Good morning, ladies and gentlemen. Welcome to the MAA Fourth Quarter 2017 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, the company will conduct a question-and-answer session. As a reminder, this conference is being recorded today, February 01, 2018. I’d like now to turn the conference over to Tim Argo, Senior Vice President, Finance for MAA.

Thank you, Savanna, and good morning. This is Tim Argo, SVP of Finance for MAA. With me are Eric Bolton, our CEO; Al Campbell, our CFO; Tom Grimes, our COO, and Rob DelPriore, our General Counsel. 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 forward-looking statements section in yesterday’s earnings release and our ‘34 Act filings with the SEC, which describe risk factors that may impact future results. These reports along with a copy of today’s prepared comments and an audio copy of this morning’s call will be available on our website. During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to comparable GAAP measures can be found in our earnings release and supplemental financial data. I’ll now turn the call over to Eric.

Thanks, Tim and good morning everyone. Thanks for joining our call this morning. Overall, same-store and FFO performances for the fourth quarter were in line with our expectations. Leasing fundamentals and results reflect higher levels of new supply primarily impacting the higher in price point properties, offsetting some of the supply pressure at our higher price locations has been the steady results captured from our more moderate price properties located mostly in suburban, submarkets in a number of our secondary markets. MAA’s diversified and balanced portfolio strategy is performing, as we would expect at this point in the cycle. As we consider 2018, we believe the year will unfold initially with leasing performance much in line with what we’ve seen over the last couple of quarters, as new supply continues to come online. However, we continue to believe that based on moderating trends for the permitting of new construction, that we are nearing the trough for this cycle, and with continued good job growth we expect to capture improving pricing trends as we enter the peak leasing season. Tom will highlight more details in his comments, and while is of course very early in the year, performance in January is in line with what we expected. January results continued with strong occupancy. In fact, daily occupancy in January across the same-store portfolio was 40 basis points ahead of the same point last year. Importantly, this strong occupancy provides the support needed for positive pricing traction, and we’re encouraged that effective pricing in January across the same-store portfolio was slightly ahead of the growth rate in January of last year. Our long-established strategy built around a goal of optimizing results over the full cycle continues to deliver solid downside protection to MAA’s earnings stream. And with the strengthening of the balance…

Thank you, Eric, and good morning, everyone. Our operating performance came in as expected. Revenues for the fourth quarter were 1.8% over the prior year with 96.2% average daily occupancy and 1.7% effective rent growth. Expenses increased just 1.3% over the prior year and NOI increased by 2.2%. Looking at revenues, revenue drivers by portfolio in the fourth quarter as compared to the prior year, the legacy MAA portfolio generated revenue growth of 2.6% with 96.3% average daily occupancy and effective rent growth of 2.4%. The legacy Post portfolio had slightly negative revenue growth with 95.8% average daily occupancy and flat effective rent growth. The slight improvement in overall year-over-year revenue growth rate from the third quarter to the fourth quarter was a result of the steadily improving occupancy in the legacy Post portfolio. Expenses continue to be a bright spot for both portfolios. While it takes time for the improvements and revenue management practices and pricing to show up in our revenues, our programs to more aggressively manage operating expenses have shown more immediate results. Including real estate taxes which were up 5.7%, overall expenses for the same-store portfolio were up just 1.3% for the quarter. That was driven by improvements in personnel, repair and maintenance as well as property and casualty insurance. We still have room to run with our expense management programs on the post-portfolio and expect continued progress in 2018. Our operating disciplines are now fully in place and at the current run rate, the savings will continue. January results show the benefit of our consolidated platform. Overall same-store average daily occupancy in January is 96.3%, which is 40 basis points higher than the prior year. This is driven by 50-basis points year-over-year improvement in the legacy post portfolio. Overall, same-store January blended lease-over-lease rates are…

Thank you, Tom, and good morning everyone. I'm up for some additional commentary on the company's fourth quarter and full your earnings performance, balance sheet activity and then finally on initial guidance for 2018. Net income available for common shareholders was a $1.08 per diluted common share for the quarter. FFO for the quarter was a $1.50 per share. Fourth quarter performance includes $0.03 per share as of a non-cash income from the valuation of the embedded derivative related to the per shares issued in the post-merger, and excluding the impact of this embedded derivative earnings results for the fourth quarter were essentially in line with our expectations. Net income available for common shareholders was $2.86 per share for the full year of 2017. FFO for the full year was $5.94 per share, which includes $0.07 of non-cash income related to the per share valuation offset by a $0.17 per share of merger and integration calls during the year. AFFO for the full year was $5.30 per share, which is for the healthy 66% payout – dividend payout ratio well below the sector average. During the fourth quarter, we acquired one community for $72 million and sold two communities for $97 million and in gross proceeds completing our capital recycling plans for the full year. Total book gains of $68 million were recognized related to these dispositions during the fourth quarter. For the full year, we acquired two communities for a combined total investment of $134 million and sold five communities for combined gross proceeds of a $186 million, which produced an average 15% leveraged IRR for this position portfolio. These sales also produced $127 million recorded book gains and a $132 million of combined tax gains for the year, which were deferred with 1031(b) transactions were covered with other…

Thank you. [Operator Instructions] And we can take our first question from Nick Joseph with Citi. Please go ahead, your line is open.

Thanks. Eric 2017 was disappointing with the same-store revenue guidance cuts in and ultimate nets, and so when you went through the guidance and budget process this year, do they’ve been changed and what were the lessons learned from 2017?

Well, you know, Nick what I would tell you is that as we started last year in 2017, we knew that supply levels were going to be picking up. And they did pick up, as Tom alluded to, peaking in the fourth quarter of 2017. I think the thing that surprised us a little bit was that we thought that it would peak frankly a little bit earlier in the year and the delays that took place worked against us a little bit. And then, as the delays occurred and more of this lease-up activity was pushed into the fourth quarter, which as you know, a very slow period of time for leasing. The concession activity proved to be much more aggressive as a consequence of that. And so, market conditions were more negatively impacted particularly on the pricing angle as a consequence of some of those delays and the seasonality factor that I alluded to. And so, I think as we think about 2018, we're encouraged as Tom pointed out that there's pretty clear evidence that the supply trends are going to moderate based on the fact that Q1 of this year we're in right now is by far the highest and by the time we get into the year it's half. So, the question becomes are you going to have more delays? We think there could be more delays, but we're still optimistic that in terms of delays and delivery, but we're still optimistic that as we get to the summer season which is really as you know the peak time for rent growth that we are going to see more moderate pricing or more moderate pressure from the new supply than we did last year. And so, I think that though this is all predicated of course…

No, I appreciate it. But given the elevated supply and I guess the risk of further delays, I mean, what gives you the confidence to increase the rent growth assumptions from what you've laid out in November? It feels like if anything after last year you'd rather be a little conservative to start off the year.

Well, a couple of things; one is the fact that we're starting in such a strong occupancy position, actually slightly higher than last year our exposure which is a combination of our vacancy plus our 60 day move out notices that we have is lower. And so that obviously solid occupancy is important to getting the pricing traction and we're in a better position now than we were this time last year. Having said that, the other thing that we're comforted by is, we have the revenue management platform if you will fully implemented under sort of the practices and approach that we take across the legacy post portfolio. And so, with that system in place, the stability and staffing I mentioned that – and the strong occupancy that puts us in a position. Now, having said all that Nick, let me -- I'm just being honest about it as we get into the busy season, we'll see how things play out. There's certainly no guarantee that -- I can't, I mean we're assuming that the job growth in demand side will be there. There's really no reason to believe it won't be. We -- I’d certainly think there's probably likely to be some delays take place, but we think that in terms of new delivery and some of it may bleed over into the summer. But having said that, having a little bit more leasing, our supply issues in the summer when leasing activity is elevated is a much better time to have it than in the winter as I talked about is what we saw in the fourth quarter and a little bit in this first quarter. So, there is a lot of influences here, a lot of factors, but we think that work – we feel good that the overall expectation that rent growth improves over the course of this year, particularly as we get into the busy season into the back half of this year is a reasonable assumption to make.

Thanks for all the color.

You bet.

Thank you. And we can go next to Drew Babin with Robert W. Baird & Company. Please go ahead, your line is open.

Good morning.

Good morning, Drew.

Question on same property NOI emergence, I'm looking at 2017 over 2016, it looks like the blended portfolio margins increased about 20 basis points and if you – kind of midpoint of the guidance for 2018, it looks like maybe in the best case it’s another 20 basis points or so. Are margins approximately where you envisioned them being at this point with the post-merger? And I guess if you include property management expenses in the calculation, would the margins look quite a bit better than what I just described?

Let me start with that, Drew. This is Al. I think no, I think they’re not where they are that we think they will be ultimately. I think what we expect and we have outlined in our forecast for 2018 some continued capture of expense performance, we are 2% of the midpoint of our guidance there with taxes, so going up 4% at midpoint. So, there is certainly some continued benefit from that, but we think there is more to go, maybe little bit more expenses, but really more on revenue through the redevelopment pipeline as we talked about it will take a couple of years. We’ve got – as Tom talked about, we got 13,000 units of inventory there. So, it will take two years, three years to really work through that. So that will be a meaningful impact. And so, I think there are other things in revenue that we’ll see more as markets improve and we really put more that on the tables, I see. So that’s not – so we don’t expect that we're at where we're going to be ultimately with those margins, they will improve really more as you move into 2019.

Okay. That's helpful. And then lastly on the external growth environment, it seems like the market remains very tight for new opportunities. I guess, it’d be helpful, if you talk about the state-wide field expectations on your four-queue acquisition? And then I guess a broader question you know I guess kind of what's the trade-off between the benefits of potentially in A minus credit rating and the interest savings that might result from that vis-à-vis up taking your leverage a little bit should some acquisition opportunities that make sense come down the pipe. What are the internal conversations around that been like?

Well. I'll talk a little bit about the environment – transaction environment and the deal in the fourth quarter. And Al can talk about the balance sheet. I you know, I'll tell you Drew, I mean you know we are seeing more transacting – transaction activity at this point than we did this time last year. We've got quite a few deals under review at this point. We have you know our guidance of $300 million to $350 million. I mean I can tell you, I mean it’s certainly no guarantee it’ll close, it's in due diligence. But we have you know contracts on deals that probably get us to about a third of that of that way already. So, we are seeing more activity. And I'm optimistic that this year is going to yield a little bit more you know better buying opportunities than what we've seen. And answer to your other question, generally, I can tell you that you know between the disposition proceeds, we generated last year we carried into this year between the free cash flow that we’re generating as you know and in our assumptions, we’re not assuming any equity issue this year. We haven’t been in the equity markets in quite some time and so see no expectation to do that. So, if we execute the plan that we have laid out, our leverage will move up just a tad as a consequence to that, if the acquisition environment is even better than we expect and the volume is higher than we have forecast and we’re successful in that regard, then will have to have that conversation about the metrics on the balance sheet. Our coverage ratio, coverage ratios are very, very strong, better – payout ratio is better than the sector average. So, we’ve got a fair amount of room to execute some external growth without worrying about any additional capital and without worrying about any sort of pressures on our current ratings. We like the flexibility we have right now and I think that that pretty well defines – we think we’re in a good spot right now and any notion that we need to work to take our rating up another notch is not something we’re actively thinking about right now.

That’s very helpful. Thanks guys.

Thank you. And we can go next to Rich Anderson with Mizuho Securities. Please go ahead. Your line is open.

Thanks. Good morning team. So, if I can just carry on with that conversation real quickly. So, the acquisition pipeline then becomes a bit more accretive, I would assume since you’re going to find it – funded with debt and free cash flow instead of dispositions going forward. So, that’s good. Can you quantify how accretive $300 million of acquisitions that’s good. Can you quantify how accretive $300 million of acquisitions might be for a full year or is that not successful?

Well, I’d say it gets a little bit difficult only in the sense that we don't know at this point how leased up if you will those particular assets will be I mean…

Okay.

On a fully stabilized basis, it becomes pretty accretive, but where we're finding our best place right now are some of the deals that are not quite stabilized, so it gets a little bit more difficult to pull that.

Understood. Okay. And then Tom, you mentioned, I think you said 52,000 units of deliveries in the first quarter in your markets, is that right?

That's correct.

So, if you were to sort of aggregate the whole year, I know it's trending down, but is it about – is it over 100,000 units of deliveries, if you were to look at the entirety of the year?

Yeah. So, it’s a 154,000 deliveries, down about 4% from 2017.

Okay. 154,000. And if you would kind of look at the national picture, I don't know if 350,000 units or something like that is about right in your mind, but so you're accounting for newer markets about a third of the supply in the United States, is that kind of in the ballpark out of 25 or 30 markets that you guys traffic in?

Oh, that sounds reasonable, Rich. I'm not looking at the overall number, but that sounds appropriate.

Okay. And I guess, the question – excuse me, for the siren in the background. The question is, what has been the history? Maybe, this is a bigger broader question for Eric. What has been the history of the Sunbelt world in terms of the total national supply picture? Is a third kind of been the number for a long time, is it been higher or lower than that and where do you see it going?

I think historically it's been the Southeast Sunbelt markets. If you look at percentages in the one of the lines we’re talking about, I would tell you long-term historically has been higher.

Okay.

I think that we've – we've sort of been in a different paradigm in the last two years to three years and with some of the more overbuilt markets being some of the markets that five, six, seven years ago, we used to think we're a high barrier. And so, I think the dynamic, that paradigm has changed a good bit, and as a consequence of that, I think I would argue that a lot of these -- there are no more high barrier markets in a way. I think supply can happen anywhere. And I think that from our perspective, we've always dealt with supply, worry, supply, risk, and thus ultimately, I believe the best way to capture the performance that we're looking for over a long period of time, is just be deployed in front of demand and we pay more attention to the demand side of the equation, we give the supply side of the equation, its due respect through active diversification and balance in various sub markets and price points, but at least that's how we think about it.

Great color. Thanks, guys.

Thanks Rich.

Thank you. And we can go next to Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead. Your line is open.

Hi. Good morning. I was just curious, if you could talk a little bit about the specific markets that you're most optimistic about and would expect to be towards the higher end of guidance or above that range? And then any markets that you're concerned that, that could be negative this year from a revenue growth perspective?

Sure, Austin. The three that, jump out on the positive side or Jacksonville, Florida, Orlando, and Phoenix, all three of those have some level of supply but great job growth, and jobs to completions ratios are in line and doing pretty well. So, those are -- those we would expect sort of to lead. On the concerning side, I would tell you Austin and Dallas are the ones that we have the most concern about. Austin actually sees supply go down a little bit next year, but it's still relatively higher rate at 3% of inventory and in Dallas will – it goes up slightly on supply. And those are the two that we are probably most engaged on.

Do you expect Austin or Dallas to produce negative revenue growth in 2018?

I think that is positive -- possible, but it would be closer to flat where it's been now.

No, that's helpful. Thanks. And then I'm just curious how you're expecting the trend in new and renewal lease rates throughout the year? You've maintained a fairly wide spread between new and renewal lease rate growth. So, what's kind of the expectation moving forward?

Austin, I can tell you what is kind of built in the forecasts, and Tom maybe can add some color there. But what we would expect in general it's in our pricing guidance is in our revenue guidance is for renewals to continue essentially as they did in 2017, they were in the 5% to 6% range here, and they will continue strong performance there. And the new pricing would be the area that we would see the improvement that would take our pricing to two in a quarter two and three quarters to 2.5 at the midpoint. And I would say probably a larger percentage that would come from the Post side of portfolio as there's opportunity for improvement in that this year as we move into the year and we see supply wane as we're talking about our expectations on the back half of the year, but Tom would have some more color...

Yeah. No, I just echo Al’s comments, we would – we’ve seen renewal rates stay steady in the 5%, 5.5% range, expect that to continue where you’ll see -- the gap, if you will, is absolutely widest this time here, it will close as we go into the busier summer season and demand picks up and then we should also as that backend supply outlines that also gives us an opportunity on new leases as well.

Fair enough. But you wouldn’t expect new leases to close a significant gap based on the $2.25 to $2.75 that you’ve kind of assumed for blended lease rate pricing, is that fair?

That is fair.

Okay. And then lastly, just getting one question on the funding side. Are you assuming acquisitions are funded on the line or any capital, anything on the debt side that you’re assuming from an issuance perspective?

Yeah. It’s a great question, Austin. We definitely – we have a $1 billion credit facility, $600 million right now, we definitely, in the short-term, plan to fund activity on the line and as the year progresses, we’ll have – we have planned bond activity to take that lying down. We’d like to keep that below half bar at any given time, so that tells you that we’ll play a bond deal probably early in the mid-part of the year and then as we move into the year, we’ll look at what’s on our line and make a decision at that time as well. So, we do have some planned bond activity in the year to knock that line down. And I would take you into the market there, you’re probably somewhere – we would probably focus on 10-year and for modeling perspective, I put in probably 4% something that maybe just south of that.

Great. That’s helpful. Thanks, Al.

And we can go next to Conor Wagner with Green Street Advisors. Please go ahead. Your line is open.

Thank you. Good morning.

Good morning.

Tom, could you give us a little color on what you’re seeing in Houston and D.C.? And then, you guys have solutions for those markets this year?

Sure. To start with Houston, Houston, that was a market that inner loop, we were seeing pretty consistently two months free suburban one month free, let's call it, a late second quarter, early third quarter, and it's tightened up significantly. Occupancies continue to stay strong. Suburban, we are not offering concessions, inner loop, we have all of our assets stabilized there now, so we don't have anything in lease-up. We are noticing that some of the lease ups might equal – might offer a month free in specific places and depending on sort of our exposure and fore plan and proximity that we might match it. But across the board, it is – it's pretty reasonable. And so, moving on to D.C., I think job growth is I would say in the acceptable range. I think what we're mostly optimistic about in D.C. is sort of execution opportunity, we've got a good team up there, but a lot of redevelopment opportunity, continued low hanging fruit, just as they learn the expense programs are doing a really fine job on that. And I think we're encouraged by D.C. The fundamentals aren’t there for it to perform like Orlando or Jackson or Phoenix, but it may perform a little better than expected.

Great. Thank you.

Thank you.

And we can go next to Nick Yulico with UBS. Please go ahead. Your line is open.

Hi. Good morning. This is Trent Trujillo here on for Nick. So, you touched on Dallas early in the call. I was just curious both looking at Atlanta and Dallas are two of your largest market and both are expected to see heightened supply in 2018, so if you could possibly provide a framework on how you’re looking at these two markets in terms of fundamentals and operational expectations and trends throughout the year, that would be appreciated.

Yeah. Sure, Nick. As far as deliveries on Dallas, it will peak like everything else on deliveries in the first quarter. But the supply falls off at a less dramatic rate, let's say, than the overall portfolio. We're seeing some encouraging signs in January there, whereas you know most of Dallas was at four to eight weeks. [Audio Gap] areas are going to be something that we wrestle with most of the year. Moving on to Atlanta, most of that supply is focused sort of in that Peachtree Road Corridor running from North Avenue in Peachtree, sort of Midtown area, up through Brookwood to Buckhead and Brookhaven. But they are currently short term on Atlanta, concessions are doing a little bit better. And we've seen a half a month to a month there, that spread in Atlanta follows more the company spread in terms of how deliveries are being brought to the market. And then the suburban Atlanta stuff is pretty solid.

Okay. That's very helpful. Thank you. Just one quick additional question. On expenses, it looks like real estate tax growth by itself pretty much gets the low end of the range. So how are you thinking about the other components of OpEx?

Pretty much all the other components are in modest growth. We haven't -- we have -- expecting significant pressure near the areas, personnel marketing, and other areas of modest growth. So, taxes is the really only area, the midpoint of the entire guidance combined is 2% only area that 4% of midpoint puts a little pressure. Remember that’s a third of the – little bit a third of your total expense.

And Austin, our R&M cost, which our total maintenance expense cost, which I would consider maintenance personnel plus all expenses related to maintenance. On the Post portfolio, we've improved it by 10% to 15%. They're still running about 20% higher than MAA for the year, and we've – we’ll have continued improvement there as they continue to refine their practices, they're doing a good job. We like where the run rate is right now, and that alone is going to provide some relief to the tax number.

Obviously, there's some negative numbers on those other line items too.

I said another way, to make the math work.

Exactly.

Okay. Sure. I appreciate the color. Thank you very much for taking the questions.

And we can go next to John Kim with BMO Capital Markets. Please go ahead. Your line is open.

Thanks. Good morning. Your average effective rent per unit of $1,170 per month, increased year-over-year, but it declined sequentially. I realize some of this is due to seasonality, but I was wondering if that sequential decline came as a surprise to you?

No, I mean John just real quick. I mean you know the math as well as I do, you come in with a certain ARU and then you re-price with concessions in the fourth quarter, it pulls it down. I don't think that's that out of phenomenon for us.

So, just to clarify that the same-store revenue guidance that you have for this year of 2% that will translate pretty much directly to 2% average rent growth? I’m just wondering if there is any other property income or other items that may change…

We would expect property income to grow roughly in line with that revenue. So, we expect it to not have a material impact up or down, so that pricing should be the pricing, the carrying in plus the pricing we’re getting for 2018 blended should be the primary drivers of revenues.

Yeah. Our effective rent growth is expected to be right around that 2% number.

Okay. And concessions, do you think they will be peaked or they will peak in the first quarter in line with the supply delivery peak?

That is what we would expect.

Okay. And then a question on your secondary market performance that's been stronger than your primary market in the last couple of quarters, it sounds like you're not necessarily focused on acquiring in these markets, but I just wanted to clarify this to get your thoughts on that?

I would tell you John that we are focused on those markets for additional growth. We continue to like a number of those smaller markets or there are some that we wouldn't expand in. But there's quite a few of them that we would and what we have found is frankly, the environment, the competitive environment for deploying capital as it has been every bit is aggressive in markets like Charleston and Savannah, in Greenville South Carolina as it has been in some of the larger markets like Atlanta and Dallas. But no, we absolutely are committed to continuing to maintain the broad portfolio profile that we have today.

And is that where you're seeing some of the time sensitive sellers?

No, it can happen anywhere. The two properties that we acquired last year happened to both be in Nashville and both had that sensitivity associated with it. But we can run into that kind of scenario frankly anywhere.

Great. Thank you.

Thank you. And we can go next to Dennis McGill with Zelmand and Associates. Please go ahead. Your line is open.

Hi. Thank you, guys. Good morning. First question continuing on that – the latest acquisition in Nashville, but the supplemental has that built in 2015. So, I just wanted you to clarify sort of the timing of that, I don't know if that's maybe the start, but just maybe in the lifecycle of that. And then any additional color you have on how that came about whether that was brought to you or you’re seeking these out more on year-over-year terms?

Well, I think that it probably commenced construction at that 2015 timeframe not because frankly it's not stabilized yet. What happened with that particular deal, it was part of the Port City sort of scenario that's unfolding and we heard about the deal early last year, it came to market, we toured it. We didn't really – we underwrote it, and didn't really get involved in the process. It went on the contract at roughly 10% more than we had underwrote the deal. Then it went under – fell out of contract went under contract with another – and this happened in July went under contract again sometime in September, October timeframe with another potential buyer at a price point that was still 5% higher than what we felt was a good price. And so, it then subsequently fell out, and they called us in late November, early December highly motivated to get it done and get it done by year end and that’s what we did.

Okay. I mean, that’s helpful. Second question, just as it relates to overall supply. I think you talk to sort of the delivery pipeline slowing at the end of this year and what we've seen in a lot of the projections of the national numbers is that the delay in supply being pushed out is also being complemented by more supply being found. So, it's not a zero-sum game as far as timing goes. How do you get your arms around just the piece of supply that's call it chad or whatever you'd like to call it that just isn't in those numbers, it tends to get found over time? How do you get confident that that's fully captured in the numbers?

Well, I mean, in thinking about putting our forecast together, I mean, first of all, we actually see supply delivery peaking in the first quarter of this year, it's actually slightly higher first quarter this year than it was in the fourth quarter of last year and some of that is the slippage that we've talked about previously. But I think as we think about looking at supply pressure, I mean, we kind of go at it both from a top-down and a bottom-up approach. And you know we look at a lot of the same forecast for supply that everyone else looks at in market studies and other things that we have access to build up our expectations at a portfolio level. But then of course, we in putting together our property budgets, I mean, we know what's happening in the neighborhoods every property manager, I can promise she knows what new property is likely to come online in 2018 and we have that dialed into our expectations to some level on. And so, there’s no if you will at a high-level, I think it’s always possible to have a project or two or more not make – not get into the data, but at the property manager level, I can promise you, they know what is under construction within any kind of proximity to their property.

That's helpful. And then, just lastly on the post transaction, you get a full year now under your belt. How would that year compared to the underwriting that was done during due diligence at the time of the pricing and any positives or negatives that you call out relative to the initial expectations?

Well, I would tell you that the supply pressure and the performance in 2017 out of the legacy post portfolio was weaker than we would have expected. No question about it. But obviously, we did not execute this merger with a goal towards maximizing opportunity of value in 2017. It's a much longer horizon associated with it. Having said that, if you go back and look at some of our prior presentations, you’ll see the merger value proposition atomized out in pretty definitive detail, and you'll notice that in most cases almost every case, those various line items that derive that we think is going to drive value out of this transaction are expected to become increasingly evident in 2018 and 2019 and some of even beyond 2019. So, the only things that I can point to right, rather that we know that we've captured some immediate value on is on the financing side and on the balance sheet side, we got immediately upgraded by the agencies when we announced the deal. The other thing I would tell you that has been faster than we expected as Tom alluded to some of the operating expense efficiencies that we've captured some of those things happened faster in 2017 than we expected, so we got better performance on that side of the equation. And as Tom alluded to, we got more to go. The redevelopment opportunity, out of the merger frankly, the redevelopment opportunity within the post assets was actually bigger than we thought it was going to be. And if you look at the sort of the outlook on the value proposition such as redevelopment that we published, it’s the time of the merger announcement versus where we were rather and you’ll see that opportunity has grown. So, net-net, over the next three or four years, I mean the value proposition from this merger is very much intact. And frankly, a little bit bigger than we thought it was going to be, it’s just little slower coming online than perhaps, we would have thought as a consequence of some of the supply pressure that has come online this year, peaking, we think early this year and but we still feel very, very good about, about the transaction.

The thing about it from a cash flow standpoint year one would have been slightly below or below where you underwrote, but the overall cash flow stream would have been higher…

Correct.

Or would stand higher today.

Correct.

Okay. Thanks guys. Appreciate it.

Thank you. And we can go next to Rob Stevenson with Janney. Please go ahead. Your line is open.

Good morning, guys. Al, just you have answered the same-store expense question I guess a couple of different ways. But another way to look at it is, the – so at the 2% midpoint, how much higher would that be without the expense savings out of post that you’re recognizing in there?

Rob, it’s hard to -- I haven’t got that math in front of me, but I would, I would -- somewhere in the range of 50 basis points to 75 basis points kind of range and just let me give a little more color on some of the performance. I probably didn’t do a good job on the first question, but yeah, there are some items that we are getting some, continue get some negatives. If you look at 2% performance with continued 4% on real estate taxes with, which is just over 30-year portfolio, still stronger performance, up above 1.8% year in 2017. And so, we’re definitely continuing to get some synergies from R&M and some other areas maybe -- and one area is insurance I should bring in. We are -- our renewal is July 1. We had a very good renewal in 2017, had a reduction in expenses and we expect that we project in this year's renewal in 2018 to have an increase, but the net effect for the year is still reduction. So, all those things together bring us to that 2% and I think probably without some of the things we’ve talked about 50 basis points maybe 75 basis points higher.

Okay. And does that – then that includes the changes that you guys have made at Post on the personnel side that savings?

Yes.

Okay. So, I mean, another way to think about it I guess is, are you guys seeing upward pressure within the core Mid-America portfolio on wages at the property level, but sort of saving it by reducing headcount at the Post properties, is that accurate?

No. No. I mean – frankly both portfolios have been in pretty good shape on the – on that line item and our folks have been thoughtful about how they spend their dollars on site and the – the Post portfolio has made it better, it’s not covering up a weakness in the Mid-America side.

Okay. So, you're not really seeing any material increase in wages at the property level like some of your – some of your peers are talking about 5% increases in wages at the property level, which obviously is another big component of the same store expense load?

Our forecast includes and we have plans in place 2.5%, 3% range for that.

Okay. Perfect. And then Eric, how’s the board thinking about I mean read to that a tough whatever you want to call it three months, six months, nine months, 12 months here, the stock is after sort of peaking up around 110 is now another bad day, tomorrow could push you guys under 90. How do you -- how does the board sort of thinking about you know share repurchases and possibly selling additional assets. You don’t have any dispositions in your guidance as of yet, but if the stock continues to get weak or weaker, you know is that plausible alternative for you guys or is that still not enough of a discount to utilize capital for that?

No, we very much think about it, Rob. And you know obviously at some level of discount to value that becomes a compelling use of capital, compelling in the sense that it’s more compelling than any other alternative that might be presenting itself, whether that be acquiring other properties or starting new developments. So, we’re very aware of the math, certainly understand the concept. We’ve bought shares back in our history. We have an active program up right now fully authorized. And so, it’s something that we will continue to monitor, but business becomes what’s the best use of proceeds. And of course, with us now at a point of generating you know close to $100 million – around a $100 million of free cash flow, you know it becomes something that we certainly think about.

Okay. Thanks, guys. I appreciate it.

Thanks, Rob.

And we can go next to John Guinee with Stifel. Please go ahead, your line is open. John Guinee, your line is open. Please check your mute function. All right. We can go next to Tayo Okusanya with Jefferies. Please go ahead, your line is open.

Yes. Good morning, gentlemen. Just two questions for me. The first one is focused on post properties. Again, you guys closed the merger in December last year, so we're well over a year into this. I do understand and see the merger related expenses dropping in 2018 versus 2017, but still curious about the $8 million or so you expect to spend in 2018 by exactly what does that comprise of?

Tayo, this is Albert. That is the final portions of integrating our systems and putting our two systems platform together. I think we talked about a bit in our Investor Day that – that our people and our platforms and our policies and practices have been fully aligned and in great shape. Really 2017, as we get to the middle part to 2017 what we did with our systems we had two platforms we’re operating. We allowed them to stay apart during the busy season of 2017 really to go ahead and jump on some of the synergies and get our people in our processes gathering. So that causes virtually all related to the finalizing the systems platform, it will be rolling, we've got all the planning, all the designing, all the testing, and all of that stuff is done, and we're rolling that new system combined platform out through the middle half of this year. And so, the majority of that costs will fall of $8 million to $10 million in the first two quarters, maybe a little bit trailing in the back part of you, but that's what that is virtually all related to and how you see it fall for the year.

Okay. And if that spend pretty even throughout the year, is that kind of very first half we did and then any kind of sales off?

Very first half weighted and telling off in the third and fourth quarters.

Okay. That's helpful. Then the second question, I had was around expenses. Your GNE combined with your property management expense, roughly about $86 million in 2017, but in 2018, it is projected to increase to $91 million and that also includes all the expected synergies from the Post transaction. So, I’m kind of wondering you've got the synergies, but yet that number is still going up year-over-year?

Yeah. I think a big part of that is as the capitalized cost overhead for our development, and that's why we kind of in our supplemental data in the guidance we laid out a gross and a net title to help with that. So, bottom line when you're looking at the – P&L and you put those two G&A and overhead together for 2017 and compare that to our guidance of the net number in 2018, it's about a 6%, 6.5% growth, $2.5 million or so of development overhead is or less is being capitalized in 2018, because we finished the large part of that portfolio. So, if we take that out it's about a 4% growth which is in line or below the sector average of overhead growth for many years. But the main point I want to make is if you really the reason we put gross in it is because really the number that we are focused on is gross, which is a cash flow for this company that produces the value. And so, we laid out a plan with the merger to capture $20 million in savings of the two companies standalone, their overhead numbers projected for 2018 to say $20 million off that number. And so, that gross line that we've established in our guidance there does that – fully does that. And so that's the target we've been focused on, and we feel good about that number, we’ve laid out for 2018.

So, let me just make so -- I get this. So, the gross number which is – yeah, the gross number the midpoint of the gross number is about $91 million, total overhead gross of capitalized development overhead is about $91 million.

Correct.

But again in 2017, that number was $86 million.

No, no, no, what you’re going to see here that the earnings statement is that net number. So, the midpoint of what you should expect on your modeling on G&A and overhead combined for 2018 is that is the midpoint of that net number. just below that 87.75 and 90.75 tie them.

Got you. Okay, okay. And that’s the 4% year-over-year increase you were talking about versus 2017, and both years 2017 and 2018 are inclusive of $20 million of synergy?

2018 is inclusive of $20 million, 2017 is -- yeah, most of it was in 2017. But 2018 is fully inclusive of it.

There’s still something I’m not following but I'll take this offline...

Let’s, why don’t we take this offline after the call. Tayo we’ll get with you, and get and work through the math.

Okay. Thank you.

Thank you.

Thank you. And we can go next to Michael Lewis with SunTrust. Please go ahead. Your line is open.

Great thanks. I wanted to circle all the way back to the very first question you answered about the same-store revenue guidance. So, you did 1.8% in 4Q, 2.1% for the year, and your range is one and three quarters to 2.75. It looks optically a little bit optimistic and I realize what you said about supply, but I would imagine even first quarter supply, you’ll be competing with those units well until into the summer, even if they don’t get push back. So, I’m just curious how you stress your model and kind of got comfortable with especially the low end of that guidance range that I think a lot of people may look at, and say you know these guys might have to cut this later in the year?

Well, go ahead. I mean, I think that ultimately what we have done is look at the expect, -- with the expectation that a lot of the pressure that we saw on 2017’s results was a function of slippage of units into the weak fourth quarter leasing season and therefore the concession activity that took place of impacting effective pricing was ultimately a lot weaker as a consequence of that. As we think about 2018 you’re right and that you’ll see some of this lease up going on now taking place in Q2, Q3 but the good news is that the pipeline is quickly falling away based on everything that we’ve been able to see. And with us starting at a higher occupancy position this year versus where we were at this time last year that gives us, and as I said earlier, us now in a position of having the sort of revenue management platform sort of fully dialed in versus not dialed in on the Post portfolio at all this time last year we just start in a much stronger position. And so, it’s a combination of we think the market fundamentals are going to work more in our favor as the year plays out versus last year where the market fundamentals were getting worse as we got leading into the weaker part of the year and we have kind of just the opposite scenario from – in terms of market fundamentals this year. And then secondly, as I say, the platform is just in a better position – much better position as we started the year. Occupancy is in a stronger position including the legacy Post portfolio occupancy. So, when you just put all those factors together it leads us to sort of where we are. But as I say and I said earlier, this is all predicated on an assumption that the demand side equation holds up there is no reason to believe that that is unlikely to occur. So, we’re optimistic that these markets are going to continue to So, we’re optimistic that these markets are going to continue to yield the level of demand that we’re anticipating and as a consequence, we think we will get to where we’ve outlined.

And if I'll ask my second question about the legacy Post portfolio, obviously, the negative revenue. I’m wondering, it’s fair to think what’s left still that you do there besides just getting helped out by supply easing in the cycle helping you? Is there anything kind of I don't know what the word is transitory reason or something that's easily fixed like being on the new platform or the changes you've had to make in personnel? And along those lines too, do you think there's a significant amount of units there that might need CapEx to be competitive beyond just the units you see opportunities to renovate?

Yeah. So, I'll take quick run of that. The quick easy pops on the Post portfolio, in terms of performance opportunity right now we’re running 50 basis points ahead on occupancy and we'll have that opportunity over last year, we'll have that opportunity for early part of the year. The redevelopment opportunity, which I would say is more offensive in nature to make the units more competitive, that is – we'll probably double that volume this year versus last. And that's an enormous opportunity, that's – that is offensive in nature. The properties themselves are in great shape. And then thirdly, there are sort of some curb appeal opportunities there both on the landscape in the physical building that aren’t increasing the dollars that we're spending, but we're getting more bank for buck on the dollars that we're spending. And then in addition to the revenue management platform, that Eric touched on earlier, we’re starting the year with a team that’s really familiar with the properties, knows their ins and outs, understands submarkets. And this time last year, we were still learning that and everybody is sort of on the same page. Those things give me good hope. I’m optimistic about what the Post portfolio can do in 2018 despite the fact of the market conditions.

Great. Thank you.

Thank you. And we can go next to Carol Kemple with Hilliard Lyons. Please go ahead, your line is open.

Good morning. On acquisitions for the year, it sounds like you all have a good pipeline right now. For modeling purposes, do you think it’s better to spread it out evenly or do you think it will be more front end or back end loaded?

Probably, spread fairly evenly over the year. We have a couple of opportunities that we think are pretty strong in the first half of the year, but I think I will spread a portion over the back as well, so fairly evenly.

Okay. That’s helpful. Thanks.

Thank you.

Thank you. And we can go next to Buck Horne with Raymond James. Please go ahead, your line is open.

Hey, thanks guys, long call. I’ll try to be brief. Just going to the renewal rate increases you guys are pushing through, I just wanted to get a feel for your confidence level and that you can maintain your very low resident turnover ratios with still pushing through those 5% renewal increases this year? And maybe related to that, do you feel like your recurring CapEx budget for this year may need to go up to maintain those renewals?

No, I don’t think so, Buck. Where we feel like there is an opportunity to improve the product and get an incrementally higher rate, we’re renovating those units and that opportunity. And there is generally very little transaction involved with renewal and CapEx spending. Generally, they're making the decision based on their lifestyle at the time in the service and the value that we've created with them. And our teams are near obsessive in terms of how they work to serve our residents and capture that. And so, you know our sense is that the – this 5.5%, 5% to 5.5% will hold steady early into the first quarter, where we're seeing that hold just fine. And it held up through frankly the tougher fourth quarter as well.

Okay. Thanks. And just a couple of quick market updates that I think maybe just to cover the all the bases. But just thinking, how do you think the year plays in terms of supply pressure in Charlotte and Tampa in particular?

In Charlotte, it is mostly focused on the – and in the sort of uptown, downtown area and south end if you will. And so that is – it’s about 3,500 units that’ll come in in the first quarter and it drops to 782 by the fourth quarter. So pretty significant fall off you know in sort of a linear fashion there. And then in Tampa, you know Tampa is actually we're seeing jobs to completions in Tampa and you know this well is jumping from five, four to nine there. So, with Tampa it doesn't have a huge supply, a lot of that is channel side. But that's a market that has the potential to upside – to have a stronger upside back half of the year than the company norm.

Wonderful. Thanks for the call. Appreciate it.

You bet. Thank you, Bob.

Thanks, Bob.

Thank you. And we can go next to Nick Joseph with Citi. Please go ahead. Your line is open.

Hey, it's Michael Bill, I'm here in with Nick. Eric, I sort of here with Nick. Eric, I sort of want to just come back in sort of evaluate where in the last 13 months, 14 months have been and clearly what was consistent missed expectations. And I dial back to August 3, 2016, when you announced the Post-merger and one of the big things that you were talking about back then was different than Colonial, and I think I remember I asked this question about what gives you the confidence of not having any sort of the same recurring issues that happened when you did that merger, and you made a big deal about being on the same type of systems that you've done that before that you're well tested. And now, what we're hearing is a lot of excuses about why 2017 was more challenging, right, you cut your same-store guidance twice last year and you still fell below what was the most recent cut that you gave with three quarter or third quarter results. You sort of blame a little bit of Post, you're blaming supply that was delayed, but I assume with supplies delayed that would have helped you earlier in the year when you cut twice. So, I'm just trying to put it all this together and hear a little bit more of effectively an apology of the performance.

Mike, I mean, I would tell you that we put together the outlook for 2017, based on the information and the insights that we had on expected supply dynamics, and I think that what -- I mean, going back to the Colonial scenario, I mean that was a completely different set of circumstances and so forth, and now we can get into more detail on that. But I think as far as 2017 is concerned, we've we wound up seeing the leasing conditions deteriorate more so in the back half of the year and in particular than we expected. And we started getting increasing visibility on that by you know April, May timeframe as projects that were supposed to be at least mark. And we knew that as a consequence of that, that the leasing would be taking, the lease up activity will be increasingly taking place in a weaker part of the year. And so, when you get in that kind of scenario, what you’re faced with is okay well how aggressive are the developers likely to get in terms of their concession practices and so forth and you know, we don’t have as good a visibility on that, because you know we don’t know what sort of financing arrangement any given developer has. And we don’t have any perspective – as given a perspective on exactly our insight as to you know what kind of pressure they’re going to have to get leased up sooner rather than later. And so, as a consequence of that, we just saw a concession practices in particularly some of the, you know sub markets like uptown in Dallas get a lot more aggressive. As a consequence of those delivery delays happening and creating more pressure in the back half of the year…

Right. Okay. Getting to a number is how you get to a number rather than the number itself, right. So, if we think about even 2018, holding more cash on the line of credit, which doesn't cost too much, you know levering up a little bit potentially doing some accretive acquisitions. The quality of that accretion is not as strong as the quality of operations, right. And if you think about your operations you started for 2017 at 3.25% same-store NOI, that dropped to 3% in the first quarter, it was held flat in the second quarter results in the summer, where arguably you should have had a better perspective of some of the supply and then, it was dropped 75 basis points at two in the quarter in the third quarter. And you came out at nearly in mid-November without any sort of update to 2017 and 2017 just fell to 2% to 2.11% 15 basis points below where you thought it was in late October. And so that's a pretty meaningful divergence when all of your apartment peers have generally met or beat their original expectations.

Well, what I can tell you is our markets, a lot of our markets solve the supply pressure later than some of the other markets. And this time last year, two years ago, we're come at a lot of supply pressure in other markets. So, the market dynamics got worse in our markets and for our portfolio particularly with Allison and Dallas, and it had the effect it did.

Let me add too on the fourth quarter performance, from our perspective, Mike, we didn't miss our fourth quarter performance in revenue. We got the expectations we had, we got there in a different way, we built occupancy a little bit, because concessions were coming down and we thought that was the right thing to do to allow those concessions to build strength for our platform to get better pricing performance in 2018. And so that's what we did, and that's what we built in our forecast with increased pricing in 2.25%, 2.75%, compared to what we talked about at NAREIT. But from our perspective, we didn't miss the fourth quarter from what we talked about where we outlined our guidance and talked about in November.

Right. Your revenue guidance was you had brought it down to 2% to 2.5% to 2.25% in the midpoint you came in at 2.11%, 2.10%, so that would fall.

You cannot range, from my expectation, we never said that our performance was exactly on the midpoint. We have a range and we have a range and we – and our expectations that drove that guidance and drove the earnings was in line with what we talked about.

Okay. All right, thanks.

Thank you. And it appears we have no further questions at this time. I’ll go ahead and turn it back over to you Tim.

Thanks, Savannah. We have no further comments. Appreciate everybody joining the call. We’ll talk to you soon.

And this does conclude today’s call. Thank you everyone for your participation. You may disconnect at any time and have a great day.