Mid-America Apartment Communities, Inc. (MAA) Q1 2019 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Welcome to the MAA First Quarter 2019 Earnings Conference Call. [Operator Instructions]. As a reminder, this conference is being recorded today, May 2, 2019. I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA. Please go ahead.

Thank you, Chris, and good morning, everyone. This is Tim Argo, Senior Vice President 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 discussions, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34-Act filings with the SEC, which describe risk factors that may impact future results. These reports, along with a copy of today's prepared comments and an audio copy of this morning's call will be available on our website. During this call, we will also discuss certain non-GAAP financial measures, a presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data, which are available on the For Investors page of our website at www.maac.com. I'll now turn the call over to Eric.

Thanks, Tim, and good morning. We're off to a good start for the year as the first quarter's growth and effective rent is the highest that we've captured over the past 8 quarters. Resident turnover remains historically low levels and rent growth on renewal transactions continue to be strong. The increase in combined new and renewal lease rates on a lease-over-lease basis was 240 basis points ahead of the performance in Q1 of last year. We're of course just now entering the spring and summer leasing season, but we certainly like the trends that we're capturing as the compounding benefit of steady rent growth continues to make a growing and positive impact. Strong expense control continues to be evident, particularly in the areas of repair and maintenance cost and utility expenses. Our property and asset management teams continue their record of innovation and expanding use of new technology, while also continuing to leverage the benefits of the larger scale of our platform. Beyond these encouraging trends with the same-store portfolio, our new development portfolio, our current lease sub-property portfolio and our redevelopment pipeline, all continue to come online and will make increasing contributions to FFO over the next couple of years. Our high-growth Sun Belt markets continue to capture steady job growth and solid demand for apartment housing. As pressures are earning high housing and related cost of challenges continue to influence population growth and migration trends across the country, we continue to favor our regional focus. Across our portfolio, average rent as a percentage of monthly income continues to hover our in the 20% range a very affordable relationship. We believe that 3 to 4 cycle, our regional markets will drive job growth and resulting demand for apartment housing that will outperform other regions of the country. As a recap in our recently published annual report, after 2 years, with a heavy focus on significantly retooling and integrating our operating platform, we believe that MAA is no even stronger and better positioned. We're excited to be now fully focused on capturing the opportunities associated with the enhancements that were made. We look forward to continued positive momentum over the coming year. With that I'll turn the call over to Tom.

Thank you, Eric, and good morning, everyone. Our operating performance for the year started off well. We've continued momentum in rent growth, strong average daily occupancy and improving trends. The factor rent growth per unit was 3.1% for the quarter, this was the fourth straight quarter of improving year-on-year growth. For perspective, in the first quarter of 2018, this number was 1.4% from 1.7% in the second quarter, 2.1% for the third quarter, 2.4% in the fourth quarter and is now up 70 basis points sequentially. Said another way, in the last year, we've doubled the - our effective rent growth rate. We're pleased with the positive trend of this steady compounding driver of long-term revenue growth. This of course is led by a steady momentum and blended lease over lease pricing. Blended lease over lease rents for the quarter were up 3.9%, which is 240 basis points better than this time last year. Average daily occupancy remains strong at 95.9%. Expense performance was steady for the first quarter, up just 2.1%. And marketing growth rate stands out in our report, but that was a result of the credit in last year's numbers. Adjusting for this anomaly, marketing expenses would be flat with prior year. As a reminder, our annual operating expense growth rate since 2012 has been just 2.4%, well below the sector average. The favorable trends continued in April. We're on track for ended the month of strong blended lease-over-lease pricing. April blended lease-over-lease rates were up over 4%, which is well ahead of the 2.8% posted in April last year. Average daily occupancy for the month continued at a strong 95.9. Our 60-day exposure, which represents all vacant units and move-out notices for a 60-day period is 8.4%, which is in line with last year. On the redevelopment front, in the first quarter, we completed about 1,700 units, which keeps us on track to redevelop 8,000 units in 2019. This is one of our best uses of capital. On average, we spend $6,100 per unit and achieve an additional 11% in rent, which generates a year 1 cash-on-cash return in excess of 20%. Our total redevelopment pipeline now stands in the neighborhood of 16,000 units to 17,500 units. The latest market delivery information is in line with our prior forecast. Job growth in our market is expected to be 2.1% versus 1.6% nationally. As long as demand remains strong, we expect the positive rent growth will continue to build. Our teams are pleased to have the work of 2017 and 2018 in the rearview mirror. We're encouraged with the momentum in rent growth and excited to have our transformed platform fully operational. Al?

Thank you, Tom, good morning, everyone. I'll provide some additional commentary in company's first quarter earnings performance, our balance sheet activity and then finally, an updated guidance for the remainder of the year. FFO of $1.58 per share for the first quarter was $0.11 per share above our guidance for the quarter. Excluding 2 items not included in our forecast, a gain on sale of the land parcels and per share adjustment, which will discuss in a moment. FFO for the quarter was $1.51 per share, which was $0.04 per share above the midpoint of our guidance. Operating results were $0.02 per share favorable to our profitable cash, with positive contributions from both same-store revenue and expense performance during the quarter. A continued strong occupancy supported the favorable rental pricing trends outlined by Tom, while favorable repair and maintenance and utilities cost also continued pressure from real estate taxes during the quarter. The real estate tax expense growth was 6% for the quarter, includes the impact of some counting of appeals. And we still expect our total cost to grow in the range of three and three quarters to four and three quarter [indiscernible] for the full year. Favorable performance for interest expense and other income during the quarter, primarily related to our recent bond deal and cancel the gains combined to add the remaining $0.02 per share to FFO for the quarter. We also sold a small land parcels located in Atlanta during the quarter, which was acquired in the post-merger. The parcel was not a viable development for us and was sold as an alternative youth. Giving significant certainty regarding ultimate closing of the sale, the gain of $0.08 per share was not included in our original guidance for the year. In addition, we incurred noncash expenses of about $0.01 per share during the quarter, related to the market-to-market adjustment of preferred shares, which consistent with our practice was also not included in our forecast. During the quarter, we completed a significant portion of our financing plans for the full year, with the issuance of $300 million in new 10-year public bonds and the effective rate, including the impact of several swaps of 4.24% and with the closing of an additional $191 million of fixed rate mortgages, priced at very attractive 4.43% for 30 years. The proceeds were used to pay down unsecured line of credit with the years to provide majority of financing needs for the remaining of the year. We've also continued to make progress on our development pipeline, coming $15 million during our construction cost during the quarter. We expect to fully complete 2 communities this year and also likely start additional projects as part of our $100 million to $150 million total projected funding for the full year. Now we continue to expect the combined stabilized NOI year-end view on the pipeline to be in the 6% to 6.5% range. Our balance sheet remains strong. We ended the quarter with low leverage, with 32.6% debt-to-total assets, with over 85% of our debt fixed or hedged against rising interest rates at an increased average maturity of 8 years. At quarter end, we had over $967 million of cash and funding capacity under our line of credit and our current forecasted is leverage neutral. Finally, we are revising our FFO guidance for the full year to reflect first quarter performance as well as our updated projections for transactions and debt financing plans for the remainder of the year, which are now expected to reduce FFO by about $0.03 per share compared to our previous forecast. Also, just as a reminder, we do not forecast any future noncash adjustments to the valuation of our preferred shares. FFO for the full year is now projected to be $6.11 to $6.35 or $6.23 per share at the midpoint, which is $0.08 per share increase of our previous guidance. We also announced net income per diluted common share to be $2.19 to $2.43 per share for the full year. We're certainly encouraged with a strong first quarter performance, but we still have very important leasing season ahead of us - a busy leasing season out of us, and our comparisons do become a bit more challenging over the remainder of the year. We're maintaining our previous same-store guidance, and we plan to revisit these projection with our second quarter earnings. So that's all we have in the way I've prepared our comments. So Chris, we'll now turn the call back over to you for questions.

[Operator Instructions]. And our first question comes from Nick Joseph with Citigroup.

Al, you mentioned the current development pipeline and NOI yields of about 6% to 6.5%. How does it compare to the new starts expected this year when the recently land acquisitions.

You're talking about the new Phoenix deal that was a prepurchase, that we announced, nick. Is that what a comparison of that?

That will be a - the development start later in the year and then the land that you acquired in Orlando. Are you also underwriting the 6% to 6.5% for that?

Right, right. And was the intend of the comments. So really you got the current deals we have underway as well as the ones we plan to start later this year. All of those will be in the range of 6% to 6.5% pipeline will obviously in that range as well. So none we see as below that level here at this point.

All right. Perfect. And how does that compare to cap rates in those market today?

I would say, Nick, for the quality of assets that we're looking to develop, I mean, those cap rates are going to be 4 75, 4.5 to 4 75 [ph] is really what we're seeing today.

And Eric, you mentioned the strength in the market. I'm wondering if you're seeing new rents [indiscernible] and I'm sure you track where they're moving. Any population flows or any change in trends from the north east to other there high tax states, just driven by the change in tax laws?

I'm going to let Tom mentioned that.

I mean sort of the best - I mean certainly we're seeing the shift in change, and we're seeing strength in the Sunbelt. Honestly, the best explanation I've seen of this is a third-party firm tracks Uhaul rentals, and it cost 25% less to move back up north than it does to move to the Sun Belt, that we are - we don't have specific information on it exactly that. But it is - the trends are positive.

I would tell you, Nick, that we continue to, I think Nashville is going to continue to see some migrations inflows, if you will. coming out of Northeast particularly as the Bernstein will begin to shape up. I think the Raleigh area continues to attract a lot of particularly technology-based jobs, both from Northeast West Coast, of course Austin has been doing some time. So I think we don't particularly track exactly comp sales were people come from necessarily. But just anecdotally, based on the information and the conversations we're having with residents, we're seeing growing evidence that folks are moving out of some of these higher cost areas of the country.

And then in Phoenix, we see, Phoenix, Denver, Denver Austin, we see inflows from California, as you would expect.

And our next question comes from Trent Trujillo with Scotiabank.

So within the last months, a roughly $1.5 billion suburban class A Sun Belt portfolio traded for what looks like a high-4 cap rate. How interested for you in that portfolio? And how do you view the pricing with respect to I guess one other transactions you're seeing in the market? And two, perhaps, as a validation of the value of your portfolio?

Well, I mean, to answer, Trent, we didn't look at it. That's not really what asset quality that we're looking to add to the portfolio for growth rate to want to achieve organic growth rate do you want to achieve going forward. So total portfolio then typically take a look at. Having said that, certainly, based on the pricing that we're seeing, that pricing is in line, maybe a little bit aggressive. Routinely, the new product that we're looking at still lease-up over just recently stabilized in the markets throughout our region, are trading anywhere from 4.5 to 4.75 cap rate. So high-4, call it a five for that portfolio is probably about right, in line with the market. It just depends on, frankly, what sort of upside opportunity they saw in the portfolio from either CapEx or development of operating perspective.

And quick follow-up. So I think we all appreciate the year-over-year and even sequential improvement in great growth, which is greater fundamental level, but it doesn't seem to be translating that into accelerating same store revenue growth. Correctly sequentially. So maybe if you can talk about how the improved flow to the bottom line. And then, considering some persistent supply pressures and some of your larger markets. How confident are you that this improvement spread can persist? And what that may imply for the rest of the year?

Well, I mean, we feel pretty good about the ability for the rent growth trends to continue, based on everything that we're seeing. Supply levels, while they remain high in the number of markets, they don't appear to be getting any higher, if you will. And I would suggest that we're at a point broadly where supply levels are likely to show stability, into slight moderation over the next call it a couple of years. As long as a job growth continues to be as robust as it is. I think it sets up for the ability to sustain the we're seeing. The ability for that rent growth trend ultimately make us way to the overall revenue line if you will is a function of a also a variable how they're performing daily occupancy and fees or other income. And we saw occupancy effective daily occupancy trade off a little bit from last year. As we contemplated in our guidance for the year, we think that's the right trade-off to be making at this point in the cycle. And I'm comfortable with that assumption, and I'm comfortable with what we're seeing. I think that is get later in the year particularly next year. The occupancy performance likely start to stabilize on a year-over-year basis and therefore, the rent growth trends start to drive more directly to the bottom line. To some degree, the other area that we see underperform in terms of rent level are in terms of growth year-over-year a revenue area since other fees and the fee area in general. And because terrorists were solo and people were stapled we're not seeing termination fees and other comp related fees associated with the moving to move out likely seen the past. So the occupancy variable year-over-year and the fee variable year-over-year has worked against if you will the rent growth variable to result in the revenue performance that you see. We think those are the two variables: a fees and occupancy, probably will start to stabilize going into next year and the rent growth becomes more impactful.

And our next question comes from John Kim with BMO Capital Markets.

On the rented lease rate growth, it sounds like you have about 4% year-to-date through April. I realize Have several comps at the second of the year. But what would get you down deceleration that implies at the midpoint of your guidance of 2.7%?

Yes. John, I mean, obviously, what we're talking about is as we're very encouraged with what we've seeing through - all the way through April, as Tom talks about it. And it will take a number quite lower than that to get us down. I think what we're seeing is as we look at the next few months or next two quarters, that's when we face the biggest part of our exposure, the vast majority of releases. So at this point, we're not seeing - we certainly believe and expect to continue to push pricing. But the question is going to be, are we able to hold the occupancy while we're doing that? We think at this point, we will. But as we talked about the guys were leaving their excess [ph] room to work to those two quarters, and then we'll have more say about that and more clarity at the end of the second quarter.

Okay. So that occupancy, that's more of the same-store revenue concept rather than the growth rate. But just you have additional vacancy that might ...

I'm saying, it'd offset the rent. I mean in other words, we're going to continue pushing price, and we believe we can hold occupancy at strong 9 59, but that's the question as we hit the busy leasing season.

John, it's Eric. If your point is, are we likely to continue to perform at the upper end of our pricing assumptions, lease over lease pricing assumptions that put out there the answer would be yes. We think that the pricing trends are likely to continue, which would put us more likely to not well above the midpoint in terms of our assumption for pricing trends along.

This quarter you broke out redevelopment CapEx. And can you just remind us what constitutes the difference between the two?

Yes. I mean we just want to get more information there and really provide as much clarity as we could there, John. I mean revenue enhancing is a more typical CapEx that you do, the normal that you would you do every year in the portfolio to continue to maintain it.

I think that's recurring.

I'm sorry. That's recurring. Recurring is typical - redevelopment is the capital. But we actually that we measure and we add our returns to our growth and we've talked about it. And as Tom talk about some of the best uses of our capital that we have. We've have a program going on for many years now variable to spend unlimited amounts of capital on units strong returns. Server that's really the difference. I think we have on redevelopment we have redeveloped, we have enhancing and then we have recurring and we just want to give you clarity of those three buckets. And so revenue enhancing is additional capital that is not specifically measured, but it's things that we do to think add to value over time. So those are three buckets.

But are the redevelopments unit kept in the same-store pools and then this quarter...

Yes, they are. And when we approached because we do not force terms we do long term. So I think over time we feel like that's the best to keep it in in the same store portfolio. And if we have situation where we did one time it was going to be extremely disruptive. We will call out. I think we've done in the past but the current platform that we are doing we don't expect not taking the same store.

And our next question comes from Austin Wurschmidt with KeyBanc Capital.

Just curious what you guys would attribute the lease rate successes that you've achieved thus far in the year to whether its operating on a single revenue system? Is that you're starting to see increased contribution from the redev? Or just maybe a more benign supply environment. Can you kind of break out the pieces and tell you where you think - what so you think's driving the success you've had so far.

Sure. Austin. I think at a macro level, we've certainly shifted from a ramp-up in supply and stabilization in supply. If from a market standpoint, a little more stable, but still have. And we can push on that. Then the other piece of the puzzle is really the improved I will tell you and the post portfolio. And that is our systems and being operated on 1 system. And let me give you an example of that. So in first quarter of 2017, the gap between blended lease over lease rate and the post portfolio and blended lease over lease rates in the Mid-America portfolio was 290 basis points. Now it was sort of first quarter of having the first portfolio. That gap has closed to just 50 basis points. And that's a result of both portfolios coming over that timeframe.

So when you look across markets, is it fewer concessions, maybe in some of those post markets that had supply? Where are you seeing the success in driving blended lease rates?

I mean early on, the first thing to take was renewal rates, where we remove those from 4 close to 6 now. And now it is new lease rates coming to bring stability, On a - just on a year-over-year basis, it's primarily the new lease rates, though, we're still up a little bit and renewals. On a going back to 2017, it's really both on the post portfolio.

Got it. Apprized that, And then just last one for me. Al, when you kind of strip out was onetime items in the first quarter and you look at what drove the beat versus your internal guidance, what line items would you attribute that to?

We put it really two major groups, $0.02 per share. If you strip out those kind of unusual items, you get to about $0.04 per share out performance from our guidance. $0.02 of that was operations, which that was same-store, pretty even spread between revenue and expenses, I would say. We're encouraged both sides of the performance. The other $0.02 was interest and other income, that was a little favorable to what we expected, primarily related to the timing of the bond that we did, a little better on its rate than we thought there. And then we had other income from casual gain that we had during the quarter that had some income from that, that's really the insurance proceeds over the cost of the books that we wrote off for that cash we lost. So those were the primary pieces.

And your next question comes from Rob Stevenson with Janney Montgomery Scott.

Tom, any markets that performed notably above or below expectations on a year-to-date basis?

Nothing really stands out on the below expectations. Dallas, we expected to be challenging, but it's coming along, honestly. On the above, we're quietly pleased with how Austin's coming along.

Any markets or what - which market, I guess, would you expect to that you could see a positive new lease growth in '19 on at this point?

Seeing positive new lease growth?

Yes. Obviously, the renewals are a bit healthy but the new lease option?

I would tell you Nashville begins to look better in the back half of the year, I think. It supplies moderating a little bit there. And as Eric mentioned, [indiscernible] Bernstein moved in Nashville as a booming market in that, that has the potential to exceed our expectations, I think.

Okay. And then lastly for me. Where are you guys in sort of technology spend. I mean it seems like all of the apartment, the large apartment guys these days are in an arms races to get to - being able to have a Alexa rent their units, rather than have people in the locations and all of the automation that they want to put in to make leasing able to do from phones, et cetera. How far down the road are you guys in terms of where you want to get over the next couple of years? And what's the spend and what's the trade-off in terms of expenses that you could take out of the business from that?

Yes. Rob, I mean, we're currently testing working on and evaluating pretty much everything that you heard out there. Smart, rent, smart homes and hence residential services portal technical ability leasing automation in the service features. Years till at the point, we were not talking we're really trying to find out exactly what those economics are early results are good, especially on the smart home testing. And we think that they have the potential to make a difference, but we're really in the testing phase at this point. And we'll have more to share as the year winds on, I would say.

Al, what are you spending this year on that, roughly?

The majority of our spending that is part of our real estate venture fund, which you probably saw 10-K, Rob. And so we spend - we're a part of that with lot of - of some of your peers that really is designed to investment is designed to select, view all of that companies are coming forward and select the winners and be a part of the discussion when it happens. So in terms of our normal spending, investment and driving technology right now that's normal spend that's our overhead and G&A that we budget this year that we talked about always improving the platform. We're testing these programs this year's, as Tom talks about, and probably roll out a little bit more next year when you drive those programs to the portfolio.

And Rod, some of those investments is bundled in the total IT overall that we did as part of the merger. So things like maintenance, mobility and the resident portal improvements, those are embedded in the transition that we just went through. And then were spending the most direct spend is on the smart home or rolling unit out at about $1,000 a unit or so. And we've got plans to test that this year.

And our next question comes from Hardik Goel with Zelman & Associates.

One of the things I wanted to ask about - I've got two for you, is G&A. So we know G&A is going up a little bit, we discussed at last quarter. But looking at the cadence of Genie particularly in the first quarter was still little heavier than gardens would imply. Are you guys still in line with your initial guidance range.

We are. That's a great question. I think and I'll point you to one of the things that we talked about and put out as we came out of your rent and discussed our guidance in the years. Is one of the presentations that we have done in the conferences. We put us like to talk about that we expected first quarter to be highest quarter for that, there's portal expenses are for the quarter, some conferencing, some year-end audit things, a few things that typically in the first quarter. So we had expected first quarter overhead to be about 20% - 8% of the year, came in right in line with that. And So we were very comfortable with our full year projection. I think what you would-- should put in your mind when you're thinking for the next 3 quarter, obviously, to get to our run rate, to our full year run rate is more like 24% of the total of our guidance for the year.

Got it. Yes, I saw those, I just wanted to confirm. The second one I have for you is on your same store expense growth estimates, you guys talked about revenue, but on expenses, I seems like pretty tough for you to guys not comment at the low end of your expenses, given that you guys outperformed even the taxes were higher. Is there a tax that went through the rest of the year? Or do you expect - what you expect from the expense side?

There are two things. I think that's important to considerer there - this is Al, I will start with that but really R&M was favorable within first quarter and utilities cost, I said R&M, repair maintenance, excuse me, utilities cost. And so repair maintenance was really favorable first quarter. We've got some remaining synergies from the post-merger which were good to see. We're glad to get that. I think we expect that we come to the end of that we expect for the remainder of the year from those cost to be more normalized, call it, in 3% range. And then the utilities, they were lower than expected because we had a mild season in the first quarter, mild seasonal cost structure in the first quarter. I think that will normalize as we go into the year. So I would tell you, as we look at the remaining 3 quarters a year, you should consider something more in that 3% range, but everything together. But taken the first quarter performance and that together, we are going to be below the current guidance. But still in the guidance for the year.

And our next question comes from Drew Babin of Robert.

I wanted to talk about capital recycling. It sounds from the way that fundamentals are unfolding across Sunbelt potential for distressed acquisitions, things like that, might not be there yet as it really hasn't done for a couple of years. And I guess I was hoping an update on, are you seeing that anywhere you seem developers may be looking to do to sell more assets? How is your pipeline looking as it pertains to things that I just mentioned?

Drew, this is Eric. Our deal flow continues to be incredibly high. We're looking for deals on a quarterly basis now than we have over the last 5 years. So it - there's a lot of opportunity that continues to come into the market. We continue to see what we believe to be incredibly aggressive pricing, that continues to in our mind at least make a little bit more difficult to some of these opportunities that you're looking at. So we're staying active. We are in conversations on 2 or 3 opportunities right now that I hope will come together over the course of this year, and we're optimistic. But we're also staying discipline. And I think given the operating environment that we're in. And what appears to be the prospect stable interested environment going forward. The sector continues to attract a lot of capital. And we see values holding up quite well. If anything value is going up a little bit as the consequence of ' improving NOI performance. So we are - we're patient, and we got to remain that way. We've got delved into our exemptions this year. As you know call it, midpoint, about $100 million of dispositions, which we think is important to maintain through that process later this year. We've got the funding we've identified as it relates to what we do think we'll do and acquisitions. And development funding. So we got sort of the sources and uses of cash identified. Obviously, recycle of what we have in combination of dispositions in free cash flow. We certainly don't see equity this year, but I'm continue to be hopeful that the acquisition environment will become easier. And I think the day our focus is really built around, trying to ensure that we're going to create a stabilized NOI yield, that's accretive to our existing portfolio and create a return on capital that will be accretive to our shareholders versus what we expect to get out of the existing portfolio. So today's pricing, it continues to be a challenge. Having said that, we continue to roll in some of these technologies, some of these other operating focus items that we talked about. We think that that's going to continue to work in our favor to perhaps start to make some deals little bit more compelling as we go into the year. So deal is high, pricing is still aggressive.

I think on the disposition side. Remind me, are those likely to be just non-core assets or potential exit for some smaller markets? I just forget if that was mentioned on the last quarterly call?

We're taking a look at that right now. And trying to finalize that. But more likely they're not to going to be just - I mean we really asset on an asset-by-asset basis and look at situations where we think the go-forward after CapEx NOI growth rate is likely to show not the kind of growth trajectory consistent with the rest of the portfolio. And more often than not that translates into some of the over assets than we've had. We very much liked the footprint that you have, as I mentioned earlier. We like the broadly, the markets we're in. But given the history of the company and when you think about in some of the older assets probably are a few outlier, smaller market that you'll continue to see as exit from.

And then just one question for Al on the balance sheet. There is another three year secured mortgage executed during the quarter. I was curious whether that was on properties that was previously encumbered by secured debt? And also to I think last quarter, there was $300 million very short-term unsecured term loan. And I guess my question is, does the secured mortgage kind of directly replace that down? What are the moving parts there?

I wouldn't necessarily put it direct. But I think overall, if you think about what we had oulines last year is our financing plans. We had said we're going to about $600 million, $300 million more into 10-year, the be 30-year in the - I mean 30 year, I think if you look back last year, the market kind of collapse in terms of public bond financing in the late year. And so what we did is we moved everything here. We get saw an opportunity in the secured market to do 30 year. We did two deals and combined over $300 million at a very attractive rates. They are secured with seven properties, for this one we just did. And I think the similar number of properties for the first one. What I wouldn't directly rate them. I'm just saying, it's part of the long-term plan we were able to adjust and just continue to perform on pushing our duration of our maturities out a little further. It's a 30-year debt in there. But also not get too much secured debt as good. We obviously are very glad we've done that. We're glad to continue to increase our relationship with the partners we have there. But I think you'll see us manage our balance sheet, 90% of our NOI is still unencumbered, unsecured right now. And so you'll see as continue to protect that. But within proper do both types of that over time. So that was piece of the overall plan. On $3 million term loan, we'll likely - we'll pay it off this year. And as you've heard us talk about, we're now are thinking about part of our plants for this year's, may be potentially do another bond deal late in the year because the market's is wide open, and we handle that and to bring some future maturities for potentially.

And our next question comes from John Guinee with Stifel.

Few curiosity questions. Looks like you sold 1 acre of land on Peachtree Road in Atlanta for $9 million. Is it really only 1 acre? And one, is land worth $9 million in acre in Atlanta? And then also, any more color on the Popular Avenue office building.

John, this is Eric. Yes, is actually less than acre, but candidly, it's Peachtree road right next to Lenox Mall. I mean it's the heart of Buckhead. This is a residual piece of associated with the condominium development that are posted in many, many years ago. The site is incredibly tight, they get incredibly different the more difficult. We thought it to be multifamily on. And we were approach by someone who has a different plans for how they tend to use that land, and we worked it. We were cautiously optimistic, but frankly, skeptical that when get it done, therefore, it wasn't in our guidance. But we are most happy to get this done in the first quarter. So it is just what it's your reading. And it is a big win for us. The Popular Avenue we've been in the same office building for 24 years. And we - I had owned the building, it was part of the IPO. And we long outgrew that space and had our corporate staff out into two different locations for the last 5 years. And so we finally had an opportunity to get everyone back together. And a new building, and the post proximity to location we just running office space. But we sold it and rather use that capital in apartments. So we've been in it for a long time and Glad to be gone.

Okay. And then the second question. Sync36 in Denver, it looks like Phase 1 cost you about 280,000 unit, but the budget for Sync Phase 2 is about $310,000 a unit. Did the cost really go up 10% that quickly? Or is there some allocation things we should think about?

It was really - more - no, cost had not gone up that much. That was really there was some allocation. When we negotiated the transaction with the developer, they had this one adjacent piece that has some unique aspects to it that created the cost umbers which you're seeing. But...

It's also a lower of number of units that we view the project as a whole. So you kind of have to put them together to think about that. And so when we underwrote it, we underwrite it together. And whole project is when in line with our expectations and our plants. And so it's allocation thing, but in total, it works well.

Is it a podium or a draft?

It's actually a surface park product.

Wow. For $300,000 a unit? Okay.

Well, I mean...

That's only - that's a small - the second one is of small number of unit, the first stage is much largest one. When you blend it down, you're going to be under $300,000.

But you also - that's why Denver - it's normal for Denver. You look at a cost per unit and the market like Denver, and that's pretty routine.

For a high-quality products.

Yes.

Surface parked up [ph].

Yes.

Yes.

And our next question comes from Buck Horne from Raymond James.

I just wanted to go back to guidance for just a second, Al, if I could. I guess you so - we raised the guidance therapeutic $0.08 for the noncash gain on the land sale. But I think there was also, you mentioned that offsetting $0.03 drag from just the timing of the transaction activity. Could you just - can you elaborate on just the moving parts there and just the changes on the timing of acquisition dispositions that drove that change to the guidance?

Yes, absolutely, Buck. That's a good question. I think so outperform the first quarter was $0.11 per share. And so we just put that performance into obviously, role that in as performance. So what we talked about was on the back part of the year we did have some changes to our transactions and into our that plans, that costs us $0.03 per share. So net that out as $0.08, and I'll give you the details of that as about $0.01 for, I talked about just a minute ago, we're planning on potentially doing another debt deal later in the year to take care some of may be our future financing as well as paid our term loan, that we talked about earlier. We also had $0.01 per share of earnest money forfeiture from that land sale that we talked about. I mean we had actually as we talked about, didn't have it in our guidance because we were really uncertain about the closing, and we had actually included in our plans that likely would fall apart and we could get the earnest money forfeited. So that's about $0.01 per share actually that comes out in the back part of the year. And then the remaining penny is just transaction timing, acquisition disposition plan, we continue to adjust those as we're selecting properties and we see clearly the deals we may buy in the year. So costs us about $0.01. So together, that's a $0.03. We beat $0.11 in the first quarter and took $0.03 out of those things.

Got you. That's really helpful. And secondly, just looking at some of the activity and the added development in the Phoenix area. Looks like you're trying to enhance or considering enhancing the presence of the Southwest a little bit further. So I'm just wondering how you're thinking about your current scale and the Phoenix marketplace or if you is there anything else you want to do to optimize the scale there. Over and would you consider reentering the market like Las Vegas if the writing came along?

Buck, this is Eric. I would tell you, I mean, we like Phoenix a lot. And I think that both Phoenix and Denver continue to have very a promising outlook over the next, call it, 10, 15 years. I think both of these markets are much more affordable than what you see on some of the West Coast markets. I think both markets are continuing to attract large pop growth. And population growth, migration trends. So we are very comfortable continue to scale up our presence in the Phoenix market, as well as obviously, in the Denver market as well. Vegas is a little bit of a different story I think. I mean we like very much the 2 properties that we have there. They're doing great. That's a market that is doing pretty well right now. I don't see that economy as probably diversified as I do at Phoenix and in Denver. Vegas obviously is - I have lot of entertainment employment base as well as military that drives a lot of it. And you're seeing some other back office costs. I think you get the wage growth in that market like you to in Denver or Phoenix. So I wouldn't think that you'll see US scale up in that particular market in Vegas. But the other 2 for sure, we would.

And our next question comes from John Pawlowski WITH Green Street Advisors.

Tom or Al, could you remind us what the left - the revenue left for full year '19 is from, just THE learning on redevelopments?

Earnings on redevelopment? So redevelopment is typically 25 to 50 basis points in our - in any year in our program as this year is consistent with what it was last year. So I'd probably give them 25, 35 basis points...

I mean that would be what it was, if we took it out. But since it is similar to what we did last year, it's not part of...

I think is that built-in impacted that over time, if that's what you're asking, John, I think that's what we would say it is.

On year-over-year basis, we've been pretty steady at the same number of unit...

Same program.

The year-over-year change is really not meaningful at all. But the overall impact on the permanent basis is the 25, 35 basis points.

Before wrapping the program up, it would be - in this year, it'd be at the higher end of that. But we've had this consistent number this year and last year. We did ramp up in last year some pretty pre-post-merger. But what we would expect as built in.

The question would be clear is, if you didn't do any redevelopments in the last few years, how much lower would 20...

25 basis points. 25 to 30. That's kind of built in on an recurring - on 'an ongoing basis.

Okay. And that kind of probably ramps next year a bit?

No. I think - I mean I would only ramp if we ramped our program up next year. I think right now we expect to do about the same number of units next year that we did last year and the previous year. So the best part of the contribution from that program. Now we certainly - will helpful if we have continued pricing performance and other things. But that's from the reduced development program specifically that we expect next year.

Okay. And then, Tom, I was hoping you could give some color on the demand side of the equation as Houston heading in peak leasing season. It's tough to just entangle what's organic structural improvement on market versus just the market is still just coming out of the basement of it. So how bullish or concerned or kind of meddling in feelings do you have in Houston right now?

I would say, I mean, they're jobs to completion are still in a healthy range at 9 to 1. I would expect Houston to still be steady from a growth standpoint, John. But I don't think we'll see the blended rate growth change that we saw between 2017 at '18. Certainly, one of our more stable and steady markets. But I think it was like a 800 basis points change in blended rents last year, and that will moderate to more normal.

So does it stay in that mid-4% revenue growth range in next few years?

So far blended's hung right in there.

And it does appear that there are no further questions over the phone at this time. I would like to go ahead and turn it back to the speakers for any closing remarks.

Well, thanks, everyone, for joining us and appreciate you being on the call. We'll see most of you at NAREIT in a few weeks. So Thank you.

This does conclude today's program. Thank you for your participation. You may disconnect at any time.