Good morning, everyone. We'll go ahead and get started. First of all, I just want to thank everyone for joining us this morning. What I thought I would do is start out just giving you guys a summary of who MAA is, what we're focused on, for those of you that aren't as familiar with the story, introduce the team here for sure, and then really walk you through some of the areas and reasons why we're pretty excited about where we sit today, and what we think the next few years, and the opportunity for growth looks like for us. First, on my left, I have Clay Holder, who's our CFO. On my right, I have Tim Argo, Chief Strategy and Analysis Officer, and I'm Brad Hill, our President and CEO.
Then we'll do questions at the end, too, or you guys can raise your hand at any point and ask a question. We're happy to answer whatever you guys have there. For those of you that aren't as familiar with MAA, we're a multifamily-only focused REIT. We're in the S&P 500. We have a strategy of delivering really long-term TSR performance for shareholders through the full cycle. We look to do that by delivering high-quality earnings growth and dividend growth. Our strategy is really focused on driving that long-term TSR performance. We do that in a, what we think is a pretty differentiated way, by focusing capital on the highest demand region of the country, which for us, generally aligns with the Sun Belt region of the U.S.
We also have other markets that aren't considered Sun Belt, but they have a lot of the same high growth, high demand characteristics, pro-business environment, as generally the Sun Belt markets do. Then we look to broadly diversify within those markets. If you look at where we're located, we're probably the most diversified multifamily real estate REIT. We're in more markets, more sub-markets, across our regions. We also allocate capital both in large markets as well as mid-tier markets. I think that's pretty important, and aligns well with our strategy, which is providing the highest return possible at the lowest volatility. That's really what our goal is. If you look at slide six, if you don't have a presentation, we can certainly get you one.
I'll walk through some of the slides here, but certainly if you look at slide six, you'll see that we've performed quite well over the long term. If you look at the 10, 15 year performance that we have there, if you look at the compounded dividend growth that we've been able to provide, it's pretty significant. I think we've really held true to what our strategy is in terms of long-term TSR performance. Certainly, if you look at performance over the last few years, it's been more of a challenge. In our region of the country in particular, we have seen high demand, but we've also seen high supply. A record level of supply in our markets, the highest we've seen in over 50 years.
If you think about we had five years' worth of supply delivered in a three year period, certainly our performance has been impacted and been challenged, particularly on the new lease rate side of the business. Occupancy has continued to be strong, renewals have continued to be strong, but certainly the new lease rates, which is the most competitive rate for us, has been under more pressure for the last couple of years. However, our focus and our team's focus has been to compete, and they have competed very well over this time. In fact, if you look at our effective rent performance over the last few years in our markets, and you compare that to our peers in those same markets, you'll see that we consistently outperform, which I think is a testament to our teams, and the overall strength of our platform.
As we enter what we think is a multi-year recovery period, certainly as we're entering the stronger leasing season, May to August, where we'll sign 50% of our leases during that time, we're certainly excited about the trends we're seeing and the momentum that is currently building for the recovery over the next few years. There's really a few reasons why we're excited about that. First, we are capturing improving leasing trends. These trends, that's what we expected this year when we laid out our forecast, and our pricing and revenue are generally in line with our expectations to date. I think importantly, we're seeing building momentum. If you look at slide 31, I'll talk about that here in a minute, we are achieving the momentum that we expected coming into this year. There's really a few reasons for that, building to slide 31.
If you look at slide 18 first, what you'll see is the demand dynamics in our markets continue to remain pretty robust. Whether you're looking at job growth, household formation, or you're looking at population growth, the trends in our markets continue to be quite strong, two times what you see in other regions of the country, which aligns very well with our strategy to be in the high-demand region of the country. One of the encouraging components of the demand side of our story is, in particular, we've seen a pickup in job relocations coming to our markets, particularly over the last three or four months, which we really didn't see for the past year. It really calmed down a bit, call it mid last year to the end of last year. That's really picked up now.
If you think about Starbucks announcing 2,000 new jobs that they're moving out of Washington to Nashville, if you think about Goldman Sachs relocating more jobs to Dallas, JP Morgan to Charlotte. Those are encouraging trends that we continue to see within our footprint that just indicates still strength on the demand side. As we indicate on that same slide, migration trends continue to be really positive. We have not seen that. Certainly, it's down from the COVID peaks, but it's really in line with long-term averages where we generally are seeing more people coming into our markets. The other thing is supply continues to decline. If you look at slide 24, kind of long-term average supply in our markets is about 3% of inventory. We have seen that decline significantly this year. It's down about 40% from last year, and it's down 60% from two years ago.
The supply picture is materially changing in our markets as we speak. That's pretty encouraging as well. Sorry, but we're going to go kind of back and forth a little bit here. The other thing on slide 20 shows that the new starts continues to be low. Not only is supply declining, but new starts is also low. It's been below long-term averages now for the past three years. In fact, the trailing 12-month starts is about 2% of inventory. That just indicates the runway that we have over the next few years is pretty compelling. Getting to the actual results that we put out. We did put out in this package an update of performance. You look at slide 31, and I think that really shows the capturing momentum that we're talking about.
We have seen an acceleration in our blended lease-over-lease rates, which are up about 140 basis points in May from the first quarter. As I mentioned a moment ago, our renewals have remained strong. The improvement that we're seeing is coming on the new lease rate side, which is really encouraging, given that's the most competitive, and that's up 240 basis points in May from the first quarter. One of the things that we're also pointing out in the chart in the top left on page 31 is there are some nuances in lease-over-lease rates. You get differences in unit mix. You get difference in term timelines that can impact those numbers a bit.
If you look at just the actual dollar amount of the average blended lease pricing that we're getting, and you look at that for May, it's the highest that we've seen in almost two years. We are making continual progress in terms of the rental rates that we are executing. I think that's a positive as we continue to work through the summer leasing season here over June, July, and into August. We expect that to continue to build. The second reason why we're encouraged about the trajectory of where we're going is we have had a very intentional and disciplined approach to expenses, believing that as we control the expense line, as the revenue line continues to improve, more of that benefit will make it to the bottom line, to NOI, and then ultimately to earnings growth.
If you look at our expense performance versus peers over the last three years, you'll see that we've done a tremendous job in controlling expenses. That's very intentional on the part of our teams. The third point is that we do have a number of growth initiatives that will increasingly contribute to our NOI performance going forward. We'll talk about these in more detail. We've talked a lot about these over the years. We're leaning into them even more now. Our growing renovation and redevelopment pipeline, which is benefited by the stabilizing new supply that's coming into the market. We are also maintaining our focus on development. We have built that development pipeline from just a couple hundred million to close to $1 billion on a run rate basis. We'll continue that.
I'll talk about that here in a moment. We have our property-wide Wi-Fi initiative as well that will continue to deliver for us. The fourth reason that we're excited about our ability to deliver compelling earnings growth going forward is on slide 12 and 13. We've put a lot of focus in this area. This is what we call our reimagine. It's really a focus to continue to strengthen our operating capabilities. It's something the entire organization is excited about. We've worked on this now for about two years to get to the point where we can actually roll this out. We're piloting this, which we'll talk about here in a minute, in three markets today. We're really focused on driving customer service. Through our renewals, we continue to believe that customer service is a differentiator on our platform.
We're able to drive better results as we focus on customer service. It is a focus on customer service, improving the alignment of our roles, our workflows, all geared toward using technology to support consistency and efficiency across the platform. We'll talk about that here in a moment. Some tremendous opportunities really building from that. We're really excited about where we're heading as an organization. With that, I was going to turn it over to Tim and let him talk about some of these growth items.
Thanks, Brad. Brad alluded to the improving supply-demand environment that we're seeing that we think will drive some pretty strong organic earnings growth over the next few years. We have several additional opportunities that we think could push that even higher and drive earnings growth beyond just what the supply-demand environment will give. Brad alluded briefly to a couple of these, and I'll touch on a little more detail the main ones we're focused on right now. First, and these are detailed in pages 12 through 15 in the presentation if you want to take a look at that. First is our unit redevelopment program, and this is a program that we've had in place for years now.
With the supply environment, new developments coming in on average about $400-$500 higher than what our average rents are, and that's what really creates the opportunity, I think, to where we can expand this program even more. We have plans for about 7,000 units that we'll do this year. It's varying scopes, and we do it on turns. We're very disciplined in how we do this program. We have multiple scopes. There are lighter scopes. We may spend $3,000, $4,000, $5,000 per unit. There are heavier scopes. We may spend $10,000-$12,000 per unit, just based on the market and the sub-market and the property, and what we think the market is needing or can get the returns we're looking for. On average, for this year, we're planning to do about 7,000 units and spend about $7,000 per unit.
Call it $50 million or so of spend. We think we can accelerate that over the next couple of years as the supply picture continues to be reduced. On average, we're getting about a 20% cash-on-cash return. There's about an 8%-9% rent increase that comes with that. It's certainly one of our strongest and highest best uses of capital. The way we do it, as I mentioned, we do it on turn so that we can test and make sure we're really getting that return. There's one approach where you can go in and do a heavy redevelopment, take units down, and redo the whole building, and raise rents, but it's difficult to know, are you getting those returns? We do it on turn. Renovate a unit, compare it to a non-renovated unit of a similar floor plan.
We can make sure, are we getting that rent increase that we thought we could or should? If we are, great, we'll continue. If we're not, we can pause it. We can adjust the scope up or down. It's a very flexible program, and it's an evergreen program. We continue to have more units that we think can be a part of this program as they age or as tastes change and as we go through. That's certainly an opportunity that'll drive additional new lease growth as part of that program. Second would be our property repositioning program, which is similar to the unit redevelopment, but more focused on the property amenities. Going into certainly the properties that are well-located and maybe have dated amenities that we can upgrade, redo pool areas, redo fitness areas. We're doing a lot of retrofits of open or common areas.
We're doing pet spas, which is certainly a huge amenity right now. Again, we go into properties. We're spending there $3 million-$3.5 million on average, and able to raise the rents once we complete that, and reprice once we complete that program. Getting, again, about a 13%-14% return on those. Also a great use of our capital. That's a program that we're doing five to six new properties per year. You'll see us continue to move on that program as well. The third one I'll mention is the reimagine that Brad touched on. This is really a transformational program that we're doing to reimagine how we think about our on-site operations, which is really phase one.
I think there's additional phases where we can look at other areas of the business. The first phase is focused on the on-site office teams. It's really all about creating specialist roles and centralized roles that our associates can do their job better. They're more engaged. We can serve the residents better. We can serve the prospects better. We think ultimately serves the shareholders better as well. The historical model has been more generalist type roles, where you're having one person. They got to be good at customer service, resident service. They got to be good at sales. They got to be good at administrative duties. They got to be good at systems. What we're trying to do is specialize those roles. We think as a result of that, each employee, each associate can be better at what they're doing. It's something they enjoy.
It's something they're more engaged. We believe lower turnover can come of this. What we've laid out in the deck is, we think over the next two and a half, three years, $25 million or so of NOI from this phase of the program. It's a combination of expense reduction and revenue growth. We're going at the, as Brad mentioned, this is all about improving the resident prospect, customer, associate experience. There'll be some expensive cuts that come from that, or expense reductions that come from that as we introduce new technology and restructure, but it's really about improving the resident associate experience. We think of that $25 million, probably $15 million or more of that is more on the revenue side. I mentioned the specialists. It's a collection specialist. We think we can improve collections. It's a renewal specialist.
We think we can improve our renewal results. It's specialists on generating leads and driving leads and nurturing leads. Specialists on touring and leasing. We think we can get better at all that and ultimately drive more tours, drive more demand, and that ultimately manifests itself in new lease growth. That's, as Brad mentioned, we just started on that. We have three waves that we've rolled out over the last few months, testing and kind of making sure and tweaking where we need to, and then we'll continue to roll this program out over the next one year and a half. Certainly excited about that, excited about all these opportunities. Think we can push earnings growth even well beyond our historical average.
Yeah. Well, thanks, Tim. One of the other areas we talked about from a growth perspective was development, that I'll hit on real quick. This has been a very intentional focus of ours over the last few years. We built our development pipeline from four years ago, call it just a couple of hundred million dollars in size. We've now grown that to close to $1 billion. It'll ebb and flow a little bit as projects deliver and come off of the construction line, and while we're in the midst of starting new projects. I think we're around $700 million today, as is indicated on slide 10. We started a new project in the second quarter in Kansas City. We have another project we'll start shortly in Nashville, with a couple more coming by the end of this year.
We've really built that pipeline to be about $1 billion, which is about $350 million-$400 million worth of spend a year. Now that we've built it at that level, we want to maintain it at that level. It's a very accretive use of capital for us. We're able to achieve yields on our developments that are between 6% and 6.5%, so very accretive there. I think importantly, the development capability for us continues to deliver higher NOI growth rates than what we're able to get out of our existing portfolio in the 50 to 100 basis points range. For us, what that basically entails is delivering an incremental $20 million-$25 million of NOI every single year that's at a higher growth rate than our existing portfolio. From a value proposition perspective, that continues to be a great use of capital.
If you go back and look at our performance on development over the last 10 years, we have been able to deliver developments that on average have delivered rents 2%-3% higher than what our expectations are. We're not stretching in terms of our underwriting on deals to make deals work. We've been able to deliver them on time. We've also been able to deliver them about 2% below our expected cost. The result of all of that, on average, we've been able to exceed the yields on development versus our expectations by between 50 and 70 basis points. A significant value creation opportunity for us, and we'll try to keep that pipeline, as I mentioned, in the, call it, $1 billion, $1.2 billion range, which is $350 million-$400 million of spend a year. That's about 4%-5% of enterprise value.
Given the size of the company, the size of the balance sheet, we feel like that's a really good place for us to continue to hold that. That continues to be a really good use of capital for us and something that we'll continue to maintain. With that, what I thought I'd do is turn it over to Clay to just maybe hit on some other items that he has from his area.
Yeah, just a couple quick comments I would make, particularly around our resident health. Touch a little bit on the expense control that Brad and Tim both mentioned, and then talk a little bit about our balance sheet. Today, as we sit here, our residents remain very healthy with rent to income levels at about 20%, which is roughly 200 basis points lower than what it was two years ago. Our collections performance remains very strong with us collecting well over 99% of rents. Our delinquency at the end of the first quarter was just under 30 basis points. A really healthy resident profile as we sit here today. These guys touched a little bit on expense control and how we've been very focused and disciplined in our approach to that.
Brad mentioned that we've shown some very good performance versus our peers over the past five years. Over the past five years, we've outperformed by 290 basis points on both properties, same store, and overhead expenses. We'll continue to focus on that as we go through this next year in 2026. You're already seeing that a bit as we've continued to push on one of our initiatives to pod our properties, and that shows itself in personnel cost, where we're taking two properties that were previously under two managers and combining those to be under one manager. You get some savings there. Lastly, I'll touch on our balance sheet. With our A- credit rating, our balance sheet remains very well-positioned to support the development, the redevelopment, and the other initiatives that these guys just spoke about.
At the end of the first quarter, our net debt to EBITDA was four and a half times. Our debt maturities are well-laddered, with an effective interest rate at just about 3.8%. Looking ahead over the remainder of this year, we have a $300 million maturity coming due in September of this year, and then we also plan to redeem some preferred shares in the third quarter as well, at around $43 million. It's a little bit of an outlook of what we see for our financing needs over the remainder of the year. With that, I think we're ready to turn it over for questions.
If anybody's got any questions?
How do higher oil prices affect your tenants?
Yeah. Well, I think in terms of our tenants, certainly, I think we're all to some degree impacted, in terms of the gas prices. I think to Clay's point a moment ago, if you look at the average income for our residents and the rent to income ratios that they're paying, it's very low at 20%. The discretionary income that our residents generally have is still significant. We're not seeing any impact at the moment on, as Clay mentioned, in terms of our residents' ability to pay associated with that. I think where we also keep an eye on that is how does that impact our R&M expenses? How does that impact potentially our construction costs on new developments? As Tim mentioned, we also have a big component of our business is on redevelopment and repositioning our properties, we have significant spend there.
To date, we really haven't seen any impact associated with that. I think, if the oil price increase drags on for six-plus months, I think it's something that it eventually starts to make it into, whether it's the cost of paint, the cost of plumbing materials, where oil is a component of all of that, could start impacting those costs. At the moment, we really haven't seen any of that impact.
If you see that impact, do you think that there's room to raise rents to compensate for it?
As we talked about, I think oil as a percent of spend for our residents and the population in general is less than what it has been historically. I do think that it's less impactful than it has been in the past. It's still impactful. I do think, if you look at our rent to income ratios three years ago, we were at 23%, today we're at 20%. I do think we still have significant room, even if there is some headwinds associated with oil prices. Yeah.
Can you see any negative.
Yeah.
I mean, we haven't seen anything yet. A couple of things that we look to track with our resident base is one, it's been talked about the unemployment rate for 25 and under being higher and those being the most impacted potentially by what's happening with AI. We've been tracking what % of our residents moving in are 25 or under. It's about 20%, and that's consistent with what it's been over the last few years. Our average age is about 37, 38. Our median age, I think, is around 34, 35. We have a little bit older demographic as well. The other thing we look at is of our applicants, are they needing to get a guarantor, get somebody to help pay for the rent? We've seen that actually go down.
At least in terms of what we're seeing on the impact, we haven't seen it as of yet. There'll likely be some dislocation, disruption, but as Brad mentioned earlier, the amount of jobs coming into our markets that are high quality, high paying jobs continues to increase. There'll be some ebbs and flows to that, but nothing we've seen impactful so far.
Can you give us some historical context on the 30 basis point delinquencies and when it's been the worst in your whole history? Yeah.
Yeah. Honestly, for us, delinquency has been a key part of our outperformance for years. To put the 0.3% in context is right in line with what we were pre-COVID. In the heart of COVID, we got up to 0.6%-0.7%. There were a few markets that were a bit higher than that. We've long had a process of trying to make sure we're doing what we can on the front end to screen out those applicants that may have payment issues. Yeah, for us, this 0.3%, and we've been at that now for the last two or three years. We've been back to our pre-COVID level. It's really a non-issue for us.
How about GFC?
Going back to then, we were probably 0.6, 0.7, something like that.
Any other questions? One last point I'll make, and then we can wrap it up, see if there are any last questions. I wanted to just quickly comment on slide 21. As we go through the recovery that we're certainly in right now, I think slide 21 shows a little bit about where we've been, and really what this slide indicates, I think, is there's a progression that we go through as a market heals from where we've been and recovers. If generally what that progression is, market level occupancies are impacted by the amount of supply coming into the market. You see concessions pick up. Which is what we saw, by the way, last year. As we got into April and May, after Liberation Day, we saw folks focusing on occupancy. We also saw the increased usage of concessions.
As we sit here today, it's a very different picture as we look out where we are and where we're going. Generally, what you see is market level occupancies start to stabilize, and what this chart is really showing, this includes lease-ups in our markets. We see occupancies are in line with where they were pre the supply impact. They're in line with historical averages. Generally, what you see from that point is you start to see concession usage start to decline, which starts to give you more pricing power. We're in the midst of that kind of recovery process at the moment. We're seeing certainly some of our markets, we're seeing less concession usage, which can lead to pretty rapid improvement in lease performance and effective rent growth.
We need to see that increase more for the trajectory of that and the pace of that recovery to continue to increase more robustly. I see a question there. I'll try to get to you here in just a second. For context, certainly we're not building that into our forecast of rapid acceleration there. There are some markets, some properties that we have, for example, in South Austin, where you see concession usage fundamentals improving, where we've seen a 10% increase in terms of the new lease rates that we have at our properties. As we work through that progression of improvement, market level occupancies, concessions coming down, we should see new lease rate continue to improve. Sorry, go ahead.
Just real quick, kind of picking up on that. I think it was last year at this conference, you painted a very optimistic picture of what rent growth could be like.
Yeah
Because of the lack of supply.
Yeah.
As you sit here now a year later, are you still feeling the same level of optimism? Less so, more so, delayed? Any change in that?
Yeah. Definitely more so. If you look at just the supply levels that we're seeing in our markets, this year it's 40% less than what it was last year. Last year was coming down. We were at 5.5% inventory of deliveries in 2024. Last year, we were 3.5. This year, we're 2%. The trajectory of supply, yeah, we're still very optimistic about that recovery. The thing that we're seeing right now, and my clock's blinking at me, I'll wrap this question up, is last year, we were pushing on rents into May. What we saw is the market started focusing on occupancy. We started getting less traction as we were pushing on rents. We're not seeing that today. We're pushing on rents, and we continue to see traction in getting those improving rents as we showed on slide 31. Thank you for that. All right.
Well, thank you for your time. If you guys have any questions, feel free to reach out.