent growth variable to result in the revenue performance that you see. We think those other two variables, seasonality probably start to stabilize going into next year and the rent growth becomes more impactful.
That's very helpful. Thank you very much.
And our next question comes from John Kim with BMO Capital Markets. Please go
ahead. Thank you. On the blended lease growth, it sounds like you have about 4% year to date through April. I realize you have tougher comps at the second half of the year, but what would get you down to the deceleration that implies at the midpoint of your guidance of 2.7%.
Yes, I mean, John, I mean, obviously, what we're We're talking about is we're very encouraged with what we've seen through all the way through April as Tom talked about and it would take a number quite lower than that to get us down. I think what we're saying is as we look at the next few months or next two quarters. That's when we faced the biggest part of our exposure, the vast majority of our leases. So at this point, we're not seeing We certainly believe and expect to continue to push pricing. But the question is going to be, are we going to be able to hold occupancy while we're doing that?
We think at this point we will. But But as we talked about in our guidance, we're leaving ourselves room to work through those two quarters and then we'll have more to say about that and more clarity at the end of the second quarter.
Okay. So that occupancy, that's more of a same store revenue concept rather than the blended lease growth rate. But you're saying if you have additional vacancy that might comparison.
Yes, I'm saying it would offset
the rent growth. In other words, we're going to continue pushing price and we believe we can hold that occupancy at strong 959, but That's the question as we
hit the busy leasing. John, this is Eric. If your point is, are we likely to continue to perform at the upper end of our pricing assumptions, lease over lease pricing assumptions that we put out there, the answer would be yes. We think that the pricing trends are likely to continue, which would put us more likely than not Well above the midpoint in terms of our assumption for pricing trends alone. Right.
Quarter, you broke out revenue enhancing and redevelopment CapEx. And can you just remind us what constitutes the difference between the 2?
Yes, I mean, we just wanted to get more information there and really provide as much clarity as we could there, John. I mean, revenue enhancing is the more typical CapEx that you do, the normal that you would do every year in the portfolio to continue to maintain it. Recurring. I'm sorry, that's recurring. Yes, recurring.
I'm sorry, I say redevelopment, I apologize. Recurring is a typical. Redevelopment is the capital that we actually that we measure and we our returns, our growth and we've talked about. And as Tom talked about, it's one of the best uses of our capital that we have. We've had a program going on for many years now.
We're able to spend fairly limited amounts of capital on the interior units and produced really strong returns. So that's really the difference. I think we have on redevelopment, We have redevelopment, we have revenue enhancing and then we have recurring. And we just want to give you clarity of those 3 buckets. And so revenue enhancing is additional capital that is not specifically measured, but it's things that we do think add to the value of the clean over time.
So those are 3 buckets.
But are the redevelopment units kept in the same store pool? Because I noticed this quarter you have Yes.
Yes, they And when we approach
it because we do not
we do them we don't force turns, we do them on turn. And so I think over time we That's the best thing to keep it in the same store portfolio. And if we have a situation where we did entire community at one time forced a turn, we felt like it was going to be extremely disruptive, we would pull I think we have done in the past, but the current pipeline that we're doing, we don't expect that and we're not taking it out of same store.
Thank you.
And our next question comes from Austin Wurschmidt with KeyBanc Capital. Please go ahead.
Thanks. Good morning, everyone. Just curious what you guys would attribute the lease rate success that you've achieved thus far in the year to whether it's operating on a single revenue management system, is it you're starting to see increased contribution from the distribution from the redev or just maybe a more benign supply environment. Can you kind of break out the pieces of that and and tell us where you think what do you think is driving the success you've had so far?
Sure, Austin. I think at a macro level where we've certainly shifted from a ramp up in supply and a stabilization of supply. We feel like we've got our legs under from a market standpoint and they're a little more stable, though still high and we can push on that. Then the other piece of the puzzle is really The improvement I would tell you in the post portfolio, and that is our systems and being operating On one system and let me give you an example of that. So in Q1 of 2017, the gap quarter.
Between blended lease over lease rates and the post portfolio and blended lease over lease rates in the Mid America portfolio quarter. It was 2.90 basis points. That was sort of in our Q1 of having the post portfolio. That gap Has closed to just 50 basis points, and that's a result of both portfolios climbing over that timeframe.
Segment. So when you look across markets, is it fewer concessions, maybe in some of those post markets that had supply? Where are you seeing the success in driving blended lease rates.
I mean early on the first thing to take was renewal rates where we moved those from 4 to close to 6 now and now it is new lease rates coming to bring stability. Just on a year over year basis, it's primarily the new lease rates, though we're still up a little bit in renewals On going back to 2017, it's really both on the post portfolio.
I appreciate that. And then just last one for me. Al, when you kind of strip out those one time items in the Q1 and you look at what drove the beat versus your internal guidance, what line items would you attribute that to?
We put it to really 2 major groups, dollars 0.02 per share. If you strip out those kind of unusual items, you get to about $0.04 per share outperformance from our guidance. $0.02 of that was operations, which was same store and pretty evenly spread between revenue and expenses, I would say. We're encouraged with both sides of that performance. The other $0.02 was interest and other income.
That was a little favorable to what we expected primarily related to the timing of the bond that we did, A little better on interest rate than we thought there and then we had other income from casual gain that we had during the quarter that had some income from that. That's really the insurance proceeds over the cost of the books that we wrote off for that casualty loss. So those are the primary pieces.
Thank you.
And our next question comes from Rob Stevenson with Janney. Please go ahead.
Good morning, guys. Tom, any markets that performed notably above or below expectations on a year to date basis?
Nothing really stands out on the below expectations. Dallas, we expect it to be challenging, but It's coming along honestly. On the above, we're quietly pleased with how Austin is coming along.
Any markets or what which markets, I guess, would you expect that you could see positive new lease growth In 2019 on at this point.
See positive new lease growth?
Yes. Obviously, the renewals have been pretty healthy, but the
I would tell you, Nashville begins to look better in the back half of the year, I think. Supply is moderating a little bit there. And as Eric mentioned, AllianceBernstein just moved in. I mean, Nashville It's a booming market in that, that has the potential, to exceed our expectations, I think.
Okay. And then last one for me. Where are you guys in those sort of technology spend? I mean, it seems like, all the apartment, the large apartment guys these days are in an arms race to get to being able to have Alexa rent their units rather than have people at the locations and all of the automation that they wind up putting in to make leasing, able to do from phones, etcetera. How far down the road are you guys in terms of where you want to get to over the next couple of years?
And what's the spend and what's the trade off in terms of expenses that you could take out of the business from that?
Yes. Rob, I mean, we're currently testing, working on and evaluating Pretty much everything that you've heard out there smart rent, smart homes, enhanced residential services portal, Tech Mobility leasing automation in those service features. We're still at the point where we're not talking about it a ton. We're really trying to find out exactly what those economics are. Early results are good, especially on the smart home testing.
And we think that they have the potential to make a difference. But We're really in the testing phase at this point and we'll have more to share as the year winds on, I would say.
What are you spending this year on that roughly?
The majority of our spending that is doing that is we're part of this real estate technology venture fund that you probably saw 10 ks, Rob. And so we spent we're part of that with a lot of some of our peers that really is designed to it's an investment that's designed to Select view all of these companies are coming forth and select the winners and be a part of that discussion when it happens. So in terms of our normal spend, our investment in driving that technology right now. That's normal spend, that's part of our overhead or our G and A that we budget this year that we talked about always improving our platform. We are testing these programs this year as Tom talked about and probably roll out a little bit more next year when we drive these programs to portfolio.
And Rob, some of that investment is bundled in the total IT overhaul that we did as part of the merger. So things like maintenance mobility and the resident portal improvements, those were embedded and the transition that we just went through. And then we're spending the most direct spend is on the smart home where we're rolling units out at about $1,000 a unit or so, and we've got plans to test that this year.
Okay. Thanks, guys.
And our next question comes from Hardik Goel with Zelman and Associates. Please go ahead.
Hey, guys. Thanks for taking my question. One of the things I wanted to ask about, I've got 2 for you is G and A. So we know G and A is going up a little bit. We discussed that last quarter.
But looking at the cadence of G and A typically, the Q1 was still a little heavier than guidance would imply. Are you guys still in line with your initial guidance range?
We are. That's question. I think I'll point you to one of the things that we talked about and put out as we came out of year end and discussed our guidance for the year is one of the presentations that we had done. We're out doing on the road shows on the conferences. We put a slide that talked about that we expected 1st quarter to be the highest quarter for that.
There are several expenses that fall in the quarter, some leadership conference things, some year end audit things, a few things that typically in the Q1. So we had expected 1st quarter overhead to be about 20% 8% of the year, came in right in line with that. And so we feel very confident with our full year projection. I think what You should put in your model, your thinking for the next three quarters. Obviously, to get to our run rate, to our full year run rate is more like 24% of the total of our guidance for the year.
Got it. Yes, I saw those. I just wanted to confirm. The second one I have for you is on your same store expense growth estimates. You guys But on expenses, it seems like it would be pretty tough for you guys to not come in at the low end of your guide on expenses, Given that you guys outperformed even though taxes were higher, is there a tax headwind through the rest of the year?
Or do you expect what do you expect on the expense side?
There's 2 things I think are important to consider there. This is Al, sorry about that. But really R and M was favorable during the Q1 and utilities cost, I say R and M, repair and maintenance, excuse me, utilities cost. And so repair and maintenance was really favorable in Q1. We got some remaining synergies from the post merger, which were good to see.
We're glad to get that, but I think we expect that sort of we've come to the end of that. We expect for the remainder of the year for those costs to be more normalized, call it, in 3% range. And on the utilities, they were lower than expected because we had a mild season in the Q1, mild seasonal call structure in the Q1. I think that will normalize more as we go into the year. So I would tell you as we look at the remaining 3 quarters of the year, you should consider something more in 3% range for everything together.
But taking the Q1 performance and that together, we probably are going to be below the midpoint of our current guidance, but still in that guidance for the year.
Got it. Thanks. That's helpful. That's all for me.
And our next question comes from Drew Babin of Baird. Please go ahead.
Hey, good morning.
1st question.
Can you
talk about capital recycling? It sounds from the way that fundamentals are unfolding across Sunbelt, potential for distressed acquisitions, things like that might not be there yet as it really hasn't been for a couple of years. And then I guess I was hoping on an update Are you seeing that anywhere? Are you seeing developers maybe looking to sell more assets? How is your pipeline looking as it pertains to the things I just mentioned?
Drew, this is Eric. Our deal flow continues to be incredibly high. I mean, we're looking at more deals on a quarterly basis now than we have over the last 5 years. So there's a lot of opportunity that continues to come into the market. We continue to see what we believe to be incredibly aggressive pricing that continues to, in our mind, at least make it a little bit more difficult to pull the trigger on some of these opportunities that we are looking at.
So we are staying active. We are in conversations on 2 or 3 changes right now that I hope will come together over the course of this year. And we're optimistic, but we're also staying disciplined. And I think that given the operating environment that we're in and what appears to be prospect of sort of stable interest rate environment going forward. The sector continues to attract quarter.
A lot of capital and we see values holding up quite well. If anything, values going up a little bit as a consequence of improving NOI performance. So we're patient and we're going to remain that way. We've got dialed into our assumptions this year. As you know, call it midpoint about $100,000,000 of dispositions, which we think is important to maintain that discipline and we'll be working through that process later this year.
We've got the funding that we've identified as it relates to what we do thing we'll do on acquisitions and development funding. So I mean, we've got sort of the uses sources and uses of cash we identified, obviously, just recycling with what we have, a combination of dispositions and free cash flow. We certainly don't see any needs for equity this year. But I'm continuing to be hopeful that the acquisition environment will become easier. At the end of the day, I mean, our focus is really built around trying to ensure that we're going to create A stabilized NOI yield that's accretive to our existing portfolio and create a return on capital that will accretive to our shareholders versus what we expect to get out of the existing portfolio.
So Today's pricing, it continues to be a challenge. Having said that, as we continue to roll in some of these technologies and some of these other operating focus items that we've talked about. We think that that's going to continue to work in our favor to perhaps Start to make some deals a little bit more compelling as we go into the year. So, deal flow is high, pricing is still aggressive.
Thanks for that, Eric. And on the disposition side, remind me, are those likely to be just non core assets or potential exits From some smaller markets. I just forget if that was mentioned on the last quarterly call.
Yes. We're taking a look at that right now and trying to finalize that. But more like These are going to be just I mean, we really approach it on an asset by asset basis and look at situations where We think the go forward after CapEx NOI growth rate is likely to show not the kind of growth trajectory consistent with the rest of the portfolio. And more often than not that translates into some of the older assets that we've had. We very much like the footprint that we have as I mentioned earlier.
We like the broadly the markets that we're in, but just given the history of the company and when you think about where some of the older assets are, there probably are A few outlier smaller markets that you'll continue to see us exit from.
Thanks, Eric. And then just one question for Al on the balance sheet. There's another 3 year secured mortgage executed during the quarter. I was curious whether that was on set of properties that was previously encumbered by secured debt and also to I think last quarter there was a $300,000,000 very short term unsecured term loan. And I I guess my question is, does the new secured mortgage kind of directly replace that or pay that down?
What are the moving parts there?
I wouldn't necessarily put it direct, but I think overall, if you think about what we had outlined last year is our financing plans. We had said we're going to do about $900,000,000 more in the 10 year, maybe 30 year in the I mean $300,000,000 in the 30 year. I think if you look back last year, the markets kind of collapse in terms of public bond financing and at the late in the year. And so what we did is we moved early in the year, we got saw an opportunity in the secured market to do 30 year. We did 2 deals and combined over $300,000,000 at a very attractive rate.
They are secured with 7 properties for this one we just did and I think number of properties for the first one. But I wouldn't directly, I'm just as part of our long term plan, we were able to adjust and just continue to perform on pushing our duration of our maturities out a little further, get some 30 year debt in there, but also not get too much secured. That is good. We obviously are very glad to be done that. We're glad to continue to increase our relationship with the partners we have there.
But I think you'll see us manage our balance sheet. 90% of our NOI is still unencumbered, unsecured right now. And so you'll see us continue to protect that. But within proper parameters, Do both types of debt over time. So that was a piece of the overall plan.
On $300,000,000 term loan, we'll likely pay that off this year. And as you heard us talk about, we're now thinking about part of plans for this year is maybe potentially do another bond deal late in the year because the market is wide open and really to handle that and to bring some future maturities forward potentially.
Great. Thank you. Great quarter.
And our next question comes from John Guinee with Stifel. Please go ahead.
Great. A few curiosity questions. It looks like you sold 1 acre of land on Peachtree Tree Road in Atlanta for $9,000,000 Is it really only 1 acre? And when is land worth $9,000,000 an acre in Atlanta? And then also any more color on the Poplar Avenue office building?
John, this is Eric. Yes, This acre of land, it's actually less than an acre. But I mean candidly, it's something about on Peachtree Road right next to Lenox Mall. I mean, it's the heart of Buckhead. This is a residual piece of land associated with comment that Post had done many, many years ago.
The site is incredibly tight, will be incredibly difficult, we thought to do multifamily on. And we were approached by someone who has a different plan for how they intend to use that land. And we worked it. We were Cautiously optimistic, but frankly skeptical that we would get it done. Therefore, it wasn't in our guidance, but we were most Happy to get that done in the Q1.
So it is just what you're reading. It was a big win for us. The Poplar Avenue site, this is we've been in the same office building for 24 years. And we had owned the building. It was part of the IPO and we long outgrew that space and had our corporate staff split into 2 different locations for the last 5 years.
And so we finally had an opportunity to get everyone back together in a new building in close proximity to our old location. We don't own it. We're just renting office space, but we sold it and rather use that capital in apartments. So we've been in it for a long time and glad to be gone.
Okay. And then the second question, the SYNC 36 in Denver, it looks like Phase 1 costs you about 280,000 unit, but the budget for sync Phase 2 is about $310,000 a unit. Question. Did cost really go up 10% that quickly or there are some allocation things we should think about?
It was really more no, costs have not gone up that much. It was really there was some location. When we negotiated the transaction with the developer, they had this one adjacent piece that has some unique aspects to it that Created the cost numbers that you're seeing, but
It is also a low number of units that we view the project as a Hole. So you kind of have to put them together to think about that. And so when we underwrote it, we underwrote it together and the whole project is well in line with our hurdle expectations and our plans. And so It's allocation thing, but in total it works well.
Is it a podium or a wrap?
It's actually a Surface Park product.
Wow! For $300 a unit? Okay.
Yes, I mean, yes, there's allocation in there and
then it's That's
a small the second one is a small number of units. The first phase is much larger. When you blend it down, you're going to be under 3 You
also Denver that's what Denver that's normal for Denver. You look at cost per unit in a market like Denver And that's pretty routine. For high quality products. Yes.
Surface Park though? Yes.
Yes. Wow. Okay, thanks. Good quarter. Segment.
Thank you. And our next question comes from Buck Horne from Raymond James. Please go ahead.
Hey, thanks. Good morning. I just want to go back to guidance for just a second, Al, if you could. I guess you said we raised the guidance $0.08 for the non cash gain on the land sale, but I think there was also you mentioned an offsetting $0.03 drag from just the timing of transaction activity. Just Can you elaborate on just the moving parts there and just the changes on the timing of acquisition dispositions that drove that change to the guidance?
Yes, absolutely, Buck. That's a good question. I think so the outperformance in the Q1 was $0.11 per share. And so we just put that performance into the into our obviously roll that in as actual performance. And so and what we talked about was over the back part of the year, we did have some changes to our Yes, to our transactions and to our debt plans that cost us $0.03 per share.
So net that out is $0.08 and I'll give you the details of that as About a penny for I talked about this a minute ago, we're planning on potentially doing another debt deal later in the year to take care of some of our maybe our future financing as well as pay down our term loan that we've talked about earlier. We also had a $0.01 per share of earnest money forfeiture from that land sale that we talked about. I mean, we had actually as we talked about didn't have in our guidance because we were really uncertain about the closing and we had actually included in Our plans that likely would fall apart and we would get the earnest money forfeited to that. That's about $0.01 per share actually that comes out in the back part of the year. And then the remaining $0.01 is just transaction timing, acquisition, disposition plans.
We continue to adjust those as we're selecting properties And we see a little clearly the deals we may buy in the year, so that costs us about $0.01 So together, that's the $0.03 We beat $0.11 1st quarter and took $0.03 out for those things. Got you. That's very helpful. Thank you. I guess secondly, just looking at some of the activity and the added development project in the Phoenix area.
It looks like you're trying to enhance or considering enhancing the presence in the Southwest a little bit further. So I'm just wondering how you're thinking about your current scale in the Phoenix marketplace or if you if there's anything else you want to do to optimize your scale there or And would you consider reentering a market like Las Vegas if the right deal came along?
Buck, this is Eric. I would tell you, I mean, we like Phoenix a lot. I think that both Phoenix and Denver continue to have a very promising outlook over the next, call it, 10, 15 years. I think both of these markets are Much more affordable than what you see on some of the West Coast markets. I think both markets are going to continue to attract a lot of job growth and population growth migration trends.
So we're very comfortable continuing to scale up our presence in the Phoenix market as well as obviously in the Denver market as well. Vegas It's a little bit of a different story, I think. I mean, we like very much the 2 properties that we have there. They're doing great. That's a market that is doing pretty well right now.
I don't see that economy as broadly diversified as I do a Phoenix and a Denver. Vegas obviously is has a lot of entertainment employment base as well as military that drives a lot of it. And you're seeing Some other back office call centers. I think that you don't get the wage growth in that market like you do in Denver or Phoenix. I wouldn't think that you'll see a scale up in that particular market in Vegas, but the other 2 for sure we would.
Thanks.
And our next question comes from John Pawlowski with Green Street Advisors. Please go ahead.
Thanks. Tom or Al, could you remind us what the lift, the revenue lift for full year 2019 is from just the earn in on redevelopments?
Starting on redevelopment. So redevelopment is typically 25 to 50 basis points in our in any year and our program as this year is consistent with what it was last year. So I'll probably give it 25, 35 basis points.
Yes. I mean that would be what it was if we took it out. Run. But since it is similar to what we did last year, it's not part of the grant. It's basically the right.
What did you ask me,
I think, is the built in impact of that over time, if that's what you're asking, John, I think that's what we would say it is. Yes. On a
year over year basis, we've been pretty steady at the same number of units program. The year over year change is really Not meaningful at all, but the overall impact on a permanent basis is the 25 basis points, 35 basis points.
If we were wrapping the program up, it would be in this year, it would be hire into that, but we've had this consistent number this year as we're doing last year. We did ramp up in last year some from pre post merger, but that's what we would expect is built in.
Yes. The question to be more clear is, if you didn't do any redevelopments these last few years, how much lower would
25 basis points, 25 to 30.
Okay.
It's kind of built in on an ongoing basis.
Okay. And that kind of probably ramps next year a bit?
No, I think I mean, I would only ramp if we ramped our program up next I think right now we expect to do about the same number of units next year that we did last year and the previous year. So that's probably the contribution from that program. Now we certainly We hopefully we have continued pricing performance and other things, but that's from that redevelopment program specifically that we expect next year.
Okay. And then Tom, I was hoping you can give some color on the demand side of the equation in Houston heading into peak leasing season.
It's tough to disentangle what's organic structural
improvement in a tangle what's organic structural improvement in a market versus just a market that's still just coming out of the basement a bit. So How bullish or concerned or kind of middling of feelings do you have of Houston right now?
Yes, I would say, I mean, The jobs to completions are still in a healthy range at 9 to 1. I would expect Houston to still be steady from a growth standpoint, John. I don't think we'll see the blended rent growth change that we saw between 2017 2018. Certainly, one of our more stable and steady markets, I think it was like a 800 basis point change in blended rents last year and that will moderate to more normal.
Does it stay in that mid-four percent revenue growth range these next few years?
So far, blended has hung right in there.
Okay. Thank you.
You bet.
And it does appear that there are no further and over the phone at this time. I would like to go ahead and turn it back to the speakers for any closing remarks.
Well, thanks everyone for joining us and appreciate you being on the call. We'll See most of you at NAREIT in a few weeks. So thank you.
This does conclude today's program. Thank you for your participation. You may disconnect at any time.