Good morning, ladies and gentlemen, and thank you for participating in the MAA First (sic) [Second] 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.

Thanks, Jonathan, and good morning, everyone. This is Leslie Wolfgang, Director of Investor Relations for MAA. With me this morning are Eric Bolton, our CEO; Al Campbell, our CFO; and Tom Grimes, our COO. Before we begin this morning with our prepared comments, 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. Second quarter results, we're at the top end of our expectations, reflecting continued strong leasing conditions across our summed up markets. Given the favorable second quarter performance, accelerating rent growth and active acquisition pipeline, and the progress to-date on securing an investment grade rating, we have raised FFO guidance for the year and expect another record performance in 2012. Property performance is driven by accelerating growth in pricing with continued low-resident turnover and high occupancy. We're encouraged by the trend in year-over-year pricing with the second quarter's growth and average effective rent increasing to 5.2%, as compared to 4.7% in the first quarter. We expect pricing performance will remain strong in the third quarter before we begin to see normal seasonal moderation in the holiday season. The third quarter is always a busy leasing quarter for us and we'll get a lot more clarity on real estate taxes over the next couple of months. But in summary, leasing conditions across our markets remain very good, and we're optimistic about NOI performance over the back half of the year. As detailed in the second quarter release, the Large Markets segment of our portfolio continues to perform very well with 7.7% NOI growth for the quarter. Our Secondary Markets segment also delivered very solid performance with 5.2% NOI growth. This difference in performance between market segments is in line with our full cycle portfolio strategy, and is what we expect at this point in the cycle. Until we see new supply trends pick up in a more meaningful way, I expect we will see this performance pattern, with our Large Markets segment outperforming our Secondary Market segment. However, with minimal new permitting activity underway in the Secondary Market segment of the portfolio, we expect that we will see the ratio…

Okay, thank you, Eric, and good morning, everyone. I'll provide comments on earnings performance for the second quarter as well as a few highlights regarding investing and financing activities. FFO for the quarter was $48.3 million or $1.13 per share which was $0.06 above the midpoint of our prior guidance, and Eric mentioned, is another record for the company. The strong result for the quarter was produced by several areas of our business, all performing above expectations, including the same-store portfolio, development activities, as well as financing costs. Same-store NOI grew 6.5% in the second quarter, based on a 4.6% increase in revenues and a 1.9% increase in operating expenses. Revenue growth was driven by a 5.2% increase in effective rents, compared to the prior year, which was essentially in-line with expectations. Operating expenses moderated more than projected from the first quarter, primarily due to personnel and repair maintenance costs, producing about $0.02 per share of favorability to our forecast. Non same-store communities, consisting of development and recent acquisitions, also outperformed expectations during the second quarter, producing an additional $0.02 per share in favorability, the majority of which was related to 2 development communities currently in lease-up, Cool Springs in Nashville and the Ridge at Chenal Valley in Little Rock, which are both ahead of plan. The remaining $0.02 per share favorability for the quarter comes from financing and acquisition costs, about 1/2 of this or $0.01 per share is timing in nature, related to lower-than-projected deal volume in the second quarter, which we now expect to occur in the third quarter. During the second quarter, we acquired 2 wholly-owned communities and purchased the remaining 2/3 interest in one community from Fund II, the company's joint venture. And in July, we purchased an additional wholly-owned community, bringing year-to-date acquisitions, including…

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

Eric, I want to go back to the Secondary Market performance a little bit, just so we can maybe understand some of the dynamics in the numbers. Is it possible you could disclose the new with renewal rates in the Secondary Markets of the quarter. And then, possibly walk us through the change in occupancy on a year-over-year basis, relative to those assets.

Sure, I'm going to let Tom do that. He's got the information handy here.

Yes, and I'll back into that real quick. On a new and renewal rates for the Secondary Markets for -- sorry to be a little behind on this, but we had about 3% on new rates and 5% on renewals. And then on the occupancy component, I think that's covered in the Q. It went down a bit, but really driven by military move-outs in 3 of our markets in Columbus, Savannah and Virginia. Those were temporary moves. The third infantry brigade deploying in Columbus, and a carrier moving out in Virginia, and those have recovered since.

Okay. That's very helpful. And then, I guess another question for you is, expense growth seems to have moderated somewhat in the second quarter, and we've seen a rather elevated expense growth of other, sort of your peers. Is this aberrational in the quarter? It seems like it's actually below guidance at the moment. Are you expecting sort of bigger problems in the second half? Is part of that tax driven potentially?

It is, Dave. This is Al. I can answer that. And we still have our range of 3.5 to 4.5 for total expenses for the year. Now, as we mentioned in the press release, we'll probably end up at the low end of that. So some of the moderation that we saw in the second quarter will carry through. The large part of it, the moderation was expected. It just occurred a little faster and a little sharper than we have projected. So we still think we'll end at the low end of that expense range that we gave for the year. A big portion, as you mentioned, is real estate taxes, which we have and always set for the year, was between 4% and 5%. Midpoint of that 4.5% is what we still expect, and we think that's about right, given the information that we received for the -- so far this quarter. The pressure points are coming from the places we thought and it's about what we expected. And we'll have more for that -- on that in the third quarter, have more clarity, but we expect it to be in the low end of our guidance in total for expenses.

Okay, that's helpful. And then my last question is just around -- some of you guys mentioned, relative to capital recycling going forward, now that some of your balance sheet goals are out of the way, and there's been some aggressive growth. What kind of assets can we expect to see in the disposition category in the next couple of years? How do you guys define assets that are right for disposition?

David, it really just starts with the process of identifying those assets that have the lowest after-CapEx cash flow margin, and we have no real intent making any sort of -- to make any sort of strategic shift out of a given region or given market. It really is just looking at those investments that are producing after-CapEx cash flow that are below the margins, that we feel like we can get elsewhere. And now what that means, as you might imagine, after-CapEx cash flow, it often translates into lower or older properties, and also it translates into properties that have lower rent structure. And as a consequence of that, you're going to see, obviously, then us, likely moving more and more out of some of the older properties. And some of the older properties, a lot of which came with the merger that we did with Flournoy Company back in 1997, also happened to be in some sort of beyond Secondary, almost really -- you would define almost as Tertiary Markets. And so that's -- and that's where you're going to see most of the capital cycled out of our other older assets and in some of the real Secondary Markets. We, again, are remaining very committed to the Secondary Market segment of our portfolio, and -- but you're going to see a cycling capital pie, a little bit more actively, in that component of the portfolio.

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

Eric, just as a follow-up to that last question, what is the gap between whatever it is, the bottom 5%, 10%, 20% of your portfolio in terms of operating margin versus the sort of average?

I think it's a couple of percent. That's what I would say, and probably 2%, and maybe 3% at the very bottom. But that's probably a good indication of it, Rob.

Okay, so over time, you could -- you're going to -- would sell assets that have 200 to 300 basis points lower operating margins, and so, that should possibly benefit your overall operating margins as a firm?

Absolutely.

Okay, and then, Al, just on the guidance level, I mean, you guys are tracking for the first 6 months -- and maybe it's a question for Tom. But you're tracking at 4.5% revenue growth, your guidance is 4.5% to 5.5%, I think. Like, what's happening in the back half of the year that's going to cause an acceleration from where you were in the first half versus, I think a lot of your peers are forecasting sort of decelerating revenue growth?

I'll tell you what the forecast is built on and Tom can come in and give you some operating reasons of why that is, but the acceleration in the third quarter is because a lot of leasing activity comes in the third quarter, and that's when we get our pricing power. So we expect some movement there. And in the fourth quarter, I think it's the continued trend that we see this year. We'll have some moderation from seasonality projected, but in large element, the trend forward will continue and there's a comparison opportunity in the fourth quarter this year, compared with the prior year. That's a big part of the acceleration in the fourth quarter. And so that's been built in our forecast all year, I would say, and it's so far, performing about the line with expectations.

Yes, Rob. I think that's really just a compounding of the new rent growth. We will see some seasonal moderation in the fourth quarter on pricing, but what we've built in on our pricing will matter more than those few leases, that rent at a lower number in the fourth quarter, and we've got some good occupancy comparisons in the fourth quarter as well.

Okay. And then, Eric, what are you seeing today in terms of the market for acquisitions? Are you seeing a lot of people bringing product on the market to try to get it out under the current tax regime, and trying to get them closed by year end? Has that not been a factor thus far, any interest in OP units, et cetera?

Well there's certainly a lot of volume in the market right now. We're underwriting a whole lot of deals, more than I can remember us ever looking at. And so it's very active. I do think that there is some motivation by a lot of capital to take advantage of what is obviously a very attractive financing environment, a very attractive operating environment and probably one of the more favorable tax windows that we'll have for some time. And so all those factors are, I think, are suggesting that anybody that's got any intent on moving out of investment, they're looking to do that between now and year end. I think that occasionally, we'll run into folks that are looking for some sort of tax-free exchange, but honestly, not very often. I think more often than not, we'll see that with some of the portfolio transactions that I occasionally come across. But on most of these one-off transactions that we're doing, it's really more just cash acquisitions.

Are you looking at any new markets this round?

Not -- well -- Kansas City is a market that we've been looking at some deals in. We're -- but other than that, no. I mean, we continue to like the region and broadly the footprint that we're in.

Our next question comes from the line of Rich Anderson from BMO Capital.

Can I just get back quickly to the margin discussion, can you quantify that? What absolute level of operating margins do you think you can buy at, is it over 70%? What's the number?

I don't think it's that high.

60.

It's going to be in the -- I'll call it 60 to 70 range.

And the number I threw out, Rich, just to clarify, the 2 to 3 is probably the bottom level of what we'll be selling from the midpoint of the portfolio, that's a good point. If the new assets that we'll buy will have the lowest, the best margins and, probably better, that gap will be wider than.

Next question on development. I'm curious with your thought processes to be a developer in any level. I mean, given the incremental risk associated with development, it's such a small percentage of your overall kind of operating strategy, why even bother developing? You're probably aren't going to get paid for it anyway, in my opinion. What were your thoughts on that?

My thought is this: We did not want to be developer. We do, however, want to find opportunities to deploy capital in new assets on an attractive basis. And we think that the way to accomplish that is to essentially outsource our development operation, by essentially hiring developers that come to us with opportunity. We negotiate a contract. They essentially take the development risk, because these are contracts with fixed price. We take the lease up and then that's really it. And we're also mindful of how much of that we want to take on the balance sheet at any point in time. But we just don't think that being a big developer, and take on the overhead associated with that, is the right thing for us to do.

Rich, remember our NOI yield expectation for our current pipeline is 7.5% to 8%. Compare that to 6.5% on acquisitions right now. So there's still a good spread there to capture in this part of the cycle and so -- and in our developments, what we're doing are ahead of plan. So that's all good news.

Eric, I'd like to get to the conversation you had about jobs permit, unit permit? I think you said it was running at 7x in the last cycle and it's higher than that this time around because of the lack of desire to own a home. I think that's what you said. Is that about right?

Yes, during the last recovery cycle, 7:1. During this particular year, it's 14:1. So it's double, if you will. But it's really a function of 2 things. One, it's a function of the propensity for renters to stay in a rental market but, fundamentally, it's because there hasn't been any supply delivered into the market for the last couple of years.

What are these jobs that are being created? Are they construction jobs, are they -- what kind of jobs are they? And do they all matter to you as an apartment landlord?

Rich, it's Tom. We can run through it. In Houston it's oil and gas. In Dallas, it's technology. In Charleston, it's manufacturing. Across the Sun Belt, it's a range of things that are not temporary in nature and are, frankly, been historically strong to the Sunbelt. So I mean, they're there and we're chugging along. It matters. Every job matters.

Peter, just coincidental events, right? The jobs are happening and permitting is happening, but they're not necessarily tethered together, one-to-one. Is that what you're trying to say? I'm just trying to understand the logic a little bit.

What I'm trying to say is that, I think in order to have a healthy leasing environment, one has to obviously look at the amount of new supply coming into the market and whether you should be alarmed or not about that level of new supply coming into a market, depends upon whether or not there's going to be enough job growth, to handle and absorb that supply. And while, I think, there's a lot of hand wringing that's starting to take place about permitting activity being up as much as it has grown over the last couple of years, obviously, from very depressed levels, I don't think it's something to be overly concerned about. I think we're going to go from an environment where we've seeing, if you will, just unbelievably good fundamentals to probably, as a result of supply coming into the market, to an environment where it's going from unbelievably good to just really good. And I think that's what we're trending.

Okay, that clarifies that. And then, Eric, last question for you, probably you've been asked this question many times, but you consider your company kind of the defensive, or having defensive characteristics, maybe not shared by some of your peers, a full-cycle type of story. So why should -- if fundamentals are white-hot right now, what would be the reason for people to buy MAA stock and not some of your peers? Or are you saying maybe that things are starting to get to peaking conditions, development is starting to pick up and then that in itself is a reason to maybe look at MAA a little bit more closely because of its defensive characteristics.

Well, again, our objective is to be the best full-cycle performer that we can be. And I think that while we have defensive characteristics, if you will, I think that we also have the capability to be very competitive in this phase of the cycle also. And our objective is to be in a position to deliver very competitive performance within the growth cycle, if you will, and to retain, though, the downside protection as much as we can. I think that our story should have appeal for, to some degree, it depends on your investment horizon. Our thought process is built on the basis that we think to deliver the -- our shareholder performance horizon that we're aiming for is really designed to match or align the horizon that we use for deploying capital. When we buy properties, those properties are assumed to be owned 7 to 10 years. That's the kind of horizon that we have to think about in terms of delivering performance for shareholders as well, because that's how we deploy capital. And of course, over that kind of horizon, you have up parts and you have down parts. And what I can tell you is that, over that kind of a horizon, and if you look at over the last 7 to 10 years, when you look at our total shareholder return and what it's been compared to others, what's important to recognize is that roughly about 2/3 of that performance for our shareholders has been the dividend that we've paid. And we think, ultimately, that's what the REIT platform is all about. It's all about trying to deliver total shareholder return over a long period of time, a lot of that return being composed of the dividend. And so, our objective is to take some of the cyclicality out of equation. Take some of the cyclicality out of the performance in an effort to support the ability to fund a steady growing dividend, sort of, no matter what. Through good times and bad times. And so I think you have to be willing to bring a little bit of downside protection into your story and onto your balance sheet and how you deploy capital. You have to have that component in there to achieve that kind of long-term performance. And in return, what you have to be willing to do is give up, perhaps, a little bit of the froth at the very top end of the market. And we think that's okay. We're comfortable with that kind of a profile.

Well said.

Our next question comes on the line of Michael Salinsky from RBC Capital Markets.

You talked about developments running a little bit ahead of underwriting. Can you give us a sense of how much that's running ahead? And will you expect those to pencil out now?

Yes, no. I mean, we're feeling pretty good. Venue in Nashville, we expect it to be 41% occupied, and they're 53% occupied and we expected 1/2 month's rent concession to do lease-up and then we're not running with any lease-up concessions. And it's the same story, really, Ridge, we expected them, actually, they're a little further ahead to be 22% and they're 52% occupied. Same story on the lease-ups.

Yes, I was just going to say, Tom mentioned it, it's all about timing of the lease-up and the lack of concessions and, as we ended the year, I think, we had $0.10 to $0.12 per share dilution from our pipeline, and probably going to be more like $0.04 to $0.06, or $0.04 to $0.07 this year. So it's a very good story. I think the yields that we'll achieve on this portfolio continue to be 7.5 per 8 but the IRR, once we're done with these things, would be better because we're avoiding largely dilutive prospects at the initial parts of these projects.

That's encouraging. Second question, more operations. Can you give us what new lease and renewal rents, lease over B-spaces were in the second quarter and also for July? And where you ended July on an occupancy basis?

On July, on occupancy was 96 and then new lease was for the second quarter was 4 2, renewals 6 2 and for July, 3 2 and 6 5.

That's lease over lease, correct?

That is year-over-year. Lease over lease was 4 1 and 6 6, and 4 and almost 7 for July.

Al, a question for you, you talked on your last call about looking at a term loan or private placement in the second half of the year. Is that still in the plan for 2012? And also where would you expect pricing given the debt upgrade there?

It is, Mike. As we talked about before and as you've seen it on our balance sheet, we paid down our secured financing from agencies using a bit of our credit facility. And so, we expect one more transaction this year, probably in the range of $100 million to $150 million, likely private placement term loan, the best product in town and we'll have more on that in our upcoming releases. I think it's safe to say, right now, surprising on a 10-year basis, we may blend 7 and 10 years, so that will change somewhat. But safe to say, somewhere in the 4% to 4.5%, maybe 4% to 4.25% expectation for that over the -- probably be funded -- begin funding late third quarter and likely be staged somewhat 50-50 in 50. You know, my 50 a month for a few months late in the year, Mike. So that should help you model out and get you pretty close to where we are.

Final question for Eric. We haven't really seen a whole lot of activity on the JV front and I was kind of going after value add. What are you seeing in terms of value add and does it still make sense today, given the compression we've seen in cap rates?

Well I think, what we're finding is that the value add transactions that come to market, these are properties that we characterize as sort of 8 to 12 years old. The competition on those is really fierce because those are assets that are fairly easily financed and, in this environment, the private capital folks are able to get very attractive financing terms and, as a consequence, put some pretty big numbers on the table. And based on what deals we've seen, where pricing has traded, they've we've also made some fairly heroic assumptions regarding the ability to raise rents and capture a lot of value out of whatever repositioning plan they plan to execute on. So it's really, frankly, just a matter of very aggressive pricing in that particular transaction set that has caused us to not see a lot of opportunities there that makes sense for us.

The final question. At this point in the cycle, you come for what your concentrations in primary versus secondary? Or is there an impetus maybe to increase the primary a little bit more to capture some growth over the next couple of years?

No, I mean, we've taken a hard look at this for quite some time and continue to believe that the current allocation that we have, which we define at roughly about 60% large and 40% secondary. I mean, optimally, the range is for 60% to 65% large and 35% to 40% secondary. We think that creates the optimum sort of portfolio cash flow performance profile that we're after in terms of long-term growth without -- with some of the volatility taken out of it. And so, we're pretty comfortable with allocation we have now. And again, going back to my point in our prepared comments, when you look at where supply is starting to get teed up, it's as always, it's in some of the larger markets and, in many cases, it's in a lot of the more urban locations in some of these larger markets. And eventually, that's going to manifest itself into leasing conditions, in some of these larger markets, and as I quoted in my comments, the ratio of sort of job growth to permits in secondary markets are actually going to be -- at least based on what we're looking at, and what we're seeing right now, are going to get better and more in our favor, if you will, next year. So I think, trying to move a bunch of cap out of our secondary markets into large markets right now would be the absolute wrong thing to do.

I appreciate the detail.

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

So those comments on portfolio allocation are helpful and as was your -- the disciplined approach to dispositions that you conveyed, but the question is, just within the secondary markets over the near-term or intermediate term, what's the opportunity to reallocate within those markets and maybe increase your concentration to more desirable secondary markets and reduce concentration or exposure to some MSAs that you are in and are not as attracted to, long-term?

I think that's where a lot of the opportunity in this recycling effort is going to be aimed at over the next couple of years. Again, it starts with a definition of where are we seeing opportunities to redeploy capital in higher after CapEx margin cash flows. And what that is normally translating into is some of the older assets. As a consequence of portfolio transactions, we went through back in 1997 with the Flournoy Company. It happens that a lot of the older assets are in some of these more tertiary type markets. And so, I think you'll see us over the next couple of years continue to cycle out of certain secondary markets and into, I would call it, perhaps secondary markets that are a little bit more well-known and our goal is that we think that, that process would yield higher after CapEx cash flow and likely we think, over time, that the public market probably puts a better multiple on that cash flow as a consequence of moving capital out of, let’s say, Macon, Georgia into Charleston. Or out of Macon, Georgia into Savannah. My guess is that over time, that kind of creates a better performance profile for the company and I think also garners a little bit more appreciation in terms of pricing them, and the company has a multiple of that cash flow.

Right. That makes sense. Next, could you talk about the Buckhead submarket of Atlanta and your interest there? Investing in a submarket like that seems a little different from your typical approach and so I was curious what you're seeing there and if we could interpret this as being an indicator of a shift in strategy towards more urban submarkets.

David, it's really not any sort of shift in strategy. I mean, our capital deployment practice is really geared towards, first and foremost, looking for those opportunities where we think -- where people want to live. And where there's the proximity to employment, good retail and just a desirable area to live in. And then from there, it becomes just a question of looking for opportunities that we could capture on pricing that makes sense, for how we model and deploy capital. And it just so happens that, frankly, over the last 2 to 3 years, some of the better opportunities that we've seen have been in some of the more the urban-type submarkets in some of these cities. That's where a lot of stuff was built over the last several years and where a lot of distress took place. And so consequently, that's where some of the best buying opportunities have emerged for us this year. Now we think an added benefit from all that is that we probably do further diversify in some of these bigger markets with a mix of both suburban and urban locations, which I think probably has some value long-term, in terms of performance stability. But there's really no intent to make any shift from suburban to urban, or one way or the other. It's really just, let's go where people want to live. And as we've pointed out in the past, a lot of these southeastern cities, a lot of the employment centers are out in the suburbs. And so, that's what drove out there to begin with. It's not because we -- it's necessarily some of the best buying opportunities, we want to go where people wanted to be, where they wanted to live. And then it becomes a question of: "okay, now, let's find the best pricing opportunity." And it just so happens that these 2 recent acquisitions in Buckhead were presented to us. We like the assets a lot, the pricing worked and we bought them.

Can we interpret that your intermediate rent growth outlook for the urban submarkets of Atlanta is pretty nicely superior to your outlook for the suburban markets? And perhaps in part due to the lack of supply there?

I think that -- of course every market, and every situation, is a little bit unique. But, no, I mean, I think that our outlook for rent growth is not -- based on what we're looking at, we don't see it being particularly strong in suburbs versus particularly strong in the urban areas. I think that you're right, and that a lot of the supply it is picking up, to some degree, in some of these bigger markets. Today, it has been more in the urban core part of the city. And my guess is that you may see fundamentals flatten a little bit quicker there, as opposed to some of the suburban locations over the next year or so. But I think that the only thing that would -- it'd really be more of a supply question and -- but from what we see right now, we're still expecting to capture pretty strong rent growth out of many of our suburban locations over the balance of this year.

And last question is, can you update us on the competition you're seeing with single-family housing move outs to buy and rent?

Sure, Dave. The move outs to -- for home buying's up slightly about 4%, or 42 units, but still 18.3% of total move outs versus like 17.8% and not a material move there, and certainly not up around the highs of the 30% that we've seen before. And the move outs due to home renting has gone down 1.7%. It's now less than 6% of move outs and it just -- continues not to be much of a factor.

Our next question comes the line of Paula Poskon from Robert W. Baird.

Apologies if I missed this in your prepared or earlier Q&A. Are you -- do you have -- currently marketing anything for sale?

We do have 2 other properties that are for sale right now. They're in the contract phase and expecting to close late third, early fourth quarter kind of range, Paula.

Have you already reclassified those, Al, as discontinued ops?

One of them is in the balance sheet as available for sale, the other one is not because it has yet to hit the bright -- or didn't, at the end of the quarter, the bright line for that test. But, yes. One is in there, you'll see it in the balance sheet.

And what's the cap rate spread between what you're buying and selling at?

We have on the whole portfolio this year, we expect about 6.7% x of cap rate. That's on in place cash flow after 4% management fee and 350 CapEx on the disposition. And so we're -- so that's -- and we talked about on our buying has historically been 5.5% to 6% range. So that hopefully gives you somewhat the spread.

Yes, that's helpful. And are you considering moving more assets out of the fund onto the wholly-owned on balance sheet? What's the opportunity set there?

Not really. I think that the one transaction that we did in Austin was just a unique situation where our partner was looking to create a transaction for their capital and we sort of looked at that property. Obviously there's some supply that's trying to pick up in Austin and they just felt that, that was an opportunity to cycle out of that one. We took a hard look at the asset and given our horizon, and the way we thought about the market, we were able to offer them a price that made sense for us, made sense for them. So that's what we did. I think that, more often than not, honestly, you're going to see us, when we make a decision to sell an asset out of the JV, more often than not, it will just be taking the market as opposed to us buying the interest back. We're not actively selling anything else right now in any of our JVs.

That's helpful. And speaking of Austin, just 1 final question. There's certainly a lot of construction underway in terms of the purpose-built student housing close to campus there. Do you anticipate any impact in your Austin properties? Do have a big percentage of your residents that are students?

No, we don't, Paula. We're out a bit from University of Texas, we certainly love the jobs that it throws off but we are not heavily exposed to the UT students.

That's all I have.

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

Can you give us an update on the rent income metrics for your incoming tenants and just how that may compare year-over-year?

Sure. The rent-to-income ratios, and I'll back it up a bit, in sort of '08, '09, it got as high as 19% and it is steadily worked its way down and we're at 16% rent-to-income ratio today.

How does that vary between large market versus secondary markets? Do you have that kind of granularity?

I do not. Not on that statistic.

I'll get it for you. I don't think it's that big a spread difference, to be honest with you.

And on your turnover. Do you know how many move outs were citing rent increases or the rent was too high as the reason of the move out?

Yes, yes, it's 13% of move outs for us. We're at rent increase and that's a number that we comfortably control and it's been offset by lack of job loss and job transfer, so we're happy with that number and we replaced those folks that moved out with rents that are paying 8% higher than they were, so it's still making sense at this point.

Just one last one. It's kind of demographic question I have for you. Just thinking about the average age of your incoming tenant, have you seen any changes in the average age of who you're renting to or at least who's walking through the door these days?

I mean, that's stayed largely consistent. I mean, I think we'll see it pull down or actually I think we'll see it track sort of the eco-boomers' midpoint, but it has not changed materially.

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

I'd like to get some more color on the Florida markets. It looks like south Florida is doing quite well and your bigger markets like Jacksonville and Orlando are not. I mean, what is the cause of the dichotomy there? And if you're considering sort of reallocating your capital there in Florida?

I'll answer that quickly. South Florida is -- you're looking at one asset in a very specific location with a good, good school district there in Coral Springs. And it weathered the storm extraordinarily well. So it's sort of specific submarket has allowed to do quite well over time. On the Jacksonville front, Jacksonville is coming back reasonably well, but it's just not rebounding as fast as the Texas markets go. But we're encouraged by where it's heading. They've been able to grow rents reasonably well this year and occupancy for the quarter was 95.7%. July, it's picked up a little bit more to 97% exposure at 7 5. So we feel like the fundamentals of Jacksonville, while they have been slower to turn than our asset in south Florida, has done -- is coming. There's more to come out of Jacksonville.

Great. And then I was just wondering if you guys have the ratio of jobs to permits by individual markets and in particular I'm thinking about Raleigh and Dallas, and maybe even Austin. But do you guys have that by the market?

Sure. I'll be glad to run through that. With Dallas, it's currently 10:3, Raleigh the same thing, 10:3. We do actually have different numbers there for it, I'm not making that up. And then just circling back to Jacksonville, it has been -- it's been a little bit -- it's been low at 6, which is that slow job creation coming on, but picks up a ton next year. And it will be almost 12.

What we'll be glad to do, I'm sorry, but if you're interested is off-line, just give us a call and we can give it to you by market.

No, that'll be very helpful. And lastly, Al, is there any update on S&P ratings and if that will do anything further for your borrowing costs?

That's a good question. What we feel like we're in a very good position to continue our discussions with those -- with S&P and we believe that by late this year, we're hopefully in a very good position to achieve our goals of getting ratings from all 3. And once we do that, it will have an impact on our borrowings because I think we'll be in a position to access the full public bond market. And so, I mean, I know you've probably seen some of the transactions that have happened over the last few months, but it's been very aggressive. Some people rated at this Baa2 level, have gotten very attractive 10-year financing costs. So I'm talking in the 3.4%, 3.5% range for 10 years. So certainly, that's a very favorable future for us and we hope that we can achieve that level and get some of that type of financing next year.

Our next question comes from the line of Andrew McCulloch from Green Street Advisors.

Just one follow-up to David Bragg's question. Have you guys changed your underwriting assumptions at all in acquisitions? I mean, Mid-America has always been very conservative in its underwriting, especially on component, especially at the cap rate. And the secondary and tertiary markets where you've historically targeted, where competition is really less intense, you've always been able to source plenty of deals even after this conservative underwriting. But in some of these primary markets, like Buckhead, where you've been more active of late and where competition has to be a lot more intense, it's a little surprising you can win some of these deals, again, under what's you've had historically, very conservative underwriting. Can you just comment on that?

The answer is no. We've not changed our underwriting approach at all. The methodology that we've used historically is absolutely being used again today. I think that, honestly, the 2 deals that we've acquired were just unique -- in Buckhead, were just unique situations where the properties have been in the contract previously before. Sellers involved had some very hard deadlines and some things that they had to get accomplished in a very short order, and we were able to move very quickly and definitively, and offer that sort of assurance. See these are brokers involved, that we've done a lot of business with, and they really went to bat for us. And so, I mean, really, we find in today's environment, that really, it's just very competitive both in more the urban areas as well as in the suburbs. And it really just comes down to looking for scenarios where our ability to move very quickly and definitively through the due diligence and close, has a lot of value. And ironically, we find, as you might imagine, we find that we get more value for that, if you will, as we get into this third and fourth quarters of the year. Often, we find a lot of transactions that are initially brought to market that we don't get -- we don't get under contract the first part of the year, they often come back around during the third and fourth quarter of the year. And that's when we're able to offer the seller our execution capability, that they put a lot of value on. But, no, quickly, we certainly add to -- we've not changed our underwriting approach at all.

This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks.

Okay. Jonathan, appreciate it, and thanks, everyone, for joining us this morning. Just let us know if you have any other questions. Thanks.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.