Mid America Apartment Communities Inc. Q3 FY2020 Earnings Call

Good morning, everyone, and welcome to the MAA Third Quarter 2020 Earnings Conference Call. This conference is being recorded today, October 29, 2020. I will now hand it over to Tim Argo, Senior Vice President, Finance for MAA.

Thank you, Ashley, and good morning, everyone. This is Tim Argo, Senior Vice President of Finance for MAA. With me are Eric Bolton, our CEO; Al Campbell, our CFO; Rob DelPriore, our General Counsel; Tom Grimes, our COO; and Brad Hill, Executive Vice President and Head of Transactions. Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results. These reports, along with a copy of today's prepared comments and an audio copy of this morning's call, will be available on our website. During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data, which are available on the for Investors page of our website at www.maac.com. I will now turn the call over to Eric.

Thanks, Tim, and appreciate everyone joining us this morning. Results for the third quarter were ahead of our expectations. Cash collections on rents built in the third quarter were strong and October trends are the same. While we still have a long way to go in capturing full economic recovery, we are encouraged by the early signs of improvement evident in our third quarter results. Leasing traffic was well ahead of prior year. On a lease-over-lease basis, new move-in rent pricing meaningfully improved as compared to the second quarter. Overall, net effective rents were 1.8% higher than Q3 of last year and average daily occupancy remained strong at 95.6%. As a result, we captured positive sequential revenue growth in each of our markets as compared to the second quarter. Demand is strong across our footprint and growing. While we expect new supply levels to remain elevated for the next few quarters, our forecast for new deliveries and the trends for permits for new construction suggest moderation in deliveries beginning in the back half of next year and significantly declining into 2022. We continue to make progress on our new development pipeline with construction and scheduled deliveries on track to our performance where we are underway with initial leasing; both our leasing trajectory and rents are in line with our expectations. We are in active predevelopment work on several other new development projects that we hope to start next year. We believe MAA's strategy, with a focus on the Sunbelt region, uniquely diversified across both large and mid-tier markets and serving a broad segment of the rental market, positions the company well to continue to work through the challenges presented by the current economic slowdown. As the economy begins to recover post-COVID, we believe our markets will continue to outperform, capturing employment trends and a demand for housing that will be well above national averages. MAA is well positioned for a coming recovery cycle. To our team of MAA associates, thank you for your tremendous work and commitment to our mission over the busy summer leasing season. You have again exceeded expectations, and as a result, have us well positioned as we head into next year. With that, I'll turn the call over to Tom.

Thank you, Eric, and good morning, everyone. The recovery we saw beginning in May and June continued across the portfolio through a busy season. Leasing volume for the quarter was up 11%. This allowed us to improve average daily occupancy from 95.4% in the second quarter to 95.6% in the third quarter. In addition to strengthening occupancy by 20 basis points, we were also able to drive new lease pricing improvement. Effective new lease pricing during the quarter improved 140 basis points from the second quarter to the third. All in-place rents on a year-over-year basis were up 1.8%, and turnover for the quarter was down 2.7% versus last year. These improvements were supported by an increase in lead-generating marketing spending. We're pleased with the resulting improvements in occupancy and new lease pricing mentioned earlier. We saw steady interest in our product upgrade initiatives. During the second quarter, we restarted our interior unit redevelopment program as well as the installation of our smart home technology package. That includes mobile control of lights, thermostat, and security, as well as leak detection. Year-to-date, we have installed 22,000 smart home packages and completed 3,300 interior unit upgrades. As noted in the supplemental document, collections during the quarter were strong. We've worked diligently to identify and support those who needed help because of COVID-19. The number of those seeking assistance dropped each month. In April, we had 5,600 residents on the relief plans. The number of participants decreased over time and it's just 470 for the October rental assistance plan. This represents less than 0.5% of our 100,000 units. October collections are running slightly ahead of the good results we saw in the third quarter. As of October 26, we've collected 98.6% of rent billed for October. This is a 20 basis point improvement from what we saw on average for July, August, and September for the same day of the month, including deferred payments for COVID-19 effective resident payment plans referenced in the COVID-19 disclosure; we have accounted for 98.8% of October billed rent. Leasing volume for October is on track to exceed last year. Effective new lease pricing for October-to-date is negative 2%, a 30 basis point improvement from the third quarter; effective blended lease-over-lease pricing for October month-to-date is 1.3%, a 50 basis point improvement from the third quarter. A high percentage of our current residents are choosing to stay with us, and our resident renewal and retention trends are positive. October, November, and December lease-over-lease renewal rates signed at this time are in the 4.5% to 5.5% range. In addition to the positive leasing trends, occupancy has also strengthened. Occupancy has improved from a low point of 95.1% in May to 95.7% today. Average daily occupancy for the month is 95.6%, which is even with October of last year. 60-day exposure, which includes all vacant units plus notices through a 60-day period, has dropped from a high of 9.2% in May to 6.8% in October. This low level of exposure also matches the same time last year and has us well positioned for the slower winter leasing season. I'd like to echo Eric's comments and thank our teams as well. They served and cared for our residents and our associates well and have grappled with the constantly changing implications of COVID-19. They've also worked diligently to adapt to new business conditions and drive our recovery. I'm proud of them and grateful for their efforts and character. Brad?

Thanks, Tom, and good morning, everyone. Third quarter transaction volume picked up from the second quarter, but still remains down significantly year-over-year, and we expect the volume to continue to be slow into next year. Because of the desirability of our markets, we continue to see robust buyer demand for existing assets within our footprint. This strong demand, coupled with very attractive debt rates, has further compressed cap rates, and in some cases, is resulting in pricing above pre-COVID levels, despite lower NOI's. We continue to expect our best buying opportunities on existing assets to be owned properties and their initial lease-up, where we believe pressure is likely to continue to build through the winter. With that said, we've only seen a few lease-up opportunities come up and pricing trends are mixed. All cash buyers and strong sponsors with established agency relationships remain the most aggressive bidders, while leveraged buyers are having more difficulty obtaining financing on pre-stabilized properties. We do expect cap rates within our footprint to remain at historical lows and perhaps continue to trend lower, likely making acquisitions a smaller contributor to our external growth for some time. As mentioned last quarter, we expect our in-house development and our pre-purchase platform to be significant contributors to our external growth going forward and anticipate starting construction on a number of these projects later this year and into next. While cap rates on acquisitions have compressed, yields on developments remain attractive. Rents and occupancy are holding up in our markets and despite cost pressure in a couple of line items, especially lumber, developments continue to underwrite to a positive spread to cap rates on stabilized properties. As shown in our supplemental, we have 6 development projects that are underway and all remain on budget and on time, despite working through some minor supply chain issues. Subsequent to the quarter-end, we started construction on the land parcel in the northern suburb of Austin that we purchased back in January. This 350-unit project should begin leasing in the first half of 2022, when we expect leasing conditions to be significantly stronger than they are today. While early reports show 2021 deliveries in line with this year's levels, data and permitting and construction starts show a material decline since March and point to a drop in future deliveries beginning late next year and into 2022, lining up well with the expected delivery of any new developments we start. That's all I have in the way of prepared comments. So with that, I'll turn it over to Al.

Okay. Thank you, Brad, and good morning, everyone. We reported core FFO of $1.57 per share for the quarter, which was slightly better than our internal expectations as operating performance, corporate overhead costs, and interest costs were all better-than-expected for the quarter. As mentioned earlier, stable occupancy, strong builds in effective rents, and continued strong collection supported the third quarter performance, while improving pricing trends position the portfolio well for the fourth quarter. As Tom mentioned, we have established a reserve for bad debts at quarter end sufficient to fully cover uncollected rent from residents not working with us on payment plans as well as for a large portion of the remaining deferral program payments. Our collections experience for those have been very good today. As discussed in our release last quarter, we expected some pressure in property operating expenses over the back half of the year. The majority of the increase for the third quarter was related to growth in real estate taxes, insurance, and marketing costs, as well as the impact on utility costs on the double-play bulk Internet program, all discussed last quarter. A couple of unusual items affecting the quarter were an unexpected increase in Austin tax rates related to a recent approval by the city to bring forward funding for a light rail system, which was approved during the quarter and actually goes before voters next week. In addition, we incurred about $750,000 of unexpected storm cleanup costs during the third quarter, which also contributed to the growth. Our balance sheet remains strong, with low leverage and significant capacity from cash and remaining borrowing potential under our line of credit, combining for $980 million of capacity. We funded $50 million of development costs during the quarter with the expectation of funding around $260 million for the full year, including the purchase of land parcels for future deals. As Brad mentioned, the acquisition environment remains challenging, so we expect the majority of investment opportunities over the next few quarters to be in-house development or pre-purchase development deals, which both have long-term funding commitments. Thus, we expect our development pipeline to increase over the next few quarters, but remain well within the risk tolerance ranges we've always had. We completed a successful bond deal early in the quarter, taking advantage of the low rate environment to issue $450 million of 10-year notes at a coupon rate of 1.7%. This funding was ultimately used to repay some secured debt maturing later this year as well as prepay a $300 million term loan due in 2022. We have no remaining current maturities or future maturities with low prepayment costs, so we don't anticipate additional debt or equity funding needs for the remainder of this year. And finally, as reflected in our release, recent trends have been encouraging; there are still significant uncertainties remaining, thus, we refrained from providing guidance for the remainder of the year, but plan to revisit the decision as we prepare for our fourth quarter release with the expectation of being able to provide guidance for 2021. That's all we have in the way of prepared comments. So Ashley, we will now turn the call over to you for questions.

Al, you just mentioned that there are some uncertainties remaining that basically allowed you to refrain from providing guidance for the year. Can you just elaborate on what some of those uncertainties are at this point?

Yes, John, I appreciate that question. I think as we look at whether there's continuation of certain government programs, the recent potential rise in COVID cases in our region, timing of reopening plans that continue in our region related to these states. And so all these things continue to bring risk. And as we mentioned, we are very encouraged with the trends, but just given that it was one quarter remaining in the year, we felt it prudent to refrain from completing that outright right now. We hope to be, and feel like we'll be, in a position, assuming continued stability in the overall marketplace and environment, to put full guidance out for 2021.

And with your cost of capital coming down, at least on the debt side, with your recent debt raise of 1.7. How does this change at all as far as how you underwrite investments?

I don't want to change. I mean, we continue to underwrite in a similar manner. I think what it does is it certainly provides the potential for very strong yields, gaps, and the spread capture on some of these new development deals that Brad, whether they're in-house development or pre-purchase. And so that's why we talked about the remaining capacity we have. And also, we talked about in the past, John, that we have the potential on our balance sheet to invest in $750 million before really impacting our leverage level. So I think we would say that, and I talked about in the comments this morning, we do expect over the next couple of quarters on development pipeline to grow because that's where the opportunity is. And as you point out, those six yields that we're putting in place compared to that leasing debt funding cost is very attractive.

It's obviously been a very different operating year thus far. So I'm wondering how you're thinking about seasonality versus the normal patterns and how that impacts your operating strategy over the next few months in terms of focusing on occupancy or rate?

Yes, Nick, it's Tom. What we've experienced so far is pricing that has been unusual for this time of year. Typically, our effective new lease pricing peaks in late July, but this year it peaked in late October, and we are seeing steady trends. As we enter the fourth quarter, I anticipate a seasonal decline in demand, which usually occurs, and I expect new lease pricing to drop slightly, while we maintain our current occupancy levels. However, I believe renewal rates, which were at 3.8% in the third quarter, will continue to rise as we progress through the fourth quarter. This trend is not typically seasonal, and I expect renewal rates to be in the range of 4.5% to 5.5% for the fourth quarter.

And then just maybe specifically on D.C., it's a little unique relative to the rest of your portfolio. So what are you seeing on the ground there? And how are you using any concession?

I'm sorry, Nick, I missed which market you were asking about?

Washington, D.C. and the Greater area.

Yes, absolutely. Yes, D.C. is a little bit different. Honestly, occupancy there is strong at 96.4%. The pricing has been weak. And as we go around the horn, we're seeing concession levels in D.C. Proper at two months unstabilized; Pentagon City, Crystal City, about two months; Tyson's Corner, two months; Alexandria, pretty similar; Maryland and Northern Virginia are a little bit stronger, but both see a month three in those markets. So D.C. is one where we're stable on occupancy, but pricing growth remains elusive at the moment.

Just curious, you referenced permitting levels declining. Fundamentals have been relatively stable, and supply is expected to fall off. I guess, why do you think there hasn't been a pickup in construction activity at this point? Anything the supply chain challenges, I think you referenced, or difficulty getting financing? And then just curious if there's any offsetting items from the pressure on lumber prices that Brad referenced and where you think construction costs are versus pre-COVID levels?

Austin, this is Brad. We've certainly seen a significant rise in lumber prices, which has been quite volatile since COVID began. There has been some relief in the last month, but construction costs remain uncertain. Currently, we are not observing any other factors providing relief or offsetting these costs. The data on permits suggests that construction activity isn't increasing, and financing is a significant issue. After COVID started, equity investors were hesitant, which made the second quarter challenging as many backed out of development projects. Although equity has returned, securing construction loans has become very difficult for many. This environment is creating new opportunities for our pre-purchase platform due to our structure. Nevertheless, our markets are still favorable for new development. There is construction cost pressure, but there are also mitigating factors, such as the lower supply we discussed from late 2021 into 2022, as indicated by the permitting data. We feel confident about our current developments and projects starting now, but the financing situation remains challenging for many in the industry.

How robust is that pipeline of prepurchase opportunities? Has there been any change in pricing there? And then do you think as the transaction market generally loosens up, that maybe that spurs a little more activity in the construction market?

In terms of what we're seeing on the prepurchase side, we're evaluating a lot of deals. As equity backed out in the second quarter, many opportunities presented themselves to us. We also have the ability to provide debt on our prepurchase platform, which sets us apart. Many established developers we work with can secure their own funding, but we offer them a better option. Consequently, we're seeing numerous opportunities. We hope to start two projects in the coming quarters and are continually evaluating others. We're optimistic that this platform will keep performing well and provide us with more opportunities.

And Austin, this is Eric. I'll add to what Brad is saying that we've got repurchase opportunities or pre-development opportunities, I'll say, that we're working, including both in-house and on the prepurchase platform that Brad mentioned. We're working on opportunities that we have tied up in Tampa, Raleigh, Denver, and Phoenix. We're also actually looking at opportunities in a new market for us, Salt Lake City, which we hope we can start on next year. So we've got a number of things we're looking at.

First off, congrats to your collections; they're remarkable as if there is no pandemic though. You guys are obviously doing something right. First question, I've been hearing more anecdotally about this, and I think it's increased with COVID. But are you seeing more inflow at your market from California, New York, Boston into the Sunbelt Phoenix market? I think have you noticed a tick up since April? Any commentary there on how people are choosing to live now that remote work is more accepted and the desire to get away from the densely populated areas has increased?

Sure, Neil. We didn't see much movement in the second quarter, but it has picked up in the third quarter. Most of our move-ins come from within the Sunbelt. Keep in mind that the numbers I'm sharing represent a relatively low percentage of our total move-ins, but they are growing. Move-ins from New York are up double digits; those from Massachusetts are up about 9.2%; Pennsylvania is at 10%; and California is almost 8%. Anecdotally, we have been looking at Google Analytics and are also seeing increased searches from those areas. For example, searches for 'apartments in Atlanta' have risen 44% from addresses in New York, and 'apartments in Raleigh' are up 22% from searches in Massachusetts. While it's not a major driver of our business at this time, there is certainly evidence suggesting that this trend is continuing.

Yes. I appreciate that. Other question I have is on the single-family side. Your markets are great. The one thing is the home prices are more affordable, but just wondering given the increase in homeownership, mortgage applications, new and existing home sales, are you seeing any increase in the move-out for home purchases or single-family rental, again but over the same sort of like since maybe April and May? Any color there would be great?

Yes. New home buying has remained steady at 19.5% of our move-outs, and move-outs to single-family rentals have stayed below 6%. While those businesses are performing well, we are not seeing an increase in turnover at this time. Our demographic, which is primarily female and single, is not at a stage where they are making such changes. We are not observing a significant shift in that direction regarding our move-outs.

Okay. I appreciate that. And then just along, how many people not answered those surveys? Like those percentages you're did 10% of the people move out the surveys. Is it 50%? It's like how good of a sample size is that?

It's roughly 100%. I haven't checked the number in the last couple of days, but that's not a survey sent after the fact. When a notice is offered to us, it's a required field for them to fill out and capture. That's where we're getting that information. It is part of our transaction for accepting the notice.

Just a question on renewals. It's impressive you guys have been able to keep your renewals close to 5% in terms of the growth. How do you guys feel about still being able to stay in that 4% to 5% range in this environment?

Pretty confident in, and just to reset a little bit, in Q3, the renewals came down to 3.8%. And now we're seeing them move back in the 4.5% and 5%. Honestly, our 2 to 3-year average is probably 6%. So we're still a little below that. We feel quite confident in our ability to continue to maintain those rates as long as we continue to do our job and create value for our residents. We feel like renewals is a place where we have the most pricing power, and that hasn't changed through this process. So we feel confident in our ability to continue that.

Yes, and I would add that residents are likely more committed now than they have ever been due to COVID. The challenges of moving have always existed, but with COVID in the picture, this has likely contributed to that stability. We believe that now is the right time to focus on our service quality, which we are excelling at, and we will keep an eye on our move-out rates. We are prepared to adjust if necessary, but currently, there are no indications that we need to do so.

Guys, just really quickly, we've been listening to a lot of developers in your markets talk about an increase in investment. So maybe you could walk us through some of the markets where you're seeing the most supply growth? And importantly, and this might be a long-term question, but still very interested. How concerned are you on shadow supply growth, let's say, from older office buildings or retail redevelopments?

Well, this is Brad. In terms of shadow development, we aren't seeing much of that in our markets right now. What we do observe is the conversion of retail spaces into apartments, particularly with the demolition of retail areas. For example, at our West property in Denver, we are demolishing an older underutilized retail space to make way for apartments. I think we will continue to see some of this. However, I don't anticipate that we will see any repurposing of hotels or similar buildings in our markets at this time. Regarding supply increases, let me get my response ready.

I think in terms of looking forward on that, we're in the process of really going through our study, Fred's team does an unbelievable job. They're really diving into the markets and understanding and what the implications are for us for 2021. So we're doing our study of the market. We're doing our study of the radius of our market, exactly how it affects us. And we'll have more on that in the fourth quarter. But what we are showing is really a falloff in supply in the back half of the year for a range of reasons that were mentioned earlier.

So obviously, you have pretty strong top-line growth compared to some of your peers that we're seeing in the urban market. Do you attribute the success figure on success reasoning? Would it be more because of the urban footprint of your markets? Or is this a market selection?

I believe that looking at our portfolio, it primarily revolves around our overall presence in the Sunbelt region. However, we're experiencing particularly strong performance in some of our mid-tier markets where supply pressures are currently less intense. This aspect of our strategy focused on mid-tier markets is beneficial at this time. Furthermore, at a submarket level, we have a significant portion of our portfolio in suburban areas outside the urban core, and this strategic orientation is a major factor in our ability to navigate downturns more effectively.

Got it. And turning to the smart home units. I'm assuming you're installing those on turns, but there is some lease-over-lease declines in the new lease. So should we think of this $25 premium as a mitigant to the declines? Or is there some sort of A/B testing that drives that 25 premium?

Yes. So we're actually doing those on turns and occupied, and really, the majority, we just got back on it in the third quarter, and most of those units got completed in late third quarter. So when we do it on an occupied unit, we do not immediately put that price increase on it; it resets at the renewal. And then on new leases, we rent them with it. And that is a bump, but it is not a material bump in the third quarter, a lease-over-lease new lease numbers.

Tom, when you adjust for urban versus suburban or just looking at sort of the suburban asset, et cetera, any differential in operating performance between price point within the various markets? Mean, in other words, a $2 square foot suburban, 2-bedroom leasing any differently than $1.75, any difference of price point between sort of the same product, same market or submarket? And then any difference in demand between larger and smaller floor plates the 850 square foot 2-bedroom units versus the 1,100 square foot, 2-bedroom units? Any color there?

Yes. Across the board, our suburban properties are performing a bit better than urban ones. Also, higher price points are slightly weaker compared to our B properties, which are strong. B suburban is performing the best in both suburban and urban areas. Regarding unit types, we mainly have 1-bedroom and 2-bedroom units, with their current lease level growth being very consistent. 1-bedroom units are performing slightly better than 2-bedroom units, although the difference is minimal. The floor plan that is currently less in demand is our efficiency units, which are averaging around 95% occupancy with about 8% exposure. To put that in perspective, efficiency units make up 4% of our exposure while 1-bedroom and 2-bedroom units account for approximately 88%. So, the less favorable floor plan we have at the moment has just 4% exposure.

What about the difference between larger and smaller units with the same number of bedrooms? Are larger 2-bedroom units receiving more interest from those seeking extra space compared to the smaller 2-bedrooms? People are looking for an additional 150 to 200 square feet.

I think that's honestly skewed a little bit by the A/B because our B assets and suburban assets tend to be a little bit larger. So if we looked at the numbers, yes, that would be the case. But I think that has to do with more the construction type and just sort of differences between our B product and our suburban product versus our A product and our urban product. Not a dramatic falloff. I think Houston and D.C. we're watching carefully, as well as Orlando. But those are more sort of like bumping along than falling off materially.

Tom, I wanted to follow up on a market inquiry. You mentioned supply issues in some areas, possibly referring to Eric's comments about reduced supply in certain secondary markets. This quarter, the smaller markets outperformed the larger ones. I'm curious if the increase can be attributed to the Double Play package or if it reflects genuine organic demand or supply variations compared to the larger markets.

No, Double Play is fairly evenly distributed across the portfolio. It is not significantly impacting one market or the other in terms of revenue or expenses.

Okay. And then, Al, last question for me. You talked about Austin property taxes. Nashville in recent months has increased property taxes as well. Are there any other markets you're hearing chatter across the Sunbelt where just property taxes to fund the growth of cities and infrastructure cities is becoming more topical?

Certainly a topical conversation right now. I wouldn't say that there's informal areas that where we're seeing right now that would be the next one to be a significant increase. Certainly going into the year, Nashville and Austin, both unexpected and were significant increases. And some question that a lot of municipalities are dealing with budget issues now. And so we're certainly watching that and monitoring. I think it's not just us in our region; it's nationwide in many markets. I would say this year, you're not seeing valuation relief yet because people are looking backwards. Maybe as we move into next year, you get a little bit of valuation relief and then the millage rates they're still in question because of all these issues that the municipalities are dealing with. So we're watching that closely, John. That's a long answer to say nothing specific, but certainly top of mind right now.

I just wanted to follow up because I might have missed it. Could you explain what is causing the 2% drop in new lease rates in October? Is it simply due to supply in the markets? You've mentioned strong demand, good occupancy, and lower turnovers, so I'm trying to understand what is going on.

I believe the decline in new lease rates is primarily a matter of timing and seasonality. While effective lease rates that came in October have actually increased, the new leases are down slightly, as I mentioned earlier. We can expect to see typical seasonal pricing trends as we move into November and December. Interestingly, new lease pricing rose from May to October, whereas it usually peaks in July. Looking ahead to the fourth quarter, we anticipate renewal rates will rise back to the 4.5% to 5% range, contrasting from the normal seasonal decrease from around 7% down to 6% or 5.5%.

I wanted to convey that we have discussed the level of tolerance we are comfortable with for our overall pipeline, considering our balance sheet. Generally, we have mentioned a 4% to 5% tolerance relative to our $18 billion balance sheet, which is a considerable amount. We expect to see the opportunities that Brad referred to in both development pre-purchase and in-house. The yields look promising compared to financing costs, and we will see that rise. We have the capacity in our balance sheet to support this for a period while still maintaining our specified range. Over the long term, we prioritize protecting and maintaining our current balance sheet ratios. So, a range of 4% to 5% translates to around $800 million that we could utilize. Eventually, we expect that figure to return to where we currently stand over an extended timeframe.

Great. I wanted to ask on your renovation project, and it was certainly nice to see kind of the slight acceleration in the rent premium achieved for those units. But are there any markets today where you pause renovations due to more challenging fundamentals? And then how are you thinking about the potential pipeline for renovation or redevelopment projects next year?

Yes. No. Thanks for the question, Amanda. And yes, there is some difference. We brought back about 80% of our units. And 80% of the properties where we're doing a redevelopment. And we do A/B testing there on a regular basis. And we did not feel in the results that we're seeing on the ground that it made sense to bring redevelopment back in Houston or Orlando at this time. We'll monitor those, and those are markets we feel good about long term. But one of the nice things about the redevelopment project, the way we do it is we can be relatively nimble in response to on-the-ground market conditions, and just made sense to pause those in those markets.

And Amanda, we are looking at our '21 plans at the moment, and we'd expect to see another productive year on redevelopment. And then also, we've got a number of more extensive repositioning efforts in projects that we will likely kick off next year as well.

Okay. That's helpful. And then just a quick clarification on some of your earlier migration comments. Are you still seeing movements from outside the Sunbelt remain in kind of that 8% to 10% historical range you've talked about? Or is it now running ahead of that with the growth you're talking about?

It's about 11% or 12%, now.

Tom, I want to not get too nitty-gritty here, but for the October move-ins up 4.8% on renewals and those that were signed up 5.8%. That's basically the foreshadow you're talking about in terms of renewals going up. I assume as we kind of venture into the fourth quarter here, but is that 100 basis point spread move-in versus signed a typical spread? Or is it particularly higher or lower right now versus other years?

No, it's particularly hot right now. Usually, there's not much spread at all because our renewals are pretty consistent. But since our renewal offers decreased in June and July, those that moved in 60 days out are lower. As our markets started to stabilize and we got a clearer view of the economic impact, we felt we had pricing power, and we began to return to our normal practices. Typically, there's a close delta between those two numbers, but we're currently on the incline. I believe that as we stabilize, you'll start to see that delta tighten, while the overall renewal rates remain at a fairly high level.

Well, Rich, there are two parts to your question. First, we are not experiencing the same level of pressure on our urban products as seen in places like San Francisco and New York. This year, our turnover and move-outs from urban locations have decreased compared to last year. The pressure we do observe on urban performance is primarily due to an increase in supply in the market, which is generally at a higher price point and more urban-focused. However, our urban products are holding up relatively well. The second part of your question is quite challenging to address. What we are witnessing as beneficial is that certain states and cities in a broader region are viewed as more business-friendly, attracting employers to this part of the country. Employers are relocating jobs from more expensive areas, making this region more affordable and appealing to live in, along with having moderate weather challenges. We are noticing these markets beginning to reopen perhaps faster and in a more robust manner than in other regions. I cannot say if this is due to political leanings or simply a different mindset that isn't easily linked to political issues. It is what it is. These cities and states are more likely to proceed with business in this environment, and we are experiencing some advantages from that.

Curious if you're seeing any new capital coming to your markets in terms of competition for acquisitions or funding new developments? Just thinking, you're hearing from a lot of private guys that have basically shunned office and retail and coastal apartments, but obviously, fundamentals are doing well in your markets. Just curious if you've seen any change in kind of new capital that's chasing your property type in your geographies?

Jon, this is Brad. Certainly, we're seeing a lot of capital in our market. Everybody that was interested in multifamily is still interested in multifamily. And certainly, in the third quarter, we've seen of the folks that have been on the sidelines is kind of coming back into the market and start looking for acquisitions, which that's one of the things that's driving and impacting pricing, is there's just not a lot of deals and a lot of capital looking for it. I'd say one thing that we have seen that's changed and has been more pronounced is a number of investors that generally have targeted the Northeast have come into our market. And I think the way they look at some of our assets on a price-per-pound basis is a little bit different than what traditional Southeast investors do. And I think that, that is also driving pricing a bit, but we've seen a lot more participation from Northeast investors in our markets. And that's really the only change that we've seen. I think international capital is down a bit in our markets, but that's more than made up for by other capital sources. And then I'd say that private REITs are certainly very strong. They had a few months of low capital raising, which that's back up. And so those folks are back aggressively in the market. So…

So my first one is about some comments you made earlier on Salt Lake City. I'm just curious what other markets you consider entering? And would your plan be to enter in some sort of scale or via opportunistic one-offs? And what do IRRs and cap rates look like versus your core markets?

No. I mean, Salt Lake is the only new market that we have intentionally targeted, and we have been working on that opportunity for some time. We've liked that market for quite some time. It has some challenges to enter, but we believe we have a strategy to succeed there. Additionally, we have several other opportunities lined up behind the one we are currently focused on that would allow us to scale up effectively over time. We view the underwriting dynamics and pricing in that market as being very similar to several of our other Sunbelt markets, and there is significant buyer interest. This market continues to experience excellent job growth, offers a great quality of life, and is very affordable, which makes it appealing to employers. Therefore, we are optimistic about the long-term prospects there. We have been disciplined in identifying the right approach to enter the market, and we have a prepurchase opportunity that Brad and his team have been working on, with hopes for more to come.

Got it. Appreciate that. And just one more from me. You sort of touched upon this in the prepared remarks in the press release that you worked with residents to stay in their homes. Can you quantify the amount of tenants to request the assistance? And how has that trended since the start of the pandemic? And where does that sort of show up in your financials?

Yes, it reflects in our financials as rental arrears. In April, we had 5,600 individuals on a rental assistance plan; that number decreased to 5,100 in May, 2,000 in June, 529 in July, and we've remained below 500 through October. This trend has been steady and continues to decline, which is evident in our numbers. We took a chance by collaborating with these tenants, and even from a veteran landlord's perspective, it's been remarkable to see how they have fulfilled their commitments. We provided them some time, and they have responded strongly by making their payments. What I'd tell you, we're still in our pre-development work on that and more to come on that as we get that buttoned up, which we hope to do early next year.

There appears to be no further questions at this time. I'll turn the call back over to you, Mr. Argo for any addition or closing remarks.

Thank you, Ashley. I appreciate everybody joining us on the call, and please reach out if you have any more questions. Thanks.

Thank you, and this does conclude today's program. Thanks for your participation. You may disconnect at any time.