UDR, Inc. (UDR) Q4 2013 Earnings Report, Transcript and Summary

Christopher G. Van Ens - Vice President of Investor Relations Thomas W. Toomey - Chief Executive Officer, President, Director and Member of Executive Committee Thomas M. Herzog - Chief Financial Officer and Senior Vice President Jerry A. Davis - Chief Operating Officer and Senior Vice President of Property Operations Harry G. Alcock - Senior Vice President of Asset Management

Nicholas Joseph - Citigroup Inc, Research Division Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Nicholas Yulico - UBS Investment Bank, Research Division Karin A. Ford - KeyBanc Capital Markets Inc., Research Division David Bragg - Green Street Advisors, Inc., Research Division Ryan H. Bennett - Zelman & Associates, LLC Haendel Emmanuel St. Juste - Morgan Stanley, Research Division Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division Michael J. Salinsky - RBC Capital Markets, LLC, Research Division Richard C. Anderson - BMO Capital Markets U.S.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to UDR's Fourth Quarter 2013 Conference Call. [Operator Instructions] This conference is being recorded today, Tuesday, February 4, 2014. And I would now like to turn the conference over to Chris Van Ens, Vice President of Investor Relations.

Welcome to UDR's Fourth Quarter Financial Results Conference Call. Our fourth quarter press release, supplemental disclosure package and updated Three-Year Strategy overview document were distributed earlier today and posted to the Investor Relations section of our website, www.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements. Prior to reading our Safe Harbor disclosure, I would like to direct you to the webcast of this call located in the Investor Relations section of our website, www.udr.com. The webcast includes a slide presentation that will accompany our Three-Year Strategic outlook commentary. On to our Safe Harbor. I would like to note that statements made during this call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in this morning's press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. [Operator Instructions] Management will be available after the call for your questions that did not get answered on the call. I will now turn the call over to our President and CEO, Tom Toomey.

Thank you, Chris, and good afternoon, everyone, and welcome to UDR's Fourth Quarter Conference Call. On the call with me today are Tom Herzog, Chief Financial Officer; and Jerry Davis, Chief Operating Officer, who will discuss our results, as well as senior officers, Warren Troupe and Harry Alcock, who will be available to answer questions during the Q&A portion of the call. My comments will be brief. First, all aspects of our business continued to perform well in the fourth quarter, which concluded in outstanding 2013. Apartment fundamentals in the majority of our markets remained favorable and we have strong momentum going into 2014, as is reflected in our guidance, which is above Street estimates. Second, we met or exceeded all first year objectives as presented in our initial Three-Year Plan that was introduced last February. Following Tom's and Jerry's remarks, we will update you on a new Three-Year Plan, which covers the period from 2014 through 2016. Finally, I'd like to thank all my fellow associates for their hard work in producing a great year for UDR. We look forward to 2014. With that, I'll turn the call over to Tom.

Thanks, Tom. The topics I will cover today include: first, our fourth quarter and full year 2013 results; second, a balance sheet and debt maturity update; third, a development and redevelopment update; fourth, an overview of fourth quarter and post year-end transaction; and last, a first quarter and full year 2014 guidance. I'll begin with our fourth quarter results. FFO, FFO as adjusted and AFFO per share were $0.36, $0.35 and $0.30, respectively. Full year 2013 FFO per share was $1.44, inclusive of $0.05 of Hurricane Sandy insurance recovery. Our 2013 FFO as adjusted per share was $1.39, inclusive of $0.01 of Hurricane Sandy business interruption recoveries relative to lost rental revenues in 2013. And full year AFFO per share was $1.23. Moving onto the balance sheet. At year end, our financial leverage on an undepreciated cost basis was 39%; on a fair value basis, it was 32%. Our net debt-to-EBITDA was 7.0x, consistent with our expectation at the beginning of 2013. Moving ahead, we will continue to manage to BBB+ credit metric while gradually deleveraging our balance sheet through nondilutive actions. From a liquidity perspective, our balance sheet remains in good shape with $930 million of available funds at the end of the fourth quarter, consisting of cash and credit facility capacity. Including extensions, we have $312 million of maturing debt in 2014 at a weighted average interest rate of 5.3%. 140 -- $184 million of this was paid off by the revolver on January 15. We intend to refinance these obligations in the unsecured markets during the second quarter of 2014. Turning to development. Before I provide an update, I would like to remind everyone how we define our pipeline. Our development pipeline includes all projects that are pro-rata ownership share outlined on Attachment 9 or Page 21 of our quarterly supplement. This equates to a $1.2 billion pipeline at year end, 64% of which has been funded. We completed 3 projects at $275 million of development during the fourth quarter at a weighted average spread between expected trended yield and current market cap rates of approximately 185 basis points. Of these completions, Bella Terra in Huntington Beach and 13th and Market in San Diego are estimated to perform at or above the upper end of our targeted 150 to 200 basis point trended range. Fiori, a Vitruvian Park community in Addison, Texas is coming in below our targeted range, though will still be accretive to earnings and NAV. Our remaining pipeline, $300 million of which is expected to be completed in the first quarter of 2014, is trending as a whole within our targeted range. During the quarter, we announced 2 new projects, both in core markets. The first, 399 Fremont, a $318 million development in San Francisco, broke ground in mid-January. 399 Fremont is a 51-49 development partnership with MetLife. UDR's share of the project equates to $162 million. The second is Steele Creek, a $108 million development in Denver, which broke ground in the fourth quarter. Steele Creek is being constructed under a participating debt structure, which is a new structure for UDR, but the economics are advantageous. There's a substantial equity piece in front of our participating loan, we are paid 6.5% current and we'll receive 50% of the upside upon subsequent purchase of the asset by UDR or sale to a third party. As to future development projects, we are carefully underwriting opportunities. In addition to our land bank outlined on Attachment 11 or Page 23, we recently acquired for $78 million the land for the development of Pacific City, a fully entitled 516-home community located in Huntington Beach, California. The site has immediate access to the Pacific Coast Highway and is only 3 blocks from the Huntington Beach pier. Looking ahead, we expect to announce a couple of new starts in the second half of 2014. On to redevelopment. We increased the scope and budget of our Rivergate redevelopment in Manhattan. The revised budget is $98 million and includes limited scope renovations on additional units, the addition of 33 homes as some large floor plans are split into 2 homes, upgraded corridors as well as other revenue-generating opportunities. At 27 Seventy Five Mesa Verde in Orange County, we are choosing to table for the foreseeable future the redevelopment of 216 homes that were in the original scope of the project given current demand trends in that particular submarket. Next, we sold $132 million in noncore assets in the fourth quarter. We exited the Sacramento market and disposed of a noncore asset in the Boston metro area. The average age of the Sacramento assets was 31 years and the 3 communities were sold at a weighted average cap rate of approximately 6%. In addition to the sale, we consolidated our 13th and Market and Domain College Park joint venture development as we assumed the role of managing partner in both ventures during the quarter. Following year end, we closed on the sale of Presidio for approximately $49 million, a noncore community located in North County, San Diego. The 27-year-old property had an average revenue per occupied home of $1,485 in the fourth quarter and was sold at a 5.4% cap rate. On to 2014 guidance. Our 2014 FFO and FFO as adjusted guidance per share are $1.47 to $1.53. Our 2014 AFFO guidance is $1.30 to $1.36 per share, an 8% increase at the midpoint over 2013 and includes $1,100 of maintenance CapEx per stabilized home. There are a number of moving parts, but the primary drivers of our expected AFFO growth from 2013 to 2014 of $1.23 to $1.33 at the midpoint includes mature and nonmature NOI growth of $0.08; development and redevelopment earn-in, net of funding costs of $0.03; and a reduction in development and redevelopment [indiscernible] of $0.01. These benefits are offset by $0.01 in dilution from expected recycling of noncore assets via 1031 transactions and $0.01 from higher CapEx. In 2014, we anticipate same-store revenue growth of 3.5% to 4.25%, same-store expense growth of 2.75% to 3.25% and same-store NOI growth of 3.75% to 5.0%. Other primary assumptions can be found on Attachment 15 or Page 27 of our supplement. First quarter 2014 FFO, FFO as adjusted and AFFO per share guidance are $0.34 to $0.36, $0.33 to $0.35 and $0.30 to $0.32, respectively. Finally, we are increasing our 2014 declared dividend by 11% year-over-year to an annualized $1.04 per share from $0.94 per share in 2013. With that, I'll turn the call over to Jerry.

Thanks, Tom. Good afternoon, everyone. In my remarks, I'll cover the following topics: first, fourth quarter and full year 2013 operating results; second, the performance of our core markets during the fourth quarter; third, a brief update on our development lease-ups; and lastly, market performance expectations for 2014. We're pleased to announce another strong quarter of operating results. In the fourth quarter, same-store net operating income grew 5.4%, driven by a 4.5% year-over-year increase in revenue against a 2.4% increase in expenses. Our same-store revenue per occupied home increased by 4.2% year-over-year to $1,509 per month. Our same-store occupancy is 96.2%, was 30 basis points higher year-over-year. For the full year 2013, same-store revenue grew to 4.9%, expenses increased 2.6% and NOI grew by 6%, all exceeding our original forecast at the midpoint from last February. Turning to new and renewal lease rates. Fourth quarter effective rental rates on new leases increased by 1.3%. Renewal rate growth remained strong at 5.2%. San Francisco, Seattle and Portland performed well, while the Mid-Atlantic region struggled. Further details can be found on Attachment 8(G) or Page 20 of our supplement. Annualized turnover in the fourth quarter decreased by 220 basis points year-over-year and was 80 basis points lower on a full year basis. Lower turnover for the fourth quarter was the result of our efforts in 2012 to move lease expirations out of the fourth quarter and into the second and third quarters. This was done because new lease rate growth is typically more than 200 basis points higher in those quarters than in the fourth quarter. Rent, as a percentage of our residents' income, held steady at roughly 17%. Move-outs to home purchase were up 50 basis points year-over-year at 13.9% in the fourth quarter. Next, we'll talk about quarterly performance in our primary core markets. New supply in metro D.C. continues to be an issue with significant deliveries expected in 2014. While we are not immune to the negative effects of new supply, we continue to believe our diverse mix of A and B product, as well as less direct submarket exposure to new supply, will help us fare better than many of our peers in 2014. New York City experienced some pricing pressure in late 4Q 2013 through mid-January of 2014 as we anniversaried off of Hurricane Sandy. With many units out of service throughout Lower Manhattan and Zone A during late 2012 and early 2013, pricing was abnormally strong in unaffected properties on the island. In the fourth quarter of 2013, all of these apartments that were off-line last year were fully recovered. So 12-month leases commanded less pricing power throughout the city. We have cycled through this issue and expect to see normalized demand over the remainder of 2014. Orange County and Los Angeles employment growth is improving, and with limited new supply, both markets are expected to perform well in 2014. We achieved 90% stabilized occupancy at our 467-home Bella Terra development in Huntington Beach in December and we're currently 96% leased. This is just 7 months after accepting our first unit, which means we averaged 60 move-ins per month and have yet to offer a concession. San Francisco remains very strong with expected 2014 job growth of more than 3%, primarily consisting of higher-paying professional jobs. We're seeing good demand throughout the city, the Peninsula and Silicon Valley with some moderate pricing pressure in North San Jose where new supply is more prominent. Channel, our new development in Mission Bay, is 43% leased just one month after opening its doors at higher rates than initially expected. New supply is coming to downtown Seattle. The job growth is expected to absorb it. Our A and B properties in metro Seattle continue to perform well. Boston was one of our better markets in 2013. Currently, it is at an unseasonally slower period of the year and it has been negatively affected by abnormally poor weather over the past 45 days. Lastly, Dallas is generating a significant number of jobs right now, but is also facing heavy new supply. We are feeling some effects from supply in Uptown and Plano, but believe Dallas will be an above average market for us in 2014. Turning to development. During the quarter, we completed 725 homes and spent approximately $76 million. As of the end of 2013, we had spent $800 million on our $1.2 billion development pipeline. Bella Terra in Huntington Beach, Channel at Mission Bay in San Francisco and 13th and Market in San Diego comprised $371 million in aggregate estimated cost. Weighted average effective rents are currently 10% above plan and leasing velocity is 16%, ahead of expectations. Each of these lease-ups continues to go well. Los Alisos in Mission Viejo, Domain College Park across the street from the University of Maryland Business School and Fiori at our Vitruvian Park JV in Addison, Texas comprised $201 million in aggregate estimated cost. Weighted average effective rents are 3% below plan, while leasing velocity is 19% below where we would have expected at this point. As the spring leasing season arrives, we expect these -- that leasing at these projects will pick up. Still, all in, we're comfortable with how the lease-ups are progressing in aggregate. Finally, I have a couple of comments regarding market revenue growth expectations in 2014. We expect San Francisco and Seattle to be among our best-performing markets. Southern California, Texas and the Northeast are expected to grow in excess of the 4.25% top end of our portfolio same-store guidance. These markets comprise over 50% of our total NOI. The Mid-Atlantic region is expected to be our weakest region once again. Page 13 of our updated Three-Year Strategic outlook has additional information on our market growth expectations. With that, I will remind those listening that there is a link to our updated Three-Year Strategic document on the Investor Relations page of our website. We'll pause for a moment so that everyone can gather the Three-Year Plan materials. I will now turn the call back over to Tom Toomey to present our updated Three-Year Plan.

Thanks, Jerry. Let's move on to our 2014 to 2016 Strategic Plan. Last February, we communicated that the heavy lifting of our portfolio and balance sheet repositioning was largely completed. At that time, we rolled out our 2013 to 2015 strategic plan. As we measure our actual 2013 results against the plan, I'm pleased to tell you that we met or exceeded each of our 2013 goals. We view our updated plan merely as an extension of last year's plan, given that strategic priorities are unchanged. We have 4 primary strategic priorities, which you will find on Page 3. These are: one, investing our shareholders' capital in accretive growth opportunities that improve our portfolio; second, continuing to generate best-in-class operating results; third, drive cash flow, dividend and NAV growth; and fourth, continuing to strengthen our balance sheet. We believe successful execution of these priorities will optimize total shareholder return for our investors over time. With that, I'll turn the call over to Tom to discuss the details of the plan.

Thanks, Tom. Please turn to Page 4 of the strategic outlook presentation. As Tom mentioned, we met or exceeded all 2013 primary objectives in our original plan. First, we completed approximately $400 million of accretive development in 2013 and expect that our remaining pipeline will continue to create value. Second, we ended 2013 ahead of all original annual guidance expectations for same-store and cash flow growth. In addition, during 2013, we raised our dividend by 7% and we'll raise it an additional 11% in 2014. Third, all of our primary year-end balance sheet metrics were in line with our expectations set forth at the outset of 2013. We continue to manage the BBB+, Baa1 metrics. Please turn to Page 5. Development remains accretive and will continue to be a primary mean to which we improve our portfolio and grow our company. Our primarily coastal and urban pipeline of $1.2 billion will be completed over the next 3 years, yet sized less than 10% of our enterprise value and at 64% funded. The remaining spend of $440 million will come from either equity issuance or sale of assets. We continue to target annual spend in the range of $400 million to $600 million per year and a trended spread versus cap rates of 150 to 200 basis points. Recently, we have tightened our underwriting standards to reflect rising costs and less robust forward rent growth assumptions. Fewer deals will pencil in today's environment, but we are still finding accretive opportunities. Please turn to Page 6. On this page, we provide Seattle pipeline statistics. Our pipeline is primarily coastal and urban. Including our land with MetLife, our Seattle pipeline totals $1 billion to $1.3 billion at 100% ownership. 85% of this potential pipeline is owned in partnership with MetLife. Our current ownership share in 7 UDR/MetLife I JV land parcels is just 4%. This provides optionality at the conclusion of the entitlement processes for these parcels. When assessing the optimal size of our development pipeline, we weighed balance sheet risk, drag to our earnings stream and AFFO and NAV accretion from the successful completion of current and potential projects. Please turn to Page 7. In 2014, we anticipate our development projects will generate $0.05 of FFO per share drag and $0.025 of accretion. Upon stabilization of each project at our targeted trended spread, we expect annual FFO accretion of $0.06 per share and continued growth thereafter. Cumulative NAV accretion is estimated at $2.10 per share during the construction and lease-up phases of our development. Please turn to Page 8. Our operations remains strong as exhibited by the chart in the middle of the page. We have consistently produced better top line growth over an extended time period than the multi-family average. Though we are not sitting idle. Jerry and his team continue to improve our operations. Our focus on technology, and more recently, our emphasis on driving repair and maintenance efficiencies are 2 examples. These investments are enhancing our margins and continue to improve our residents' experience. Moving forward, we expect to generate strong operating results as evidenced by the same-store growth assumptions presented over the life of the plan in the chart at the bottom of the page. Please turn to Page 9. A primary tenet of our Three-Year Plan is to drive AFFO, NAV and CVNI growth. We anticipate 2014 and 2015 being good years. Looking at the chart -- at the top chart, AFFO per share growth is forecasted at 7% to 9% in 2014. I discussed the 2014 drivers in my earlier remarks. Growth in 2015 is expected to be similar to 2014. Our 2016 expectations are negatively affected by fewer development starts in 2013 and higher interest rate assumptions. However, our crystal ball gets hazier the further out we look. The bottom 2 charts show expected NAV per share growth and CVNI, both assuming a flat cap rate environment. Applying our next 3 years' expected growth to our 2013 NAV per share implies an NAV of approximately $36 in 2016, a 30% increase over 2013. We anticipate annual CVNI of approximately 12% through 2016. This is consistent with our long-term average historical growth. However, historical cap rate compression contributed significantly to CVNI whereas, going forward, accretive development returns are expected to help drive CVNI. Please turn to Page 10. We continue to focus on net debt-to-EBITDA, leverage and fixed charge coverage when evaluating the strength of our balance sheet and anticipate our metrics will further improve over the life of the plan. Same-store growth and development earn-in are the primary drivers of our forecasted improvement in net debt-to-EBITDA and fixed charge coverage. Please turn to Page 11. Pages 11 and 12 provide our 2014 guidance and 2015/2016 cumulative expectations. Please turn to Page 13. Our 2014 growth assumptions for our markets are presented on the map. The West Coast and Northeast are expected to grow at above -- at an above average rate in 2014, while the Mid-Atlantic is likely to continue to struggle, but is still expected to perform better than our peers due to our 50-50 mix of As and Bs in D.C. and less direct exposure to new supply. Please turn to Page 14. As Tom indicated earlier, we view this update as a continuation of our previous Strategic Plan. In the charts, the midpoints of our cumulative Three-Year expectations for the 2013 to '15 time period are relatively similar or improved when compared to our updated plan for these years to our previous plan. I'll now turn it back over to Tom for final remarks.

Thank you, Tom. I've had the pleasure of being UDR's CEO for 13 years now. Our mission over the first decade was to reposition the portfolio and the balance sheet. The last couple of years we have spent finalizing the transition of the previous decade, as well as positioning the company for strong cash flow growth. The next decade will continue to focus on long-term cash flow growth, which is the focus of this plan. In our view, this plan remains the best avenue for creating value for our shareholders. Our team remains highly focused everyday on executing it. From time-to-time, during discussions with our investors and analysts, we were asked, what differentiates UDR from our peers? I believe there are several value-creation drivers that are applicable to the multifamily space, and currently, UDR is uniquely positioned to take advantage of each of them. First, we have the necessary skill to garner cost of capital and G&A efficiencies, but are small enough that moderately-sized transactions still move the value-creation needle. Second, we have a best-in-class operating platform. Third, we have substantially and accretive development program. Fourth, our portfolio is primarily bicoastal, but diverse enough to generate strong results in a variety of economic environments. And lastly, we have a unique relationship with a Fortune 50 company in MetLife that affords us favorable capital along with opportunities unavailable to many others. I will conclude my remarks by observing that the most vital component of successful execution of our plan is our people. I'm fortunate to have in place an experienced and dedicated team, of customer-focused associates and believe we will achieve outstanding results against each of our priorities we have set forth today. With that, I'll open up the call to Q&A. Operator?

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

In terms of the equity issuance assumed in 2014 guidance and the Three-Year Plan, if your stock continues to trade at discount, will you forego that equity? And if so, how do you expect to replace that capital?

Nick, Tom Herzog. Yes, if we're not trading at or above NAV, we will forego that equity issuance and would replace it with additional asset sales from our capital warehouse or noncore markets.

Okay. And then, Jerry, can you give the new and renewal rate growth by month for January than where renewals are going out for February and March?

By every market?

No, no. Total, total portfolio.

Oh, sure. January, new rent growth was 0.1%. The lows were once again the Mid-Atlantic where it was in the 4s, down 4%. We did have some strength in the Pacific Northwest, as well as San Francisco where it was up around 5% to 6%. Then renewals in January were signed at 4.9%. We're sending out 5% to 5.2% for the remainder of this quarter. I would add, we do expect new lease growth for the quarter to average out to about 1.3%. It does look like it's going to accelerate the following 2 months and that compares to about 2.2% in the first quarter of last year. We think renewals will average for the first quarter of this year 5% and that's down from about 5.8% last year.

And then where's occupancy at the end of January?

At the end of January, it was about 96.1%, 96.2%. As of yesterday, after we had some month in move-outs, it was 95.9% and that's 20 basis points higher than the same time last year.

Our next question comes from the line of Alexander Goldfarb with Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: The first question is on slide -- I just turned it, on Slide 7, Tom. You guys talk about $1.2 billion development pipeline that should be about $0.06 accretive. If my quick math, which is always a dangerous thing, is right, that seems to imply about a 1.3% spread. Last week, Avalon talked about a 250 basis point spread on their development program verse [ph] funding source. So can you just comment a little bit more? Is this just adding in cushion just because it's a forward projection and therefore you have no way of knowing where disposition pricing may be or equity pricing may be? Or is this just -- or is there something else going on here?

No, Alex, as we look at the development program, that $0.06 is based on our current portfolio, which we'd call it, it's in the middle of the range, between the 150 to 200 basis point spread. And if you run that math, you'll see the drag that results from it. You'll see the accretion that builds in that, at the point of stabilization, it will produce that $0.06. So that is based on pretty much right down the middle at 175 basis point spread from the cap rates in those corresponding markets. That's how the math will work. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. So it's 175?

Yes. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. And then...

It's actually just -- it's slightly -- it's just slightly higher than 175. I think we're running more like just maybe 10 basis points higher than that on average across the modeling that we've done on our portfolio currently, but just call it in that range. It will be about $0.06. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. So the $0.06 is not the 175, the $0.06 more reflects the impact of timing?

Timing, but probably call it 180 to 185 basis point spread. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Okay. Next question is for Mr. Toomey. Putting on your big picture hat, if you took a read of the Essex-BRE proxy, it looks like there were only 4 companies that were sort of interested in BRE and only 1 bid. In your view, looking over the history of M&A in REIT land, is it your view that it's typical that M&A only comes down to maybe 1, maybe 2 people who actually throw in bids? Or you think it's a reflection of where pricing is today or companies' hesitancy to engage in deals because of where stock prices are?

Well, Alex, I've been at it a long time even through the '94 window where we started out with 36 public companies. And there, it was a race to get larger and it was a cost of capital multiple game. I think what you have today is 10 companies that are very well run, they're very efficient, there's not a lot of upside in the companies and so that brings down how we can create value for the future investor to really cause capital advantage and that shrinks the pool of potential buyers. I think there's probably more value to be brought in the private space and that's where people are headed today and you can see it in their accumulation of portfolios. So I think these are just well-run companies, hard to see a lot of upside in it and that just shrinks the pool of buyers. That's all I observe.

Our next question comes from the line of Nick Yulico with UBS.

A couple of just quick modeling questions. One, could you give the capitalized interest estimate for 2014?

Yes. We've got that. I think that's something that we normally don't lay out in detail, but you can take what we had last year and then we speak to the change in cap interest from 1 year to the next. So I think you can back into it.

Okay. Sorry, what was the change in cap interest this year versus last year you said, you talked about that?

It's $0.01 on the development and redevelopment projects.

Okay, got you. And then on D.C., I was hoping to get a little bit more detail on what your same-store revenue expectation is for the market this year?

Sure. This is Jerry. Our expectation is in 2014, we, like everyone else, will see a deceleration in D.C. due to new supply. We do continue to believe D.C. will be positive, albeit a low positive revenue growth, probably call it in the 1% to 2% range. What we think we have that some of our peers don't is locations that are less indirect path of new supply, as well as a portfolio that is a little over half of B quality rather than A and those definitely don't go head-to-head as much. We have 2 or 3 markets where new supply is coming at us, one's out in Manassas, one is the U Street Corridor and the third one is in Woodbridge. But many of our properties that are within true Washington D.C. are not in the same neighborhoods as the new supply. But I can tell you, you see it in the supplement where we show what new rents were in fourth quarter, we have seen a deceleration in what we can get on new rents, but we are continuing to see renewals go out in the 3% to 4% range and we are holding occupancy.

Okay. And then just one last question on the Three-Year Plan. It looks like, based on some of the development spend projections, that you're going to start -- I guess, target to start roughly $1 billion of additional development. And what I'm wondering is going back to that $0.06 FFO benefit once stabilized on the current $1.2 billion development pipeline, I mean, is that going to be a similar type of FFO benefit if you do, in fact, start $1 billion -- a little over $1 billion of development?

You've got to remember that if we take the $1.2 billion pipeline, that's completed over a period of about 3 years, 2.5 to 3 years, let's say. So we assume $400 million to $600 million of spend per year. You're correct that the $0.06 is the completion of the existing $1.2 billion development. We had starts at the end of 2013 of about $250 million. We expect a couple more projects to be announced probably the latter half of 2014, but we haven't announced a specific dollar amount of new development starts in 2014 at this date yet. But we're still underwriting to the 150 to 200 basis point trended spread over cap rates, so the kind of accretion that you would see for the types of projects that we're approving on a relative size basis would be similar.

I guess I was just trying to figure out. I mean, if the development spending is supposed to total $1.5 billion from 2014 to 2016, you have about $450 million left on the existing pipeline. That seems to imply about $1 billion of incremental starts.

Yes, you guys go to our Seattle pipeline page and you'll find in...

Page 6.

Page 6. Yes, Page 6. If you took the ownership effective numbers and assume that the UDR/MetLife numbers were at 50-50 by the time we [indiscernible] development, along with our 100% owned stuff, you get an ownership effective number in the $600 million to $750 million range, plus you've got Pacific City on top of that. So those -- we do have already a Seattle pipeline in place on top of what's already under development. So for the time frame that we're looking at, I think, we're in good shape for what we're speaking to of $400 million to $600 million per year.

Our next question comes from the line of Karin Ford with KeyBanc Capital Markets.

Just looking at Page 8 of the slides. It looks like your '15, '16 same-store revenue growth expectations are roughly in line just a little bit below what you're expecting for '14. Can you just talk about what fundamental underpinning gives you the confidence that revenue growth will stay steady here for 3 years and what you think the biggest risk to that are?

Yes. Again, this is Tom and I'm going to -- Herzog and I'm going to pass it to Jerry. But Karin, a variety of different things. And the further out we go, of course, the harder it is to make these estimates. But we've looked at the AXIO data, the Moody's data, all the different pieces that you guys write and have put our own views toward that, we've got an improved job market that should more than offset the new supply estimates in our -- the vast majority of our markets over the next 2 to 3 years. In the markets that are being hit harder, like a D.C., a Seattle and a Austin, our specific locations within each of these markets has sheltered us from the rent deceleration experienced by some of our peers. We see supply flattening out in the latter half of '14 and first half of '15 due to the higher construction costs, interest rate, the less explosive rate growth. And another point that I think is worth making is just take a look at what's happened with single-family housing. If you took a home 12 months ago and then looked at the year-over-year increase in value, it's about 12%, higher in some of our markets, but 12% across all markets. And if you took mortgage rates, it's up -- they're up 120 basis points from a 3.5 base. Add that together, do the math, that's about a 30% increase in mortgage payments. That, along with social patterns that continue to favor rent-in, we're just seeing that the growth is going to continue to be favorable. So when we look at a 3.9% 2014 growth, kind of flattening out to 3.75% in '15. '16 is kind of a long ways to look out, but we're not seeing anything that looks different than that, but again it's hazier, we feel pretty good about it. But Jerry, maybe more on some specifics as to how you see it?

Sure. Hi Karin, just a few things I would add to what Tom Herzog said. First, when we look out into '15 and '16 and what's projected for job growth, we look in our core markets and we see that job growth is projected to be 20 to 30 basis points higher in our core markets. In addition to that, we see that new supply growth is probably going to be a little below average in '15 and '16 after being above the national average in '13 and '14. Also, when we go back and look at what percentage of households are renters, in our core market, it's 42% compared to 35% as a national average. So we see those stats and it's encouraging. One other thing is, when you look at an urban platform that we've really moved towards, many of our residents don't own cars. They rely on public transportation. And one interesting tidbit I picked up a few weeks ago at the National Multi-Housing Conference was that transportation costs are the second largest cost component of these households. So when I look at a suburban household of renters that have 2 drivers, you're probably talking transportation cost when you include car payment, insurance, gas, repairs, tolls, parking, things like that, are well over $1,000 a month. Most of my residents don't have that cost. And in addition, when I look at my percentage of rent to income across all of my markets, it typically is falling out anywhere between 15% and 20% regardless of the market. So we do feel that those urban renters, if you're getting normal pay increases, let's say 2% to 3% across-the-board, will better be able to handle increases over time than our suburban peers.

Tom, anything you'd add?

Yes. Karin, I think it's a very good question. And when I back up and look through all the detail that Tom and Jerry go through to build this up, what you realize about our '14, '15 and '16 outlook, I'd throw this observation at it. '14 and '15 are going to look very much alike, in our view. Well then why do we have a lot of high comfort around that aspect of it, it's clearly that we have high visibility on new supply, we have a very good feel about employment picture about our individual markets. And so, we feel very good about the '14, '15 aspects of it. And as you get out to '16, it's very hard to ask our site teams to build up a projection, to understand supply, growth dynamics. And so we ended up defaulting to a lot of third-party analysis to arrive at '16. And I think that's a relatively conservative view, but one that is easily explained. And as I would take it away from your chair, I'd say, these guys feel very confident about their '14, '15 forecast and they're going to look a lot alike at this point in time. And '16 is just a wildcard that's a long time off into the future and certainly, as we get closer, we'll have a better visibility and, we hope, a more optimistic view of it.

My second question just on guidance, question for Jerry. On Page 13, you give a lot of nice market-specific information. Are there any of your markets that you're expecting to accelerate from a same-store revenue growth perspective versus 2013?

Yes. I'd tell you, there's a few that could accelerate slightly. Right now, Orlando is very strong as we enter this year. I could see it holding up well. I'm hopeful, although I say this every year about Orange County and L.A., we've had modest results there the last year or so. We've had a good start in January of this year, and I think those potentially could be a little bit better. And the other one that just continues to chug, even though it's a very small market for us, is Portland.

And would Boston potentially be in that category as well, or because you had a good year in '13, maybe not?

No. It will not be. I'll tell you, we killed it in 2013. I want to say our total full year revenue growth was upwards of 8%, if I remember correctly. And to replicate -- it was 7.7%. To replicate this year, things would have to turn around quite a bit. It's going to be a good market, but it won't be as great as it was last year.

Our next question comes from the line of David Bragg with Green Street Advisors.

I wanted to follow-up on Nick's earlier question, and I'm hoping that you can point us in the right direction as it relates to the equity issuance assumptions that you have in '15, '16. If it's an unfortunate circumstance that the stock is not there for you over that time period, can you just walk us through what the alternatives are, whether it's significantly more dispositions than you plan here or higher leverage?

Yes. Dave, thanks for that. It definitely is not higher leverage. That's not the direction we're going. We have the benefit of having a $1.2 billion capital warehouse portfolio that we're in no rush to sell, but yet, those are assets over time that we'll prune in a $300 million non-core portfolio. When I think about equity issuance, of course, we think about it on a cost of equity. But when you look at it on an annual cost, as it might apply to this plan, it's probably right around a 5% cost of -- an annual cost of funds on an AFFO yield basis. You compare that to sales and assume that we've got a fixed cap NOI cap rate, and that would include some sprinkling too, of some non-core assets in core markets. That equates to about a 5.5% cash flow cap rate, so not terribly different than what the equity would look like to the bottom line of our plan in that particular year. So it comes down to this. We've got $1.5 billion of stuff that over some period of time, we intend to prune and put into more higher-growth assets, development assets, the type of assets that Harry's producing. And so if we're not able to issue the equity, that's fine, we will sell assets. But I will remind you guys one thing -- or at least express to you one thing, we've done studies. In 63% of the time over the last decade we've traded at a premium to NAV, and there's only been 1 year in the last decade that we have not, that was 2013. So we do expect that sometime during the period of the plan, we probably will trade above NAV and we'll utilize that opportunity to continue to grow the company, which is something that we would intend to do over time as well.

Okay. And my second question is on Rivergate. How do the changes there affect your -- the yield that you expect to achieve on -- or that you are achieving on that asset?

Yes. Let's take Rivergate for a minute, Dave. Rivergate was acquired as an acquisition rehab asset. And with that, as we think about that, we target a stabilized yield in excess of what we could acquire a similar asset for that didn't require the rehab in that same market. Inclusive of this expanded budget, we believe we'll trend to about a 5% yield on a fully-stabilized basis some time in 2016, which we feel really good about. So that's just kind of the background. Harry, what might you add to that?

Dave, this is Harry. So just to speak specifically about the rehab. Our initial budget was $60 million. That was to rehab about 400 of the units that the prior owner hadn't touched; cure a lot of exterior items, the full exterior of the building; all new windows; a brand-new lobby, which we finished; all new AC and heating systems, that type of thing. We finished that, and in the course of [indiscernible] having the property and operating it for the past 2.5 years, we found a number of additional opportunities to generate additional revenue and enhance our return. So this really is a phase 2, and sort examples of those items are create a second floor amenity area in space that was previously unused, we're going to split an entire stack of large 1-bedrooms, 950-square foot 1-bedrooms, and split them into a combination of a 450-square foot studio and a 500 square-foot junior 1-bedroom, which gives us a new entry point in the building. We have 11 homes with very large terraces which is a unique amenity in this market that we're going to increase the rehab scope. We're going to add washers and dryers to 194 units. So the point is, we think we're going to add, for that $38 million, get another $375 or so in additional rent and generate about an 8% return on that incremental $38 million in spend. I'll remind you that in the 2.5 years we've owned it, the average rents at acquisition were about 3250. We've increased rents nearly 30% at that building. The rehab units are generating rents in excess of 4,300 today and we've got another 375 to go as a result of the Phase 2.

Our next question comes from the line of Ryan Bennett with Zelman & Associates. Ryan H. Bennett - Zelman & Associates, LLC: Just wanted to go back to the Shadow development pipeline for a second. I was just wondering if you had any color regarding your land parcels in California and Seattle in terms of the submarkets where those land parcels are located versus the new supply that's coming online now? And as the markets, as well as what's planned over the next couple of years and the level of competition you might be expecting within those submarkets?

Sure. This is Harry. I'll go ahead and sort of walk through those in general and, I guess, there's a number of different answers. But to walk through, we've got 4 properties -- 5 properties, actually. On Wilshire Boulevard in Los Angeles from Santa Monica to Koreatown, which represent a big chunk of it. An awful lot of the new supply in the L.A. area is downtown. None of these are downtown. So these happen to be in submarkets that are not experiencing the rate of supply you're seeing in Los Angeles on the whole. We've got 1 of the land parcels in Bellevue, Washington that is -- again, Bellevue is, I think, there's 2 projects under construction now. There's a couple more on the drawing board. Bellevue, again, is not getting nearly the same level of new supply as downtown Seattle is. We do have 1 property in Irvine that we could start later this year. The City of Irvine does have a fair amount of new supply. We think we'll be kind of right in the middle, perhaps slightly ahead of the overall supply in that marketplace. But that is going to be something that we will deal with when we're releasing those projects up. We've got 1 property on El Camino in Mountain View. Again, the City of Mountain View has just delivered 2 brand-new product -- projects. Those are the first new projects that have been delivered in that city in a long time. There's a couple of others that are coming online. The point is, we're -- this is not an area where we expect a tremendous amount of new supply. It's just very difficult to get these types of sites and title that takes a long time. And we feel very good about the types of assets that we'll be starting over the next 2 or 3 years. Ryan H. Bennett - Zelman & Associates, LLC: Got it. That's helpful. And just one more. Jerry, in terms of your expense growth guidance over the next few years, it's ranging around about 3%. I'm just curious, given the expense savings programs that you put in place for the past few years, if you quantified what sort of savings that you're generating in the next 3 years?

Well, we continue to find new opportunities to save money, especially on the repairs and maintenance side. As we make our service associates more efficient, it will enable us to continue to bring third-party cost in-house, as well as we think, by doing more preventive maintenance and doing a better job at move-in and during the residents' time period with us, we're hopeful, although I can't back this up yet, that we'll be able to drive resident turnover down. But as I look at 2014, like you stated, we have expense growth projected at 3%. And if I had to break that down, we're looking at about 6% for tax increases next year. While 35% of our company is in California or Oregon where you have caps on valuation increases, those will come in somewhere in the 2% to 3% range. We're going to feel some pressure, again, next year in Washington, D.C., where taxes are projected, currently, to be going up close to double digits. It's high single digits, and D.C. is about 14% of my total same-store pool. And then when you look at the rest of the company, which is about half of it, they kind of all blend in to about a 6% growth. So we're seeing taxes going up, based on valuations, about 5%. And then, we did receive some refunds last year that translate to the total expense going up about 6%. As you look into the other components, we think insurance is going to be roughly flat with last year. We're seeing utilities probably coming in about 4%. We're keeping our eye on the State of California for future years with severe multiyear drought conditions that have been happening. That could, in the future, have an impact on water rates. To date, we really haven't seen that in any of our markets. But 2014, our expectation is, our repairs and maintenance expense will be negative growth once again. This past year, it was down about 4%. As we were able to bring more work in-house, we think it will be down 2%. In '14, we see personnel going up in that 3%, 3.5% range. And we still think we can become a little more efficient in the office, as well as on the marketing side and drive down our administrative and marketing cost about 2%. And I really don't see anything as we go out further years, and I think our '15, '16 projection is to be in that 3% range. I would say, upside risk is probably more in the utility side. I think taxes will start to moderate as valuations are fully built in. We think some municipalities may start looking to raise levy rates in the future if they can't get on valuation. Nobody in 2014 that we're looking at do we see expectations that rates will go up. But I do think this efficiency in repairs and maintenance has another year or so.

Our next question comes from the line of Haendel St. Juste with Morgan Stanley.

So I'd like to go back to Boston for a minute. We're seeing a meaningful amount of supply specs to come online over the next year or 2 there, particularly in the city core. And given your more urban footprint in Boston, can you talk a bit more about your expectations for your Boston portfolio, specifically in 2014? And can you give us some broad color on proportionately what proportion of your portfolio there is urban versus suburban and then A versus B?

Sure, Haendel. This is Jerry. We really don't have that much urban. We have 1 property, several hundred units in the Back Bay, Garrison Square, that we've owned for several years. We have 2 same store Properties up in the North Shore that are more B quality. And then as you go down to Braintree in the South Shore, we have 1 same-store property. We have various properties that we own with MetLife that are scattered around the suburbs, but we really have only 1 that's in urban core. And it is interesting. For the first time since we purchased that 3, 3.5 years ago, it's having a bit of a struggle right now. I think some of it is due to new supply. I think the other part of it that we've experienced sort of last 45 to 60 days is pretty bad weather in that New England area that's made it difficult for people to get out and shop for apartments. But the new supply is coming in that downtown area. Predominately, we think our 1 core asset, which is more of a brownstone 4-story property, will be fine. But it's been hurt a little bit. And right now, I would tell you, the strongest submarket that we see in Boston and it's been this way for the last 6 to 9 months has been down on the South Shore.

Appreciate that. So looking at the Northeast forecast here where you have Boston and New York effectively a similar forecast, can you perhaps give us a sense as to -- well, scratch that, scratch that. I want to go to D.C. for a second. I think that's more important here for me. Can you give the same relative assessment of D.C.? Your portfolio -- you mentioned earlier about your D.C. portfolio benefiting from some of these. Can you talk a bit more about your relative urban, suburban, A versus B? And then any sense of delta in revenue growth expectations there that you are forecasting for this year?

Sure. Some of this will be kind of off the cuff, but the B portfolio is probably about 60% or so of our total D.C. holdings when you look the Metro D.C. area. If I was doing the math in my head, I would say probably 50% to 60% is outside of the Beltway, or in the suburban portions of D.C. We have a couple of deals that are wholly-owned, our A product that are in the line of new supply. Most of that is in the U Street Corridor. The Bs, projected, will go up in that 3, probably 3% revenue growth. And this is with the exception of Manassas. That's a B product that we are getting dinged up pretty good from new supply out there. And I would say the As that are within the Beltway are probably flat to negative 1% as far as revenue growth projections.

Great. And just one last one if I may. Can you guys talk a bit about the near-term opportunity for redevelopment within the portfolio? The numbers in the book are grouped with development. Can you parse out the redev and your sort of opportunity in the portfolio today for redev and any type of commentary on returns, et cetera?

Yes, Haendel, again, what we do is we look at redevs 2 different ways. We've got the acquisition rehabs, where we seek a yield, and then we have the redevelopment of an asset that's on book. So we'll seek 7% to 9%. We've probably got, out of the, call it, $400 million, $600 million that we're doing per year, maybe 10% of that is redev. We've got on the books right now or on the pipeline right now, Rivergate is the only one that has any substantial spend left and 27 Seventy Five winding down. So it's not going to be a big number to us. And as far as what's in our portfolio right now, we're looking at a couple of opportunities. But it's not going to be a huge part of our pipeline.

Our next question comes from the line of Paula Poskon with Robert W. Baird. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: Going back to the 4 tenets of the updated strategic plan, accretive capital allocation, operational excellence, cash flow growth and balance sheet health. I must confess it sounds more to me like a mission statement that really any REIT ought to be guided by as opposed to a strategic plan for a finite period of time. So I was wondering if you could provide more specificity on some of the execution elements of each of those tenets? For example, what might be an example of a continued enhancement to the best-in-class operating platform?

I'll take that -- oh, sorry, Tom.

Yes, Paula, I think it's a very fair question. And I would agree with your initial assessment that these should be the 4 tenets of any strategic plan and direction. And clearly, you can see we build our plan around supporting those, we measure them, we report to our board and discuss them constantly. As I think about it, what doesn't get discussed when strategic plans are put forth is the prioritization and the trade-offs. And hopefully, from this Three-Year Strategic Plan, you can see that the trade-offs that we're making are -- portfolio improvement is important, but cash flow growth, NAV growth is our paramount driver and focus of this Three-Year Plan. And I would tell you, the last decade, the strategic priorities probably started with capital -- really started with portfolio. I mean, we just did not have the right assets in the right markets and we had to move all of that out and away, and that took a decade. I'll tell you, it took a lot longer than I thought, but I'm glad where we're at. So I would agree that we've toggled between those 2, and now are focused really on the cash flow and dividend per share growth, as well as the NAV per share. The other aspects, operational excellence, Jerry will give you some more specific. But it's always been a strong tenet of the company. You look year-in and year-out, we're always in the top part of the pack and we measure it by market and how we perform, and that's how our site teams are compensated, is how they perform head-to-head in markets. So I feel like there's a lot of still potential there. This industry continues to grow and do well. But there's more room in that area and Jerry give you spec. On the balance sheet, it's hard to put the balance sheet in the last decade as the first priority when we had so much work to be done on the portfolio. And you can see the last couple of years, it's come into focus. We think we're on the right path. And it would be a derivative of growing the cash flow and the NAV and the balance sheet will improve as time occurs. So that's -- the trade-off of the 4 are always critical in what we discuss about which lever to pull over what period of time and constant measure and monitoring of it. And so, I hope that helps a little bit. Jerry?

Yes. There's been quite a few things over the last 4 or 5 years that we've done on operational excellence that we'll continue. And I will tell you, we never stop looking at ways to grow our margin and to provide a better customer experience. And it goes back years ago when we first started doing electronic marketing, then we moved to electronic payments. We just made our office staff much more efficient. And then we looked more at the direct resident. We got online renewals, online leasing going. Then really about 2 years ago, we started looking at our maintenance teams and determined we were still doing things old-school, the way we've done them since the 1980s. And in addition to technology, we've put up performance standards for our teams and expectations. We've rolled out better ways to order parts, to transport parts and have mobile shops that go with our guys so they can become more efficient. And it's allowed us, really, if you would assume that our NIM cost should be going up 3%, we were down 4% this past year. It's enabled us to cut those costs by about 7%. We expect this year to have comparable-type results with a downward expectation of repairs and maintenance, and we think we can play this out for a few more years, with probably the final piece of this coming still a couple of years down the road with electronic locks, and we think will be an amenity to our resident as well as make our people more efficient. And on the expense side, over the last, really, last 1.5 years, we started looking at other opportunities to generate revenue out of our existing resident base. And some of that was on things, we call them rentable items, storage, parking, garages, things like that, that we looked, we only had occupancy in those types of places of 40% to 45% to 50%. We drove that occupancy up to 70%. We think we can continue to drive it over the next couple of years. And lastly, we're looking at other opportunities that will help our residents get by. Some of that is flexible payment plans or biweekly payments. Things like that, that we've realized that a portion of our residents struggle to budget their own income and they would just like a lot of people to pay their mortgages biweekly, people would like to be able to pay their rent biweekly, and we've rolled that out this year. And so far, in the states where it's allowable, we've seen pretty good acceptance of this and people do see it as a benefit that, I think, will help us not only stay in good graces with our residents, but I think it's also going to help them manage their money better and we're hopeful that it will help drive down our bad debt. But it's things like that, that we're just keeping our eyes open, watching competitors, watching other industries, listening to our customers. And I think the next step that we are really going to look at is what do our customers, how do they feel about us, ratings and things like that, and be able to respond more quickly and provide better customer service. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: That is very insightful.

And I might add one thing, Paula is when think about the other 2 pieces of this that haven't been spoken of, Harry's side of the business, where we're developing assets, providing accretive returns, driving additional CVNI and growth for our shareholders, we think is important -- very important, but there's -- and you're seeing the results of that now as the deliveries are starting to occur. But if you play that through for the balance of the $1.2 billion pipeline, we had a couple of questions earlier about equity issuance and what happens if we don't issue equity. Well, you'll see on this balance sheet page that we have on Page 10, we speak to different metrics. And if we issued no equity, all we did was stay -- or at least we just stayed at a leverage-neutral basis, we would still drive our net debt to EBITDA down to a 6.2x, just with the delivery of Harry's development projects, which, again, we've spoken to wanting to delivered to BBB+ or operate to BBB+, Baa1 metrics. And so, that all ties into the plan mechanically as we speak to each of the 4 tenets that you alluded to. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: And my second question is just on the assets that are being marketed for sale in Tampa and Orlando. Can you just talk what was it about those specific assets versus the others you have in the market that teed those up for sale? And on a housekeeping perspective, have those already been classified as discontinued ops?

Paula, this is Harry. I'll answer the first part of the question. Tampa and Orlando are both within our capital warehouse. Our universe will also sell a few non-core assets this year for a number of reasons. As we go through and rate the assets having to do with expected cash flow growth, having to do with future capital needs, having to do with expected buyer response, having to do with a number of sort of operational issues, those are the 4 assets that rose to the top of the heap and the assets are of a size that will satisfy our necessary sales volume for the year, combined with a few others that we'll put in the market later this year. Paula J. Poskon - Robert W. Baird & Co. Incorporated, Research Division: And are those in discontinuum?

Yes, the second part of your question, no, they have not been included in discontinued ops. Until we get hard dollars down, our policy has been not to do that, which I think is fairly consistent with the way a lot of other REITs handle that.

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

Just to follow -- I think you mentioned a couple of development starts. Can you give the dollar volume that you're looking for in terms of starts so we can kind of see the [indiscernible] out of the pipeline? And then a question just as it relates to leverage. The leverage, just as you provided on 10, look like they don't include the JVs. If you look at going for -- as you look at the business plan for '14, then going forward to '16, can you talk about leverage in the context of how you're looking at managing the -- your holding on balance sheet versus the JV and whether you see leverage come down the same amount for the total entity on a proportionate basis?

Yes, Herzog here. I'll start with this and then Harry will jump in on the developments. But the development starts for 2013, $250 million ownership effect at between Steele Creek and 399 Fremont. A couple of more starts in the second half of 2014 because Harry's working on a variety of different entitlements and we're doing a lot of underwriting right now to make sure we meet the return hurdles that we have in place. We have not yet set forth a number as to what that might look like for the balance of 2014. Anything you'd add to that, Harry?

Yes, I mean, we do have 3 assets that, depending on the timing of the completion of the design and various reconstruction activities that we think we could start this year, those types of numbers could be another couple hundred million in UDR's share of incremental development starts this year. And again, as you know, we just started 399 Fremont in San Francisco.

The one you bought in the first quarter, would that be a '14 start, and would that be a wholly-owned, just given the size?

It is wholly-owned, and it -- I think it's unlikely that it's a '14 start.

Mike, this is Toomey. We won't start a deal until we have a GMAX in hand and 100% drawings. In that timeframe, on most deals, if you even have entitlements, is still a year.

You had mentioned...

If we don't have entitlements it could string out for many. So we're just trying to be thoughtful in making sure we can nail the returns and price it against cost of capital with the right fact patterns. So we're in no hurry to start putting things into the ground that we don't have all the facts on-hand.

I appreciate that. And then Tom, could you address the JV leverage versus on balance sheet?

Yes. I don't think the numbers, Mike, will be too different than what some of you guys have published. But looking forward, so if we were, let's just say, fixed charge, we're in the mid-3s in 2014, net debt to EBITDA in the mid-6s, debt-to-asset cost of, call it, the high-38s, probably 39%. If we take the pro rata joint venture debt and assets, we're looking more like the very low 3s for fixed charge, net debt-to-EBITDA is about a 7, so it still looks pretty good, inclusive of pro rata debt, and then the debt to asset cost [indiscernible] probably about a 42 [ph] or something like that. Those are the rough numbers that we put together based on the joint venture activity.

I appreciate that. Then just as a follow-up. Can you just give us a sense? In your guidance, you've identified a decent amount of acquisition volume. Is any of that identified? And in the same sense in terms of dispositions, should we think about that kind of going throughout the year match funding or would you expect that to be all lumped together at one point?

Well, I would say that we certainly, internally, have looked at a pool of assets that we would seek to liquidate. Harry is going through that now, testing the market. So we wouldn't seek to individual assets at this point. But Harry, maybe you can give a little bit more color on how you're are looking at that.

Yes, we -- I mean, on the acquisition side, we did -- we acquired the land parcel. And then in Orange County in January, in terms of other acquisitions that fall within our guidance, as always, we'll speak to those once we have something to talk about, meaning the hard contract and a deal that's ready to close. On the sale side, we have the 4 in the market I talked about and others will come in the market throughout the year. This continues to be a very liquid disposition environment, transaction environment. This is a year, if you look at 2013, there's over $100 billion in trade. So the disposition environment continues to be very liquid.

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

First, public service announcement. CVNI is NAV plus dividend. I did not know that. Many thanks to Chris. I doubt many people on the call knew that. How do you get NAV equal CVNI, Tom? What is...

How do I get NAV equal CVNI, is that what you're saying?

No, NAV plus dividend is CVNI?

Yes, it's NAV is -- it's actually not that. It's the change in NAV plus dividends reinvested at the then NAV, creates CVNI.

Okay, got you.

It's kind of the old Warren Buffet tick changes in NAV plus dividends is just -- is reinvested back in at NAV.

Okay. The mention of issuing stock once you get over NAV, why does that not put a ceiling on the stock if you're basically going to say you're going to raise equity since you're above NAV?

Well, it doesn't necessarily mean we will raise equity above NAV, but we certainly might. So I wouldn't say that as putting a ceiling on a stock.

Okay. And then, the last question, maybe big picture, for Toomey. It was brought up a while ago about M&A. What do you think about with all this work you've done to put yourselves in high-barrier markets, you probably don't feel like you get properly valued for all the work that you've done to put 80% of your portfolio on coastal high-barrier markets. What about UDR as a seller, if the right price came along. Is that in the mindset there?

Well, I think we can't control that and the market will be what it's going to be. And what we can do is grow our business, grow our cash flow, grow our NAV. And if the chips fall and there's an offer, that's what you have a Board of Directors for and a management team that has an alignment of interest with the shareholders. And we'll conduct ourselves accordingly. So we don't seek it out. I think it's a consequence. And for us, we can only put forth our plan, execute on it. We think it's the right plan and are excited about the plan.

I would like to turn it back over to management for closing remarks. Please go ahead.

Well, a brief closing. First, thank you for your time today and, certainly, for the -- a very good set of questions. Clearly, we have put forth an updated Three-Year Plan. We feel good about that plan. You can see through the transparency of it, what we expect to do. Like '13, we feel good about that execution, have the right resources in the room, the right environment. And are excited about not just performing at it, but exceeding it. And we will see many of you at investor conferences throughout the part of the season, and look forward to seeing you and discuss it in more detail and the rest of us will get to work and execute.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation. You may now disconnect.