NexPoint Residential Trust, Inc.

and welcome to the NextPoint Residential Trust, Inc. fourth quarter conference call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jackie Graham. Please go ahead.

Thank you. Good day, everyone, and welcome to NextPoint Residential Trust's conference call to review the company's results for the fourth quarter ended December 31, 2020. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer, and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the company's website at nxrt.nextpoint.com. Before we begin, I would like to remind everyone that this conference is in belief. Forward-looking statements can often be identified by words such as expect, anticipate, estimate, may, should, intend, and similar expressions and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding NXRT's business and industry in general, The COVID-19 Pandemic and its Effects on Companies, NXRT's Strategy and Guidance for the Full Year 2021, and the Related Assumptions Guidance for the First Quarter of 2021 and Related Assumptions. NXRT's Net Value Adds and its Related Components Assumptions and Planned Value Add Programs, including Projected Average Rent, Rent Change, and Return on Investment. The expected return to service of damaged units and expected acquisitions and dispositions. They are not guaranteed the future results and forward-looking statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statement, including the ultimate geographic spread, duration, and severity of the COVID-19 pandemic and the effectiveness of actions taken or actions that may be taken by governmental authorities to contain the outbreak or treat its impact. as well as those described in greater detail in our filings of the Securities and Exchange Commission, particularly those specifically described in the company's annual report on Form 10-K and quarterly reports on Form 10-Q. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other titles of the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during this conference call speak only as of today's date and accept as required by law, and SRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call includes analysis of funds from operations, or SFO, core funds from operations, or core SFO, adjusted funds from operations, or ASFO, net operating income, or NOI, and net debt, all of which are non-GAAP financial measures of performance or total debt. These non-GAAP measures should be used as a supplement to and not a substitute for net income loss and total debt computed in accordance with GAAP. For a more complete discussion of FFO, Core FFO, AFFO, NOI, and NetDeck, see the company's earnings release that was filed earlier today. I would now like to turn the call over to Brian Mitt. Please go ahead, Brian.

Thank you, Jackie. Welcome to everyone for joining us on the NHRT 2020 Fourth Quarter Conference Call. I'm Brian Mitt and joined here with Matt McGraner. Let me start with some highlights from 2020. That income for the year was $44 million or $1.74 per diluted share as compared to $99.1 million or $4.03 per diluted share in 2019. Same-store NOI increase was $2.1 million or an increase of 3.2% as compared to 2019. We reported 2020 core FFO of $55.5 million or $2.20 per diluted share which is an increase of 14% on a per share basis as compared to 2019. Total revenue for 2020 was $204.8 million and total NOI was $116.1 million which was an increase over 2019 of 13.1% and 13.2% respectively. NOI margins for 2020 were 56.7% which was equal to margins of 56.7% during the same period in 2019. We continue to execute our value-add business plan by completing 1,679 full and partial renovations during the year, achieving an average monthly rent premium of $131 and a 21.7% ROI. Exceptions to date, the portfolio as of 12-31, we've completed 5,355 full and partial upgrades 4,286 kitchen upgrades and washer-dryer installs, and 8,880 technology package installs, achieving an average monthly written premium of $126, $48, and $44 respectively, and an ROI of 21.5%, 74.2%, and 33.8% respectively. During 2020, we issued 1.3 million shares of stock for approximately 59.5 million gross proceeds. Based on updates and cap rates in NOI, we're revising our NAV per share range upward as follows. On the low end, $42.83. On the high end, $52.94. The midpoint of $47.88. These are based on cap rates ranging from 4.4% on the low end and 5% on the high side. The updated NAV compares the midpoint of $46.31 The fourth quarter, we paid a dividend of 34.125 cents per share on December 31st to shareholders of record as of December 15th. Yesterday, the Board declared a dividend per share of 34.125 cents payable on March 31st to shareholders of record on March 15th. Since inception, we've increased our dividend 66% The year to date, our dividend was 1.72 times covered by core FFO with a payout ratio of 58% of core FFO for the year. Overall, although 2020 provided some early challenges, we continued our track record of thoughtful capital allocation and earnings growth. As the pandemic first hit and stocks in general and NSRT specifically dropped from multi-year lows, we aggressively bought back stock by 1.6 million shares of common stock at an average price of $27.07 per share. The stocks recovered, including NXRT. We issued 718,000 shares of common stock at an average price of $43.92 per share, creating significant permanent value for shareholders. Inception to date, we've issued 2.8 million shares of common stock at an average price of $47.14 per share. We've repurchased 2.4 million shares of common stock and an average repurchase price of $25.70 per share. Despite fully drawing our facility at the beginning of the pandemic to ensure maximum liquidity, we were able to continue our long-term deleveraging plan by paying our facility down to $183 million by the end of the year. As of 12-31, we had $57.1 million cash on the balance sheet and $42 million in capacity under our facility for approximately $100 million of successful liquidity and our dividend is 1.72 times covered by core FFO. Since going public in April 2015, we've grown core FFO 62% and NOI by 92%. This performance combined with the thoughtful, powerful allocation of dividend policies is translating NXRT being one of the best performing REIT stocks among all REITs regardless of property type since we went public in April 2015. Let me go through some of the specific results for full year 2020. Total revenues were $204.8 million, which compared to $181.1 million in 2019, or a 13.1% increase. Net operating income for 2020 is $116.1 million, which compared to $102.6 million for 2019, or a 13.2% increase. Core FFO listed at $5.5 million, or $2.20 per deleted share, as compared to $47.6 million, or $1.93 per deleted share in 2019, which represents an increase of 14% on a per share basis. Despite the challenges presented by the pandemic, our Core FFO came in at the midpoint of our original 2020 guidance. For our same store pool, we had 24 properties, assisting in 9,074 units. Our same-store rent increase is 1.4%. Same-store occupancy declined slightly by 10 basis points from 94.3% to 94.2%. And same-store NOI increased 3.2% for the year from 66.1 million to 68.2 million. As the pandemic began, we, as did all of our peers, withdrew guidance starting the second quarter of 2020. We are on this fall reinstating guidance for the full year 2021 as follows. Core FFO on a per annum share basis, $2.16 in the low end, $2.35 on the high end, with a midpoint of $2.25, which represents an increase of 2.3% over 2020. Same sort of revenue, 3.9% increase in the low end, 5.2% increase in the high end, the midpoint of 4.5% increase. Same-store expenses, the estimate will increase 7.9%. On the low end, 5.3% on the high end, 6.6% in the midpoint. And for same-store NOI, we have a 0.9% increase in the low end, 5.1% increase in the high end, a 3% increase at the midpoint. So with that, let me turn it over to Matt for his comments.

Thanks, Brian. I'll start by recapping our fourth quarter same-store operational results. So rates in the fourth quarter grew in six out of our ten markets in 2020, with Nashville and Orlando being essentially flat and Houston the only one that's slightly negative. Every other market ended the year in the black. Notable markets for same-store NOI growth for the fourth quarter were Phoenix at 11.3% and Dallas at 4.9%. Even during the pandemic, leasing activity and revenue growth continued to improve in the fourth quarter over the second and third quarters, with eight out of our nine markets achieving revenue growth of 1% or better. The top five were Phoenix at 8.4%, South Florida at 3.9%, Dallas-Fort Worth at 3.3%, Tampa at 3%, and Nashville at 2.9%. Renewal conversions were a healthy 53% for the quarter, with five out of our 10 markets delivering renewal Real growth rates of at least 2%, and every market was in the black. The leaders were Tampa at 3.1%, Atlanta at 2.6%, Phoenix at 2.4%, Dallas-Fort Worth at 2.3%, Nashville at 2.1%. On the occupancy front, we're pleased to report that Q4 same-store occupancy remained over 94% and is well positioned for 2021. As of this morning, the portfolio is 96.5% leased and has a healthy 60-day trend of 91.5%. Turning to full-year 2020 same-store NOI performance, our same-store margin improved, as Brian mentioned, to 55.8%. Same-store average rents and revenues each increased by 1.3% and 3.6% respectively. NOI holds strong across the majority of the portfolio in 2020, with six out of our nine markets growing NOI by at least 3.9%. Notable themes to our NOI growth markets for the year were again Phoenix and South Florida at 12.3% and 10% respectively. Operationally overall, the portfolio generated positive revenue growth for the entire year 2020, with eight markets achieving growth of at least 2.4% or better, Orlando being the only outlier. The top five markets were Phoenix at 8%, South Florida at 6.1%, Charlotte at 5.2%, Tampa at 5%, and Nashville at 4.8%. On 2020 collections, April through December in 2020, the portfolio has collected 98.5% of all total charges. Payment plans have continued to decrease month over month since we started offering the program in April of 2020. 2020 payment plans are 97.2% collected as of Friday. and there were 959 payment plans in April of 2020. Those numbers are down to 168 payment plans at the end of the year and as of today, just under 198. Turning to 2020 acquisitions, as Brian mentioned, we acquired one asset in 2020, Fairways and Sand Markets in Chandler, Arizona for $84.5 million while selling four assets for $142 million and exiting the D.C. market entirely. We plan to upgrade at Fairways 156 units at an average cost of $11,800 per unit and generate premiums of $152 a unit with an ROI of approximately 15.5%. We also plan to install smart tech packages in every unit and expect to generate monthly premiums there of $40 a unit. As a result, our underwritten three-year average same-store NOI growth for this asset is 7.5%. Today, Fairways is $150,000 or 19% ahead of our NOI underwriting budget already. Turning to 2021 guidance, as Ryan said, we're optimistic we can grow the same-soil NOI in 2020 by at least 3%. And from a geographical perspective, we're expecting particular strength across the following markets. We expect Atlanta to grow the same-soil NOI by 6.7% due to the strength of the real market Economic Growth, Terrible Supply Demand for Affordable Housing, and Interior Renovation Plans for over 200 units, 85 at the Preserve at Terrell Mill and 120 at Rockledge. We're targeting $180 to $235 rent premiums in high teens and low 20s ROIs. As a result, we're budgeting 5.6% revenue growth for Atlanta. Next on to Tampa to grow, same sort of ROI by roughly 5.5%. Again, driven by economic growth both internally and from surging net migration trends into Florida. Also, we expect revenue growth to reach the high 4% to 5% this year, while continuing to upgrade over 50 units in the market. Next, South Florida, we expect it to grow, same storyline, by 5.4%, driven again by economic growth both internally and from surging net migration trends. We have large interior renovation plans for South Florida, particularly at the Avant at Pembroke Pines, where we expect to complete our comprehensive common area and many upgrades at Pembroke in 2021. We're also having a tremendous amount of success upgrading units at Avant, and we see a pipeline for another 200 or more at roughly $250 in premium in the low 20s ROI. Finally, we expect Charlotte to grow SAMHSA Rental I by 5% driven by, again, economic growth, strength of rental markets, and net migration into the state of North Carolina. We expect to upgrade over 30 units in the market and generate revenue growth of high force of 5% in 2021. At West, we expect both Phoenix and Las Vegas to grow SAMHSA Rental I in the range of 3.5% J.D. We are witnessing a material supply demand imbalance for Class B Sunbelt product, driving cap rates down to 4% and below in some markets. particularly with debt financing remaining at historical lows. That said, we remain active in evaluating attractive opportunities that fit our style box and do think we could likely acquire 100 to 200 million properties this year. We would expect to reasonably pair this 100 to 2 million of acquisitions with 75 to 150 million of dispositions with the most likely candidates being a couple of assets in Nashville where we could complete our business plans and generate a tremendous value over the past five years. To not restate an extremely competitive acquisition market, we continue to be an internal growth company at our core. To that end, our guidance in 2021 includes the following assumptions regarding our value-add programs. We expect to complete at least 1,300 full interior upgrades, roughly the same as 2020. We expect the average cost to be roughly $10,000 per unit and generate roughly $170 in average monthly premium or approximately 20% ROIs. We expect to complete approximately 75 partial interior upgrades at an average cost of $4,400 per unit and generate $77 in average monthly premium or 21% ROIs. We expect to complete roughly 100 of other minor interior upgrades, for example, new backsplashes, bespoke appliance upgrades, and frame mirrors, to name a few. We think these upgrades will average roughly $1,000 per unit and generate $50 in average monthly premium or over 30% ROI. We expect to install approximately 425 washer-driver sets at an average cost of $850 per unit and generate $44 in average monthly premium or roughly at 60% ROI. And finally, we expect to add 700 additional smart home tech packages which will generate $40 to $45 in average monthly premium and a 52% profit margin. So far in 2020, we're off to a good start in January and February with leasing activity in 2021 showing signs of improvement. Combined January and February new lease growth is up over 3% and renewals continue to exceed 2% across the entirety of the portfolio. In closing, I'll just reiterate that we're excited about 2021. We'll work hard to generate another year of outsized NOI growth for shareholders and poor earnings growth. That's all I have for prepared remarks. I appreciate our team's work at NextPoint and BH and their continued execution. Thank you, Brian.

Thanks, Matt. We'll turn it over now for questions.

Participants, If you would like to ask a question at this time, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal. And we'll take the first question at this time. It comes from Buckhorn from Raymond James. Please go ahead.

Hey, thanks for pointing, guys.

I guess let's start with real estate taxes to begin with and just kind of how that impacts your outlook for 2021 guidance. It certainly seems like that is the biggest variable. So I guess I'm curious to what degree – We know that the assessments are going to come in at these elevated ranges. What amount is kind of your best guesswork here? I know Tennessee seems to be the most volatile component of coming up with these estimates, but trying to get a sense of to what degree we know the assessments are going to come in this range and to what degree is kind of conservatism on your part relative to the guidance.

Hey Buck, it's Matt. Good questions. And so there's between the upside kind of case in our guidance and in the base case, the two significant drivers were basically an increase in real revenue at roughly 90 basis points, and that's for market rent, and a reduction of roughly $1.3 million J.D. J.D. J.D. J.D. J.D. We're optimistic that there's some number between zero and that $1.3 million that would allow us to reach the upside case. Okay.

Okay.

Sounds good.

One other quick one for you. There was a line I was noting, miscellaneous income, I think for the year total about $1.8 million. Is there any color you could add to what the miscellaneous income represented, and is that some sort of repeatable fee income, or what's in that line?

It's just late fees, app and admin fees that we were able to collect in 2020, which is down from historical levels, but nonetheless, I think that they can be collected This year, again, particularly after the CDC list, they're more important.

I got you. I got you. Okay, great. I'll turn the call over to the next analyst, and we'll follow up later. Thank you. Thanks, Bob.

Once again, participants, that's star 1 to ask a question. And if you find that your question has been answered, you may always remove yourself from the queue by pressing star 2. Our next question comes from Rob Stevenson from Jamie. Please go ahead.

Good morning, guys. Matt, did you say that you had 198 payment plans versus 168 at year end, or did I get those numbers mixed up?

Yeah, that's about right. So we started out with roughly 960, 980 in April down to 98. Yeah, down to 98 in February. We were at 168 a year in.

Okay, so just 98, not 198. It's not an increase. It's a continued decrease.

That's right. That's right.

Okay, perfect. I was wondering why it was going up.

I just didn't hear that right. Thank you.

And then did you give January 2021 collection percentage yet?

Yes. Yes. We have it. It is just at 95%.

And how does that compare versus, you know, December at this point, sort of 45 days in, or November is an improvement, status quo a little bit weaker? How would you characterize that?

Yeah, it's kind of compared to... I guess compared to last year in 2019, it's about 70 basis points behind, but it's about 30 basis points behind trends, but it's caught up and seems in line for now. Okay.

And then any substantial known differential today versus core FFO and what may read would be calculated as of? If you're anticipating prepayment penalties or anything else big that's likely to come through?

No, I think we're in line kind of with Mary. If we sold those properties that Matt indicated, we would, I think, have some prepayment penalties, but that's factored into our guidance.

Okay. And then the last one for me, you guys, you know, gave the market-by-market quarter-over-quarter same score operating metrics. I think it's page 16 of the supplemental. Nashville had negative, slightly negative average effective rent sequentially and flat occupancy, but total rental income was up 10%. Can you walk me through how those numbers, how you get to that big of a jump in rental revenue? with occupancy flat and rental rate down slightly. Does the total rental revenue maybe include some sort of fees or something that were outsized in Nashville that drove that?

Yeah, hold on a second.

Okay. Tampa and South Florida both have both negative effective rent changes quarter over quarter and negative occupancy and are slightly positive, but that 10.1% jump in Nashville really stuck out.

Yeah, I think it might just include the additional property orders being added to the pool.

Okay. All right. Thanks, guys. Appreciate it.

Thanks, Rob.

We'll take the next question. It comes from Amanda Slicer from Baird. Please go ahead.

Thanks. Good morning, guys. On your fourth quarter results, what was the main driver of the 90 basis points sequential decline in occupancy? And on that, did demand for renovated or non-renovated units deviate at all from your expectations during the quarter?

Yeah, the demand didn't deviate. We thought we would upgrade basically what we did. There were a couple market-specific issues, one in Houston with an asset called Surplace that experienced some evictions that has now recovered. It's about 94% occupied today, and the other one was an asset in Charlotte that had the same issue, Rathborn. And then the other dealer we own in Charlotte had a small fire, Timber Creek, that had some blackened seat. But those are the main drivers of the decline. And like I said today, we're back at 94-plus percent for those assets.

Yeah, that's helpful. And then following up on some of the earlier questions, thank How much bad debt are you assuming in 2021 guidance, and then how much of a benefit did you realize from some of those state-issued rental assistance funds in the fourth quarter?

Yes, so bad debt assumptions, roughly 120 basis points for 2021. and, you know, anywhere kind of in the band, I think this is your question, in the band from the base case to the upside case, I think that that number can, you know, decrease to about 80 basis points to cause further upside. But we're optimistic we'll be better on bad debt in 2021 than 2020. We're already seeing An increase in first payment over a long time. And like I said to Rob's question, the decrease in the payment claims.

And then last one. Go ahead.

Yeah, I was going to answer the aid. I think we've collected around a million dollars of aid across our various markets from the local aid that's being offered outside of anything in those packages.

Okay, that's helpful. And then are you guys expecting additional aid in your guidance ranges at all, or that would be incremental if you received it?

Yeah, it'd be incremental. I mean, from all the states in our markets, there's over $7 billion of available aid, $400 million at the county level, and that's all available, but we're not underwriting that in the guidance.

Thanks. And then last question for me is just on capital allocation. The kind of expected capital recycling or guidance makes total sense today given cap rates, but are you exploring any alternative external growth opportunities given how competitive the transaction market is today?

Not at the moment in terms of any other deviation from our core property type or value-add multifamily. We're not trying to venture outside of of any of that. We're focused on the internal growth first and foremost and buying, recycling the capital and then we can arm our stock like we did in 2020, which I think Brian mentioned, we bought 60 million at a implied five aid cap and sold 50 plus million at a I think we'll continue to do that.

Thanks. That's it for me.

Thanks, man.

The next question comes from John Musoka from Ladenburg Feldman. Please go ahead.

Good morning. Good morning. In the prepared remarks, you mentioned some market-specific NOI expectations. But if I heard correctly, they were all at or above the midpoint of kind of total NOI growth expectations. So what are the markets counterbalancing those stronger markets, and why are they maybe relative underperformers?

Yeah, the two largest detractors or kind of under the, you know, the 4% or 5% are Dallas-Fort Worth and Nashville. The good news for both of those markets is if the taxes come in at the upside case for either market, then those markets will be above the midpoint and should provide upside to our guidance. So it's largely, it's almost entirely tax driven.

Okay, understood. And then as we think about 4Q's same-store rental rate change, What would that have been if you excluded Uplift from rehab projects?

X rehab organic, probably just under 1%, so call it 70 basis points.

Okay. And then if you think about kind of the NOI expectation for next year, You know, in terms of occupancy, are you kind of seeing current levels of maybe the ceiling on total occupancy, you know, particularly versus 4Q, or is a potential uplift there as well as, you know, kind of rental rates?

Yeah, I think there's... There's a lot of uplifts in occupancy. I think that's going to be a primary driver of growth first, and then the rates once you have stabilization across.

I mean, I guess there's a feeling kind of the 96.5 you're at today, or it needs to even go higher, just as everything kind of shakes out and we get to the end of the month.

Yeah, I mean, we could sort of run around 94 and push rate instead of another point, point and a half in occupancy. So I think we'll continue to do that. I'd be surprised if we pushed in higher than 96%. Okay.

That's it for me. Thank you very much.

Thanks, John.

The next question is a follow-up question from Raymond James. Please go ahead.

Yeah, one quick follow-up for me. So you mentioned in some of your NOI forecasts and your outlooks that you're seeing continued economic strength in the Sunbelt markets plus some factor of continued in-migration population trend that seemed to be playing out. I'm just wondering, you know, in some of the early Leith Application Data, whether it's fourth quarter or the January, February numbers you've got so far, is there any tangible uptick in applications coming from out-of-state or out-of-market residents that are part of that migration effect that you can quantify?

Yeah, absolutely. So January, the January numbers we have, so net migration, total move-ins into our market, For NXRT markets, out-of-state to internal markets is 10.9%. Majority of that, 11% from California, 9% New York. Ohio is 8%, and then Illinois was above 5%. January 2021, net migration data into our markets, and we could send this to you, to Buck, later after the call, but just to give it to you here, was 14.4%, so roughly 3.5% increase kind of January over January. Same leading markets, California, 19% of those numbers, so went from almost 11% in January 2020 from California I just want to follow up on your earlier question about miscellaneous income.

You were talking about the actual miscellaneous income on the face of the financials, so we misunderstood your question, but what that $1.77 million is is mostly business interruption insurance that we received on the Cutter's property, which was basically completely destroyed in October of 19, so we've been rebuilding it this year and getting income from that insurance.

There we go. That's helpful. I appreciate that. Thank you for your feedback there.

Yeah, once that's operational again, that'll flip up in the NOI and out of the miscellaneous income. Got it.

Thanks.

The next question comes from John Peterson from Jefferies. Please go ahead.

Oh, great. Thanks. You know, as we think about more leisure travel affecting certain markets, I'm kind of looking specifically at Orlando and Vegas, places that you have significant exposure. I mean, can you help us characterize maybe specifically how some of your properties are positioned there, and if you expect some uplift as we see more leisure travel? And then kind of on the other side, I like the migration trends you guys were just talking about. I mean, is your same-store guidance underwriting some We really took it on the chin.

It's your first question on leisure travel markets. In Orlando in 2020, the one asset I can think that comes to mind is Lake Buena Vista, which was directly impacted by the closure of the theme parks. in some cases got down to 90% flat occupancy, which we hadn't seen since we owned the asset. We're getting through those issues and are really optimistic that we could see that property come back and perform much, much better in 2021. Vegas, on the other hand, really wasn't as weak as we thought it would be. Obviously, the with the strip closed down and a lot of the leisure related jobs were lost or furloughed. What we saw that kind of offset that was in migration from California particularly and that kind of helped us have a pretty good year in Vegas all told and I think ended the year positive from a year-over-year basis. I particularly don't believe that Thank you. Thank you. Thank you. Thank you. I don't think that once a millennial or other new jobs applicant comes and stays in the Sunbelt will return anytime soon, but that's our personal belief.

Yeah, a lot of that is the jobs and companies have moved there and they're not likely to turn around and move back, especially in our renter cohort. People that were escaping the cities, and then they're going to go back once things return to normal. I mean, they're more working class people that are made new permanently to follow jobs or companies.

All right. I appreciate the call. Thank you.

I think the next question, it comes from Michael Lewis from Truist Securities. Please go ahead.

Great. Thank you. I wanted to ask about the cap rate assumption in the NAV calculation. It looks like you took the cap rate down about 30 basis points across all the markets. So I was just wondering if you could give a little more color on, you know, is that due to interest rates or some kind of blanket assumption or alternatively is it based more on transactions or seeing each of those markets just kind of a coincidence that they're all the same? and, you know, the level of transactions and the confidence you kind of have in cap rates right now?

Yeah, so the main drivers were tightening of the high end and it was to bring cap rates sub 5%. I haven't seen a 5% cap rate in several years now. And so, you know, I think that from what When we surveyed CBRE and Green Street and RealPage, they came back, frankly, at a lower number than these are. And from a transactional perspective in the acquisition market and bidding tent, we haven't seen and have offered on assets most recently in Tampa and Charlotte that have gone sub-4%. And we were holding our notice bidding around a 4.4, 4.5 cap rates. So there's a lot of capital out there, to your point. There's an incredible amount of sub-3% debt financing as well, and it's just driving material supply, demand, and balance for this type of product in the Sun Belt.

Matt, you mentioned at its core this is an internal growth company. You've got about 14,000 units. There's kind of what I call modest net acquisition activity in the 21 guidance. Do you like the size of the company, or do you think there are any advantages to diversifying or going into new markets or just kind of growth of the portfolio in general, or do you like where you are now?

Yeah, great question, and we debated it a lot. We've kind of never been the company that's saying we're going to go 50, 75, 1,000, We've had basically 40 properties since we went public in 2015 and we were able to quadruple the market cap by recycling capital and that's what we care about first and foremost is the stock price and getting that up for stockholders. I want to venture into any new property type, so to speak, but we are looking at and intrigued a little bit by the research triangle in Raleigh-Durham. Alexandria made some, in the life sciences space, made some acquisitions there. We like the job growth there. We like the demand drivers there. That's a market that we're searching for and could be interesting over the next few years for us. But other than that, we're We're comfortable and like what we're doing.

Sounds good. And then just lastly for me, I'm going to ask about a line item in the income statement as well. That corporate G&A line was down a fair amount sequentially in year over year. When I looked at the guidance for next year, it looks like it goes back up. Was there anything unique that we should look to that kind of drove that forward? Any number over the lower?

Yeah, I think maybe being conservative on the guidance, I think we did see some drop in auto costs and some of our kind of overhead there, you know, pretty minimal and immaterial amount, but there was certainly less travel and stuff that was getting flushed through corporate G&H with the pandemic. But, yeah, we don't really expect a material increase in those expenses, but I think we four guys who kind of averaged it back out to where we thought it would be historically.

Okay. Thank you.

The next question comes from John Masilka. It's a follow-up question from Leidenberg-Bellman. Please go ahead.

Just a quick one on capital recycling. I mean, I guess as you think about that today, J.D. Willmore, Matthew Goetz,

Settled on the disposition, and that's cash accretive, but depending on where you buy the deals, it could be, to your point, cap rate diluted. But on a stabilized basis, we're probably more than likely, like if we buy a four and a quarter, four and a half, our goal is to generate 75 to 125 basis point NOI lift post rehab in three years. So, you know, the kind of second, year and a half, second year cap rate accretion would deliver at that point would be the way we think about it.

Yeah, and a couple other things. So, as you said, we typically recycle out of something that's older and have gone through the rehab process, and so the upside there is not as much, to Matt's point, as the new deal we're bringing in. And then not so much NOI-focused, but core FFO. If we're refinancing that new deal or putting financing on that new deal at a cheaper cost of debt than what the current deal is, ultimately I think that's a creative to core FFO and ultimately interview.

Understood. That's it for me. Thank you.

We'll end the question and answer session for today, and then I'd like to turn it back over to you for any closing remarks.

Yeah, no, we're good. Appreciate everybody's participation. A lot of good questions. We look forward to 2021, 2020. It was definitely a tougher year than we thought going in, but I think we came out This concludes today's call. Thank you for your participation. You may now disconnect.