Good morning, ladies and gentlemen, and thank you for participating in the MAA First Quarter 2012 Earnings Conference Call. The company will first share its prepared comments, followed by a question-and-answer session. At this time, we would like to turn the call over to Leslie Wolfgang, Director of Investor Relations. Ms. Wolfgang, you may begin.

Thank you, Howard, and good morning, everyone. This is Leslie Wolfgang, Director of Investor Relations for MAA. With me is Eric Bolton, our CEO; Al Campbell, our CFO; and Tom Grimes, our COO. Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the Safe Harbor language included in yesterday's press 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. I'll now turn the call over to Eric.

Thanks, Leslie, and welcome, everyone, on our call this morning. Mid-America's first quarter result is the highest FFO per share performance in our 18-year history. FFO per share increased 14% over the prior year to $1.12 per share. Leasing conditions are strong, and we expect to capture increasing positive momentum from our same-store portfolios we have into the peak leasing season. As outlined in our earnings release, we have increased FFO guidance for the year to a range of $4.28 to $4.48 per share or $4.38 at the midpoint. Strong leasing conditions generated positive rent and revenue growth in each of our markets across the portfolio. As expected, during the first quarter, we did see an increase in resident turnover with move-outs increasing to 56.4% on a rolling 12-month basis from 54.2% at this time last year. The increase was primarily fueled by our more aggressive push on rents, as move-outs due to rent increases is now driving 12% of our resident turnover, which is up from 6% at this time last year. We're comfortable with this result for 2 reasons. First, overall resident turnover remains near historic lows as pressure from residents leaving to buy a home continues to fall. Secondly, we captured, on average, close to a 9% rent increase from the new residents moving in as compared to those residents moving out due to the rent increase. We believe the long-term benefits associated with repricing units at this level of increase is worth some uptick in current quarter vacancy loss and a higher turn cost resulting from the forced turnover. During the quarter, we captured a significant increase in move-ins, growing a strong 13.2% over Q1 of last year. Leasing traffic was up 8% as compared to last year and fueled the ability to capture the high…

Okay. Thank you, Eric, and good morning, everyone. I'll provide comments on our earnings performance for the first quarter as well as a few highlights regarding investing and financing activities. FFO for the quarter was $46.4 million, or $1.12 per share, which is $0.03 per share above the midpoint of our prior guidance and, as Eric mentioned, is a record for the company. The majority of this FFO per-share outperformance compared to our forecast was produced by financing and investing activities during the first quarter. Interest expense for the quarter was $0.02 per share better than forecasted primarily due to a more favorable-than-expected execution on the unsecured term loan during the quarter. Acquisition expenses were also about $0.02 per share favorable to expectations for the quarter. A portion of this relates to lower acquisition volume with no deals closing in the first quarter, while the remainder relates to the capitalization of some prior costs for acquisition and development land. When we originally acquired the land tracts for 3 of our current development projects, certain costs, mainly commissions, title and attorney fees, were expensed as acquisition costs. During the first quarter, we determined that the correct treatment was to capitalize these amounts, along with other development costs, so we recorded a onetime adjustment during the first quarter. These 2 favorable items during the first quarter were partially offset by about $0.01 per share of additional dilution related to the equity offering, which occurred earlier than projected in our initial guidance. The same-store portfolio performed in line with expectations during the quarter, producing 4.5% NOI growth over the prior year based on a 4.7% increase in effective rents for the quarter. On a sequential basis, NOI grew 1.9% in the first quarter. Same-store operating expenses for the quarter also grew 4.5% over…

[Operator Instructions] Our first question or comment comes from the line of Mr. David Toti from Cantor Fitzgerald.

First question. As we see the cost of capital go lower for the company sort of in lockstep with cap rates on acquisition potential -- potentials, has your underwriting criteria changed at all given that sort of environment over the last couple of quarters?

David, this is Eric. To be honest with you, no, it hasn't really changed much. We've -- we continue to look at our cost equity that we -- we define it looking at where our dividend yield is at any given moment in time, which obviously, to some degree, is -- or is affected by our share price. But we go through a process of defining what we expect our shareholders are looking for using the dividend discount model, and then we add the, as we've discussed with many of you in the past, add the -- a premium to that. And so the only -- as our cost of equity changes a little bit, it affects the model a little bit, but not a significant amount. And we continue to have a hurdle rate that's pretty consistent with what we've had for the last year or so.

We do put in interest costs into underwriting that's consistent with what we expect to get from the full balance sheet. So over time, as those costs decline, it certainly will be in underwriting as well, David.

That's true. Good.

Okay. Well, that's helpful. And then sort of along those lines, how does the company internally weigh or measure how to allocate investment dollars between development versus acquisitions and the CapEx you're spending? There's a pretty wide variety of returns, so I'm just wondering how you guys think internally about those allocations given the spreads.

Frankly, our allocation to redevelopment is driven more by just what we feel comfortable executing on. I mean, we look at the opportunity within the portfolio, look at the execution capabilities that we feel like we have and sort of ramp it up commensurate with our ability to get the work done and to obviously achieve the rents that we're looking for. We will push that as aggressively as we feel like we can, particularly in this environment. On the development side of things, frankly, we've spent a lot of time thinking about this with our Board. And with the Charleston deal now under way, that puts us at about $150 million of total capital commitment that is in some stage of development right now. And we're pretty comfortable with that level. We don't expect to see it go up much from that, if at all. We're under way leasing, obviously, in both Nashville and Little Rock, and the lease-ups there are going very well. And if -- we may very well, by the end of this year or early next year, look at getting into another project or 2 as those begin to lease up. But we're pretty comfortable carrying not more than about $150 million of development. And on the acquisition side, our goal for this year is somewhere close to $300 million. It's -- it typically starts out slow, as it is this year. Qs 2 and 3 will pick up. We may do close to $300 million. We may do something less, we may do something more. We just don't know. But that's a number that -- we're going to push it as hard as we can, but we're going to stay committed to the disciplines that we have always used about how we allocate capital in terms of putting out for acquisition. But in terms of just how we allocate between those 3, that's kind of how we think about it.

Okay, that's helpful. And my last question just has to do with the expense growth in the quarter, a little bit higher than most peers, a pretty high number for you guys. Given your current ranges that you've held for the year relative to guidance, does that sort of imply that we'll see considerably lower expense growth rates in the second half and then subsequently potentially stronger NOI results going into the end of the year?

Well, I think it certainly implies it, as we expected. Some of those costs per turn that we had in the first quarter will moderate as we move into the back part of the year. And yes, you definitely should see some moderation of overall expenses in the second and third and fourth quarters and coming down to the midpoint of our guidance in the 4% range for the year.

Our next question or comment comes from the line of Swaroop Yalla from Morgan Stanley.

I was -- I wanted to touch up on the Jacksonville market a little bit, your second largest market. I mean, you're seeing some softness there. Can you comment on whether it's due to job growth-related issues or is it supply or single-family homes threat?

Sure, Swaroop. And this is Tom. Jacksonville was one that is making some strides on its comeback. It's just well behind places like Texas. I mean, it's primarily been driven by weaker job growth. The -- but it is -- it has turned positive. And the signs of encouragement we see in Jacksonville are on the development side. For the past 3 years, they've only seen, on average, 200 units delivered a year for the last 3 years, and that's a market you used to see more than 2,200 a year. And that continues on forward, and we expect job growth to pick up in 2013. So right now, the job -- the units-to-job ratio is about 6.5 to 1, which is really pretty good. Or the -- excuse me, the jobs-to-unit is about 6.5 to 1. That jumps to 13 to 1 in 2013. So we feel like Jacksonville will begin to pick up steam as we go forward. Its full demand has been very good there, in terms of traffic, and we're seeing rents pick up. They're doing about 3.7% on rents, but not as strong as some of our other places.

Great. And Eric, you mentioned cap rates of 5.5% in your markets. I'm sorry if I missed this. Is this for the Large Markets or for the blended market? And then maybe if you can comment on the secondary market, what are the cap rate compression you have seen as well?

Swaroop, we're -- to be honest with you, we're really not seeing a significant spread between buying in Dallas or buying in Charleston or -- as an example. For the good-quality assets that come to market, the competition is pretty fierce right now. And throughout last year, we were -- as I mentioned, we were able to lock deals down in the 6-cap range, and that would include both Large and Secondary markets. And this year, it's trending closer to 5.5%. And frankly, as I mentioned, we've seen some deals recently close around 5 caps. And that would be in some of these higher-growth, Secondary Markets that we have targeted for acquisition as well, such as Charleston and Savannah, and some of those type of markets. Now we saw a deal recently trade hands in Chattanooga at pricing close to that. So it's just -- I think capital just continues to come into the sector, and they're coming much more active -- becoming much more active in both the Secondary as well as the Large Markets around the Southeast. And I think that we're -- if -- over time, I think it's reasonable to assume something around the 25 to 50 basis-point spread between what you typically see in Secondary versus the Large Markets. But given the asset quality that we're chasing, we're not seeing a whole lot of difference right now.

Is that making you pause a little bit in your acquisition underwriting? Or are you thinking that folks are underwriting this correctly with the NOI growth for the next couple of years?

Well, I think that it's causing us not to lock up as many deals. That's for sure. I think that we've seen assets trade at pricing that, based on our underwriting, either they're assuming some incredibly heroic assumptions regarding performance over the next 5 to 6 years or the return expectations that they're willing to accept are far lower than what we're willing to accept. So I can't really tell you what they're doing per se. But we feel like that we are pushing as hard as we feel -- as we're comfortable pushing. I think that we've long had a practice of being very disciplined about how we deploy capital. We understand and appreciate that these markets can get supply from time to time. And in this environment, of course, the higher-leverage buyers, the private capital buyers, in this rate environment are able to come in with some fairly aggressive debt and make their numbers work. And so that's what we're kind of running into, and it will change. I think that as we see interest rates move up at some point down the road, I think the dynamics will change. But for us, what we try to continue to do is offer sellers very efficient and effective execution capabilities and certainty -- and the ability to execute a deal for them. And what we typically see is that, that execution capability tends to have more value, frankly. As we get towards the end of the year, people become a little bit nervous about closing on the deals that they'd hoped to get done in a calendar year. So we're going to be patient and stick to our disciplines.

Our next question or comment comes from the line of Rob Stevenson from Macquarie.

Can you give a sort of indication what the hard turnover costs are per unit for you guys? And sort of what the -- do you have a ratio as to whatever it is, whatever the right number is, 300 or 500 basis points of turnover, if the impact winds up being on same-store expenses?

Rob, I don't have that ratio. I would tell you it's -- the answer is it's a lot. I mean, the -- what we did was we increased occupancy by 110 basis points, and that's something like 440 units that we turned that we wouldn't -- that we didn't turn last year that we got ready for move-ins. So very significant impact in that. And that's sort of the story of the quarter. And we don't expect -- we ended at 96.2% this quarter, and we don't expect to end next quarter at 97.2%. I mean, this sets us up to just really push rents well a little bit earlier than we had thought.

Yes, and what I'll tell you, Rob, I mean, the way we think about the trade-off in terms of sort of forcing turnover versus not, is does the overall turnover level remain acceptable? And we're near our historic lows, so we're comfortable with it. And then we take a hard look at the amount of rent growth we're getting as a result of that forced turnover, and we track it very, very carefully. And we're getting 9% in the first quarter. The rents moved 9% up versus what the old customer was paying that left us because they were upset with the rent increase. And with that -- those kind of dynamics, we're comfortable with what's happening right now. If we saw overall turnover jump up a lot or we weren't getting that level of rent growth from the market as a result of the forced turnover, we'd back off. But, and as Tom said, I mean, in Q1, I mean, the pressure on expenses from repair and maintenance and turn-related activities, that's not going to repeat itself. It can't because we're already so full right now, and we don't think that we're going to force turnover at a higher level than what we saw in the first quarter given that we're just now going into the busy traffic season. With traffic levels running as high as they are, we're pretty confident that we're going to continue to see some pretty strong internal growth and that we think that expenses will come down over the course of the year given where occupancy already is. I would tell you on the hard turn cost that it varies, obviously, to some degree on the unit. But on average, we're going to probably spend somewhere around $700 to $750 a unit. And then if you put the carpet in, it's going to go up a little bit from there.

Okay. So just in terms of ballpark numbers, $700 or so on 440 units get you to about a little over $300,000 of turnover costs that would have been a drag on you guys this year -- this quarter?

Just give you a context, Rob, about a 1% rise in turn costs a year is probably $2.5 million to $3.5 million. And so that's how -- because you guys, you said 1% on 40,000 units in same-store, and you can walk through the math, that's $750 per turn. So for every 1%, rule of thumb is call it $2.5 million to $3.5 million.

Okay. And then where is property tax? You're a third of the way through the year, where is the conversation on property taxes these days? I mean, is it coming in as expected? Less? Greater?

We're getting some very early indications, Rob. We've got a lot of information to go. So we went in the year thinking that was 4% to 5%, 4.5% at midpoint. We don't see anything at this point that tells us that that's not accurate. We need to get a lot more information on the hotspots, which are going to be Texas and Florida. We are getting some early indications from Austin that it's -- that it was going to be about as what we thought. That the increases coming out of there are going to be pretty large and -- which we had planned and put in our numbers, and we're going to obviously fight very aggressively. But we need to get a lot more information on Houston, Dallas and then the Florida markets. So short story is a lot more updates come in the second quarter. But right now, we don't see anything that says we were off the mark.

All right. And then given your geographical concentration, was there really any benefit to the warmer winter, lack of snow for you guys this quarter?

To be honest with you, it may work the other way. The ACs got cranked up a little sooner. And snow removal is not something we tend to think a lot about. But frankly, the warmer spring probably worked more against us than it helped us.

Well if you keep coming north, that's going to be a increasing problem for you, right? And then just the last question for Tom. Which markets positively, negatively surprised you the most this quarter operationally?

On the surprise side, it's more of the same. Honestly, Rob, there's not much out of the ordinary. on the -- it's Texas rolling on as it has. We were pleased with the improvement in Atlanta. And on the weak side, Jacksonville was about as expected.

Our next question or comment comes from the line of Mr. Josh Patinkin from BMO Capital.

It's Rich Anderson here with our new associate, Josh. So I just want to make sure I understood the first quarter. You said that it was in line with expectations except occupancy went up. So what -- can you reconcile that for me? Was it just a trade-off in the first quarter between occupancy and rental rate growth that you initially thought would happen going into the quarter?

Well, primarily, in the first quarter -- I'll give you some numbers then I'll let Tom give you the operating facts behind it, Rich. But what you saw is physical occupancy rose, but it -- we didn't get a lot of dollar value from that in the first quarter. That'll come in the second and third quarter. So basically, that's the impact to financial numbers. And Tom can take...

Yes, if you look at the economic rent, it's reflective of what we would call effective rent, which takes into account that churn of both a little bit more turnover and then the people moving in. We didn't get the benefit of their rent dollar for the full quarter, roughly. But we're sort of excited about what that indicates going forward.

Okay. So did you expect to see the occupancy pop up like it did by the end of the first quarter? Or was that a positive surprise?

That was a positive encouragement. That was the traffic, and first quarter was better than we expected. We were happy to jump all over it, and that was a better thing.

Can you talk about the economics of the new lease growth rate of 3.8%? I mean, I always come back to this, that in a healthy environment, usually the new lease rent growth is greater than the renewals. And that's just not happening anywhere yet, including you guys. So I'm thinking if you're only growing at 3.8% -- not only, it's still very good, of course, but the economics of it, including downtime and having to get the unit back up in sellable order and all that sort of stuff, does that really make sense? I mean, wouldn't you rather maybe pull back a little bit on those people that are leaving because the rent's too great and let them stay just because it's better economically from the standpoint of downtime and the rest?

Yes, and center point. I would point out that the 3.8% is an average for those movements. The people that are leaving us, those were the folks that got 10%, 12%, 13%, 14% increases, and we're backfilling them with somebody that's paying 9% more, not 3.8% more. Does that make sense?

Well, then that does make sense. I guess I'm -- I was looking at the wrong number. Okay. Well, we'll leave it at that. I'll go back through that. Regarding the guidance, you guys are well known for ranges that you can drive a truck through. And I'm curious what it is about the guidance, the quarterly guidance that is creating such a huge range at this point. What are the swing factors, the main swing factors in your mind? You probably said this, but if you could just kind of crystallize it for me.

Yes, I mean, Rich, this is Al. We -- first, we did narrow the quarterly a little bit. I think we had a 7% -- $0.07 on each side guidance range at first, and then we narrowed that to $0.05 on each side. And I think the major things that could change are obviously the major drivers of the forecast. It would be operating performance, financing plans and major differences in that. So, I mean, I think it's just us taking account sort of the worst-case scenario to happen and actually the best-case scenario to happen. But if you want to know what we think, it's the midpoint of that range, obviously.

I mean, what you'll see is the range will narrow a little bit as the year unfolds. But as Al said, if you want to know what we think, look at the midpoint.

Okay. But, I mean, when you look at some of your peers like -- I'm just looking at Equity Residential, theirs is 65 to 69. I don't know, they have the same forces at work as you do, right? Just a way of going about business, it's different than your peers. No big deal, I guess. And then the last question is on your comment, Eric, about the Larger Markets picking up and performing better in the first quarter. I'm sorry if I'm mis-remembering this, to use a Roger Clemens term, but isn't that the -- smaller markets have been your leaders, have they not?

They have up until recently.

Okay. And what do you think is creating that change?

Well, to a large degree, it's been Dallas and Houston. I mean, It's been Texas. But I -- I mean, we fully expect at this stage of the cycle that the Large Market dynamics will support more rent growth, a stronger rent growth, and in aggregate, it -- that, that group of the portfolio will begin to surpass performance of the secondary market. Frankly, we expect it to happen sooner. But our Secondary Market was much more resilient than we expected. And I think that frankly, for the next several quarters, we will see our Large Segment group outperform our Secondary Market segment group. But having said that, I think that the size of the delta in any one given quarter, I don't think you need to -- don't read too much into a given quarter's result. I think over time, what we expect to see is that frankly, our Secondary Market group is likely to begin to show more strength than in -- maybe at some level than our larger group just as a result of the fact that the Secondary Market group is the group that is really not seeing anything at all, really, in the way of supply pressure. And I think that, that group will continue to be more insulated from supply pressure in late 2013 and 2014 than what you may see begin to ramp up in the some of the bigger markets. And recognizing that the Secondary Market group, places like Greenville, South Carolina and Chattanooga and Spartanburg, I mean, they've got some very good job growth dynamics going on. And not to lose sight of the fact that San Antonio is in our small market group, NOI in the first quarter was up 16%. Spartanburg is in our small market group. NOI was up almost 14% in the first quarter. So we've got some strong performances out of that group that I think are going to continue to be pretty good for the next couple of years. I think on average, Dallas and Houston has just been so strong, and Austin, that have really boosted the Large Market group.

I have one more follow-up question, and that's on your -- maybe your closest comp. Colonial was able to achieve investment-grade rating recently from S&P, I believe it was. How does that factor into your thinking about your pursuit of them and Moody's? And do you feel like maybe you got a shot to move a little bit faster up the food chain with that news?

That's a good point, Rich. This is Al. I mean, certainly, if you look it -- and we've talked about this in the past. You look at our balance sheet and the metrics, look at the primary metrics that all the agencies look at, whether it's leverage, we look in very good shape compared to Colonial and really all the other peers in the space. Fixed-charge coverage, we're actually the highest in the sector this quarter. Debt-to-EBITDA, I mean, I think they expect something in the multifamily that's little higher, a little over 7. We're 6, 7 in the quarter. And so yes, I think we will point to them, and we'll begin discussion with those guys. And I think the one thing that we talked about that we needed to work on to get there is clearly the malsecured debt and the unencumbered asset pool, and we've made a tremendous amount of progress in both of those over the last couple of quarters really. And so I think they would target -- they would tell you that you would need something about 40% of your portfolio to be unencumbered. They like between 40% and 60%. But 40%, you kind of begin the investment-grade discussions. And so if you look at the quarter, we were at 35.9% at the end of the second -- I mean, the first quarter. And we expect to continue progressing that over the year. So long story short, we're making a lot of progress. And absolutely, we'll point to those guys, we'll point to Essex, who've recently finished out getting their final portion to that. And definitely, we're going to be having discussions for making the case that we believe we're investment grade and hope to persuade those guys and tell them "When you take a close look at the company?" We feel good about where we stand. So yes, I think we will make that point.

Our next question or comment comes from the line of Mr. Michael Salinsky from RBC.

Talk a little bit -- I don't recall if you mentioned it or not. Did you give April trends for the portfolio, where you guys ended up -- ended the month in terms of occupancy and also what you saw in terms of new lease and renewal rents and also where renewals have gone out for May and June?

Sure, yes. And I'll just try to run through those. If I miss one of those questions, pull me back to it. But April was a good month. We saw the new leases were almost 4%. Renewals we got close to 6%. For blended of almost 5%. Renewals are going out in the 7% range, and we're getting mid-6s on them. Occupancy was 96.1s. So essentially, the same place where we ended the quarter. And traffic's -- was exactly where we needed it. Move-ins or move-outs were actually down. Our turnover trend was down 10%. So that's another thing that bodes well for our expense line going forward.

So that's great detail. Eric, question for you. You talked about acquisition pricing coming down and also, potentially, as you start to lease up, the developments may be adding another 1 or 2. As you think about cap rates at this point, is there -- and you look at development, is there any thought to potentially expanding the development pipeline potentially through joint venture development as a way to grow but also maintain your risk? I mean, maintain your overall exposure?

We look at it, Mike, we talk to a number of folks, developers and other capital sources who are always thinking about JV ideas. But I really -- we've obviously got the one JV in place right now that's focused on sort of the value-add play. To be honest with you, I would be reluctant to get into any sort of an extensive JV relationship for purposes of doing new development. I think it just adds increasing complexity to what we're trying to execute on. And I think for us, I mean, the development that we're doing, we feel great about it. It's got -- it's going to be great returns. We feel very comfortable executing at the level that we are. But I -- this is a region of the country that, as you well know, can get supply quicker than most other regions of the country. And we just believe that it's more prudent long term to not try and ramp up a development operation either in-house or on a JV basis. Do it on a selected basis as we're doing it now where we're essentially outsourcing our development to a developer who we just pay a fee for and -- or pay a fee to. And we feel pretty comfortable with that level of execution. I think that by the time we get to 2014, 2015, and presumably supply is coming into the markets at a much more robust pace. I mean, frankly, that's a great opportunity for us to not be in the development business at that time. And we'd much rather have our balance sheet where we're getting it to and be in a position to capitalize on that supply coming into the market that, inevitably, some of it's are going to run into trouble, and it's going to create some great capital deployment opportunities at that time for fairly new product.

That's helpful. Just staying in terms of the investment. The Austin joint venture buy out there, was that motivated by the -- by your partner? Or was it motivated by MAA?

It was our partner who was just, frankly, had some things they were trying to do with their fund and for their investors and made a decision that they wanted to cycle out of some holdings. And we took a look at that deal. We feel very -- we feel great about Austin. We've got a great presence there. This is a terrific property that we think is going to be a good performer long term. And given the ability of the relationship we had with our partner, we were able to execute a transaction that worked for them and for us. And -- but they really brought it up, and we were glad to work it out the way we did.

Are you guys marketing any additional fund assets?

No, not at the moment.

Okay. And then final question. Al, it sounds like you guys got disposition activities you could increase there in the second quarter. Is that earlier than what you had guided to before? And has that any impact in the earnings results relative to your original expectations?

Not really, Mike. That's about as we expected. We had -- went into the first of the year with a pretty clear plan, and we've been progressing and pricing and timing. And all that's about what we thought. So no real change there.

Our next question or comment comes from the line of Ms. Paula Poskon from Robert Baird.

I apologize if I missed this in your prepared comments, Al. Did you discuss the percentage of move-ups to homeownership?

I did not, but Tom has that for you, I think.

So it is -- the percentage of move-ups to home buying for the quarter was 16.5%, which was surprisingly down from last year. Down again.

And Eric, are you still getting the same velocity of inbound calls from private developers looking for capital partners?

To be honest with you, it slowed down a little bit because of so many other capital partners that are making themselves available right now, Paula. And, I mean, we still talk to a lot of them, but we're seeing developers having more options going out at this point. So what we find is developers have increasingly more interest in trying to stay involved in the ownership and looking for much more complicated arrangements that we really feel like it's not the right way we want to deploy capital. But, I mean, we're still seeing a lot, but it's not -- I mean, they've got more options at this point.

And just a final question. On previous calls over the last year, you talked about the difference in permitting between your Large and Secondary Markets. Any changes there? Anything that is on your radar screen as a concern that maybe wasn't 6 months ago?

Not really, Paula. It's still continue to see most of the permitting activity running higher in the bigger cities, and particularly in Texas. We're seeing some pickup in Florida and in the Carolinas. But the -- there still remains a very clear differentiation between permitting activity between Large and Secondary Markets. The Secondary Markets are not seeing near the pressure at the moment. And I think that that's why -- as I mentioned earlier, I think it bodes well for the Secondary Market group to be more resilient later in the cycle than what's happening right now. Because I think that by the time we get to 2014 and 2015 and you see moderation taking place in the bigger cities because of supply, I think the Secondary Markets will be in a stronger position.

And Paula, just to build on that a little bit, the -- for 2013, taking the permits and sort of converting them over to completions, we -- so the Large Markets, you'll see 9.4 jobs per unit completed, which is pretty darn healthy, but the Secondary Markets are 13 to 1.

Our next question or comment comes from the line of Omotayo Okusanya from Jefferies.

Just 1 quick 1. Eric, I believe you mentioned, or Al, that you were contemplating doing one more capital transaction at the back end of the year to further delever the balance sheet. Is that correct? And what are you possibly contemplating?

Omotayo, this is Al. We are contemplating one more transaction not to delever but really to do 2 things. One, to increase our fixed rate protection at the end of the year. So if we have right now about 80%, 89% fixed or hedged, we'll be well over 90% at the end of the year, probably 93% to 95% range. And two; it'll be an unsecured financing of some form. We've moved tactically over the last few quarters with the best products at the right time. So it'll be some form of unsecured financing that allows us to move forward with our plan for investment grade. So it's a debt transaction that we're contemplating to complete our long-term plans.

And how much dilution are you going to factor in into your numbers as a result of that?

In the fourth quarter, if you look at -- the real change in guidance for the year -- it's $0.03 for the year. And I know it would -- they say you need to take first quarter and push it through, but that's really not what happened. It's really -- the thing that is causing the full year is interest expense, which is a component of the first quarter, a couple of cents in the first quarter favorable. We have another call it $0.01 in the second quarter and $0.01 in the third quarter from very good execution of that term loan transaction. In the fourth quarter, we'll give up $0.01 to $0.02 in terms of this transaction and -- so that we can fix rates higher and protect our balance sheet and be ready for investment-grade rating. So at the end, that's probably -- if -- for modeling purposes, in essence, I would think of a transaction late this year, $100 million to $200 million in range, probably midpoint of that, call it a financing cost of 4.5% because it will likely be a 10-year-type thing.

Our next question or comment comes from the line of Mr. Dave Bragg from Zelman & Associates.

What was the move-out to rent single-family home rate during the quarter and also first quarter of last year?

Move-out to single-family home rental rate was 6 6 last year, and it was 6 5 this year. We still don't see it as a meaningful pressure point, Dave.

Okay. And then, just, Eric, back to your opening comments, I think you made an interesting connection between move-outs-to-rent increases and move-outs-to-buy. And I think what you said is that you feel more comfortable with the higher move-out-to-rent increase rate today in part because move-outs-to-buy remains so low. So assuming that the move-out-to- buy rate does start to rise at some point in the next several quarters or so, at what point does that cause you to be less aggressive on pushing rents? And can you just talk in general about how you think about the interaction between the 2?

Well, our goal, of course, is to be sensitive to the overall turnover level that we see happening. And I think that if turnover begins to pickup associated with people leaving us to buy a home and vacancy loss and the churn costs begin to pick up as a result of that, our tolerance for forcing turnover to a rent increase will moderate at some level. And we will begin to think a little bit differently about how aggressively we're willing to push on the rent increase on a renewal. But for the moment, as I said, we're comfortable with the trade-off for really -- for 2 reasons. We're comfortable with the trade-off in terms of forcing turnover because we're seeing the turnover associated with home buying so low, as you point out. But we're also comfortable with the change, if you will, in the forced turnover because we're getting 9% rent increases, on average, from those folks moving in versus what the people that left us were paying. So with those 2 dynamics, it's pretty strong. I think if move-outs-to-home buying picks up, then we'll have to reconsider that.

But Dave, I would think for move-outs-to-home buying pickup psychology, the situation has to change a bit, and that likely would generate -- that means jobs are back, the economy's rolling, things like that. So we become less dependent on people staying with us and more dependent on new household creation. So the demand dynamic, we would hope and we would think, changes that way where the shift comes. From where our strength has been lower turnover, our strength becomes higher demand.

Okay. And on that point, given the better job growth across your markets lately, and despite the fact that the move-out-to-buy rate is basically flat, are you getting feedback from the field about improved psychology as it relates to home purchasing?

We are not. And, I mean, Dave, I would have told you last year that move-outs-to-home buying had bottomed last year, and in this quarter, they're out and they're down again. So we're not seeing much about that. The psychology of getting a rent increase definitely hasn't changed. People don't really love that. But the market supports it, and we educate them as to their options as best as we can.

Okay, that's helpful. And the other question is just on Cool Springs. It looks like the stabilization date has been pushed out a couple of times, and this is despite what looks like a pretty healthy lease-up. So could you talk about that?

Yes, David. Our developer had trouble with the framing contractor, and that delayed us a bit. But because the leasing has gone so well, and because we plan for these things a bit, the yield is intact, and the internal rate of return is intact. The leasing is going extraordinarily well really on both deals but particularly at Cool Springs. We budgeted these to come online with concessions, almost more than 1/2 of a month free per move-in. And we're not offering any concessions, and our base rents are higher than we planned. So slight delay on the construction but not material, and we're excited with the leasing.

Our next question or comment comes from the line of Mr. Andrew McCulloch from Green Street.

In your Secondary Market segment and that kind of "other secondary category," which has, I think, almost 10,000 units in it, can you just talk about that 3% revenue growth in that bucket and just how different the markets in there are performing, I guess? You touched on it briefly, but how wide is the variability in the performance of those markets?

Well, it's pretty wide. I can tell you that in that secondary bucket, we -- I mean, places like -- in terms of revenue, year-over-year revenue growth, Chattanooga was 5.3%, Birmingham was almost 6%, Bowling Green, Kentucky was right at 6%, Greenville, South Carolina was 6.6%, Gainesville, Florida was 8.1%. Spartanburg was almost 10%. So obviously, we've got some that are less than that. Warner Robins, Georgia and Macon, Georgia, I don't have those numbers handy. Tom, you may have them. But they're going to be closer to 1% to 2% broadly.

Yes, and the weaker response were really generated by an increase in turnover. Their occupancies are in reasonably good shape. But you'll see -- at the top of that same page, you'll see the term difference between the Secondary and Large Markets is substantial, and that's what's generated that a bit.

One of the markets in that Secondary Market group that pressured us a little bit was Columbus, Georgia where we've -- it's got a high exposure to Fort Benning there. And we had -- some sort of pretty extensive troop redeployment took place in the first quarter. And resultingly, we had a very high churn take place that pressured the performance in that market. Overall, all of the Secondary Markets were up. It's just some were affected by different factors. And in particular, ones where -- I remember that had a little unique pressure was Columbus, Georgia and, to some degree, the...

San Antonio.

Yes, San Antonio.

Just a big-picture question on the acquisition front. In any given year, can you give us a rough estimate on what percent of deals that you actually underwrite and bid that you will actually close on?

Well, I -- just kind of an underwrite, bid, and then there's a best and final and then there's what we actually close on. And I would tell you that what we underwrite and look at, the percent of those that get -- we get into best and final is probably pretty high, 50% to 60%. But, I mean, frankly, in a lot of these markets and the relationships that we have, people kind of generally always want us in the best and final because we're just -- we're kind of a sure thing as they see it. And then it drops off considerably from there. Probably, the best and final, those that we actually wind up closing on, are less than 5%.

And when you do get out there, the ones that do fall out, what is the delta, generally, between your bid and the winning bidder?

10% to 15%.

Our next question or comment comes from the line of Mr. Buck Horne from Raymond James.

A question for you. Are you noticing your rent income ratios in terms of your renters changing at all? And I guess I'm curious. Are you seeing any higher-income residents moving in now?

Yes, I mean, in terms of our portfolio, that point has changed a bit. The rent-to-income ratio has moved from 19%. It sort of peaked in the recession to 16%, which is a bit of an all-time high or all-time low, I guess you can say, an all-time good. The thing that's been interesting to watch a bit is the change in our average incomes, which, last year, average income for the portfolio by unit was $43,000. This year, it's $62,000.

And I guess I'm curious about your -- the people that are moving in. What percentage of those, if you know, are first-time renters versus those that may be moving in from another apartment? I mean, are you seeing -- and I guess the question is, are you seeing any benefit from a trade-down of people leaving higher-priced apartments for your apartments?

We are not.

I'm showing no additional questions or comments at this time. I'll turn the conference back over to you.

Okay. Well, we appreciate everyone joining us this morning. And we will, I'm sure, see you at [indiscernible]. Thanks.

Ladies and gentlemen, thank you for participation in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.