Please stand by. Your program is about to begin. Should you need any audio assistance during your call today, please dial star zero. Good morning, ladies and gentlemen. Welcome to the MAA First Quarter 2018 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, May 3rd, 2018. I will now turn the conference over to Timothy Argo, Senior Vice President of Finance for MAA.
Thank you, Savannah, and good morning. This is Tim Argo, Senior Vice President of Finance for MAA. With me are Eric Bolton, our CEO, Al Campbell, our CFO, and Tom Grimes, our COO. Before we begin with our prepared comments this morning, I would like 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.
Reconciliations to comparable GAAP measures can be found in our earnings release and supplemental financial data. I will now turn the call over to Eric.
Thanks, Tim, and good morning. First quarter results were slightly ahead of our expectation and reflect the continued solid demand for apartment housing across our markets. Occupancy is high, and rent growth on renewing leases is strong. However, elevated levels of new supply continue to weigh on our ability to drive rent growth on leases written for new residents. We expect the supply pressures will persist through most of this year, with trends moderating in 2019. As we enter this busy summer leasing season, we are encouraged with the number of trends that we are capturing and continue to believe that revenue trends have bottomed out for the cycle. Our expectations moving forward are supported by favorable trends in several key variables.
These include the continued strong job growth and demand for apartment housing across our markets, our high occupancy levels, the strong performance being captured on renewal lease pricing, the improving pricing trends within the legacy Post portfolio, and finally, the continued strong performance on same-store operating expenses and continued improvement in operating margins. While supply pressures will remain evident in several of our markets for the next few quarters, continued favorable results in these key areas support our belief that we should see incremental improvement in NOI moving forward, with better momentum in 2019 as supply pressures moderate. Resident turnover remains very low at 49.6% on a running 12-month basis. This is despite continued healthy growth in renewal lease pricing of 5.5% during the first quarter.
This level of strong pricing performance in the face of higher new supply is a testament to not only the continued healthy demand for apartment housing in our markets, but it's also a very positive statement about the quality of service provided by our on-site associates, and I really appreciate their efforts. The leasing pressures associated with higher levels of new development continue to mostly impact the higher rent properties and more urban-oriented submarkets within the portfolio. However, it's worth noting that the overall blended rent growth on leases signed in the first quarter within the more urban-oriented legacy Post portfolio did improve by 190 basis points as compared to the first quarter of last year.
As new supply pressures moderate, we believe the opportunity within the legacy Post portfolio for accelerated rent growth as a result of both the execution of our revenue management practices and the meaningful redevelopment opportunities in the portfolio will support much-improved performance trends. As noted in the earnings release, our progress associated with managing operating expenses continued to drive strong results. Tom will cover more details in his comments, but we have been pleased with the early results within the legacy Post portfolio as our various operating practices are fully implemented, and the efficiencies associated with our larger scale are making a positive impact on overall portfolio operating margins. Over the course of the summer, we expect to wrap up the work associated with the back office and systems integration associated with our merger with Post.
As we continue to refine and capture the benefits associated with having both portfolios on the same operating platform, as well as accelerate the unit interior redevelopment effort, the value accretion that we've previously outlined for the Post merger is something we continue to feel confident about. As noted in our earnings release, during April, we closed on a property acquisition located in Denver. This off-market acquisition of this newly developed property was negotiated late last year with the closing subject to the completion of the construction of phase 1 of the project. The property is located adjacent to a recently approved new light rail station that will connect to downtown Denver and located adjacent to high-end restaurant and retail shopping venues. This is a high-quality property in a terrific location that is a great addition to our Denver portfolio.
We expect to get underway with the phase two expansion of the property later this year. We continue to see heavy deal flow with our underwriting and transaction volume reaching a five-year high for the typically slower first quarter of the year. I continue to believe that as we work further into the cycle of new property deliveries, the capacity and optionality surrounding our balance sheet, along with our proven execution capabilities, will yield increasing opportunity for earnings accretive external growth. In summary, we like the start to the year and continue to believe 2018 will play out along the lines we expected. Demand remains high, resident retention is strong, and rent trends look to have stabilized.
We're excited to be nearing the completion of the final steps in fully integrating all operating and reporting activities of the legacy MAA and Post portfolios. We remain very enthused about the long-term value proposition surrounding the merger. I appreciate all the hard work that our team has done over the past year in stabilizing our platform. We look forward to the opportunities in front of us with the important summer leasing season. That's all I have in the way of prepared comments. I'll now turn the call over to Tom.
Thank you, Eric. Good morning, everyone. Our operating performance came in as expected. Revenues for the first quarter were 1.8% over prior year, with 96.3 average daily occupancy and 1.4% effective rent growth. Expenses increased just 1.6% over the prior year. NOI increased by 1.9%. Looking at revenue drivers by portfolio in the first quarter as compared to the prior year, the legacy MAA portfolio generated revenue growth of 2.3%, with 96.4 average daily occupancy and effective rent growth 1.8%. The legacy Post portfolio had 0.4% revenue growth with 95.8% average daily occupancy and 0.2% effective rent growth. Supply has been elevated in our markets for several quarters. Despite the supply headwinds, we saw the blended lease-over-lease performance of the combined company grow by 1.6% in the first quarter, which is 40 basis points higher than the same time last year.
This is primarily the result of new lease pricing on the Post portfolio, which improved by a significant 260 basis points in the first quarter from the same time last year. This is further supported by improving monthly trends during the quarter. Blended pricing growth for the overall same store portfolio in January was 0.7%, February 1.8%, March 2.2%. Expense performance continues to be a bright spot for both portfolios. While improvements in revenue management practices are just now showing up in pricing, our programs to more aggressively manage operating expenses have shown more immediate results. Overall expenses within the same store portfolio were up just 1.6%. This includes $900,000 of winter storm related costs incurred during the quarter. Adjusting for storm costs, our expense increased less than 1%. Total expenses on the Post portfolio during the quarter were down 2.2%.
That was driven by reductions in personnel costs, repair and maintenance expenses, as well as property and casualty insurance. As a result, the first quarter operating margin of the Post portfolio improved another 90 basis points. This is on top of the 130 basis point improvement we made in first quarter of last year. We still have room to run with our expense management programs on the legacy Post portfolio and expect continued progress in 2018. Our operating disciplines are now fully in place, and at current run rates, the savings will continue. April results show the benefit of our consolidated platform and momentum. Overall same store average daily occupancy in April was 96.2%, which is 10 basis points higher than the prior year. This is driven by a 50 basis point year-over-year improvement in the legacy Post portfolio.
Overall, the same store April blended lease over lease rates are up 2.9%, which is 90 basis points better than blended rents in April of last year. Our 60-day exposure, which represents all vacant units and notices for a 60-day period, is a low 8.3% and in line with prior year. The supply picture is well documented. Dallas and Austin are facing the most pressure. In 2018, we expect 22,000 deliveries for Dallas, and in Austin, we expect 8,400 deliveries. We're encouraged that job growth has remained strong in both markets. Dallas job growth was at 2.5% in 2017 and expected to increase to 2.6%. Austin job growth was 3.3% in 2017 and expected to remain robust again at 3.3% in 2018. These growth trends are strong and well ahead of nationwide trends.
While elevated supply levels have pressured rent growth in several of our markets, we are seeing good growth in a number of markets. Phoenix, Richmond, Orlando, and Jacksonville stood out from the group. Our focus on customer service and retention is paying dividends. Move-outs by our current residents continue to remain low. Move-outs for our overall same store portfolio were down 2.3% for the quarter. Move-outs to home buying were down 3%, and move-outs to home renting were essentially flat with last year. Home renting remains an insignificant cost for turnover and accounts for less than 6% of our move-outs. On a rolling 12-month basis, turnover dropped to a historic low of 49.6%. The steady decrease in turnover was achieved while increasing renewal rents by 5.5%. Momentum is building on the redevelopment program across the legacy Post portfolio. In 2017, we completed renovation on 1,700 units.
We have completed an additional 560 in the first quarter and expect to complete 3,000 units this year. On average, we are spending $9,400 and getting a rent increase that is 11% more than a comparable non-redeveloped unit. As a reminder, we have identified a total of 13,000 Post units that have compelling redevelopment opportunity. For the total portfolio, in 2018, we expect to complete over 8,000 interior unit upgrades. On the legacy MAA portfolio, we continue to have a robust redevelopment pipeline of 10,000 units-12,000 units. On a combined basis with the legacy Post portfolio, our total redevelopment pipeline now stands in the neighborhood of 25,000 units. As you can tell from the release, our active lease-up communities are performing well. In Houston, Post Afton Oaks stabilized in the first quarter as expected.
Our remaining pipeline of lease-up properties, The Denton II, Post South Lamar II, Post Midtown, Post River North, and Acklen West End are all on track to stabilize on schedule. We have begun leasing at Post Centennial Park in Atlanta. 2017 was a year of significant change for our organization. We started 2017 with two completely operating platforms and teams. We are pleased that the bulk of the integration work of the Post portfolio is now behind us. We have started 2018 with a much more aligned and cohesive operating platform and team. Results are progressing as expected. We look forward to continuing to capture value creation opportunities on both the revenue and expense sides of the equation as we finalize full integration activities in 2018. Al?
Thank you, Tom. Good morning, everyone. I'll provide some additional commentary on the company's first quarter earnings performance, balance sheet activity, then finally on guidance for the remainder of 2018. Net income available for common shareholders was $0.42 per diluted common share for the quarter. FFO for the quarter was $1.44 per share, which was $0.01 per share above the midpoint of our guidance. First quarter performance included $0.02 per share of non-cash expense from the valuation of the embedded derivative related to the preferred shares issued in the Post merger. This was not included in our original guidance. Same-store performance, G&A expense, interest expense were all slightly better than expected and combined to produce the outperformance for the first quarter. During the first quarter, we did not acquire any communities.
We did, however, close on the disposition of two land parcels acquired in the Colonial merger for $5.9 million in total proceeds. These sales produced net gains of about $200,000 recorded during the quarter. As Eric mentioned, in April, we closed on the acquisition of Sync36, a 374-unit high-end community located in Denver. The acquisition included a land parcel to develop an additional 79 units as part of a phase two expansion, which we expect to begin later in 2018. Including the phase two expansion, the total investment is expected to be approximately $128 million. Following quarter end, we also closed on a disposition of additional land parcel located in Las Vegas for total proceeds of $9.5 million, which will produce a $2.8 million gain that will be recognized during the second quarter.
During the first quarter, we completed construction of one of our development communities, Post River North, located in Denver. The community was completed on plan with a total investment of $88.2 million, is expected to be stabilized in early 2019 at a 6.4% NOI yield. We currently have two communities remaining under construction with a total projected cost of $125.8 million, of which all but $24.4 million was funded as of quarter end. Including Post River North, our lease-up portfolio now contains five communities totaling 1,509 units. Average occupancy for the group was 56.1% at quarter end. We expect four of these communities to stabilize in the second half of this year, the remaining communities to stabilize in the first half of 2019 at an overall average stabilized NOI yield of 6.4%, which will ultimately produce over $21 million of NOI.
Our balance sheet remains in great shape. During the first quarter, we paid off an additional $38 million of secured debt, pushing our unencumbered NOI to over 85%. We also executed $300 million of forward interest rate hedges to secure future bond financings projected for later this year. At quarter end, our leverage, as defined by our bond covenants, was only 33.1%, while our net debt to recurring EBITDA was just over five times. We also had almost $600 million of combined cash and borrowing capacity under our unsecured credit facility at quarter end. Finally, we are maintaining and confirming our outstanding guidance for all major components of our forecasts, including net income, FFO, AFFO, same-store performance, and transaction volumes. In summary, net income per diluted common share is projected to be $1.78 to $2.08 for the full year 2018.
FFO is projected to be $5.85 to $6.15 per share, or $6 per share at the midpoint, which includes $0.08 per share of projected final merger and integration costs related to the Post merger. AFFO is projected to be $5.24 to $5.54 per share, or $5.39 at the midpoint. For the second quarter, FFO is projected to be $1.43 to $1.53 per share, or $1.48 per share at the midpoint. Though we expect continued volatility related to the valuation of the preferred shares acquired with the Post merger, our projections do not include any further valuation adjustments over the remainder of the year, as these adjustments are both non-cash and impossible to predict.
We remain on track to capture the full $20 million of overhead synergies related to the Post merger, as well as other NOI and earnings opportunities outlined with the merger, which are reflected in our current guidance this year. That's all that we have in the way of prepared comments. Savannah, we will now turn the call back over to you for questions.
Thank you. At this time, if you'd like to ask a question, please press the star and one on your touch-tone phone. We can take our first question from Nick Joseph with Citi. Please go ahead. Your line is open.
Thanks. You had 1.8% same-store revenue growth in the first quarter, and full-year guidance is for 2% at the midpoint. I know you talked about an acceleration throughout the year, just want to get a sense of the pace. How do you expect it to trend? Do you expect four Q same-store revenue at the high end of full-year guidance around 2.2%?
Nick, this is Al. I would say in general, as we've talked about before, what the forecast is built on this year is really a few major components. Occupancy remaining strong at 96% through the year, certainly through the back part of the year. Renewal pricing being consistent, 5%, 5.5%, new lease pricing being the key to that performance over the back half of the year. We have discussed that we do expect new lease pricing to be above prior year, that would drive blended pricing. I think for the remainder of the year, what we would expect to see was somewhere in the 70 to 80 basis points range to capture our guidance at the midpoint.
I'll tell you, though, in the first quarter of the year, we captured 40 basis points improvement over the prior year, as Tom mentioned, April actually was much better than that at 90 basis points. We feel very good about the trends and the prospects and so far, what we lined up and outlined with guidance, we're right on track.
From a same-store year-over-year basis, by the end of the year, you should be towards the top end of the guidance that-
That's right
You still expect that acceleration.
That's right. Good point. The revenue based on that would build as we went through. Second quarter would still be on the lower end. It would grow in the third and fourth more significantly.
Thanks. Just wanted to get your view on the Houston market. We saw same-store revenue growth in the first quarter, actually a little lower year-over-year than what we saw in the fourth quarter. Just what you're seeing there today.
Yeah. Nick, it's Tom. Last year, we ran with high occupancy and negative rent growth, as you know. The hurricane changed that a bit. It takes time for the revised pricing to be replaced on each unit. Just to give you a flavor for what's coming, April blended rents in Houston were up 7.5%, and we think revenues will continue to follow. We just need that repricing to get on through the system.
Makes sense. Thanks.
All right.
Thank you. We can go next to Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead. Your line is open.
Yeah. Hi, good morning. As it relates to supply, you guys had laid out a table in your investor deck that showed quarterly supply growth by market, and indicated some fairly significant decreases by quarter. I was just curious, one, do you still think that that's the case, that we should see it ratchet down, I guess, each quarter throughout the year? Have you seen some of that pushed, I guess, later into the year? Then second, do you think you're already feeling the impact from some of that supply, as properties tend to lease prior to completion?
Yeah. The answer to your question is yes, we do think that some of the supply, based on the most recent and updated information we have, appears to be slipping a little bit later into the year. Yes, you're right, we do begin to see some of the pressure on, particularly as I've mentioned, in new lease pricing, prior to the actual delivery of the unit as pre-leasing activity starts up. I will tell you that the slippage, if you will, of some of the supply into later in the year, in some respects, is not such a worrisome thing in the sense that it's slipping into the more robust time of the year for leasing anyway.
What was really a problem last year is we saw slippage take place in the third quarter with deliveries that we thought would happen in the third quarter move into the fourth quarter, which of course, is the worst leasing quarter of the year. Moving some of the Q1 deliveries into Q2, Q3, is not such a bad thing, given that leasing activity is more robust. Having said that, I also want to quickly mention, while the revision that we're seeing on supply being pushed out a little bit is accompanied by also a higher job growth forecast than what we started the year with. We've seen job growth pick up on a blended basis about 40 basis points more than we expected starting this year.
While the supply picture is moving around a little bit in terms of timing, we're encouraged with continued healthy demand and job growth taking place, which I think is going to be helpful.
Any particular markets that job growth are the big drivers of the improved job growth outlook?
Yeah, Austin, this is Tim. We're really seeing Austin and Dallas push up, which is, they've been drivers now for a few years, and they just continue to be job engines. That'll be helpful as those are obviously two of our larger markets.
Great. Thanks. Then as far as expenses, clearly, another quarter of expense savings from Post and really kept expense levels low. As revenue ratchets higher through the year, should we think about expenses also ratcheting a little bit higher, or do you think that maybe the initial outlook is a little bit conservative and that you're finding continued opportunity to keep that kind of towards the lower end of the range on the full-year guide?
Austin, this is Al. I would say we feel good about the guidance that we have full year for expenses, which is 1.5%-2.5%. With the first quarter at 1.6%, that would tell you that what we're expecting over the remaining three quarters is somewhere around 2%, maybe a little up north of 2%, blended for the back half of the year. I think that's what we would expect overall.
If nothing else, some of the early wins we were getting on the expense side began showing up really in the last half of last year. The comps, the comparisons to prior year, get a little tougher as we get towards the back half of the year. The absolute savings continues, but the comps just get a little bit harder, which will, of course, affect year-over-year results.
Appreciate that. Then just last one for me. On the $128 million total investment on the Denver deal, can you give us the breakout between phase one and phase two, as well as what the going-in yield on that deal was, and then what you ultimately expect it will be on stabilization?
Well, the phase one was something approaching $94 million. Is that-
104.
$104 million. The balance is what we expect to spend-
128 overall.
Yeah. What we expect to spend on phase 2. The stabilized yield that we expect to get out of this project is upper five range, as phase 2 gets fully built out and leased up. We, as I mentioned in my comments, it's an incredible location, and we think that as we continue to build out our Denver presence, we think this can be a great addition. We expect to be in an upper five range on the stabilized NOI yield on this deal, over the next couple of years or so.
Does that put phase 2 at north of a 6% yield?
Yes.
On a standalone basis? Great.
Yes.
All right. Thanks for taking the question.
Well, phase 2 is a smaller 79 unit, as you can do the math on that, which will be a very efficient addition because it'll use most amenities and things from phase 1.
The phase 1 was about 68% occupied when we bought it. That'll give you an indication of sort of the initial yields.
Great. Thanks for the detail.
Thank you. We can go next to Rob Stevenson with Janney Montgomery Scott. Please go ahead. Your line is open.
Good morning, guys. Other than this phase two on the newly acquired asset, what other land are you controlling these days for future developments? How much of that are you thinking is going to start within the next 12 or so months?
We have parcels already that we own in Fort Worth, in McKinney, North Dallas, City North in North Dallas, McKinney, Texas, and we have a site in Cherry Creek sub-market in Denver. We would expect, potentially, to be underway with all of that very late this year. The Cherry Creek site may slip into early next year, but we're still working through pre-development on those three opportunities. We also control opportunities, another opportunity in, also we have a phase three opportunity in Raleigh, North Carolina, with an existing property that we will likely pull the trigger on later this year. In addition to that, we have another site in Denver that we are working, that we have under contract, and we also have a site in Orlando that we are working on.
Okay. From a timing standpoint, it sounds like that most of this is going to wind up being either late 2018 or 2019 starts, which means that basically, I would imagine then that there's basically the expectation to little to no deliveries at all in 2019. Is that correct?
That's correct.
Okay. Tom, any markets that, you're a third of the way through the year now, that you're seeing might be a little bit stronger, a little bit weaker than you guys were initially expecting?
Honestly, Rob, not out of the chute. We expected headwinds in Dallas and Austin, and those are there, but we're pleased with the job growth there. Very pleased with places like Phoenix and Orlando right now.
Okay. Al, one last one for you. In terms of the hard cost on unit turnover, what are you guys spending these days?
I think it's around $1,000 per unit with what, $1,200 with all things, depending on whether you replace carpet or not. That's a big factor in there. I think that pushes it to high-end if you replace carpet, you would do that every five years or so. I think that's roughly what we would say today.
Okay. Given the reduced level of turnover, are you able to do that with existing Mid-America staff, or are you having to bring in outside contractors to do that?
That's one of the key things that has helped us with the Post portfolio, is we're handling close to 80% of those turns in-house, meaning sort of paint and carpet cleaning. The carpet installation and replacement, the capital item that Al mentioned, we contract that out. By comparison, Post really used contract labor for the overwhelming majority of their paint and carpet cleans.
Okay. Thanks, guys. Appreciate it.
You bet, Rob.
Thanks, Rob.
Thank you. We can go next to Dennis McGill with Zelman & Associates. Please go ahead. Your line is open.
Hi. Good morning. Thank you. First question. You gave a couple of stats around new leases. I think you had said the Post new leases were up 260 basis points year-over-year. Can you just fill in the holes as far as what new lease was for the overall portfolio, then maybe the pieces, then how that trended versus 1Q 2017?
Yeah, sure. New lease rates were for the first quarter combined same store, new lease was negative 2.3, renewal 5.5, blended 1.6. For April, new lease rates are 10 basis points positive. Renewals are 5.6, blended 2.9. Just on roughly on a blended basis, to save some math, but I'll go into detail if you want it, first quarter was up 40 basis points versus last year on blended, April is up 90 basis points.
Yep, got it. I guess the only question within that, Post new leases, I think you said were up 260 basis points year-over-year.
That's correct.
What did Legacy MAA do in the first quarter on new?
Legacy MAA on blend, you said new lease rates?
Yeah.
Right.
Bear with me just a second. MAA new lease rates were about flat for the quarter.
Perfect. Second question, you noted the operating platforms will be finalized on the synergy later this year. Where will we see the most obvious benefits once that's done, either expense-wise or revenue-wise?
Well, I will tell you, it gets a little hard to point to specific things. Generally, a lot of the expense savings that we hope to get as a result of just renegotiating a lot of contracts and services for various services and supplies and products that we use, and that really wasn't so much a function of the systems conversion and consolidation effort, if you will. I will tell you, on the revenue side is where I think the opportunity comes from in terms of where the opportunity is as a result of putting both companies on the same platform. We frankly just get more efficient in how we manage the company. Right now, our regional leadership are working with two different systems and having to look at two different sets of reports.
Our LRO, our revenue management system, is not as fully optimized because of having to, if you will, still interface with two versions of our property management software. There's a lot of inefficiencies, frankly, that we have in terms of just how we manage the business by having the portfolios on two different systems. I think as a consequence, we're about halfway through the conversion process at this point. We'll wrap up here in another 90 days or so, and I think it ultimately just gets to a point where we have more efficiency. The other thing that comes from this is, frankly, with the new system, we're introducing a little bit more robust activity as it relates to sort of web-based activities. There's a new consolidated web platform that is being finalized. It's a lot of things.
A lot of them are subtle, in aggregate, we think it just creates a lot more ability to bring intensity to the things that we really want to focus on, as opposed to a lot of focus on putting systems together. We sort of are able to, if you will, get back to work in a much more intense fashion as a consequence of the merger. I might just add to that, too, if the question is what is remaining to capture from those opportunities, one of the things we've talked about is the redevelopment. Remember, we're capping that over three years or so, and the plan is this year to capture a third of that. It'll take several years to roll that opportunity, that portfolio opportunity out at the pace we're doing it.
There are several things that'll keep providing opportunity for us in the future.
When you flip the switch in 90 days or so and you're on the same platform, how long will it take you after that to get to a stabilized, fully efficient run rate on the revenue management?
I think it's happening. I think it'll be instant, frankly. I think it happens. What remaining little inefficiencies we have sort of dissipate as a consequence of finally being on the same system.
Dennis, what I would tell you is, I think most of the benefit of the revenue management system on the Post portfolio, we're really beginning to capture that now, and you're seeing that in the new lease rates. It'll just be streamlined reporting and quicker reacting.
Okay, great. Then just last question. Eric, you talked to turnover being at historic lows, and we're seeing that not just across the multifamily space, but pretty much all of housing. Any thoughts from your perspective how much of that is changing consumer behavior versus not having anywhere to go because of inventory constraints?
I think that a lot of it is a change in behavior. I think that we certainly continue to see average age, average income, continue to move up within our resident portfolio over the last couple of years. We continue to see the percentage of female versus male continue to move up as a consequence of the last two or three years' worth of trends. Certainly, the ability to go out and buy a starter home is more challenging, and I'm sure that factors into it to some degree. I continue to believe that a lot of it is more social and more about just our behavior patterns of our resident profile as much as it is anything.
Dennis, we've seen our single rate go up about a percentage point, which indicates, supporting sort of Eric's point, we're not seeing people get married and sort of be backlogged in the unit in some way, shape, or form, assuming that a married couple is more likely to buy a house than single.
Helpful. Thank you, guys.
Thank you. We can go next to Nic Yulico with UBS. Please go ahead. Your line is open.
Hi, good morning. This is Trent Trujillo on with Nick. I appreciate all the comments that you had on supply. Just wanted to circle back on that topic, though. Given peak supply across your market, you said in first quarter, plus some slippage, so maybe you're experiencing it right now. Can you speak to the level of concessions you're seeing across some of your larger urban markets of perhaps Atlanta, Dallas, Houston, and D.C., and how that's trended since the start of the year?
Sure, Trent. We'll roll through it with Atlanta and going down. Concessions, it's really by sub-market in Atlanta. We've got 1 to 2 months free in Buckhead and Midtown. There are pockets of 1 month free, depending on specific lease-up places like Roswell Road and 285, or the perimeter has a little bit of pressure with a 1-month. Outside the perimeter, concessions are really pretty rare there. In Austin, we see sort of 1 month in Cedar Park, which is north area, and in south Austin. The tightest part is, or the most pressured part, is sort of that South Congress Lamar corridor, and we're seeing 6 weeks to 2 months there. That's pretty similar with what we saw earlier. In Dallas, we're seeing 1 to 2 months in Frisco, Plano, and Richardson.
Uptown is running close to 6 weeks, which is actually slightly better than what we saw previously. It was running closer to 2 months. Uptown supply is about 2,000 units, which we expect that in 2018, which is about what it was in 2017.
Thank you very much. I appreciate that. Perhaps regarding acquisitions, how competitive is the transaction market, and can you speak to the amount of deals you're currently considering? I think earlier, Rob had mentioned something about the land sites that you were looking at. I think last quarter you mentioned you had quite a few acquisition deals under review, but just the one closed in the Denver market after quarter end. Any commentary on that would be helpful. Thank you.
The transaction market is incredibly competitive. As I mentioned in my call comments, the number of deals that we underwrote in the first quarter is the highest we've had in over 5 years in the first quarter, which is typically a very slow quarter for deal activity. We continue to see a lot of volume. We've seen cap rates, if anything, over the last 6 months move down a little bit. Routinely, you're in 4.5%-4.75% range in some of the bigger markets, and you're low 5%-5.25% in perhaps some of the smaller markets, as more capital continues to wade into some of these more, if you will, non-coastal markets or more secondary markets. It's incredibly competitive. We continue to remain active in the market.
Believe that based on the hurdles and the disciplines that we're holding ourselves accountable for in terms of any capital deployment, that where the pricing is right now, it's just hard to really justify some of the pricing that we see happening. We're going to remain patient, frankly, as we think that as we get a little later into the cycle, I think later this year, supply trends being what they are, that the opportunities may get a little bit more favorable. It's pretty competitive right now.
Okay. Thank you very much.
Thank you. We can go next to Drew Babin with Baird. Please go ahead. Your line is open.
Hey, good morning.
Morning.
Hey, Drew.
Question on the improvement in new lease pricing year-over-year within the legacy Post portfolio. Would you say that this is directly attributable to the ROI CapEx on some of these units you've acquired? I guess, can you speak to how you're pricing those units relative to new supply in places like Uptown Dallas, Atlanta, and Austin?
Yeah, Drew, we haven't done enough of that CapEx to really move the number. This is really a direct reflection of where pricing was last year, when we were just getting started on the merger and supply was picking up. Last year, we were really on two different pricing systems completely. We were just beginning to push renewals up, and we were adapting to the portfolio. I would tell you the uptick is significant in terms of just us learning the portfolio and getting our practices and habits and systems in place. Then, sorry, what was the second part of your question, Drew?
I guess just as more of these renovated units come to market, maybe into peak leasing season, I guess, what's the pricing strategy relative to the new supply in these markets? Is there a certain kind of gap relative to where the new supply is delivering as far as rents go that you're targeting to sort of be a value proposition relative to it?
That's what we're so excited about the Post portfolio on is, Post did a really fine job of picking locations that stood the test of time. Essentially what you've got is we have mid-rise product that was 8-10 years old, let's say, and were being shaded out by high-rises that are looking for $3 a foot. We're able to upgrade the unit, great bones, well-developed property, and we're able to stay, even with the upgrade in units, $200-$500 less than new lease pricing. It's a real sweet spot for us.
That's very helpful. Lastly, Al, just a question on the balance sheet. On secured bond pricing right now for 10 years, if you could kind of give maybe the spread economics there, then whether MAA would consider doing anything with a duration over 10 years, given kind of a flat yield curve.
Yeah, Drew, that's a good point. Both the underlying treasury rates, 10-year rates, has gone up recently, and the spreads have gone up a little bit in the bond market. 10-year bond, if we do one today, it would probably be around 4.3-4.5 range, something like that. Keep in mind, as I mentioned, we've done $300 million of hedges in preparation for some financing this year. When and if we do a deal this year, it will be a little bit lower than that, I would say. What was the second question, second part of that?
30-year.
Oh, absolutely. No question. One of the things we've talked about before is we've worked very hard on our balance sheet over the last few years. Now we're at a point we've got a lot of public bonds outstanding, a lot of liquidity. We think we're ready to go to potentially a 30-year market at some point, and one of the things that we are looking to do to continue to strengthen our balance sheet is push our durations and maturities out. That's a specific target for us over the next few years through. I can't tell you when we would do that. Obviously, we're going to work tactically where the market gives us that opportunity, but we do expect to seek that kind of activity over the next year or two.
Great. That's all for me. Thanks.
Thanks, Drew.
Thank you. We can go next to Omotayo Okusanya with Jefferies. Please go ahead. Your line is open.
Hi. Yes, good morning. A couple of questions. First of all, you're quickly increasing your exposure to the overall Denver market. Just curious how big you expect to get in Denver over the next few years, and why you're particularly focusing on that market.
Well, we've been looking at the Denver market for, frankly, the last several years. We continue to believe that the growth dynamics there are very compelling. I think that there's just a lot of good things associated with, I think the next 10 years likely to occur in Denver from a job growth perspective and migration and household demand for that market. Some of the West Coast markets continue to become prohibitively expensive to live in. We think that the markets like Denver and Phoenix continue to find favor with a lot of households and employers as well. As a result of the merger we did with Post, you may recall they actually had a development project already underway there. That really gave us the toehold into the Denver market that we had been working to find for several years.
As a consequence of now spending more time in the market, we went out and created an off-market opportunity on the Sync36 acquisition that we looked at. As I mentioned, we also have another site in the Cherry Creek sub-market, very compelling and high-end sub-market there, just a little bit southeast of downtown that Post had already on balance sheet that we're working on. We've got another site that we're working that we recently have been working for the past year or so to sort of tie up. It's just a very slow, methodical process that we're continuing to work through, both in terms of development as well as acquisition. We'll be patient as we look to build out our presence in the Denver market.
We very much like the growth dynamics in that market and continue to feel that it's a good fit for us.
Got you. That's helpful. The second question is for Al. Just kind of going back to same store effects again, really good quarter, holding those costs down. Kind of going forward, I guess, with where your guidance is, could you just talk a little bit kind of category by category, where you still think you might be able to hold costs down? I know this quarter in particular was repairs and maintenance, and even property taxes were only up 2.6%. I'm curious for the rest of the year, how do you see that mix that will keep you within that low guidance range?
I think for the rest of the year, you'll definitely continue to see the repair and maintenance be a good performer for us, Tayo. You'll probably see personnel be in line with what it is now. Repair and maintenance continue to show favorability as we're capturing more of the Post opportunity. I think taxes, real estate taxes, will be pretty consistent. It was 2.6 for Q1, there was some timing of the prior year appeal finalization. 4% for the full year on that is about the right picture. I think we would say marketing expenses will be at the lower end of, not negative, but low 0%-1% kind of range. I think those are the key drivers of it as you look at the back half of the year.
The insurance renewal that we had last year that's providing a lot of opportunity, in the first half of the year, we do renew in July 1st of this year. We have an increase projected, that's a little bit of a wild card. We feel like our increase we have in there is correct, that's yet to be determined.
Great. Thank you.
Thank you.
Thank you. We can go next to John Pawlowski with Green Street Advisors. Please go ahead. Your line is open.
Thanks. Eric, on the capital plan for 2018, I guess what specifically would you need to see to begin ramping dispositions? I understand you've done a lot of capital recycling in the past. What would we need to change on the ground to pivot the disposition strategy?
Well, I think that, as you alluded to, we've worked a lot over the last five years, both as a consequence of capital recycling and two fairly significant M&A events that have really gotten the position, the portfolio, more or less where we want it. I think that we've got the balance and the diversification. We shrunk, reduced, if you will, the number of markets that we're in pretty significantly. As a consequence, we think created a little bit more efficiency in terms of how we are able to operate the portfolio. I think that it's a long way of saying we sort of like where we are right now.
I think the opportunity to then ramp up recycling of capital by selling more assets really comes back to the opportunity to match or to fund or match, fund the capital we pull out of those dispositions into something that is attractive and would offer an improvement, if you will, in our long-term earnings growth rate over what we're selling. We're having a hard time finding new deployment opportunities right now that are particularly compelling in terms of pricing. As a consequence, we think the right thing to do at the moment is to continue to clip the earnings coupons that we have coming out of a lot of the investments that we have today, keep our earnings coverage strong, keep the balance sheet strong, keep the optionality in place.
I think that we're at a point where obviously there is just a wall of capital out there that is continuing to chase multifamily real estate. I don't think it will always be this way, but I think that we're going to continue to be patient with the optionality that we have right now. I think, just selling a bunch of assets and using the proceeds in a compelling way right now, it's not a good environment for that right now. Obviously, it's a good time to be a seller, but finding an attractive use of the capital without really creating earnings pressure associated with that is difficult to pull off right now.
Yeah. In certain markets, your comments about how competitive the bid is, and you're sitting in the bidding tent for acquisitions, not willing to underwrite the growth on certain deals that people are. I guess why not sell the dream to somebody else with comparable assets in your own portfolio and balance sheet's in good shape, but build a war chest for another day, sell that dream today?
Well, we think we've got a pretty big war chest right now, I think that giving up earnings right now doesn't seem to be particularly compelling for us. We think that the right thing to do right now is continue to enjoy the earnings that we're getting from the portfolio. We've put the organization through a significant amount of earnings dilution over the last five years, recycling well over $1 billion of capital from high-yielding to low-yielding assets. Longer-term earnings growth rate is better as a consequence of these new assets. We put the organization through a significant dilutive event, both in terms of the recycling that we've done through the merger with Colonial and more recently through the merger with Post. We have de-leveraged the balance sheet massively over the last five years.
We've done a lot of dilution, if you will, earnings dilution over the last five years, in order to position the company, we think, for a better future earnings growth profile. A lot of that has been accomplished right now. We don't see a big need to do more of it right now. We think, frankly, the thing for us to do over the next few years is to harvest the earnings out of all this stuff that we've done for the last five years, and that's really where our focus is.
Okay. Last one from me. In terms of sub-market supply backdrop, on the margin, when you look forward to 2019 and 2020, do you expect supply to start weighing on the legacy MAA footprint more than the Post footprint?
No, not really. I think that we continue to see that, frankly, what development does get done today, and I think I see no reason why this is going to change any time, given the significant rise in construction costs and significant rise in land costs. The only thing that pencils right now is to build a pretty high-end, very high-rent kind of product, is the only way you can make it work. I don't think there's any reason to see that those conditions are going to change in such a fashion that all of a sudden you're going to see a wave of more modestly priced product starting to be built out. I just don't see that happening.
Okay, thanks.
Sure.
Thank you. We can go next to Wesley Golladay with RBC Capital Markets. Please go ahead. Your line is open.
Hey. Good morning, guys. Just want to go back to the questions on concessions. On average for the entire year, do you expect concessions to be less of an issue this year? I know you got hit last year, particularly in the fourth quarter, and that really hurt the guidance, but how should we look at the progression of concessions and new lease spread?
Yeah, I would think, well, new lease rates, I would expect on a net effective basis to continue to build on the pattern that they have for the first four months of the year. Concessions, I would not expect. It really ramped up in the fourth quarter of last year, and we just don't see anything indicating that that's going to happen again this year.
Okay. I don't know if you have the data handy, but do you have the new lease spread last year in the fourth quarter?
I do not have it at my fingertips. We can follow back up with you on that, Wes. It is a number we're looking forward to comparing to.
Okay. Thanks a lot.
It appears we have no further questions at this time. I can go ahead and turn it back over to you, Eric, and the team for any additional or closing remarks.
Okay. Well, thanks everyone for joining us this morning. I guess we'll look forward to seeing everyone at Nareit in a few weeks. Thank you.
This does conclude today's call. Thank you everyone for your participation. You may disconnect at any time, and have a great day.