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Edited Transcript of UDR earnings conference call or presentation 25-Apr-17 5:00pm GMT

Thomson Reuters StreetEvents

Q1 2017 UDR Inc Earnings Call

Highland Ranch Apr 29, 2017 (Thomson StreetEvents) -- Edited Transcript of UDR Inc earnings conference call or presentation Tuesday, April 25, 2017 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Christopher G. Van Ens

UDR, Inc. - VP

* Harry G. Alcock

UDR, Inc. - CIO and SVP

* Jerry A. Davis

UDR, Inc. - COO and SVP

* Joseph D. Fisher

UDR, Inc. - CFO and SVP

* Thomas W. Toomey

UDR, Inc. - CEO, President and Director

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Conference Call Participants

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* Alexander David Goldfarb

Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research and Senior REIT Analyst

* Andrew T. Babin

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

* Austin Todd Wurschmidt

KeyBanc Capital Markets Inc., Research Division - VP

* John Kim

BMO Capital Markets Equity Research - Senior Real Estate Analyst

* John Pawlowski

* Juan Carlos Sanabria

BofA Merrill Lynch, Research Division - VP

* Neil Malkin

RBC Capital Markets, LLC, Research Division - Associate

* Nicholas Gregory Joseph

Citigroup Inc, Research Division - VP and Senior Analyst

* Richard Allen Hightower

Evercore ISI, Research Division - MD and Fundamental Research Analyst

* Richard Hill

Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS

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Presentation

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Operator [1]

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Greetings, and welcome to the UDR First Quarter 2017 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Van Ens, Vice President. Thank you, Mr. Van Ens, you may begin.

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Christopher G. Van Ens, UDR, Inc. - VP [2]

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Welcome to UDR's First Quarter Financial Results Conference Call. Our first quarter press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website, ir.udr.com.

In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.

I would like to note that statements made during this call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. (Operator Instructions)

I'll now turn the call over to our President and CEO, Tom Toomey.

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [3]

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Thank you, Chris, and good afternoon, everyone, and welcome to UDR's First Quarter 2017 Conference Call. On the call with me today are Jerry Davis, Chief Operating Officer; and Joe Fisher, Chief Financial Officer, who will discuss our results; as well as senior officers Warren Troupe, Harry Alcock and Shawn Johnston, who will be available during the Q&A portion of the call.

My comments today will be brief. UDR's business performed well in the first quarter with our diversified portfolio and best-in-class operating platform continuing to deliver results and enhance our status as a full cycle investment. The macro and demographic tailwinds underpinning our strategic outlook presented in January remain in place and in line with expectations.

As I look at the first quarter results, there are 3 key takeaways investors should be aware of: our continued operational success; the status of our developer capital program; and our path forward.

First, operations. In the first quarter, we produced a solid same-store revenue and NOI growth in the 4.5% to 5% range, a level we expect again to be near the top of the peer group. A personal tip of the hat to our team in the field for a great execution.

Blended lease rate growth in markets that comprised 55% of our same-store NOI improved in the first quarter as compared to the fourth quarter of 2016, supportive of our view that operations are stabilizing. And for our community and lease-up, we continue to see strong leasing velocities in rental rates.

Next, our developer capital program, which includes the participating loan investment in Steele Creek and the West Coast Development Joint Venture. This program is a key differentiator for UDR and demonstrates our ability to create value for shareholders and to pivot our investment strategy as markets present opportunities. Specific to our option assets, as you recall, a couple of years ago, we identified these types of investments as a good use of capital, given their strong risk adjusted returns in conjunction with the value creation potential embedded in their fixed-price options. The options provide us with the opportunity to potentially buy high-quality new development at a discount to market or sell to third party and realize upside versus cost or employ some combination of buy-sell, in effect, self-funding.

As option windows open on the current pipeline of communities over the coming quarters and years, we will be sure to keep you informed of our plans. And we remain confident that Harry and team will be able to reload our developer capital program in the future given the financial constraints developers are facing today.

Last, looking at the path ahead. It is still early in the year, with prime leasing season just beginning, but we are running slightly ahead of expectations as of quarter end, and we like where our current momentum is trending. Our positive outlook for full year 2017 is unchanged, which should put us in an advantageous position going into 2018. Despite the uncertainties around governmental policies, we remain confident that we have the right portfolio, platform and team in place to continue to effectively execute our strategic outlook, which will generate strong earnings, NAV and dividend per share growth over the long term.

With that, I will turn it over to Jerry to address our operational success.

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Jerry A. Davis, UDR, Inc. - COO and SVP [4]

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Thanks, Tom, and good afternoon, everyone. We're pleased to announce another quarter of strong operating results. Year-over-year first quarter same-store revenue and NOI growth were 4.6% and 4.9%, respectively. After including our JV communities that satisfy our same-store definitions, revenue and NOI growth would have been 4.3% and 4.5%, respectively, both relatively similar to our wholly owned results. As our MetLife and KFH joint venture properties represent only about 10% of our total NOI, their influence on all-in same-store growth, whether positive or negative, is relatively minimal.

Our operating strategy during the quarter continued to focus on building and maintaining portfolio level occupancy. As a result, same-store occupancy increased by 50 basis points year-over-year to 96.8%, while annualized turnover declined by 100 basis points. Concessions for the first quarter as well as gift cards were flat compared to first quarter of 2016.

New lease rate growth of 0.3% incrementally improved each month during the quarter and stabilized versus the fourth quarter of 2016. We expect to see typical seasonal improvement during the spring and summer leasing season.

On the renewal front, rate growth remained strong at 4.9% as we continue to see minimal pressure from home purchase and affordability-related move outs, which totaled 13% and 7%, respectively, during the first quarter. Net bad debt remains low and at levels consistent with previous quarters.

Next, our other income, which represents just over 9% of revenue, grew 11% or $2 million year-over-year during the first quarter, significantly higher than same-store revenue growth. Why does this matter? Because the majority of the incremental income came directly from ongoing multi-year revenue-generating operating initiatives that were implemented over the past year or 2, such as suburban resident parking and package lockers installations. We're often asked how we consistently generate strong same-store results and win our markets. Our initiatives are a major reason why and will continue to be as we innovate and implement further improvements in the years ahead.

On to expenses. Expense growth often plays second fiddle to revenue growth, but both contribute meaningfully to NOI growth and drive our best-in-class operating platform. Today, I would like to highlight our success in containing controllable expenses.

Controllable expenses include personnel costs, utilities, repairs and maintenance and administrative and marketing costs. Over the 5-year period from 2011 to 2016, our annual same-store expense growth averaged 2.9% versus only 1.0% for controllable expenses. Much of this 190 basis point annual difference is attributable to a multitude of operating efficiency initiatives we have implemented. This includes programs that reduced repairs and maintenance cost through technological solutions and moving the majority of our leasing online. I would like to thank all of our operating associates for continuing to focus on these line items as they create meaningful value over time.

On to a brief market update. Making up 33% of our same-store NOI in the quarter, strong blended lease rate growth was evident in Dallas, Seattle, Orange County, Los Angeles, the Monterey Peninsula and Orlando, while Baltimore, Richmond, San Francisco, Austin and Portland, which comprised about 19% of our same-store NOI, were challenged. While we have yet to enter the prime leasing season and the first quarter represents a relatively small sample of leases, we are encouraged to see stabilization in New York and San Francisco quarterly new lease growth rates, which combined, represent 24% of our same-store NOI. Occupancy averaged 97.1% and 98.0% in San Francisco and New York in the first quarter, up 110 and 70 basis points year-over-year. Should the prime leasing season come out of the gate strong in these markets, we are in an advantageous position to drive rate growth.

Lease rate growth in Washington, D.C., which accounts for nearly 20% of our same-store NOI, was a little wider than expected in the first quarter but reasonable given our occupancy pick up of 110 basis points year-over-year to 97.0%. We expect leasing to pick up as we head into May and June.

Last, Seattle, which accounts for 6% of our same-store NOI, has come on strong as of late. We realized incremental improvement in rate growth in each month during the first quarter, and this has continued into April. We continue to believe that Seattle will produce above-average results in 2017 despite elevated deliveries in the city proper.

Finally, our development lease ups continue to perform well, achieving rates in aggregate above original expectations and with leasing velocities generally ahead of original forecast. The average value creation spread expected on our pipeline is at the top end of our targeted 150 to 200 basis point range. Highlighting Pacific City, a 516-home, $342 million development in Huntington Beach briefly, as of April 20, the community was 17% leased, 2% occupied at an average rate per square foot of 12% above underwriting expectations despite units and amenities not even being opened in the first quarter. We are very excited about this asset and its prospects in the years ahead. Other community-specific quarter-end lease-up statistics are available on Attachment 9 of our supplement.

Summing it up, first quarter was another good quarter for the company. We remain focused on maximizing revenue growth and constraining expense growth. Most importantly, we remain highly confident in our ability to execute in 2017.

With that, I'll turn it over to Joe.

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [5]

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Thanks, Jerry. The topics I will cover today include our first quarter results, a transactions update, a balance sheet and capital markets update and our second quarter and full year 2017 guidance.

Our first quarter earnings results came in at the midpoint of our previously provided guidance. FFO and FFO as adjusted were $0.45 and AFFO was $0.43, all of which were up approximately 5% year-over-year, driven by solid same-store growth.

Next, transactions. As previously reported, in January, we closed on our acquisition of CityLine, a 244-home West Coast Development Joint Venture community located in suburban Seattle. As a refresher, we purchased this community at a roughly 10% to 15% discount to market value, which equated to a 5.3% cash flow cap rate at the time of acquisition. In addition, during the first quarter, we invested $15.5 million into CityLine II, a development project adjacent to CityLine, with our partners in the West Coast Development Joint Venture. CityLine II will contain 155 homes, has a going-in valuation of $58.3 million, a fixed-price purchase option and will earn a 6.5% preferred return on our investment.

As it relates to future options on West Coast Development Joint Venture communities or Steele Creek, current market pricing expectations tilt these towards being a source of capital. Some of the proceeds of which may be reinvested into similar types of value-accretive structures within our developer capital program. For an overview of other transactions consummated during the quarter, please see Attachment 13 of our 1Q supplement.

Next, balance sheet and capital markets. Late in the quarter, we prepaid $98 million of L plus 190 debt, the majority of which was scheduled to mature in 2023 as the spread on this debt was well in excess of current market levels. The prepayment, inclusive of a 1% penalty, was temporarily funded with a commercial paper facility priced at L plus 33 basis points as we continue to evaluate permanent funding options at a lower spread.

With regard to our $500 million commercial paper facility, $220 million of debt was outstanding as of the end of the first quarter at a weighted average rate of 1.24%. We are pleased with the pricing we have garnered thus far on this facility.

At quarter end, our liquidity, as measured by cash and credit facility capacity net of the commercial paper balance, was $920 million. Our financial leverage was 32.9% on an undepreciated book value, 24.7% on enterprise value and 29.5% inclusive of joint ventures. Our net debt-to-EBITDA was 5.4x and inclusive of joint ventures was 6.5x. Timing will drive some variability in our quarterly credit metrics, but in total, they are tracking in line with our strategic outlook.

I would now like to direct your attention to Attachment 15 of our supplement, where we have reaffirmed full year and provided second quarter guidance. Our full year guidance range has remained $1.83 to $1.87 for FFO and FFO as adjusted and $1.68 to $1.72 for AFFO.

Our full year same-store guidance is unchanged at revenue growth of 3% to 4%, expense growth of 2.5% to 3.5% and NOI growth of 3.25% to 4.25%, with average 2017 forecasted occupancy at 96.7%.

As Tom mentioned earlier, we are running slightly ahead of plan thus far, but it's still too early in the year. While we have yet to see how the primary leasing season will unfold, our current read is that it will be difficult to reach the bottom end of our same-store guidance ranges.

For the second quarter, our guidance ranges are $0.45 to $0.47 for FFO and FFO as adjusted and $0.41 to $0.43 for AFFO.

Finally, we declared a quarterly common dividend of $0.31 in the first quarter or $1.24 when annualized, representing a yield of approximately 3.4% as of quarter end.

With that, I will open it up for Q&A. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Nick Joseph with Citigroup.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [2]

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Just wondering from a market perspective, if there are any markets that are either outperforming or underperforming materially, where you thought they would be at this point in the year? And then if there's any markets where you're seeing concessions increase?

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Jerry A. Davis, UDR, Inc. - COO and SVP [3]

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Nick, this is Jerry. Yes, there’s a couple of markets that are probably doing a bit better than we would've expected. I'd tell you, San Francisco probably is the first one that comes to mind. We have revenue growth that was comparable to what we reported in the fourth quarter. And as you look at, really, the trending, if you will, of new lease rate growth, that was a negative of, I think, 5 in the fourth quarter. It closed to negative 1 in the first quarter. And right now, through the first 24 days of April, it's positive 2.2%. When I was in San Francisco last week, we're feeling better across all of our submarkets there. We don't have any direct competition currently. So right now, San Francisco feels good. And in addition to those rents that picked up, we had also seen in San Francisco about an 80 basis point improvement in the occupancy year-over-year. So San Francisco is probably one of the ones. Dallas has performed well through the first quarter, even though there is quite a bit of new supply hitting Dallas. Most of our portfolio is up in Plano. Plano does not have a ton of new supply directly hitting it right now, but what it does have is about probably 8,000 to 15,000 jobs coming up to that submarket, whether it's Toyota, Liberty Mutual, few other companies over the next 3 to 6 months. We feel good about that market. And then New York, obviously, when you look at it, we put up a 4% revenue growth. We're very pleased with that. I think our team did exceptional work back in the fourth quarter to set us up for this kind of performance. We drove occupancy significantly up to about 98% as we entered the year. And because we had such high occupancy, we didn't have to be as aggressive on competing for residents and lowering rate, and that allowed new lease rate growth in New York to be just a negative 0.4 in the first quarter. I would tell you, that is one of the only properties that as we go from first quarter into April, that shows a worsening of new lease rate growth. It's at negative 1.4%. And the reason I'm telling you this is I want you to see through the 4% that we reported in first quarter. We don't expect that to trend for the remainder of the year. A large portion of that 4%, again, was made up of a pickup in occupancy year-over-year. That contributed about 70 basis points of the revenue growth. And we also had a good comp for bad debt that helped by about 40 basis points. So New York, we still feel is going to come in probably below the bottom end of our full year guidance. When we give our 2-year outlook, we state which markets are going to come in where. So we still don't see New York coming in above a 3% right now, but we're very happy with the work our team did in the first quarter there.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [4]

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Are there any markets right now that you're seeing concessions increase?

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Jerry A. Davis, UDR, Inc. - COO and SVP [5]

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I don't think they're going up much. New York has continued to be probably in most of the lease-up properties, they're giving away 2 months. In our particular properties, I mean, stabilized properties, we saw concessions first quarter versus first quarter of last year remain fairly flat, as did gift cards. But again, on the lease up side, you're really seeing between 4 and 8 weeks in a variety of markets. New York is probably the most concessionary market along with Austin that we're in, and those are both probably pushing close to the 2 months free. Orange County, where there is some new supply hitting in Huntington Beach as well as Irvine, we're only seeing a month in those markets. Downtown L.A. is somewhere between 1 and 2 months. San Francisco seems to be fairly stable with the lease-ups at about 6 weeks. And then when you get into Seattle, it's still about a month free there. And then I guess the last one I would close with, or last 2, Boston is right around a month. And in D.C., it's probably right around a month. Most of the new lease ups there are either NoMa or the ballpark area.

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Nicholas Gregory Joseph, Citigroup Inc, Research Division - VP and Senior Analyst [6]

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I appreciate that color. And then just in terms of the West Coast JV, you expanded that relationship, is there an opportunity to further expand that relationship? And then more broadly, are there -- are you seeing additional opportunities similar to Steele Creek or the West Coast JV for these kinds of more creative structures?

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Harry G. Alcock, UDR, Inc. - CIO and SVP [7]

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Nick, it's Harry. In terms of back billing, we did close another Phase 2 with CityLine in Seattle with Wolff. As you can imagine, we continue to have dialogue with Wolff on other similar deals which may or may not happen. In general, in the market, with the reduction or change in sort of lending guidelines, reduction in proceeds, increase in pricing, this type of opportunity is going to continue to be available for us to fill a small piece in the capital stack for developers. So we're continuing to have dialogue, and we'll let you know how those play out as the year goes on.

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Operator [8]

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Our next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [9]

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I noticed you guys included blended lease rate detail from last year in the supp, and it seems like that spread has narrowed the last couple of quarters after peaking out in the third quarter. And so I'm just wondering if you would expect the spread between blended lease rates versus a year ago continue to narrow over the next several quarters.

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Jerry A. Davis, UDR, Inc. - COO and SVP [10]

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Yes. This is Jerry. We absolutely do expect that to happen. In fact, when you look at where April is today, it's narrowed from the blend down to about 1.8%. So it is a negative 1.8%. So it's continued to get better. I think in the first quarter, it was at negative 2.7% on a blended basis. As we look out, our expectation was you probably get to the point where it actually flips to positive sometime later this year. Not sure on the timing at this point. It's really dependent on the continuation of job growth and new lease ups having rational pricing. But we do see a point in time later this year where we would expect the blend and especially on the new site to be better than it was at the same time last year.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [11]

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So it's fair to say, I think last quarter, you said you expected blended lease rate growth of 3% to 4%. You guys put up 2.5% in the first quarter, so that as well should accelerate through the year? Or I guess the spread between new and renewal lease rates should converge?

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Jerry A. Davis, UDR, Inc. - COO and SVP [12]

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Absolutely. When you look at April, for example, and this is through the first 24 days, our new lease rate growth was up to 2.2% compared to the 0.3% that we had for the first quarter, and that's normal seasonality that's in play. And we would expect that 2.2% to continue to grow through at least the next 4 to 6 months. Then once you get to 4Q, you'll have the seasonality kick in and take it back down a bit. Our renewal growth so far in April for the total same-store pool is at 5.3% compared to the 4.9% in the first quarter. You won't see a continuation most likely of renewal growth continuing to rise. Our expectation would be for the next 3 to 6 months, that it's probably going to be in that 5% range maybe, maybe high 4s, but you should see the new continue to come up. And if typical seasonality happens, and I'm not saying it will because it definitely didn't last year, you typically get to a point, call it, July and August where new comes fairly close to renewal.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [13]

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Could you just round out and go ahead and give us occupancy, I guess, for April and then what you're asking for May on renewals?

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Jerry A. Davis, UDR, Inc. - COO and SVP [14]

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Sure. Occupancy today is just under 97%, call it 96%, 95%, as a company. And what we're sending out for May, again, is right around that -- well, what we're achieving is right around that 5.2, 5.3 range on renewals.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [15]

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Great. And then last one from me, you mentioned starting to see stabilization in San Francisco, and I was wondering if you could just marry the recent slowdown we've seen in job growth across several of the West Coast markets with the demand or traffic that you're seeing across the market in your property, specifically?

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Jerry A. Davis, UDR, Inc. - COO and SVP [16]

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Yes. Traffic has continued to be good in all of the West Coast markets. SoCal right now is probably a bit slower and just a hair weaker than we would have hoped for, especially down in Orange County. We're feeling it. I think that's more on the job side than the supply side. L.A., where our same-store pool is out in Marina del Rey is doing fine. There's a lot of job growth out there, unlimited new supply. Downtown is very difficult though. San Francisco, I'd tell you what I heard last week is you're starting to see a few -- a little more activity from the startups with some job growth, which is helping to stabilize Silicon Valley. Silicon Valley, also this year, is expected to have less new supply, and most of it's going to hit in the first half. But today, it doesn't feel that bad. And then the one, I didn't mention it earlier when Nick asked, but the one that's really come on, and I know it's of concern for a lot of people when we put out our update a few months ago, is Seattle. Seattle is very strong today for us. We had a new lease rate growth of 0.9% in the first quarter. So far in April, it's over 6%. So you've seen that market really accelerated throughout the first quarter, especially starting in March and then it really jumped up this past month. So I think Seattle is one that while you have to keep your eye on new supply, especially downtown, most of our portfolio is out in Bellevue, we actually have no same-store properties in downtown Seattle, but we're pretty encouraged over there. And you're seeing jobs, relocations going out to Bellevue, whether it's Salesforce, Amazon, Apple's been looking out there, so we're pretty pumped on the East side.

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Operator [17]

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Our next question comes from the line of Drew Babin from Robert W. Baird.

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Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [18]

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Question for Jerry, you mentioned that in San Francisco and New York, you're not seeing much direct competition at your properties so far this year. Do you anticipate that there will be any, at any point, any properties kind of delivering as the year goes on that might impact things?

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Jerry A. Davis, UDR, Inc. - COO and SVP [19]

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Yes. We actually -- we've really started looking at how much traffic is going to come at us within a mile of our properties. And when you look at it, you're going to have about 3,500 units that are within a mile of us in New York City. So a lot of that -- about half of it is going to hit us in the first half, half in the second half, but it's typically at a higher rent and higher price point. For example, in New York, you've got the Copper building right next to View 34, but the rents they're asking are quite a bit higher than us and the size of the unit is quite a bit smaller. So while there is supply, and we think it will affect us, that's probably the most direct. They just started lease-up of that property. Gosh, probably about 3 or 4 weeks ago, so we're going to have to see how that one plays out. It probably won't help us. I think long term, it will because it's going to bring (inaudible). And then in San Francisco, direct supply coming at us within a mile of our location is at about 1,500 units this year. The good part about San Jose is most of it is going to deliver in the first half of the year. San Francisco, about half -- about 40% comes in the first half of the year. So we'll feel a little bit, and again, just remember, on both of those markets, about 20% of our unit's repriced. And while we're encouraged with how we've done, they're still -- they can move quickly. But right now, from what we're seeing, I'd probably be more optimistic on San Francisco and a little more cautious on New York.

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Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [20]

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That's helpful. And then on the MetLife JV, I was just curious, the year-over-year NOI growth of 60 bps in 1Q, is that sort of a rate that we should model kind of consistently for the rest of the year? Do you expect that to pick up some?

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Jerry A. Davis, UDR, Inc. - COO and SVP [21]

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I think it's going to pick up some. I think if I remember correctly, on the expense side, we have some real estate tax issues that hurt us on the expense side. But when you look at the revenue, which was up 1.7, it's quite a bit below our same-store 4.6. And that one, it's probably going to improve somewhat, but you do have very high-end assets in a couple of submarkets that are significantly impacted by new supply, whether it's the Upper West Side of New York, downtown Austin, places like that, that are helping to suppress that. So I think the revenue growth will improve, and I think the expense growth will improve, but it's still going to have NOI growth that's less than our same-store.

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Andrew T. Babin, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [22]

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Okay. And then finally, with the debt paydown in 1Q, I noticed kind of a proportionate pickup in your expectations for capital markets activity, including dispositions. If you were to sell more properties, kind of what is that next tranche properties that you may look to sell, whether it be by market or type of asset, any way in which to classify it?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [23]

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Yes, Drew, just to clarify in terms of that increase in sources, so you're right, we did pay down $98 million of secured debt. The increase in sources is not necessarily specifically related to dispositions. It's additional debt issuance, dispositions and/or equity. So just to clarify that, then Harry will take the rest of that in terms of where we'll be looking to sell from.

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Harry G. Alcock, UDR, Inc. - CIO and SVP [24]

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Yes. This is Harry, Drew. As Joe mentioned in his prepared remarks, we've got 3 of these assets that are coming up for a capital event. One is Steele Creek in Denver. One is [ ADAR ] in Seattle, which is a Wolff portfolio deal. And one is a property [ seller ] in Anaheim, which is another Wolff deal. It's conceivable that, that will be a net source, as Joe mentioned, so that could potentially increase our sales for the year. In terms of other sales, we haven't changed our expectations for the amount of sales for the balance of the year nor have we sort of changed nor finalized really our -- the properties we intend to sell for the second half of the year.

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Operator [25]

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Our next question comes from the line of Rich Hightower from Evercore.

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Richard Allen Hightower, Evercore ISI, Research Division - MD and Fundamental Research Analyst [26]

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So I wanted to follow up on the -- one of the earlier questions that was pertaining to the West Coast, but this one really applies to the whole portfolio. Just wondering if you've materially, in either direction, changed your assumptions on job growth or perhaps the cadence of supply growth and when deliveries happen across the different markets, maybe that don't evidently show up in the fact that guidance wasn't change.

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Jerry A. Davis, UDR, Inc. - COO and SVP [27]

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Yes. I don't think it's material. I think one thing we've seen from our third-party data providers is a little bit of slippage from 1Q to 2Q on some of the deliveries, so it's a little more back half loaded than front half loaded. When you look at the job growth, we built our forecast assuming between 150,000 and 200,000 jobs per month. Today, we're at about 180,000, so that seems to be fairly in line. But no, I think other than a little bit of slippage from 1Q to 2Q, that's about it.

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Richard Allen Hightower, Evercore ISI, Research Division - MD and Fundamental Research Analyst [28]

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Right. That's helpful. And then maybe just a little bit bigger picture question here, I mean, as you look at multifamily NOI trends across different cycles, I think that the trough in many cases were lower than where it appears that the industry is going today. I mean, would you say that the industry generally, or at least with the markets that you guys are invested in, I mean, would you say that the glide path is a lot smoother in terms of what the downturn could look like, just given that supply dynamic, that demand dynamic that you're currently forecasting? How do you think about it relative to history?

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [29]

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Rich, this is Toomey. From a lens perspective of time, I'd say, I've been at it since the '80s. And the #1 thing that usually kills off our revenue growth is supply. And even in a recession, the Bs generally hold up in the face of economic downturn. So on the supply picture, what I've seen over the last decade is more transparency on information about individual markets, individual price points, lenders using that data and turning their spigot on and off and shutting off supply pretty darn quickly as well as the Fannie and Freddie shops looking at those same numbers and adjusting their spreads with respect to permanent financing. So I think what's happened is, is we've finally moved to enough transparency that the threat of oversupply seems to be quickly shut down before it gains so much momentum that we go negative. And just recent example in D.C., '09, '10, it was a market that was -- everybody was piling in to build on. It was generating jobs. It got oversupplied. It never went negative. And that's because they were able to cut it off quick enough on new supply to shut that down. So I would always think about this transparency has probably provided us and taken out a lot of those high volatile years that we've had in the past.

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Operator [30]

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Our next question comes from the line of Juan Sanabria from Bank of America.

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Juan Carlos Sanabria, BofA Merrill Lynch, Research Division - VP [31]

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Just a quick question with regards to supply, to Rich's question, you mentioned some slippage from the first to the second quarter. Could you give us any color as to what markets those are? And does that change anything in terms of the trajectory of the better-than-expected results to date?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [32]

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Juan, this is Joe. So just to clarify, first quarter, second quarter is actually first half to second half. So when we're originally looking at supply coming through this year, we had deliveries penciling in at about, call it, 52%, 53% of full year coming in at first half. That's closer to about 46% on the numbers that we're seeing today. So you have seen a shift over to the second half. Most of that being due to labor. And I would say that the labor issue that we're seeing is really throughout the country. It is not necessarily market specific. So in terms of market specifics as to where we're seeing that shift take place, there isn't one market that sticks out as being more first half, more second half in terms of what our original expectations were. So no clear trend there.

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Juan Carlos Sanabria, BofA Merrill Lynch, Research Division - VP [33]

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And just following up on that supply question, we've seen the national kind of permit numbers continue to be up, 20-plus percent on a trailing 12 months basis. I mean, how should investors get comfort that supply isn't going to continue to be pretty elevated just given the permitting data? Is it just a question of just the buildings won't get built because they won't get the financing necessary? Or how are you guys thinking about that?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [34]

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I think we've taken a look at it from 2 different perspectives. There's the quantitative aspects, some of which you alluded to, and then the qualitative aspect. So from a quantitative perspective, you're correct that permits have remained stubbornly high here over the last 6 months. That said, when we've gone back and looked at what the typical ratio is of deliveries to permits on a lagged basis, it's about 85%. And when we overlaid that with the availability of credit, that does oscillate a little bit. So to Harry's comments earlier in terms of seeing credit become more constrained for developers, seeing proceeds come down, seeing cost go up, and then difficulty in terms of getting labor in the market, we do think that there's going to be a reduction in that ratio from a historical perspective. The qualitative aspect comes into discussions that we're having with private developers in terms of the amount of sites that they're sitting on today, what their starts were last year versus their starts that they expect this year. That continues to tilt us towards the belief that starts activity will come down and not necessarily mirror the permit activity. But you're correct, it has remained high, and we're going to continue to keep an eye on it.

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Juan Carlos Sanabria, BofA Merrill Lynch, Research Division - VP [35]

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Great. And just one last question from me. In terms of turnover, you guys have done a great job reducing that and kind of boosting occupancy. Any ability to kind of maybe not be quite as conservative and pushing -- and not pushing rate and letting turnover climb up and driving pricing more aggressively? Or is it still kind of too tenuous to do that at this point in time?

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Jerry A. Davis, UDR, Inc. - COO and SVP [36]

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This is Jerry. I guess I'd start with -- I think while our turnover has come down and our occupancy has gone up, I don't think I'm going to sacrifice rate. I would just ask you as our competitors report, just do a deal comparison. What we've done is create some teams here in our corporate office that have worked very hard over the last year to reach out to residents that have given notice to try to save them. Frequently, you'll have to give them a reduced rate. Sometimes, you have to come down a little bit. But they’ve helped drive that turnover rate down more than anything. And I think when you look at it too, when you look at the delta between when a renewal comes in at and a new lease comes in at, over a year, it's probably going to be at least 200 basis points, if this year holds true for what's happened over the last 5 or 6 years. If you look at the first quarter, the delta was more like 500 basis points. So it's definitely advantageous on the revenue side, plus on the NOI and AFFO because you're not having to turn the unit, you're not having to come up with recurring CapEx to save as many residents as you can. And in addition to that, I can tell you we’ve put much more of a focus over the last 2 to 3 years on our customer satisfaction ratings. And I think that's helped also. So I think it's a combination of all those things. But again, I do not think we're sitting here making a trade of rate for occupancy.

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Operator [37]

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Our next question comes from the line of Alexander Goldfarb from Sandler O'Neill.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research and Senior REIT Analyst [38]

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Just 2 questions. First, Joe, now that you've been there for a few months, one of the things that's interesting about UDR is you guys have some top same-store metrics and yet, your earnings growth is sort of in line with peers. So to that end, do you think that you'll start to combine and just publish one same-store metric that includes both the wholly owned and share of JVs, so that way we get a better sense to align the same-store metrics with earnings growth? Or is there something now that you've been there for a few months that you see that in the P&L or somewhere, that's causing that slippage between same-store and earnings growth?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [39]

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Thanks, Alex. So in response, I guess, to the JV same-store and whether or not we'll do a full pro forma same-store, I think the approach that we’ve taken in the past is that we do not have complete operational control of those joint venture assets. We operate those in conjunction with MetLife. So until we have 100% control of those assets, the intent is not to put them into same-store. Clearly, back in Attachment 12A, we provide the detail as to what same-store impact is for those specific pools, and then Jerry mentioned it in his script, in terms of what the impact overall is to the portfolio. So I think we're providing quite a bit of transparency on that front. In terms of the translation of same-store NOI down to the bottom line, there really hasn't been anything that I can speak to specifically. On the quarter, I think we had a couple questions as to, you guys looked pretty good on the same-store rev and NOI line, we ended up at $0.45, in line with the midpoint of what we've guided to in first quarter. It was really just due to a couple of things. As you mentioned, the JV piece of the portfolio, Met coming in maybe a little bit below expectations. From a G&A perspective, it ran a little bit heavier than we expected really just due to timing issues as it relates to payroll taxes and health care. And then the other piece probably, just from a development-redev earn in, we expect that to ramp throughout the year. So while we did do very well on the same-store side coming to the midpoint of FFO, that kind of walks you through the disconnect there.

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Alexander David Goldfarb, Sandler O'Neill + Partners, L.P., Research Division - MD of Equity Research and Senior REIT Analyst [40]

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Okay. And then on the development side, there was the -- the regulators came down in December ‘15 to say, "hey, banks start paring back on multifamily. And then we heard recently from speaking to some private developers that it really didn't have an impact until last summer, given deals that were already in the pipeline and yet, as one of the earlier questions alluded to or said, we haven't really seen a drop in supply. So for all the talk that we give to banks curtailing construction lending, it hasn't really seemed to have an impact. So what do you think is the disconnect there? Do you think that banks aren't dialing back on their construction lending, and therefore, that's why supply hasn't come down? Or do you think that it's just taking an incredibly long time and therefore now, it's taking hit, where we will start to see supply come down?

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Harry G. Alcock, UDR, Inc. - CIO and SVP [41]

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Alex, this is Harry. I'll start, and then Joe may want to fill in. He talked about this just a few minutes ago in the last answer that we're still seeing elevated permit activity. Well, first of all, the deliveries that we're seeing in '18 are projects that started in '16. So those are -- that has -- the sort of current financing environment was not in place 2 years ago when those assets started. Second, as we look forward, while we see elevated permit activity with not just the sort of financing market that has become more difficult, but also these deals are getting a little bit harder to pencil, where you have decelerating revenue growth, you have increasing costs, you're just not -- you're simply not going to see as many deals penciled as you would have 2 or 3 or 4 years ago. So all of that leads us to believe that while permit activity appears to be high today, that the likely number of starts is going to tilt towards the lower end of the range relative to historical levels. So we do expect development pipelines to shrink and starts in 2017 to slow from levels of the last 2, 3 years.

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Operator [42]

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Our next question comes from the line of Rich Hill with Morgan Stanley.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS [43]

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Just had a couple of questions. At the outset of Q&A, there was some discussion about jobs. And specifically, I think there was an example given how there's been some decent job growth in Plano, which helped drive some of the performance in the Dallas area. Curious, how are you thinking about job growth now? Obviously, I think job growth caught some people off guard heading into this time last year. Could you just give us some comments on job growth overall and maybe some markets where you're seeing more job growth more than others? I know you mentioned a couple previously.

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [44]

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Rich, this is Joe. So I wouldn't say that our expectations or forecast for job growth has materially changed from what we put out when we put out the 2 year plan a couple of months ago. At that point in time, we were looking for that 150,000 to 200,000 type of range. In terms of the segmentation of that, the North East and Mid-Atlantic were going to be a little bit lower, so there's a little bit more decel there. Sun Belt, both Southeast and Southwest, were expected to be higher. However, I'd say the deceleration there is probably a little bit more on a relative basis than what we've seen, but they're coming off a very high mark, meaning the Orlandos, Tampas, Dallases up in the high 3s, low 4s on year-over-year growth. They're coming off of very high levels at this point. So I don't think there's really been a material change in expectations. We continue to be positively biased to what's taking place from a tax reform deregulation perspective. But we haven't taken that into our underwriting, we don't see it on the ground necessarily today, but the improved consumer confidence, business confidence, CEO confidence, gives us some positive bias towards the future in terms of sustaining job growth.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS [45]

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Got it. And so, Joe -- hey, Toomey.

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [46]

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Rich, if I might add. You've got to stop from a lens time and think that we've gone through 8 plus years of kind of a heavy regulatory environment that really, if you will, business was retarded and developing and expanding. And now, you're arriving at yet an incomplete legislative agenda around taxes, infrastructure and pulling back that regulatory envelope. And so the question you've got to just ask is we did pretty damn good in 8 years of good steady growth, and yet, it was done in the face of those challenges, what will the next 4 plus years hold if you start pulling back some of those types of (inaudible). So while the numbers are averaging out right in our range, I'm kind of optimistic, but I do live with kind of a glass half full and believe that when we finally get some legislative action, we'll see some more robust numbers starting to be produced across the entire spectrum. But what matters to us is our markets, our price point of our individual communities and how they interact with that job number. So the global -- the overall U.S. number is one thing. The global number's another. But we're really trying to run our business community by community, and look at the impact, and we feel pretty damn good about it.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS [47]

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Yes, of course. What I was trying to get at really for the most part was what's driving what seems to be some pretty impressive growth in the fourth -- in the first quarter, and what seems to be some optimism, whether it's jobs or supply. And it seems like jobs are remaining steady and it's really just the supply coming down, which I think we've all been expecting. Is that fair?

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [48]

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Yes. I think that's a good summary.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS [49]

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Good. Good. And then going hand-in-hand with that, I'm just curious, obviously, first quarter was good, and your commentary seems to be pretty optimistic. What gives you guys the comfort -- what would give you guys the comfort to actually take that formal step and maybe increase guidance? Is it really getting through the spring and summer time and making sure that the strong leasing seasons are in fact strong?

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [50]

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Absolutely. In our prepared remarks, we said we had good momentum. We're just looking for a little bit more progress into the prime leasing season to see some traction.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity and Commercial Real Estate Debt Research and Head of U.S. CMBS [51]

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Got it. Helpful. And then one final thing from me, on the lenders side, are you seeing any alternative lenders, especially finance companies become more active in the multifamily space? I obviously keep hearing about banks curling back, but I am hearing more and more about alternative lenders getting involved, so I was curious if you're seeing that on the ground.

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [52]

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This is Toomey. Certainly, we are, Rich. When there's a need, the market prices that opportunity but what we're finding is that's pricing pretty expensively compared to traditional normal lending patterns. And as a result, as Harry alluded to, that's causing everybody to have to repencil their deals, and it's scraping some of them off the to-do list, and they're not going to get done. But there is capital out there at a price. There always will be. The price is so steep that it's really putting a lid on it. And I always expect the markets to work that way.

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Operator [53]

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Our next question comes from the line of Neil Malkin with RBC Capital Markets.

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Neil Malkin, RBC Capital Markets, LLC, Research Division - Associate [54]

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First, Jerry you talked about the blended spreads kind of getting back in line or even possibly above last year's numbers later in the year. I guess, what gives you confidence in that? Because the numbers we're looking at for supply actually, we see it accelerating into the back half of the year, and then still remaining elevated into the first half of next year. So I mean, is it -- do you think deliveries will keep getting pushed off? Or jobs will start to pick up once more regulatory legislation is enacted? What kind of gives you confidence in that?

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Jerry A. Davis, UDR, Inc. - COO and SVP [55]

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Well, I think it is, the expectation that job growth continues to come in at the levels it will, I just think it's naturally going to grow to that level. I don't see people fleeing to single-family home. So yes, I think it's predominantly what you said. You really just have easy comps as you get to the back half of this year that I think are very beatable. And when we look at in place rates today and the expectation of where we're going to reprice units as the year progresses, it just looks to us like that's the direction it's going.

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [56]

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Neil, this is Toomey. I'd also add, you have to look at where that aggregate number of supply is coming. It shifted out of the urban corridors and has moved more predominantly to the Sun Belt markets, where the number of doors built for the relative cost per home can be expanded. But you're going to see markets like Phoenix, Dallas, Austin, Florida markets, start to elevate their supply pictures, and it's away from the urban cores that we have a lot of exposure to today. So we're, again, talking about the supply picture as it relates to our portfolio and not so much on the aggregate because that's shifting away from our competitive set.

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Neil Malkin, RBC Capital Markets, LLC, Research Division - Associate [57]

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Okay. And then also, next would be L.A., I know that you guys last year had a large development leasing up that was hindering your performance there. And I guess, the first quarter started off, I guess, a little bit weaker than I thought just given that tough competition. Is that something that's really going to pick up more in the second half of the year or I guess we'll see more in the peak leasing season of 2Q and 3Q? How should we kind of look at that?

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Jerry A. Davis, UDR, Inc. - COO and SVP [58]

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Yes. That's a good point. You're right. We didn't fight competition in Playa Vista last year because most of our portfolio's in Marina del Rey. It kind of subsided. But when you really look at it, my new lease rate growth in the first quarter was 2.1% in L.A. compared to 0.3% for the entire company. So it was way above the company average. When you look at the revenue growth, just remember, revenue growth is based on the rate growth you've got over the past 4 quarters as well as any change in occupancy. And when I look back to the first, second and third quarter of last year, I was going head-to-head against that lease up. And I had a pretty minimal new and renewal rate growth. So now that that's behind me, you should see an acceleration of new and renewal rate growth. And I can tell you, even as I look in the month of April, we're at 2.8% on new compared to 2.1%, and my renewal growth in April is 5.6%, and it was 4.6% in the first quarter. But you should see, as each quarter marches on this year, that my year-over-year revenue growth should continue to improve from where it is today.

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Neil Malkin, RBC Capital Markets, LLC, Research Division - Associate [59]

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Okay, great. I appreciate that. And then I guess the last from me is can you guys quantify the remaining amount of 421-a tax abatement burn-up left to go?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [60]

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Neil, this is Joe. So as we footnote on Attachment 6, you can see down there at the bottom, in the first quarter, we had $233,000 impact on a year-over-year basis, so it's about 130 basis point impact on real estate taxes. Overall, the expense impact around 40 basis points. And in terms of NOI impact, fairly de minimis, call it, 15 to 20 basis points. For all of 2017, we think the impact's going to be about $1.2 million or 160 basis points of real estate tax increase. If you look at NOI, again, that's only about 20 basis points impact for the full year. So fairly de minimis. We continue to provide the disclosure on it just because we get questions on it. But as when we went through the 2-year outlook, we then provide the guidance on that, given the size and nature of it. And so probably don't intend to provide any additional guidance in terms of '18 and beyond at this point, but it is a fairly minimal amount overall.

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Operator [61]

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Our next question comes from the line of John Pawlowski with Green Street Advisors.

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John Pawlowski, [62]

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A follow-up on the developer capital program, between preferred equity and participating loans, the total portfolio size, the total pipeline size is just under $700 million. Over the next 2 years, does that number -- does the size of that portfolio go down meaningfully, stable or trend higher?

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [63]

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John, it's Joe. Developer capital program, we kind of look at in connection with overall capital uses. So there's a couple of constraints that we place on ourselves related to that. One is we and the board take a look at 3-year capital plans in terms of its worst-case scenario, what's going to happen if capital sources dry up completely, do we have the ability to fund the committed development pipeline, committed developer capital program and debt maturities. So we have that constraint. In terms of annual usage of capital, we’ve typically talked to $300 million to $400 million per year of development spend. That's what we think we can efficiently raise through free cash flow and dispositions. So we have that constraint as well. And then developer capital basically ends up competing with development. Harry's team takes a look at where they can find the best risk-adjusted returns, and they'll place the capital there. So it's not a goal of increasing developer capital program. It's really having 2 different pieces of the business compete with each other. We're going to continue to look for developments going forward, but it does look like that pipeline's going to be reduced slightly over the near term. And then you look at developer capital, we mentioned that we are going to tilt toward sources in terms of the upcoming options that we have. I think you should expect that we're going to continue to look for ways to reinvest that into similar types of structures. So the goal is not to necessarily grow that pipeline to a certain size or to have too much earnings exposure to one piece of the business, but I think that piece of the business today probably has outsized returns relative to the risk, so it probably grows incrementally over the next couple of quarters.

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John Pawlowski, [64]

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Okay, thanks. And then Harry, it's a been about a year or so after you've closed on the home D.C. acquisition. I believe you're on the road of 5.2% year 1 cap rate. Can you give us some color on how revenues and expenses have trended on the acquired properties and how actual performance compares to the 5.2% underwritten?

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Jerry A. Davis, UDR, Inc. - COO and SVP [65]

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John, this is Jerry. I’m going to answer that. We came in very close to that 5.3%. I think we're in a 5.25%, 5.3%, so it was right about there. Probably we're a bit behind on the revenue, but we were ahead on the expenses. Really, we found more efficient to be on the operating side.

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John Pawlowski, [66]

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Okay. Is it your sense that the miss or the slight miss on the revenue was market rent growth? Or just less juice to squeeze on the Home Properties?

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Jerry A. Davis, UDR, Inc. - COO and SVP [67]

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It was probably a bit on the market rent growth. I don't think it was the juice. And the other thing is when you take over a portfolio that size, you've got to culturally get that entire team to buy into your way of doing things. And over that first year, we probably transitioned out 50% to 60% of the associates there. So there was a bit of a churn on the people side. So I would expect, you'll continue to see some of the juice come from that deal over the next year.

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Operator [68]

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Our next question comes from the line of John Kim with BMO Capital Markets.

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John Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [69]

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I wanted to follow up on the disparity between your owned and JV same-store growth. I think Joe alluded to not having full control of the MetLife JV. And I'm just wondering if you actually manage the leasing process differently in the joint venture. For instance, on your own asset, you trade rate for occupancy, and I'm wondering if you do the same for the MetLife JV?

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Jerry A. Davis, UDR, Inc. - COO and SVP [70]

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Yes, this is Jerry. We actually manage them very similarly. It's really -- we do get input from our partners on it. But when you look at the occupancy rate on the Met deals versus the wholly owned, they run probably 50 basis points lower than the wholly owned. And when you look at the delta between what occupancy was same time this year versus last year, Met is actually up 80 bps year-over-year compared to 50 bps for the same-store. The biggest difference in addition to having some input on whether it's revenue-enhancing spend or a few other operational things, it's really the quality and the location of those assets. Those are A+ deals, typically, very frequently, in urban locations that are competing more head-to-head against new supply. And again, when I think about where they're at, it's downtown L.A., it's downtown Seattle, it's downtown Austin, it's Upper West Side of New York. So it's really more of a competition versus new supply, and it's all A product. When you look at our same-store pool, our same-store is 50-50 A B. Bs continues to outperform As. It's compressing right now, but it's still probably 80 basis points. So I would say it's more those factors.

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [71]

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John, this is Joe. Maybe just one follow-up related to that, just to kind of put our same-store in perspective because we do get some questions on this. Same-store overall for us represents about 80% of our total NOI. And so we took a look at where we're kind of stacked up versus peers. We actually found as of 4Q, the peers on average sat at about 79%. So while we get questions on what's in same-store, what's not in same-store as well as the MetLife piece, we do have a same-store pool that is very commensurate with the peer set today.

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John Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [72]

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Can you remind us how often you update your same-store pool?

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Jerry A. Davis, UDR, Inc. - COO and SVP [73]

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We do it quarterly. The property has to have been in the same-store for -- we've got a definition of it in the supplement.

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Joseph D. Fisher, UDR, Inc. - CFO and SVP [74]

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16.

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Jerry A. Davis, UDR, Inc. - COO and SVP [75]

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It's on Page 16 of our supplement. But we do update it quarterly. But the guidance we give is based on the properties that are in the same-store pool as of the first quarter of each year. And the only addition to the same-store pool throughout the year -- so you'll have a different pool in quarterly metrics versus full year, we have one addition that's coming in, in the second quarter, and that is the sixth asset of the Home portfolio that we bought.

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John Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [76]

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Okay. And then can I ask what your official view is on Airbnb? I know how some of your competitors feel about it. But as far as whether or not you've encourage it or deter it within your portfolio?

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Jerry A. Davis, UDR, Inc. - COO and SVP [77]

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We do not encourage it. We attempt to deter it. When we find out Airbnb is happening in our properties, we serve the resident notice. It is a lease violation. We feel strongly that the majority of our residents want full-time renters as their neighbors, and they like that we do a criminal background check on everybody that lives at our properties.

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John Kim, BMO Capital Markets Equity Research - Senior Real Estate Analyst [78]

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Do you have an estimate as to what percentage of your residents use Airbnb?

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Jerry A. Davis, UDR, Inc. - COO and SVP [79]

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No. I mean, it's very minimal. And again, when we find out about it, whether it's from us looking or their neighbor's telling them, it's minimal.

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Operator [80]

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There are no further questions in the queue. I'd like to hand the call back over to Mr. Toomey for closing comments.

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Thomas W. Toomey, UDR, Inc. - CEO, President and Director [81]

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Well, thanks for all of you and your time today. And we certainly are happy with our position and our momentum, and look forward to seeing many of you in NAREIT in June. Take care.

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Operator [82]

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Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.