U.S. Markets closed

Edited Transcript of MAA earnings conference call or presentation 30-Jan-20 3:00pm GMT

Q4 2019 Mid-America Apartment Communities Inc Earnings Call

Memphis Feb 5, 2020 (Thomson StreetEvents) -- Edited Transcript of Mid-America Apartment Communities Inc earnings conference call or presentation Thursday, January 30, 2020 at 3:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* A. Bradley Hill

Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing

* Albert M. Campbell

Mid-America Apartment Communities, Inc. - Executive VP & CFO

* H. Eric Bolton

Mid-America Apartment Communities, Inc. - Chairman, President & CEO

* Thomas L. Grimes

Mid-America Apartment Communities, Inc. - Executive VP & COO

* Tim Argo

Mid-America Apartment Communities, Inc. - Senior VP & Director of Finance

================================================================================

Conference Call Participants

================================================================================

* Aaron Brett Wolf

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Andrew T. Babin

Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst

* Austin Todd Wurschmidt

KeyBanc Capital Markets Inc., Research Division - VP

* Hardik Goel

Zelman & Associates LLC - VP of Research

* John Joseph Pawlowski

Green Street Advisors, LLC, Research Division - Analyst

* Neil Lawrence Malkin

Capital One Securities, Inc., Research Division - Analyst

* Nicholas Gregory Joseph

Citigroup Inc, Research Division - Director & Senior Analyst

* Piljung Kim

BMO Capital Markets Equity Research - Senior Real Estate Analyst

* Richard Charles Anderson

SMBC Nikko Securities Inc., Research Division - Research Analyst

* Richard Wynn Skidmore

Goldman Sachs Group Inc., Research Division - Vice-President

* Robert Chapman Stevenson

Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst

* Zachary D. Silverberg

Mizuho Securities USA LLC, Research Division - Research Associate of Americas Research

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good morning, ladies and gentlemen. Welcome to the MAA Fourth Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded today, January 30, 2020.

I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA. Please go ahead.

--------------------------------------------------------------------------------

Tim Argo, Mid-America Apartment Communities, Inc. - Senior VP & Director of Finance [2]

--------------------------------------------------------------------------------

Thank you, Priscilla. Good morning. 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 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.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [3]

--------------------------------------------------------------------------------

Thanks, Tim, and good morning. Our fourth quarter results were better than expected as improved rent growth and record low resident turnover continued to drive positive trends in overall revenue performance. Over the course of last year, we focused on an opportunity to prioritize rent growth and push that agenda throughout the year. As a result, we carry good pricing momentum into the new year. Based on our updated analysis, we do now expect that the overall level of new supply deliveries in 2020 will run higher than in 2019. This will, of course, vary by market.

As has been routinely commented on, the majority of the new supply continues to be higher end product at a high price point. Based on our detailed submarket analysis, it's important to note that the new supply forecasted to deliver in our markets in 2020 will be at rents that, on average, will be 25% higher than the rent across our properties in the same submarkets.

While we are certainly not immune to the impact of new supply, we see this pricing gap is generating good long-term opportunity. The price point of our portfolio, the quality of our locations, the diversified nature of our submarkets, the strength of our operating platform and a number of new initiatives that we are rolling out in 2020, along with the pricing momentum that was built in calendar year 2019, will continue to support steady growth in NOI over the coming year.

One of the benefits surrounding the new and higher-priced product delivering into the market is the expanding redevelopment opportunity created in a number of our properties. The price spread between the new supply and the existing rents at our properties creates opportunity to upgrade and still offer attractive value to our leasing prospects while also generating a very accretive use of shareholder capital. Our property upgrade and repositioning pipeline will expand in 2020, supporting above-market rent growth in a number of locations over the next couple of years.

We continue to find select opportunities to capture disciplined new external growth. We began the year with our new development pipeline at 2,100 units, representing $490 million in new investment. In addition, we have 640 new units undergoing initial lease-up, representing $146 million in additional new investment. We did close on one new acquisition in Q4. Consistent with the transactions we executed on over the past few years, this was a newly built property undergoing initial lease-up. We partially match funded the acquisition with new equity issued through our ATM program, thereby retaining plenty of growth capacity and protection for the balance sheet.

So in summary, our Sunbelt markets continue to capture great demand. MAA's portfolio is uniquely balanced and well positioned across the region to capture this demand. Our redevelopment and new development pipelines are growing. Emerging new technologies and products will also support further NOI growth, and the balance sheet is in a great position with ample capacity to jump on compelling opportunities. I want to thank our team of associates here at MAA for a great year of performance in 2019, and we look forward to another year of progress in 2020.

I'll turn the call over to Tom.

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [4]

--------------------------------------------------------------------------------

Thank you, Eric, and good morning, everyone. Our operating performance for the fourth quarter exceeded our expectations with the steady demand for apartments and our enhanced platform with continued momentum in rent growth and strong average daily occupancy.

Same-store effective rent growth per unit increased 4.3% for the quarter. This is the seventh straight quarter of year-over-year improving ERU growth. As a result, our year-over-year same-store revenue growth was 4.1%, the highest it's been since 2016. Effective rent per unit increased 60 basis points sequentially. Revenue performance was led by steady momentum and blended new and renewal lease-over-lease pricing, up 2.6% for the quarter, which is 100 basis points better than this time last year.

In addition, average daily occupancy during the quarter remained strong at 95.7%. As we wrap up January, average daily occupancy is still strong at 95.5% and compares to 96% in January of last year. Our 60-day exposure, which is all vacant units and notices through a 60-day period, is just 7.2%, 10 basis points better than this time last year.

Looking forward, as Eric mentioned, our overall supply in our markets is expected to increase in 2020. The Dallas, Houston and Savannah markets are expected to be the most challenging. Based on our pricing progress last year, along with current rent and exposure trends, we expect our leading revenue markets to be Phoenix, Raleigh, Austin and Nashville.

Of course, the new supply creates an opportunity for our redevelopment platform. In addition to our kitchen and bath program, we are underway with an amenity upgrade program at 10 communities. This $20 million to $25 million investment in 2020 is primarily focused on legacy Post assets, where the product was built in excellent locations, and new supply continues to push the rent of the submarket up. In these cases, we can update leasing centers, hallways and common areas, create shared workspaces, outdoor gathering areas and rooftop decks to allow us to increase rent while still offering compelling value in these submarkets.

Our technology platform also continues to expand. Our overhauled operating system and new website has contributed to our ability to attract, engage and create value for our residents. Our tests on smart homes have gone well. The technology was installed in 15 communities with minimal disruption and has been well received by our residents. We expect to install 24,000 smart home units in 2020. Our high-speed Internet access initiative is deploying and will be a contributor to 2020 NOI growth. We are also exploring a range of AI chat, customer resource management and prospect engagement tools.

We're pleased with the progress our teams made in 2019 and greatly appreciate their efforts. We have a solid base of earned-in rent growth as we head into 2020 and are excited about the opportunities ahead.

Brad?

--------------------------------------------------------------------------------

A. Bradley Hill, Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing [5]

--------------------------------------------------------------------------------

Thank you, Tom, and good morning, everyone. I'll provide brief comments on what we are seeing in the transaction market as well as on our transaction activity in Q4. As you're all aware, the transaction market continues to be extremely competitive with record levels of liquidity and demand for multifamily properties. Given the favorable migration and job growth trends that exist in our region of the country, investor demand for multifamily properties within our footprint continues to be robust, leading to deep bidder pools, aggressive pricing and compressed cap rates.

Reflecting the positive job growth and strong demand, we expect supply to increase in 2020. This increased level of supply should continue to support a historically high level of acquisition and prepurchase deal flow. We remained disciplined in our capital deployment decisions. And Al and his team have our balance sheet in great shape, allowing us to respond to compelling investment opportunities as they materialize.

As we've done in the past, we'll continue to focus our acquisition efforts on new lease-ups. In Q4, we closed on the acquisition of The Greene in downtown Greenville, South Carolina. This was a recently completed asset involving a developer and equity provider we've worked with in the past. The asset was still in its initial lease-up with the equity requiring a certain and quick close by year-end. We were able to execute on the acquisition at a stabilized market cap rate of 5.1%.

In 2020, we'll also continue to pursue prepurchase opportunities. As a reminder, this is a program where we partner with good developers that have access to great real estate. We bring the capital to the venture and return -- and in return, we get access to an asset at a reduced basis with a clear path to 100% ownership at stabilization. This program allows us to selectively pick well-located, to-be-built assets while minimizing our overall development risk. In Q4, we closed and started construction on a 264-unit prepurchase, located 9 miles southwest of downtown Orlando in the very desirable high income Dr. Phillips area.

And finally, in Q4, we took advantage of strong investor demand and pricing and sold all 5 of our assets and exited the Little Rock, Arkansas market. We had over 25 qualified bidders offer on these properties. We achieved good pricing for this noncore market with 24-year-old properties, equating to a 5.4% market cap rate. We will continue to selectively prune our portfolio on an ongoing basis, and we'll have more to say about our specific 2020 disposition plans in coming quarters.

With that, I'll turn the call over to Al.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [6]

--------------------------------------------------------------------------------

Thank you, Brad, and good morning, everyone. I'll provide some brief commentary on the company's fourth quarter earnings performance, major financing activity, and then finally, on our initial guidance for 2020. Reported FFO per share of $1.68 for the fourth quarter was $0.05 per share above the midpoint of our guidance with the majority of this outperformance produced by property NOI as both operating revenues and expenses were favorable to expectations for the quarter. FFO per share was $6.55 for the full year, which included several items considered unusual or not core to our business, such as the market-to-market valuation of our preferred shares and gains on sales of land parcels. Excluding these noncore items, FFO for the full year would have been $6.26 per share. As discussed more in a moment, we are providing earnings guidance for 2020 on a core FFO basis, which we believe will help provide a clear picture of performance.

We were active on the financing front during the fourth quarter as we issued $300 million in new public bonds. We also retired $170 million of unsecured loans and $17 million of additional secured debt. The effective interest rate of the new bonds will be 3.1% over 10 years after considering the interest rate hedges related to the financings. We ended the year with 98.4% of our debt fixed with an average duration of almost 8 years, which is a record for the company. During the fourth quarter, we also issued $20 million in new equity through our ATM program, essentially match funding a portion of the Greenville property acquisition mentioned by Brad.

Finally, we are providing initial earnings guidance for 2020 with the release, which is detailed in our supplemental information package, providing guidance for net income per diluted common share, which is reconciled to FFO, core FFO and core AFFO in the supplement. Core FFO for the full year 2020 is projected to be $6.38 to $6.62 per share or $6.50 per share at the midpoint. The definition of core FFO, including a description of the items considered noncore, can be found in our supplemental package. The primary driver of 2020 earnings performance is same-store NOI growth, which is projected to be 3.5% at the midpoint.

Effective rent growth for the year is expected to be around 3.7%, produced by 2020 lease-over-lease blended rental pricing growth of 3.4% at the midpoint, combined with the 2019 blended rental pricing of 4.4% achieved. This pricing, combined with a slight decrease in average occupancy to 95.8% average for the year, brings projected total rental revenue to the 3.5% range. Fees and other income items combined are projected to add an additional 20 to 25 basis points to revenue growth for the year with the primary driver being a 55 basis points contribution from the Double Play bulk internet program, which is partially offset by other fees and reimbursement items which are projected to remain essentially flat for 2020 primarily due to slightly lower occupancy.

These items combine to produce our total same-store revenue growth expectation of 3.75% for 2020 at the midpoint. Same-store operating expenses will continue to have some pressure from real estate taxes and insurance costs for the year, and we'll also have the additional expenses related to the Double Play bulk Internet program which is recorded on a gross basis. These items combine to produce projected same-store expense growth of 4.25% for the full year at the midpoint. Our forecast also assumes a modest increase in overall -- of overhead cost, just below 3% for the year, and continued use of our ATM program to essentially match fund expected acquisitions for the year with $80 million of new equity issuance projected, of course, assuming we find accretive uses of capital during the year.

And that's all that we have in the way of prepared comments, Priscilla. So now, we'll turn the call back over to you for questions.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) And we'll take our first question today from Austin Wurschmidt with KeyBanc Capital Markets.

--------------------------------------------------------------------------------

Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [2]

--------------------------------------------------------------------------------

Brad, you mentioned supply is increasing in your markets in 2020, which I presume is off of your kind of detailed supply analysis. Could you quantify that thought and tell us which of your top markets are seeing the biggest increases or decreases?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [3]

--------------------------------------------------------------------------------

Yes, Brian -- Austin. It's Tom. I'm going to jump in. Where we really think that we'll see the most pressure from new supply is in Dallas primarily. It will continue to be challenged, but we're -- but it's -- that supply is coming in at 45% above our market -- our

(technical difficulty)

and then I think we would expect that Houston, Savannah and Charleston will soften over time as supply comes online. But feel like we've got Phoenix and Raleigh will probably lead the pack in terms of performance, and we've also got strong momentum in the face of elevated supply with Austin, Atlanta and Nashville.

--------------------------------------------------------------------------------

A. Bradley Hill, Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing [4]

--------------------------------------------------------------------------------

And Austin, real quick, just to clarify. When Tom says it's -- supply is coming in 45% on top of us, that's a rent gap between what we have in place with new supply that's coming in is about 45% higher in rent than what our assets are.

--------------------------------------------------------------------------------

Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [5]

--------------------------------------------------------------------------------

Yes. That makes sense. And then what's the supply, sort of, for the overall portfolio? What are kind of the numbers when you compare what it was in 2019 and what you're expecting for this year?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [6]

--------------------------------------------------------------------------------

Yes. So if you look at our radius supply as a percent of inventory, we'll -- we -- this 2019 was about 1% of supply delivered. And this year, it will be 1.6% in 2020.

--------------------------------------------------------------------------------

Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [7]

--------------------------------------------------------------------------------

Got it. And then kind of going back to the clarification on the rents for units being delivered versus what's in place. Eric, you've kind of highlighted that across the overall portfolio, I think you said 25%. How does that 25% compare to the last 2 to 3 years of where new supply was coming in versus where your portfolio was at the time?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [8]

--------------------------------------------------------------------------------

I don't have those numbers right in front of me, Austin, but we reviewed them, and it's very, very similar to what it is this year.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [9]

--------------------------------------------------------------------------------

I think as construction costs continued to escalate -- land costs continued to escalate, I think if you go back over the last several years, you're going to find that that gap is going up. Certainly, the rise in cost of construction is accelerating at a pace faster than rent growth is accelerating. So I think if you go back over the last several years, you'll find that that gap is probably spread somewhat.

--------------------------------------------------------------------------------

Operator [10]

--------------------------------------------------------------------------------

And we'll take our next question from Neil Malkin with Capital One.

--------------------------------------------------------------------------------

Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [11]

--------------------------------------------------------------------------------

First question on the operating expense side. You talked about implementing technology through several of the assets and units across your portfolio. I'm wondering if any of that is also pressuring operating expenses or is all that being capitalized? And then what are your expectations for payroll and insurance growth in 2020?

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [12]

--------------------------------------------------------------------------------

Let me make sure I'm understanding. Can you tell me what you -- in the first question, what expenditures were you talking about specifically, Neil, to make sure I'm clear?

--------------------------------------------------------------------------------

Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [13]

--------------------------------------------------------------------------------

Yes, yes. So the elevated operating expense this year is mostly related to the bulk Internet program, but I thought you're also implementing the smart home technology package. Are those...

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [14]

--------------------------------------------------------------------------------

Okay. Okay. I know. I got it. Yes, we are, and the majority of that is capital. So just to give you a little breakdown of the expenses, I think the midpoint, as we talked about, was 4.25% growth for the year, and about 65 basis points of that is related to the bulk Internet program. And then you have real estate taxes, which are 1/3 of our expenses, adds probably another 60 basis points. So if you strip all of that out, the other items, personnel, R&M, utilities, all those things are growing together about 3% for the year.

--------------------------------------------------------------------------------

Tim Argo, Mid-America Apartment Communities, Inc. - Senior VP & Director of Finance [15]

--------------------------------------------------------------------------------

And I'll, Neil, add to that. You mentioned specifically insurance. We're expecting probably low double-digit increase for our insurance program, which will renew in July.

--------------------------------------------------------------------------------

Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [16]

--------------------------------------------------------------------------------

Okay. Great. Recently, there's been some pretty strong homebuilder confidence. I'm wondering if you're seeing that play out in any way or anecdotally in terms of the people who are moving out, if they're moving out to home purchase and -- or if the builders are starting to focus more on the entry-level homes or still the sort of higher price point homes?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [17]

--------------------------------------------------------------------------------

No. We're not seeing the folks move out for entry-level homes. In fact, move-outs to home buying was down 10% this quarter, and that's part of what continues to drive our turnover down.

--------------------------------------------------------------------------------

Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [18]

--------------------------------------------------------------------------------

Okay. I guess last one for me. Can you just talk about what cap rates have done, just talk about maybe in your top 5 markets over the last maybe 6 months for A and -- versus B products?

--------------------------------------------------------------------------------

A. Bradley Hill, Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing [19]

--------------------------------------------------------------------------------

Yes. Neil, this is Brad. I'd say, just broadly speaking, cap rates just continued to decline. I mean certainly, the demand for multifamily, if you heard anything about the NMHC conference last week where attendance was up record levels. So I think the demand for multifamily assets continues to be very, very strong. And every indication we have from selling properties to be very, very active in the acquisition market. And the numbers we're seeing, cap rates continued to come down. And I'd say the gap between As and Bs continues to compress, and we don't -- we certainly don't see anything changing the liquidity in the market that's really driving that at this point.

--------------------------------------------------------------------------------

Operator [20]

--------------------------------------------------------------------------------

We'll go next to Nick Joseph with Citi.

--------------------------------------------------------------------------------

Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [21]

--------------------------------------------------------------------------------

I'm hoping you can give a little more color on the bulk Internet program. In terms of the contracts with the providers, how long are those typically? And then from a rental perspective, do all units need to opt in to the program? Or is there an opportunity to opt in or opt out?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [22]

--------------------------------------------------------------------------------

No. On the first one, they're 5- to 7-year contracts, depends on the provider, and we've got the option to opt out.

(technical difficulty)

3 years, I believe, but don't hold me into that, Nick.

On the -- as the rollout goes, all residents participate in it. And when we did this -- we've had the bulk cable program for a while. We had decided to add high-speed Internet access. When we did that, we looked at our market and who's already subscribing for high-speed Internet access, and 80% of our residents are already paying for the speed that we're providing or less. So it's an upgrade, and they're paying less through us for that. Part of the reason that our results were a little better than we expected in the fourth quarter is, Nick, we really assume that would roll in on new leases on renewals, but the number of existing residents that chose to opt in, Middle East was higher than we expected.

--------------------------------------------------------------------------------

Nicholas Gregory Joseph, Citigroup Inc, Research Division - Director & Senior Analyst [23]

--------------------------------------------------------------------------------

That's helpful. And then maybe to that point, where are you in terms of the rollout? And then how long will it take to be fully deployed?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [24]

--------------------------------------------------------------------------------

We have one provider done and the next provider underway, and I would think we'd be deployed by May -- fully deployed by May with some carryover the benefit, of course, into 2020 because they will ramp up from there.

--------------------------------------------------------------------------------

Operator [25]

--------------------------------------------------------------------------------

We'll go next to John Kim with BMO Capital Markets.

--------------------------------------------------------------------------------

Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [26]

--------------------------------------------------------------------------------

Tom, in your prepared remarks, you mentioned current occupancy is at 95.5%, which is 50 basis points lower than last year. Can you just comment on how concerned you are that occupancy may come in at the low end of your guidance or potentially lower than that given new supply?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [27]

--------------------------------------------------------------------------------

No, no. As you will have noticed for the last year, we really felt like and continue to feel that with demand, the way that it is, now is the time to raise rents and build our effective occupancy, and that is the basis for which our steady rent growth from quarter-to-quarter and the growth that we've seen throughout the year is built. And we're willing to give up a little bit of occupancy on that, though, 95.5%, very solid from our perspective. But we feel pretty good about that this time of year. I would expect it to be a little lower, and I would expect that you'll see that climb as the year goes on. But we're certainly not going to be shooting for 96.2%, 96.4%. We're very happy in the range that we're in, and it's starting right where we thought it would.

--------------------------------------------------------------------------------

Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [28]

--------------------------------------------------------------------------------

And can you provide commentary on how you see job growth or other demand drivers in your markets this year versus last year?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [29]

--------------------------------------------------------------------------------

Yes. I mean job growth, we see no slowdown at this point. And the -- we continue to see interest in the Sunbelt and in migration trends. Renewal rates continue to stay in the 6% to 7% range right now, though we anticipate those coming down a bit this year. But right now, demand is very strong. And for that reason, we'll continue to prioritize rent growth.

--------------------------------------------------------------------------------

Piljung Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [30]

--------------------------------------------------------------------------------

Okay. And then your development pipeline increased to $490 million this quarter. Can you just comment on how big you feel comfortable with the pipeline is going forward? And are you developing at any different spec as far as adding smart home technology or any new technology as part of the development program?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [31]

--------------------------------------------------------------------------------

This is Eric, John. We're very comfortable where the development pipeline is at this point. I mean we've established the tolerance that we're very comfortable with the 3% to 4% of enterprise value, which would put the pipeline tolerance, if you will, at $500 million to $700 million. So at $490 million, we're pretty comfortable with where it is at this point.

We have several other projects that we're working on now, if you will, in a predevelopment sense. I doubt we will start anything else this year. We do have a couple of land sites that we either own or are tied up, but I suspect it will be early '21 before we get those projects going. So we're very comfortable with where the pipeline is at this point. And yes, as this new product is being developed, the smart home technology and a lot of the new technology services and products that Tom has alluded to, they will certainly be a part of what we build going forward.

--------------------------------------------------------------------------------

Operator [32]

--------------------------------------------------------------------------------

And we'll take our next question from Haendel St. Juste with Mizuho Bank.

--------------------------------------------------------------------------------

Zachary D. Silverberg, Mizuho Securities USA LLC, Research Division - Research Associate of Americas Research [33]

--------------------------------------------------------------------------------

Zach Silverberg here with Haendel. Just a quick follow-up on John's question. How do you guys view new development yields against IRRs? And how do they -- or against IRRs compared to acquisitions?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [34]

--------------------------------------------------------------------------------

Yes. We're generally seeing right now that our stabilized yields out of our development are somewhere in the 100 to 125 basis points higher than what we are capturing on the acquisitions. As Brad alluded to, The Greene, the deal we bought in Greenville, stabilized yield at just over 5%. We're seeing our -- our projected stabilized yields on our development pipeline right now trending anywhere from 6% to 6.5%, so call it 100, 125 basis point spread.

--------------------------------------------------------------------------------

Zachary D. Silverberg, Mizuho Securities USA LLC, Research Division - Research Associate of Americas Research [35]

--------------------------------------------------------------------------------

All right. And could you provide an update on the quarter and year-to-date lease rates between the legacy Post portfolio and the MAA portfolio? And is there any extra opportunity that we should view this year between the 2 of them?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [36]

--------------------------------------------------------------------------------

Yes. We do -- we are -- I do not have that information in front of me. We've largely narrowed that gap -- or that gap is narrow, to be honest with you. And differences between Post and Mid-America assets in the same submarket are negligible. Now going forward, as I touched on with our redevelopment program and amenity upgrade, we do still have opportunities in those very strong locations to update the exterior and amenity packages there. And that is more of a 2021 impact that we'll see from the work that we do this year.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [37]

--------------------------------------------------------------------------------

Tom is referring to the Post -- legacy Post locations for the upgrade. So we'll probably see more robust rent growth emerge out of Post, but it's more a function of the upgrade as opposed to market differences.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

We'll go next to Rob Stevenson with Janney.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [39]

--------------------------------------------------------------------------------

Tom, so same-store revenue guidance is 3.25% to 4.25%. What do you expect -- where are you expecting your top markets to come out? Where are you expecting the bottom performers to come out? What's the sort of spread that underpins that 3.75% midpoint.

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [40]

--------------------------------------------------------------------------------

I mean Rob,

(technical difficulty)

that range to be on a blended basis. The top markets in that -- probably in that 4%, 4.5% range, and the bottom markets in the 2%, 2.5%, something like that. I'm estimating that, to be honest with you, but that's rough feedback.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [41]

--------------------------------------------------------------------------------

Okay. So nobody is sort of close to flat or even negative or anything? It's all sort of at least 1%, 1.5% positive at the bottom end?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [42]

--------------------------------------------------------------------------------

Correct. I think on a blended basis, we would expect to get a full year traction and not have many people go backwards.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [43]

--------------------------------------------------------------------------------

And Rob, I'll tell you -- this is Eric. I mean to some degree, the opportunity that we carry from 2019 into 2020 because of the focus on prioritization on rent growth, it really puts us in a much better position to work through some of the supply pressures in these markets in 2020 and really enables us to avoid any of the real weak performance metrics that you might -- you were alluding to as a possibility. I think that we knew heading into this year that we likely would see some moderation of some sort occur. And that was part of the reason behind the logic of focusing so intently on the rent growth last year, which really helps us this year.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [44]

--------------------------------------------------------------------------------

Where are you guys -- on that topic, I mean how are you guys thinking about turnover for 2020? I mean it was only 47% last year. I mean are you anticipating it being sort of flattish? You're expecting more contraction, some re-expansion there? And how big of a benefit is that to you if it stays low from an earnings standpoint?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [45]

--------------------------------------------------------------------------------

Yes. As far as our expectation, we expect it to be up slightly. We don't see any fundamental changes coming across the board. But it is honestly hard to assume that it will continue to drop, and that plays into our earnings forecast really minimally at this point. Al may add some color.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [46]

--------------------------------------------------------------------------------

Yes. If you look at what we've got dialed in for occupancy, we've given ourselves about 15 basis points decline. There's a little bit of increase in turnover implied in that, but nothing significant, I would say.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [47]

--------------------------------------------------------------------------------

Okay. And then did I hear you guys correctly that you're going to do 24,000 smart home unit installs in 2020?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [48]

--------------------------------------------------------------------------------

That is correct, Rob.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [49]

--------------------------------------------------------------------------------

Okay. And what is the cost for that? How much are you doing per unit?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [50]

--------------------------------------------------------------------------------

The average cost on that is $1,300 on the install, and that gives you locks, thermostat, 2 lights, 2 moisture sensors and a interactive flat panel display, the resident interface as well as their app.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [51]

--------------------------------------------------------------------------------

And just one thing that's important, I think, in doing your model, Rob, there, the smart home program plus the amenity redevelopments that Tom's talked about, we're investing about $60 million in capital this year in that, which is very strong returns, but a lot of that will begin to come more strongly in 2021.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [52]

--------------------------------------------------------------------------------

Okay. So I mean in terms of units, though, that you redevelop in 2020, instead of being 6,000, is that going to be wrapped up? Or is that going to be separate? So in other words, are you going from essentially 6,000 to 7,500 a unit on the redevelopment? Or I assume there might be some sort of cost savings if you've got to open up walls and do whatever, anyway. But I mean is that going to be wrapped up into a higher redevelopment per unit cost for the whatever number of units you do redevelopment into your full-scale redevelopment on?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [53]

--------------------------------------------------------------------------------

Sure. And Rob, those programs are separate. And the reason that they are separate is because the timing is different in them. And if you'll remember on the kitchen and bath redevelopment, we do that on turn. When we install smart homes, we go in and we do the whole property at one time and then move people on to the product. So those programs are independent of one another.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [54]

--------------------------------------------------------------------------------

And that's really why I mentioned them, Rob, this is Al. If you think about it, the program that we've done for many years into our redevelopment part will continue along at basically at the same pace, call it, 7,000 to 8,000 units at $5,000 to $6,000 per unit spending on that. And it's been the same level, and that will have a constant contribution to earnings growth. On top of that are the 2 programs that Tom's mentioning: the amenity redevelopment and of course a smart home. And those together, about an additional $60 million that are great investments that will begin to pay off more in 2020, and that was really the point, as you model it, to help you lay that in right.

--------------------------------------------------------------------------------

Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [55]

--------------------------------------------------------------------------------

Okay. And then just last one for me, Al. Property taxes especially elevated in any specific market?

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [56]

--------------------------------------------------------------------------------

It continues to be the same offenders. I mean what we have this year -- when you're beginning in the year, you don't know a lot. We'll go back to that, Rob. And what we do know is about 1/3 of our portfolio is a revaluation year. We continue to expect pressure in Florida, Texas, maybe North Carolina a little bit this year. So we've dialed that in. And so we -- overall, we do expect our costs to come down a little bit. The 4% to 5% range as 4.5% point is about 50 basis points down. And also we're cautiously optimistic about some of the changes in Texas, the new law changes. Hard to know where that's going to play out over the next few years. You don't yet know how that's going to affect both millage rates or valuations. So we've dialed in what we think we're going to have. And over time, we're hopeful that that line begins to come down a bit, but 4.5% for 2020 is our expectation.

--------------------------------------------------------------------------------

Operator [57]

--------------------------------------------------------------------------------

We'll take our next question from Hardik Goel with Zelman & Associates.

--------------------------------------------------------------------------------

Hardik Goel, Zelman & Associates LLC - VP of Research [58]

--------------------------------------------------------------------------------

I actually wanted to touch up on supply again. The way we look at it, it doesn't seem to be as impactful as maybe you've mentioned. Beyond Dallas and Houston, the 2 markets that you highlighted, can you give us a sense for supply in your, maybe secondary, tertiary markets and how that's shaping up?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [59]

--------------------------------------------------------------------------------

Sure. Probably the market with the -- in the secondary group with the largest impact is probably Charleston, moving from 2.3% as a percent of inventory to 4.8%. Now we're a little encouraged by that because the -- where the supply has been, where it lines up to our A assets is in Mount Pleasant, and the Mount Pleasant moratoriums are finally taking in effect. And so while Charleston has seen higher, that supply has moved to the Upper Peninsula area, which, as you know, is across the Ravenel Bridge from Mount Pleasant. So we're a little bit optimistic there. But again, we see Charlotte at 2.5% to 3.7%. Others in the secondary market are -- Greenville goes from 2.1% of supply to 2.3%, so not a lot of change there.

Probably the other market that has the biggest increase delta between '19 to '20 is in Savannah, Georgia. In 2019, they delivered 3% of the existing supply -- market supply into the market. In 2020, that jumps to 7%. Now you'll recognize Savannah is only 2% of our same-store NOI, so it's not a huge impact, but it's kind of hit or miss. Some are up a little bit. Some are up or more than others. But because of the diversified nature of our capital across these, particularly the secondary markets, we -- it's not particularly significant, but it varies a bit by market.

--------------------------------------------------------------------------------

Hardik Goel, Zelman & Associates LLC - VP of Research [60]

--------------------------------------------------------------------------------

And just one quick follow-up. Could you share the new and renewal for the quarter?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [61]

--------------------------------------------------------------------------------

Yes, sure. The new for the quarter was 90 basis points down; renewal, 7% up, a blended 2.6%, which was 100 basis points better than last year.

--------------------------------------------------------------------------------

Operator [62]

--------------------------------------------------------------------------------

We'll take our next question today from Rich Anderson with SMBC.

--------------------------------------------------------------------------------

Richard Charles Anderson, SMBC Nikko Securities Inc., Research Division - Research Analyst [63]

--------------------------------------------------------------------------------

So last year, your same-store growth sort of cadence kind of climbed over the course of the year from 2.5% on NOI line to 5% to end the year in the fourth quarter. I'm wondering if that means sort of a mirror image in 2020, where you start the year somewhat stronger than you ended on the basis of increasingly tougher comps.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [64]

--------------------------------------------------------------------------------

Well, I mean certainly, I think the prior year comparisons will be a little bit more challenging for us this year. A lot of the momentum that we had last year was a function of our clear focus that we had going into last year about focusing on rent growth at the expense of a little occupancy give-up, and that momentum built over the course of the year. So I think that -- and which is really helping us this year as we carry a lot of that momentum that baked in, if you will, into 2020.

We do think that as a result of some of the supply issues in a number of markets that our lease-over-lease pricing, if you will, the more current pricing that's occurring in 2020 will be off a little bit from the trends that we saw in 2019. But a combination of the carryforward that we have from last year and the plans that we have this year,still offer up a blended lease-over-lease pricing performance for 2020 at 3.4%. So we think that's off a little bit from last year, but 3.4% of blended pricing performance in 2020 in the face of some of the supply pressures that we see on some of these markets, we feel pretty good about that actually and still with strong occupancy that we think we'll capture as well. So I think these markets continue to show resiliency because of the strong demand and our portfolio, in particular, because of the diversified nature of the markets that we're in.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [65]

--------------------------------------------------------------------------------

I'll just add to give the -- how it's slated into our projections that support that, what Eric was saying is, all quarters in this year is going to be a little more stable, just because of where we are. And all quarters are sort of in that 3.5% to 4% revenue range for the year. And so second and third quarter, maybe a little bit higher, but it's -- they're all in that range, much more stable.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [66]

--------------------------------------------------------------------------------

I'll add one point, even though the blended pricing is a little bit lower in '20. As the smart home and the bulk Internet start to take hold, it helps the back half of the year a little more than certainly the first half.

--------------------------------------------------------------------------------

Richard Charles Anderson, SMBC Nikko Securities Inc., Research Division - Research Analyst [67]

--------------------------------------------------------------------------------

Okay. Great. In terms of the external growth sort of projections for this year, obviously more on the acquisitions, how much of that is sort of this prepurchase opportunity? And how much of that is cost of capital that's making deals work a bit more easily in 2020 versus previous years?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [68]

--------------------------------------------------------------------------------

Well, I mean we think that it's more likely than not that the vast majority of the acquisitions that we do will be some prepurchases of things to be built. We may -- particularly as you get towards the back half of the year, we see the opportunity set improve a little bit for buying lease-up deals as we get closer to year-end and developers or owners get a little bit more motivated to get some things done.

But certainly, our cost of capital has improved, and it does, at the margin, generate a little bit more flexibility in this regard. But at the end of the day, I mean we're really driven by can we deploy the capital and create a stabilized yield on that investment that's going to be accretive to our existing earnings profile, and that's what really drives our mindset. We pay attention obviously to our cost of capital, but just the idea that there's all of a sudden a better spread opportunity in and of itself is not what compels us to go out and start putting money to work. We want to be sure we're adding earning assets that are going to be accretive to the existing earnings profile of the company.

--------------------------------------------------------------------------------

Richard Charles Anderson, SMBC Nikko Securities Inc., Research Division - Research Analyst [69]

--------------------------------------------------------------------------------

So declining cost of capital doesn't mean you're willing to take a lower yield? Or does it influence your underwriting?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [70]

--------------------------------------------------------------------------------

No. It really doesn't. We do not want to begin to just take on a bunch of lower-yielding investments, just simply because the cost of capital is adjusted as it has. We're trying to compile a long-term earnings growth profile for the company, and we're trying to protect that long-term earnings growth profile. And just adding a bunch of low-earning investments, just because our cost of capital happens to be where it is really runs counter to that long-term objective.

--------------------------------------------------------------------------------

Richard Charles Anderson, SMBC Nikko Securities Inc., Research Division - Research Analyst [71]

--------------------------------------------------------------------------------

Well, I mean you'd say lower cap rates sometimes lead to higher growth in the second year of ownership, but that's just another observation.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [72]

--------------------------------------------------------------------------------

It can.

--------------------------------------------------------------------------------

Richard Charles Anderson, SMBC Nikko Securities Inc., Research Division - Research Analyst [73]

--------------------------------------------------------------------------------

Anyway, last question for me. I appreciate the positive wrap you're putting around the supply, which -- it makes sense to me in terms of premium relative to where your rents are. But clearly, you'd rather not be the case, right? I mean this is making the best of a not so great situation from a supply perspective. With concessions that can be offered, newer product and a strong job market, people might have a willingness to entertain optionality. So in your mind, while you see some opportunity out of the supply picture, what is the risk, though, that this could actually have -- be more damaging when you consider the health of the job markets in your neck of the woods?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [74]

--------------------------------------------------------------------------------

Well, certainly, I think the supply picture and the supply pressure as -- and we've talked about, it does create some short-term pressure. And as evidenced in our guidance, I mean we assume that our lease-over-lease pricing in 2020 on a blended basis runs about 100 basis points below 2019. So there's no question that you get into these heavier supply scenarios, particularly where there's leasing concessions coming into the market, that there is some short-term pressure generated. And as I mentioned, that can vary quite a bit by market. And in a bigger market, like in Dallas, you're going to see more pressure than you are in a smaller market like in Greenville, South Carolina. And that's why we tend to be very focused in our efforts to deploy capital across the region in both large and secondary markets in an effort to -- something you'll remember, Rich, in an effort to get our full cycle performance profile that we're after. So I certainly acknowledge and we do that there is going to be some near-term pressure from some of the supply. We've got that dialed in, we think, appropriately into our guidance.

But I will tell you the fact that a lot of this new high-priced product is coming into our locations, we think that, long term, that's a good thing. It says good things about our neighborhood. It says good things about the value of the real estate in those neighborhoods, and it creates the opportunities that we alluded to, to continue over the next few years to get some, not only good rent growth because of the improvement we're making in the assets, but also great returns on our capital. This is the most accretive use of money that we have right now is these redevelopment initiatives. So we'll deal with a little short-term pressure, but the long-term value play is pretty darn attractive.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

We'll move next to Drew Babin with Baird.

--------------------------------------------------------------------------------

Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [76]

--------------------------------------------------------------------------------

A quick follow-on question to Rob's question earlier on the Texas tax revenue caps. It sounds to me like that is not baked into your same-store expense guidance range at all. It seems like maybe a longer-term benefit. Is that true? Or is there any kind of directional benefit that's beginning to influence guidance there?

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [77]

--------------------------------------------------------------------------------

No. I mean I think we've dialed in what we think is going to be our best estimate at this point, Drew. I mean the cap is not at a taxpayer level. It is at the market level. And so I think there are still some things to be worked at exactly how that's going to play to each individual asset, the valuation, even the millage rates that we get in the year for all of the markets.

So we've dialed in what we think it's going to be. I think -- what we would say is, over time, hopefully, those walls are helpful in restraining the fast growth of taxes in Texas. That's hard to say, taxes in Texas. But I think in the short term, it's yet to be seen exactly what it's going to play out. And so to Eric's point, we put our best estimate on that.

--------------------------------------------------------------------------------

Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [78]

--------------------------------------------------------------------------------

Okay. And one follow-up on the same-store revenue buildup, blended leasing spreads from '19, blended leasing spread in guidance, marrying that with the occupancy guidance, Double Play impact, it would seem like the revenue buildup goes towards the high end of guidance, which I would surmise there's maybe some other ancillary-type items that may be a little flatter and dragging on that, which that was a trend kind of throughout 2019 as well. Can you talk about what kind of the growth in other -- aside from the Double Play, what was that other income growth in '19? What will it be in '20? And is there anything going on in that to kind of drive new other income into 2021, anything else you're kind of doing?

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [79]

--------------------------------------------------------------------------------

I think the easiest way to do that -- quickest way maybe, Drew, is to just say talk about what our growth would've been, our guidance would've been without the -- assuming the bulk Internet program this year. And we would've had a midpoint range somewhere around 3.2%, growth revenues; 3.6% for operating expenses; and 3% for NOI. And then so you have the bulk Internet program on top of that, and so that can kind of help you.

And I think the 3.2% on revenue is the combination of the rents that we put on the table this year. The 3.4% blended lease that we expect to get, combined with what we did last year, that's helpful. Giving up a little bit on occupancy, 15 basis points or so. And then the other fee income items, other than the bulk Internet, the reimbursement items and trash, pest fee, other items, they're expected to be flat with last year, essentially, which when your growth rate lugs a little bit gets you down to that 3.2% expectation for the year. And then on expenses, we talked about the 3.6%. And really everything, but real estate taxes, would have been about 3%. So I hope that's helpful and gives you what you're looking for.

--------------------------------------------------------------------------------

Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [80]

--------------------------------------------------------------------------------

Okay. And it sounds like the Double Play program is being implemented kind of fairly rapidly, and so the benefits will be kept mostly in 2020. Is there anything else you're doing on the other income side that might help '21 kind of coming off of that '20 comp? Any other additional parking fees, things like that? Anything else kind of in the hopper that's being worked on? Or the technology element, might that move the needle as well?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [81]

--------------------------------------------------------------------------------

Well, I would tell you that a lot of the Double Play, I mean we're going to roll it out over the course -- first half this year, but I really the full year benefit will be more next year.

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [82]

--------------------------------------------------------------------------------

It's about half this year and half next year because while we deploy it and will be deployed in May, residents have to sign up for it when they do on leasing renewal.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [83]

--------------------------------------------------------------------------------

I think that that's going to build up over this year, and we'll see more benefit in 2021. The other thing, though, that Al alluded to, and we've talked about here is this repositioning effort that we're doing with Double Play and with the more enhanced amenity upgrades. What's happening is we're investing a lot of that capital this year, this calendar year 2020. And the real rent growth from that will actually emerge in 2021. So that's really what's at play here. A lot of that benefit will play out next year, not this year.

--------------------------------------------------------------------------------

Operator [84]

--------------------------------------------------------------------------------

We'll take our next question from Rick Skidmore with Goldman Sachs.

--------------------------------------------------------------------------------

Richard Wynn Skidmore, Goldman Sachs Group Inc., Research Division - Vice-President [85]

--------------------------------------------------------------------------------

Eric, you mentioned in your prepared comments some new initiatives in 2020. Perhaps I missed them, but can you just perhaps speak to what those new initiatives are that you're focused on in 2020?

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [86]

--------------------------------------------------------------------------------

Well, Tom can jump in here. I mean now it's the bulk Double Play initiative, the high-speed Internet program that we're rolling out was what I was referencing. We've got the more -- the smart home technology implementation that we're going to be rolling out this year. And then as I was just mentioning, we've got some repositioning opportunities with some of the legacy Post assets that we'll be rolling out this year and are working on this year. And as I was just mentioning -- and then as Tom alluded to, there's some other new technologies, the AI chat and some other things that were self-touring and other things that we'll be testing out later this year. We don't really expect any impact this year, but we're going to continue to evaluate those programs for possible implementation in 2021.

--------------------------------------------------------------------------------

Operator [87]

--------------------------------------------------------------------------------

And we'll go next to John Pawlowski with Green Street Advisors.

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [88]

--------------------------------------------------------------------------------

Maybe just a follow-up to your response to Drew's question. So it sounds like if the rollout for the Double Play Internet goes as expected, the NOI contribution or the NOI lift in 2021 is greater than the 50 bps in 2020. Is that accurate?

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [89]

--------------------------------------------------------------------------------

More comparable, I would say. I mean we're rolling out -- there's 2-phase program -- 2 major providers that we're dealing. And in 2020, we'll have full bear of one of those providers and be building the second one. So I would say probably something -- it wouldn't increase. It might be something comparable.

--------------------------------------------------------------------------------

H. Eric Bolton, Mid-America Apartment Communities, Inc. - Chairman, President & CEO [90]

--------------------------------------------------------------------------------

Yes. I think equal, maybe slightly a little less since we've got the biggest provider in line now, and we're working on the rest of the portfolio.

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [91]

--------------------------------------------------------------------------------

Okay. And then Tom, listening to your comments on which markets you think will lead the pack and which markets may lag. Is it a fair read that your -- as an aggregate, the smaller or secondary markets will be below average in terms of same-store revenue growth?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [92]

--------------------------------------------------------------------------------

I don't have them split exactly that way, but we've got some encouraging places on both sides of that equation. So I think we are the -- probably the runaway leaders are Phoenix and Raleigh. But I'll tell you, Birmingham, Huntsville and Memphis have been pretty solid players for us, and we would expect that to continue.

--------------------------------------------------------------------------------

John Joseph Pawlowski, Green Street Advisors, LLC, Research Division - Analyst [93]

--------------------------------------------------------------------------------

Okay. And then final one for me, if I could sneak it in there. Do you see revenue growth had been accelerating nicely for you year-over-year, last few quarters and then slowed meaningfully this quarter. So is there anything idiosyncratic this quarter that hit the D.C. market? Or are the fundamental slowing in your eyes in the market?

--------------------------------------------------------------------------------

Thomas L. Grimes, Mid-America Apartment Communities, Inc. - Executive VP & COO [94]

--------------------------------------------------------------------------------

We don't believe the fundamentals are slowing. It's really a comparison between the prior year, the 2 quarters. So last -- in the third quarter, we had a 30 basis point occupancy comparison tailwind that juiced revenues a little bit. In this quarter and the fourth quarter of '18, we were at 96.6%, and we're 96% this go around. So we had a 60 basis point headwind.

--------------------------------------------------------------------------------

Operator [95]

--------------------------------------------------------------------------------

And we'll take our final question today from John Guinee with Stifel.

--------------------------------------------------------------------------------

Aaron Brett Wolf, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [96]

--------------------------------------------------------------------------------

This is Aaron Wolf on for John. Two quick questions. Can you provide any detail on the price per unit on the Greenville asset that you recently acquired and also on the Little Rock, Arkansas portfolio?

--------------------------------------------------------------------------------

A. Bradley Hill, Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing [97]

--------------------------------------------------------------------------------

Yes. So this is Brad here. Let me give the details of that up in front of me. So the price per unit on the Greenville deal -- excuse me, make sure I get you the right number there. So that was 268 (sic) [271] unit for the Greenville deal, which, as we said a moment ago, was a 5.1% cap rate on that asset. And I'm sorry, your second question?

--------------------------------------------------------------------------------

Aaron Brett Wolf, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [98]

--------------------------------------------------------------------------------

Little Rock.

--------------------------------------------------------------------------------

A. Bradley Hill, Mid-America Apartment Communities, Inc. - Executive VP & Director of Multifamily Investing [99]

--------------------------------------------------------------------------------

Yes. So our Little Rock assets, we sold -- the total price there was just under $150 million.

(technical difficulty)

and it was $109,000 a unit.

--------------------------------------------------------------------------------

Aaron Brett Wolf, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [100]

--------------------------------------------------------------------------------

Okay. Great. And one -- that's helpful. And one last for me. You may have disclosed this already. I apologize if you did, but the average share price on the ATM activity in the quarter.

--------------------------------------------------------------------------------

Albert M. Campbell, Mid-America Apartment Communities, Inc. - Executive VP & CFO [101]

--------------------------------------------------------------------------------

You can get from the press release, the proceeds and the shares, that's around $136 a share, I believe, is what that will come to.

--------------------------------------------------------------------------------

Operator [102]

--------------------------------------------------------------------------------

And this does conclude our Q&A session for today as well as our call. We would like to thank everyone for your participation today. You may disconnect at any time.