Good morning, ladies and gentlemen, and welcome to the MAA Second Quarter 2021 Earnings Conference Call. During the presentation all participants will be in a listen-only mode. Afterwards, the company will conduct a question-and-answer session. As a reminder, this call is being recorded, July 29th, 2021. I will now turn the call over to Tim Argo, Senior Vice President of Finance of MAA, for opening comments. Please go ahead.

Thank you, Mallory, 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, our Head of Transactions. 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. 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’ll now turn the call over to Eric.

Thanks, Tim, and good morning, everyone. MAA had a strong second quarter with rent growth, same-store NOI and core FFO results ahead of expectations. Strong job growth and positive migration trends continue to drive higher demand for housing across our Sunbelt markets, and we expect continued strong rent growth. As noted in our earnings release, we are adjusting our performance expectations for the year and meaningfully increasing guidance for core FFO performance. The various factors that were driving employers and households to the Sunbelt markets before the impact of COVID continue. In addition, the COVID-related recalibrating by both employers and employees about where they choose to do business and live continues to fuel higher demand trends across the Sunbelt. And those trends are accelerating. The new residents that we moved in year-to-date from outside of our Sunbelt footprint increased another 265 basis points as compared to the first six months of last year, during the peak of COVID-related relocations. New move-ins from renters relocating to the Sunbelt currently constitute almost 13% of our new leases so far this year and are trending higher during the second quarter in a number of markets such as Phoenix, Tampa, Nashville, and Charleston, where the percentage of new residents moving to our properties from outside the Sunbelt was even higher.

Thank you, Eric, and good morning, everyone. We saw a strong pricing performance across the portfolio during the second quarter. Blended lease-over-lease pricing during the quarter was up 8.2%. As a result, all in-place rents on a year-over-year basis grew to 3.1%. This is more than double the 1.3% growth rate of the first quarter. Average effective rent growth is our primary driver and what the current blended pricing momentum we expected to continue to strengthen through the remainder of the year. In addition, average daily occupancy for the quarter increased to 96.4%. As outlined in the release, we saw steady progress on our product upgrade initiatives. This includes 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. For the full year 2021, we expect to complete just over 6,000 interior unit upgrades and install 22,000 Smart Home packages. We’re also in the final stages of completing the repositioning work on our first eight full reposition properties and have another eight that will begin this year. We’ve seen strong activity for July. New lease-over-lease pricing month-to-date for July is running close to 17% ahead of rent on the prior lease. Renewal lease pricing in July was running 9% ahead of the prior lease. As a result, blended pricing for the portfolio is up 12% so far in July.

Thanks, Tom, and good morning, everyone. The strong investor demand for multi-family properties in our footprint that began prior to COVID continues to strengthen today. Transaction volume is up significantly since the first quarter as investors look to buy into the strong rent growth outlook in our Sunbelt market. Strong leasing fundamentals coupled with robust investor demand have accelerated pricing growth, putting additional downward pressure on cap rates. Cap rates on deals we underwrote in the second quarter have compressed another 25 basis points from the first quarter, and the compression has accelerated in the last 30 days, pushing cap rates down approximately 100 basis points since the first quarter of 2020. We like the overall balance and unique diversification of our Sunbelt-oriented portfolio and have no need to change our market weightings by participating in the aggressive pricing market for existing properties. Therefore, we will continue to focus our capital deployment efforts on new development and pre-purchase opportunities, which provide higher yields, higher growth, and a much lower basis than the acquisition opportunities we’re seeing in the current market. We continue to make progress on our development pipeline as noted in our release. We closed and started construction on two pre-purchase projects in the second quarter, bringing our pre-purchase and development pipeline both under construction and in-lease up to 3,347 units at a total cost of $775 million. In addition to these two projects, we have a number of other development sites owned or under contract and hope to start construction on several projects later this year and into 2022. Our pre-development opportunities are in Denver, Salt Lake City, Tampa, Raleigh, and Nashville, all existing markets within our portfolio footprint. We continue to see very strong leasing demand in our region of the country and our recently completed properties in Dallas and Phoenix that are currently in lease-up reflect this strong demand.

Thank you, Brad. The strong second quarter operating performance produced core FFO that was at the top end of our prior guidance range, $0.08 per share above the midpoint, which also supports improved performance expectations over the remainder of the year. As you saw on our release, we are significantly increasing our guidance for both core FFO and same-store performance for the full year. The increases are primarily based on projections of continued high occupancy levels remaining, essentially full between 95.5% and 96% over the remainder of the year, and continued strong rental pricing growth over the second half, particularly during the third quarter, with some typical seasonal moderation expected in the fourth quarter. That supports revised revenue growth projection for the full year of 4% at the midpoint of guidance, which is 200 basis points above the prior midpoint. Same-store operating expenses have largely been in line with our expectations for the year. As outlined early in the year, we expected expenses to be somewhat elevated during the first half mainly related to the impact of our double play program. The difficult prior year insurance renewal, as well as some continued pressure on real estate taxes, which would represent about 40% of our total operating costs overall.

We’ll now open the call up for questions. We’ll take our first question from Nick Yulico from Scotiabank. Your line is open.

Thanks, good morning, everyone. In terms of the new guidance on blended lease growth that you have for the year, I guess it’s implying some strengthening here, which you’ve seen in July and I assume for the rest of the third quarter, it’s assumed. Can you just maybe just give us a feel for how that’s going to look in the back half of the year? And as well, if those numbers are still very high sort of single-digit, double-digit numbers, what does that mean in terms of the benefit that you’re starting to get from the lease role, as we’re thinking about next year’s results?

Hi, Nick, this is Al. I can start with that and maybe Tim and I can join on some of those details. So, I think, obviously, as you saw in the second quarter we had tremendous trend coming from the first quarter. Our average pricing, our blended pricing was 2.7% for the first quarter, 8.2% in the second quarter. And so as you look at the back half and you take the guidance that we put out 6.5% to 7.5% for the full year, while obviously assuming continued strength in that. And as I mentioned a bit in my calls, primarily in the third quarter because July we’ve seen and it’s already very strong, we expect that to continue. We do expect some normal seasonal moderation in the fourth quarter, but still have the strong numbers, but that blends down. So you can do the math on that. You’re around, somewhere around 8% for the back half of the year when you did the math of our new guidance. And so, that’s with – obviously with continued strong and stable occupancy that we talked about those are under guidance there.

Yes. I’ll add to that Nick, to kind of answer your second question about sort of what the baked in is the way we think about that as you take sort of a half of pricing in one year and half of the pricing in the next year. It should sort of average out to the full year effective rent growth. So to Al’s point about our 7% blended lease-over-lease for the year, about half of that we expect to blend into 2022s and certainly setting up some good strength for next year.

Okay, great, thanks so much. Second question is just on, if we look at some markets that are – if we look at some of the industry data coming out on markets such as Atlanta, Tampa, Phoenix right, which you also highlighted as being very strong markets. And I think you also said that the migration into some of those markets from without outside the Sunbelt is higher than other parts of the portfolio, but which may be a factor in this question but I guess, what I’m wondering is when we look at the data, it feels like those markets right now if you blend what’s going on with rent growth this year and last year is actually looking better than pre-COVID. And maybe that migration is a benefit or there are other factors, but just wanted to hear your thoughts on some of these really high rent growth markets, which are not – they didn’t have concessions, so this is pure rent growth you’re seeing. It looks stronger than 2019. Maybe you could talk a little bit about what you think is driving that excess rent growth now versus pre-COVID.

Yes, Nick. I mean, it is economy first. We’ve seen those never let up the gas on the growth. And so that’s continued to roll on in those larger markets. And then secondarily, these move-ins from out-of-market has grown over COVID levels and over prior year, even someone like Phoenix 21% of our move-outs were out-of-market, Tampa 18% out-of-market, Nashville 15% out-of-market and Savannah 16%. Those are substantially higher than we saw even last year, which we believe accelerated the trend. So it is those items and you’re seeing folks follow job announcements from places like Oracle and Tesla and Microsoft and places like that.

And Nick, this is Eric. A statistic that I’ll share with you that Tim and some others pull together that I think is pretty telling. If you look at the MAA markets collectively, we have about 28% of the households in America live in our markets, 28%. But you look at where new household formation is occurring, our markets constitute 42% of projected new household formations and that 42% is expected to grow to 44% next year. So, there’s a lot of factors that come into why the household formation trends are so much more robust in the Sunbelt, a lot of them, but I think that the trends that were there before COVID are still there and then I think COVID is sort of cause, as I mentioned, companies and employers and households to sort of recalibrate their thinking a little bit about where they choose to live. And I think that has just added more fuel to the demand curve.

All right, thanks Eric and everyone else.

Thank you, Nick.

We’ll take our next question from Neil Malkin from Capital One Securities. Your line is open.

Hi, good morning, everyone.

Hi, Neil.

Great quarter, I’m just clapping you over here for the amazing results, just continue to blow my mind. In your first IRT and Steadfast merger that portfolio seems to be a little bit under the radar, but pretty sizable mostly markets that overlap nicely with your portfolio, some B quality stuff in there, so opportunity to do some highly accretive redevelopment. I am just wondering if you look at that deal and if there are any others like it out there and your thoughts on M&A using your stock price given it’s very attractive currency at this point in the cycle and given the strength that you probably expect for the Sunbelt market for quite some time.

Hi, Neil, it’s Eric. We are somewhat familiar with that portfolio given the overlap with a number of our markets. But candidly, this is that is not something that we looked at and it’s not something that we would have looked at simply because I really didn’t see meaningful strategic value in trying to pursue that. The only new markets for us would have been in Indiana, Oklahoma and their small exposure in Chicago, and frankly, those are not markets we’re really interested in pursuing. In addition, the in-place financing on the portfolio was not really a good fit with our balance sheet strategy and where we’re working at the balance sheet position to. So absent a strategic, a solid strategic rationale or some form of an assessment that a big opportunity really makes us stronger in some way, just getting a little size is not something we’re really interested in trying to do. We’re looking to strengthen the platform. We’re looking to make ourselves better, if we do something strategic, not just get a little bit bigger. And certainly, absent some sort of a strategic compelling reason to do it, waiting into this super competitive acquisition market and paying top dollar in this environment is frankly just something we weren’t interested in doing.

Yes. Thank you. Appreciate your comments there. The other one for me is you looked at especially this quarter EQR AVB, the sort of coastal bellwether have both made pretty candid comments about the regulatory challenges and less attractive coastal markets California, New York, et cetera. And have started to use your word wait into your markets, your backyard. And obviously, that’s a positive in terms of confirming your thesis on your market, but what do you think the biggest, I guess, threats or risks and then potential opportunities could be now that some of the big boy well-capitalized REITs are starting to sniff around your territory?

Well, it’s a big region and a lot of market – markets across the region, MAA has a fairly long, long history focused for the last 27 years on this region and on these markets. We also have I think a very unique approach to how we diversify across the region. And so, we think that the long history we have on the region, the in-depth deep knowledge we have of the markets and the submarkets probably continues to create some level of advantage for us. I think overtime platform capabilities associate with scale and revenue management, cost of capital and market knowledge to support both operations and also to support a disciplined new growth can drive competitive advantages and long-term outperformance. And as I say, with the 27-year history focused on this region, I continue to like our chances.

Yes, okay, I appreciate that. Thank you guys and just tremendous quarter.

Thanks, Neil.

Thanks, Neil.

We will take our next question from John Kim, BMO Capital Markets. Your line is open.

Thank you. Good morning. I wanted to ask about your guidance for blended lease growth for the year. It actually seems conservative at 7% just given what you printed in the second quarter and then 12% July so far. On top of that, Tom, I think you mentioned in your prepared remarks that new lease pricing will peak seasonally greater than normal. Can you elaborate on that comment? And then also if you really anticipate the lease growth has slowed significantly from what you have so far in July.

Let me start with that, John, and maybe Tim and Tom can jump in on some of that too. In terms of what we have our guidance – if you look at what we’re projecting for the back half of the year, I mean, we projected a strong performance. We’re taking the third quarter as we talked about, we continue – that – expect that to continue sort of July strengths into that, but we do expect some modest seasonal moderation in the fourth quarter and that’s normal. I mean, we – typically that happens. And so, I’ll say this, we’re still projecting the fourth quarter, that’s well above probably anything we’ve recently done in recent history for sure. So it’s strong, but we will have – there is just less demand in that period and good thing is that we’ve designed it, so there are fewer leases being signed as well. So it has less of an impact as well, but we do expect some. So just to give you a flavor, you can do the math on what we’re talking about, but you’re talking more like 10% or more expectations in third quarter moderating down to six or so in the forecast, still very strong projection leading to the full year blend that we’re talking about. So it’s very good to see these trends, but we reflect what we really think is going to happen over the full year in that.

One point of clarification, John, the July is 12% on blended, I think you might have said 16% or 17%. The new lease was that, but the blended was 12%. So we’re expecting sort of August to be pretty similar to that and then start to trend down as demand typically starts to wane a bit.

John, one quick way to think about it is blended accommodation both new and renewal pricing year-to-date through the first half of the year was 6%. The forecast assumes that blended performance of the back half of the year, even with seasonal factors, is 8%. So it’s still positive and good. And we think it’s definitely reasonable to work off that kind of assumption.

Okay. Thank you. And then for the guidance we have seen for expenses, it went up for the year. A lot of that is due to higher repairs and maintenance. Are you accelerating any of these costs just given the strength in the market or are you doing anything different as far as expensing versus capitalizing certain items?

No.

No changes in expenses and capitalizing. We would expect repair and maintenance costs to come down in the back half of the year just because of the odd comparisons this year. We have some inflationary pressure on some specific items in that, but that’s in Tim and Al’s guidance for the year.

There are two things in that, of course, it’s a pretty modest increase in the range overall of 50 basis points, John. But there’s really two things in that. One is, property-level performance awards for this strong performance that we’re seeing expected for the year. And we’re very glad to see it and proud of our teams for producing that. So the new some of that...

That’s the bulk of it.

That’s probably the bulk of it. And then you have some inflationary pressures on impairment supplies and things that we did, which is typical across, I’d say, everybody right now with full market, but pretty smaller growth.

Thank you.

We’ll take our next question from Brad Heffern, RBC Capital Markets. Your line is open.

Yes. Hey, everyone, thanks. Since we’re on the topic of guidance, can you just talk through the 3Q guide a little bit? Obviously, in the second quarter you had the $169 for core FFO, and then the mid-point of the third quarter range is $168. So is there some sort of offsetting factor to this strong blended rate growth that you are seeing?

I think if you look historically, over the last several years, in terms of core FFO, third quarter is usually sort of the low point and it’s really just with all of the activity going on in third quarter, we have – the expenses are at their highest point, obviously getting the highest rents as well. But the seasonality of expenses usually drives and I think honestly, like I said, I think if you look at the last several years Q3 is probably our low point in terms of core FFO, nothing structural driving that other than the normal outage.

Okay. Got it. And then going back to the first question on the call, this double-digit strength we’re seeing in a lot of your markets. How long do you think that goes on more broadly? I mean, is demand just so strong that it won’t taper until you see either demand fall off or supply pick up or is there sort of just a kind of one-timer pricing of the rent levels that these markets can bear?

Well, I mean fundamentally, it comes down to just supply-demand sort of balance and we certainly continue to see evidence that the demand level is going to remain strong other than sort of normal seasonal patterns that we’ve alluded to. It’s hard for me to point to any sort of definitive reason as to why the demand side of the equation is likely to show any significant moderation. I think that if you want to think about some level of catch-up occurring, if you will, as a consequence of what went on last year, we went back and took a look at what we expected to occur last year in the second quarter, in our pricing before we knew about COVID. And obviously last year during COVID, we came in short of those original expectations to the tune of about 250 basis points in terms of blended lease-over-lease pricing. So if one wants to think about this year’s performance as somewhat of an extra juice to it, as a consequence to recover from last year, I would argue that probably no more than 200 basis points, 250 basis points of that is a function of recovery from last year overwhelming what’s driving, it is just all the factors that are driving the really strong demand side of the business. In terms of employers and employees finding reasons to come to the region and then new jobs are continuing to form here. And as I pointed out a moment ago with our markets constituting collectively 42% of the household formation – projected household formations in 2021 and that’s growing to 44% based on the information we get from economy.com. And some of these other services suggest to us that the demand side of the equation is likely to remain pretty robust. And we do think that it’s unlikely for all the reasons Brad alluded to surrounding what’s going on with construction costs, land sites and things of that nature. We think that we probably see supply levels remain fairly elevated like they are now going into next year. But it’s hard for me to envision supply levels picking up materially from where they are. So as we sit here today, I think we’re pretty optimistic that we’re going to see pretty good favorable demand-supply relationship for us going into next year.

Okay. Thank you.

We’ll take our next question from Nick Joseph, Citibank.

Thanks. You guys talked about the competition for assets and all the new entrants into the market. Are you seeing the similar level of competition for developments in pre-sale? Or is it a little different than stabilized properties?

Nick, this is Brad. I mean, I would say that it certainly aggressive. There is certainly a lot of equity that’s looking to put money out in development. I would say, it’s a little less. I think the demand for immediate earning assets is a bit higher than the demand for assets that are not going to produce for three years. So it certainly aggressive out there with a lot of capital, but I would say it is less in the development arena and in the JV arena than it is in the acquisition market.

Thanks. And then you talked about the population movement a lot with people entering the market, but when you look at the move out and obviously turnover still low, are you seeing people leave the markets or any changes or reason to move out with the data that you collect?

No. We’re seeing a little bit higher move outs, slightly higher on home buying and but primarily job transfer, which is kind of what you would expect especially comparing to last year, when there was less of that kind of movement. And then 4% of our move out sort to outer area and that’s down from 5%. So sort of once people move here, they tend to stay in the area and job transfers and home buying generate the change.

Thanks.

We’ll take our next question from Alex Kalmus, Zelman Associates.

Hi, thank you for taking the question. When you look at their move-ins this quarter and the demographics of the move-ins, are they similar to your current portfolio and do they vary from the out-of-state Movers versus within the same markets?

Though when we look at it, one thing that is interesting, that is occurring Alex is you would think with the large run-up in pricing opportunity for us that that would stress on affordability. But we’re seeing affordability, staying at 19% to 20% range or the rent to income ratio I should say in that 19% to 20% range. So the incomes are – that are coming in are higher and that is – that gives us plenty of room to run in that area.

Got it. Thank you very much. And moving to the Smart Home tech side, you’ve talked in the past about the A/B testing and potentially gaining some top line views from including the Smart Home technology. Have you updated that analysis? And are you still seeing the same sort of top line benefits there?

Yes, we’re getting a very solid $20 to $25 bump in that. And then what we’ll begin to see as well, we really underwrote on the thing that we knew we would get or we felt strongly about was the revenue opportunity. We’re beginning to see the benefits of our mobile maintenance plan, which was we just installed mobile maintenance or upgraded mobile maintenance for the portfolio in the second quarter. Then that will begin to create some efficiency for us on the expense side, on leak detection, as well as just saving time between units responding to calls real time those kinds of things.

Got it. Thank you very much.

Thank you, Alex.

We’ll take our next question from Amanda Sweitzer from Baird. Line is open.

Thanks. Good morning. You’ve gotten plenty of questions on guidance, but I did want to ask about your occupancy outlook that’s embedded for the full year. It sounds like you may have seen a slight increase in turnover more recently, given a sequential occupancy decline in July, how are you thinking about balancing rated occupancy for the remainder of the year? And do you think you’ve reached the structurally high level of occupancy for your portfolio in the second quarter?

Yes. Amanda, I’ll start with that and then Tom, you can. The way we look at it is we’ve talked about in the past. Around the 96-point level, which we’re talking about to the back half of the year, high-95 to mid-96 range we’re projecting. That’s essentially full given our turnover and the way things are right now in our portfolio. So we’re projecting to be stable at that very strong, but give ourselves in the back half, a little bit of room to continue pushing on price. We certainly didn’t want to expect occupancy to continue growing from where it is because we like to continue putting these good prices in the portfolio. So that’s what’s underlying our expectations and our forecasting.

Yes. And Amanda on balancing pricing occupancy, I think we’ve always believed that when there is an opportunity to build strength in embedded rent growth, that we should take that. And that is something that we did before the pandemic, we will really push that and that gave us higher ERU or effective rent growth for all in place ahead of the downturn, which allowed us to weather the storm. And again we’re in an opportunity where we can push rates right now, and we’re having that way.

Amanda, this is Eric. One final point I’ll make on that. I mean, we do monitor very closely the percentage of our turnover that’s occurring because of the rent increase, and we track that. And in the second quarter, the move-outs that we had due to the rent increase were about 7% of our move-outs. And you compare and contrast that to 2019, a more normalized year and move-outs due to rent increase range anywhere from 7% to 10%. So we’ve monitored pretty closely. If we saw move-outs jump up a lot because of rent increases, we would start to taper back a little bit. But at this point, no real change occurring.

That’s helpful. Certainly, a good problem to have. And then on development, how are you thinking about staging the construction starts for those pre-development projects you’ve discussed? And then as you think about adding additional projects to that pre-development pipeline, are you still finding the best opportunities in some of those longer-term repurposing and permitting opportunities that you’ve talked about?

Well, this is Brad. Amanda, certainly in terms of the staging, the developments that we’re working on now we’ve got a pipeline right now of about $800 million or so that we’re really working through both owned sites and then sites under contract and they were working on pre-development on and then also our pre-purchase platform. So, those take given where we are in the cycle and given how hard it is to get find sites and get sites entitled. The staging of those you can’t perfectly map those out, frankly. And a lot of the developments that we’re doing in-house are for sites that need to be rezoned. So it takes some time to get through that process. But frankly, really what we’re doing on those is, is working through the pre-development process in our approvals. And then really once we get to a point where we can have a GMP and known construction prices locked in, that’s acceptable to us, we look to move forward with those opportunities. I would say, the pre-purchase timeline is a bit more truncated, because again, we’re putting off some of the risk associated with the pre-development work to the developers that we’re partnering with. So those have a little bit shorter time period on them, sometimes, not all the time. So we’re able to work those in kind of power starts a little quicker than stuff that we’re doing in-house. So a long way of saying, we can’t really perfectly map that out. It’s really once we get costs and approvals, and everything behind us on those projects. And then what was the second part of your question, Amanda?

Just in terms of future opportunities to add to your pre-development pipeline are you still finding some of the best opportunities in those longer-term repurposing or permitting opportunities that you’ve talked about in the past?

Yes, I mean we certainly have opportunities there. I think I mentioned a moment ago, we’ve got about $800 million that we think we can repopulate here and that’s a mixture of stuff that is on balance sheet and then also our pre-purchase – the sites that our development teams are working on now. Sometimes are 1.5 years to get through the development process. So, it’s taking a little bit of time to do that on some of them. But, those are great opportunities. But I will say it is becoming increasingly difficult to find sites. It’s becoming increasingly difficult to get sites zoned and permitted and really work through that process. So those are taking a bit longer, but we feel really good about the pipeline that we have and then the ability to repopulate that as we go forward.

And Amanda, this is Eric. I would add that we do think that we see the competition for opportunities that involve rezoning or that involve a much longer process. The competition for those sites is not quite as fierce as what you find in something that is shovel ready if you will and ready to go. That’s what caused a lot of the particularly among the smaller developers and among the private capital coming to the market. They have a mandate that doesn’t allow them to take quite that much time often. And so we do find better opportunities more often than not in those projects that require a little bit more time.

That’s helpful, thanks for the time.

Yes. Thanks, Amanda.

We’ll take our next question from Austin Wurschmidt, KeyBanc Capital. Your line is open.

Thanks, and good morning, everybody. Just curious if you mark-to-market and trend out rents on your existing development pipeline, what the difference or upside between the yield that you underwrote and what that might suggest? And do you think that the projects could stabilize ahead of the timeline that you’ve outlined in the release?

Austin, this is Brad. I would say broadly again we’re seeing strength as I mentioned in my comments in our lease-ups and we’re seeing that both in velocity and we’re seeing that also in rate. So I would say, if we trended that out, we’re going to see some good positive momentum in the yields that we have there. Certainly for the two that we have in lease-up right now, that’s the case. The other ones that are under construction where pre-leasing is kind of just starting, it’s a little too early to say on those, but we’re certainly seeing really, really good momentum as we go forward there. And in terms of the velocity, we did move up the expected stabilization date of our novel midtown deal in Phoenix by two quarters that again that market is doing extremely strong in the lease up is going very, very well and ahead of expectations, so we have moved that data.

Not to put you on the spot, I mean, could you quantify what the yield you think, the yield outside? And I think you’ve said 6% it is sort of the average yield across the pipeline. I mean, do you think is it 50 basis points or something less in any sense putting a range?

No, I wouldn’t say 50 basis points. But I would say it’s call it 20 basis points at this point. But again, as we get into the novel mid-town deals, 46% occupied and it’s really – it’s too early to put numbers on that, but broadly, I would say, it’s 20 plus basis points.

Got it. And then as far as redevelopment, I think the average increase was around 11%, but clearly the new lease rates you’re achieving across the portfolio are even higher. What do you think the premium is you’re getting on redevelopment today?

I think the premiums right at 11%, honestly, because the way we really should try to understand what the market will pay for the premium and match that and then let the market rate push us up from there. So, our redevelopment unit may be getting $200 more, $100 of that is redevelopment premium and $100 of it is market growth.

Got it, got it. Then one last quick one for me. What’s the loss to lease today on the portfolio?

So Austin, if you think about that in a lot of different ways, and talking to Nick earlier, one of the way we really think about that, it can be very seasonal depending on what time of the year you’re looking at. But, I think we’re expecting 7% blended lease over lease for this year. So that obviously half of that or so trades in the next year. So certainly the good spot and I would – it’ll depend on kind of where the full year lease-over-lease.

Okay, that’s fair. Thanks guys.

Thank you.

We’ll take our next question from Rob Stevenson from Janney. Your line is open.

Good morning, guys. Tom, can you talk a little bit about the markets, first half versus second half and which ones you expect to see the strongest incremental growth for the first half of the year, the second half of the year and then which ones, because either they’ve had such a big pop already, are going to wind up seeing the least sort of incremental growth as you move forward here?

Yes. I mean that’s a relative question, Rob, because at this point in July, our leasing growth, I’ve got six markets below 10% blended rent growth and the slower of those are DC and Houston, which are I think 5.2% and 5.7% for blended rent growth but that’s encouraging progress for those. So I don’t think that we’ve seen – I don’t see any market where it’s slowing to be honest with you. In terms of the market, again we’ll have seasonal trends as you’re well aware of but places like Phoenix and Tampa continue to accelerate in places like Atlanta and Austin have really picked it up recently and we’re seeing that on into Dallas and across the portfolio. I mean the number of markets and the majority of our markets are – a large majority of our markets are now pushing higher than 10% blended rent growth. So I don’t see any sort of tipping point that’s been reached other than seasonality. And of course, Eric made the point earlier of we’re pushing through stout renewal increases and we’re getting less pushback than we have historically.

Okay. And then, Al, once the – when did or when does the insurance renew? And did you get hit with any type of major increase on the last renewal just simply because of higher construction costs on replacing units or et cetera?

We did our renewal effective July 1 and it was roughly we called 14%, 15% year-over-year, which is right in-line with what we’re expecting. We didn’t see anything necessarily driven specifically by development costs. Frankly, the winter storm Uri is really what drove it more than anything. I think we would have had a lower without that. But we feel like we’re in a good position now and taking the appropriate amount of risk on the balance sheet and expect to see that continue to decline going forward.

Okay. And then one last one. Given your markets, how many units do you have that you would have evicted if you could, but are legally prevented from doing so? And then how many units overall in the portfolio are currently in the eviction process?

Rob, I’d say on that it’s very limited, and you can see that with our collections of 99.2% right now for the second quarter. It’s been strong, I don’t expect the change in rules on evictions to change anything much and we’re working closely with relief fund folks to manage that process. So, honestly I don’t see that it makes a big difference going forward.

Okay. Thanks guys.

We’ll take our next question from Rich Anderson, SMBC. Your line is open.

Thanks. Good morning. So the ultimate sign of fundamental strength, not that we need a hint is when new lease growth is greater than renewal lease rents. And so, I’m curious if in the past when that condition has existed with MAA, how long does it last? And is there anything strategically you’re doing for an incoming new resident that is perhaps driving that level of growth relative to renewals?

Rich, what I’ll say is it is also a sign that we have opportunity on renewal. And I’ll tell you the renewal pricing that was achieved in the second quarter was really priced in the first quarter and vice versa. So, I think you’ll see that delta begin to narrow as we re-price going out. And July was higher than the second quarter and we’ll see that continue to grow a bit. But – and the new lease rate really frankly gives us a good cover to begin to move that out up. And again as Eric mentioned, we have a low push back on renewal acceptance rates because they can get out and see the housing market pricing very transparent and they know they’ve got a good deal right now.

Rich, in addition to what Tom alludes to, in terms of the gap closing just as a natural consequence of us repricing on renewals faster, I mean there’s a timing difference between how we price new leases versus how we price renewals, which you alluded to. But in addition to that, I mean, what frankly defines how long the opportunity continues is a function of just basic sort of demand-supply characteristics. And as I’ve alluded to, we – as we sit here today, we don’t see anything near term over the next year. So that’s likely to disrupt kind of the strong environment that we find ourselves in. So we think that we’re going to keep pushing hard today on the pricing increases for new move ins. Today, we are pricing renewals for what we will achieve 60, 90 days from now. And when we get 60, 90 days from now, we will be pricing those renewals at a steeper rate. So it’s sort of – as you say, it’s an indication of real strong fundamentals and we don’t see anything near-term that is likely to disrupt that.

Okay. And then when you mentioned early on the 13% new leasing is coming from outside the Sunbelt and you gave some examples of some markets that are above that. What was that percentage kind of 2019? What would it be typically? I’m curious, how much it’s grown to that 13% level?

I’ll give you an example of it. In Atlanta, as an example, 12% of our move-ins came from outside the Sunbelt, and in 2019, that was a little over 8% in a market like Phoenix, which is incredibly strong in terms of move in some outside the Sunbelt. That was over 21% and so far this year and compared to the same period in 2019, that was a little over 18%. So it’s about a 411 basis point jump from 2019 in Phoenix. We’re seeing a big jump in Tampa from 2019, this is about over 18% today versus 13% in 2019. So 380 basis point improvement. So it varies a bit by market, but it’s pretty good back to 2019 before COVID. It’s up and move-ins from outside the Sunbelt are up and let’s see it looking at our markets here, the only market that I see where it’s actually the move-ins from outside the Sunbelt are actually down is one and that’s Huntsville, Alabama.

Okay. Just a real quick last question. A lot of talk about the cadence between suburbs and urban coastal versus Sunbelt, all those types of geographical dynamics. Do you see within your portfolio any particular strengths where the population is kind of denser? Do you have better performance there versus a more rural-looking area? Or is it just the whole place is great?

I mean, broadly the whole place is good, Rich, but the delta between urban, suburban and inner loop and A, B was wider during COVID. Both have narrowed. So A&B assets the difference between the two is only 130 basis points but it’s 7.4% for our lagging A and 8.7% for our leading B. I mean those are both numbers I’m happy to have. And then the same real story, it’s almost the same for sort of urban inner loop versus suburban assets, it 7.5% and 8.7%. So there is – both are strong and there’s just a little bit more of a supply headwind in the urban markets, but we don’t see them as less desirable.

Got it, thanks very much.

Thank you, Rich.

We’ll take our next question from John Pawlowski, Green. Your line is open.

Great. Thanks so much. Brad, would you mind sharing the cap rate on the Jackson, Mississippi exit and the anticipated pricing on the handful of upcoming dispositions?

Yes. So we look at this a couple of ways. One is as a cap rate on MAA’s trailing 12 numbers that was about a 5.4, but looked at on a buyer’s perspective with kind of adjusted taxes and insurance, it was about a 4.7 cap rate. Going forward on the three that we’re looking to sell those – both of the metrics are very similar because there’s not a big re-evaluation of taxes on those, but we’re looking in the call it 4.5 or 7.5 range. And John, just to keep in mind, that 4.7 cap rate on the exit from Jackson Mississippi, that’s on 36-year-old assets. So the average age of that portfolio is 36 years old in Jackson, Mississippi.

Understood. And, Brad, upcoming dispositions, what markets are there?

So we have two in Savannah and one that is in Charlotte.

Great. Last one for me, Tom. Single-family rental build to rent communities are the deliveries are probably accelerate pretty meaningfully in the early vintages do have smaller floor plans, a little bit more like apartments. So curious any case studies you’re seeing when a build to rent community opens nearby, any impact on leasing, any statistics or any color you could share will be of interest.

No, it’s pretty limited. And there, while that is a booming space, it is a relatively small space, but a place we’ve probably seen the most that sort of thing happened and it’s in Phoenix and it certainly hadn’t slowed our momentum there. And just as a reminder and it’s 5% of our move out sort of single-family rental, which is really dwarfed by the job transfer number it is, not a driving factor and we love it that they are raising their rents as well. I mean, it’s been steady where they’ve been.

Okay, thanks for the time.

Thank you, John.

We’ll take our next question from Buck Horne from Raymond James. Your line is now open.

Hey, thanks, good morning. Just – yes, thank you. Real quickly. Any thoughts or potential impact from eviction, moratorium, roll-off in your portfolio and/or how are you working with residents right now? It’s potentially recover, any rental assistance payments through the government program.

Buck, this is Eric. And no, we don’t really see much change coming as a consequence of the expiration of that CDC moratorium. Frankly, it’s not in our portfolio, we haven’t seen a lot of that activity. And I think that as we touched on ever since this started last spring, I mean we have been very active in reaching out to our residents and offering assistance in various ways with over 8,000 of our residents that we’ve assisted. And we continue those efforts and we are also very active and doing all we can to assist our residents with making application that needed for a financial assistance, we’re very aggressive and active and showing them where to go, we are – where we can, we’re actually doing it for them and making application on their behalf. But it’s not a big percentage of the portfolio, but we don’t really see any near-term change occurring just as a consequence of getting into August and the CDC moratorium no longer being in place.

Great, thanks. And just following up on the single-family rental question there. Just may be a different tack on it. A lot of builders are out there and a lot of capital is out there building out entire communities and running them effectively like horizontal apartments. Any evolution in your thought process about maybe a partnership or strategic partnership with a home builder or someone else to invest in a single-family rental community.

Well, it’s something we kick around from time to time, Buck. I mean we have a number of our communities, where we actually do have adjacent townhomes and housing structures if you will that are not traditional apartment type and design. And if we were to find an opportunity to do something where you’ve got a purpose-built single-family community in the contiguous area with common amenities and all that kind of stuff, yes, I mean something that we would invest in. We’re not actively looking to make that happen at the moment. We think we were able to capture a lot of good growth right now with what we’re doing with all the projects that Brad has alluded to. But we’ve got, if you will, a little bit of that in the portfolio already. And it’s something that if we find opportunities in that regard to look at, we wouldn’t hesitate to look at it.

Thanks, guys.

Thank you, Buck.

We have no further questions. I will return the call to MAA for closing remarks.

Okay, well, we appreciate everyone joining us this morning and any follow-up questions, feel free to reach out anytime. Thank you.

This does conclude today’s program. Thank you for your participation. You may disconnect at any time.