UDR, Inc.

Greetings. Welcome to UDR's second quarter 2022 earnings call. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Senior Director of Investor Relations, Trent Trujillo. Thank you, Mr. Trujillo. You may now begin.

Welcome to UDR's quarterly financial results conference call. Our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the investor relations section of our website, ir.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements. Statements made on 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 our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements. When we get to the question and answer portion, we ask that you be respectful of everyone's time and limit your questions to one plus a follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today. I will now turn the call over to UDR's Chairman and CEO, Tom Toomey.

Thank you, Trent, and welcome to UDR's second quarter 2022 conference call. Presenting on the call with me today are Senior Vice President of Operations Mike Lacey and President and Chief Financial Officer Joe Fisher, who will discuss our results. Senior Officers Andrew Kantor and Chris Van Enns will also be available during the Q&A portion of the call. Let's get started. We continue to be in the strongest operating environment I've seen over my tenure in the multifamily industry. This is largely driven by the strength of our customer, relative affordability among housing options, and steady near-term supply. This, combined with ongoing accretion from our well-timed 2021 acquisitions and DCP activity, drove our strong quarterly results, including a 16% year-over-year increase in FFOA, and led to our second guidance raise this year. Still, we are aware of the underlying economic crosscurrents that support our business and how they may impact the results in the near term. We believe UDR is well equipped to manage this environment based on what we can control. Specifically, first, our diversified portfolio as defined by geographic mix, portfolio quality and location within markets should provide some level of risk mitigation. Second, our ongoing innovation will continue to drive relatively better margin expansion and drive more accreted dollars to the bottom line irrespective of the macro environment. Third, our anticipated 2023 revenue growth earn-in of 5% is about four times the average earn-in over the past decade. Fourth, our balance sheet in excellent shape with plenty of capacity to invest in highly accretive opportunities. And last, compared to prior periods of economic uncertainty, we have a lower leverage profile, higher liquidity, and minimal debt maturities over the next three years. While not in our direct control, there are also favorable conditions that are supportive of the multifamily industry, including first, Shelter is a necessity, and multifamily rentals continue to screen incredibly cheap versus housing alternatives, despite the exceptionally strong effective rent growth our industry continues to realize. And second, wage growth remains strong, unemployment is historically low, and employers may be less willing to lay off employees during a potential downturn given the ongoing challenges of finding skilled labor. All in, our growth prospects for the remainder of 2022 and into 2023 are very strong. These tailwinds combined with our leading operational capabilities and innovation, which Mike will further detail in his comments, should drive incremental margin expansion, higher resident satisfaction, and more value from our real estate. Moving on, we continue to build on our position as a recognized global leader in ESG with the hiring of Patsy Dorr as UDR's chief ESG and people officer and our commitment to the science-based targeting initiative to reduce our carbon footprint. We are focused on continuing to be a leader on ESG. Furthermore, during the quarter, We appointed Joe Fisher to the role of president in addition to his responsibilities as CFO. Joe's promotion reflects his strong leadership and ability to consistently create incremental shareholder value. In closing, I remain very optimistic on the resiliency of the multifamily industry and know we have the right team in place to deliver best-in-class results. Moving forward, we will continue to base our decisions on data and adjust our tactics to maximize our competitive advantages while delivering value to our stakeholders. I thank all my fellow UDR associates for their effort to demonstrate on a daily basis. Your commitment and dedication to drive our innovation culture and the success we enjoy together. With that, I will turn the call over to Mike.

Thanks, Tom. To begin, strong same-store cash revenue and NOI growth of 11.4% and 14.7% accelerated sequentially by 60 and 70 basis points and above our expectations. Key drivers of these results included, first, effective blended lease rate growth accelerated more than 300 basis points sequentially to 17.4%. This resulted from the differentiated pricing strategy we implemented earlier in the year, whereby we have traded 10 to 30 basis points of occupancy to drive rental rate growth and improve our 2023 rent rule. And second, annualized resident turnover ticked up year over year to 50%. But of the 16% of residents that moved out because of rental rate increases, we released those apartment homes at an average 30% higher effective rate. This enabled us to capture embedded loss to lease quicker than normal, highlighting our rationale for allowing turnover to increase. This approach of focusing on rental rate growth has maximized 2022 revenue growth, and we anticipate a 2023 earn-in of 5%. This is the highest earn-in in our history. It's double our previous high, which we achieved coming into 2022. and is nearly four times the average earned in over the past decade. As is clear from the regional results we reported, strength is broad-based. Sunbelt markets continue to demonstrate phenomenal growth, while West Coast markets, such as Los Angeles and San Francisco, as well as East Coast markets, such as New York, were among our leaders in year-over-year growth. Currently, same-store revenue growth drivers remain robust. Lended lease rate growth is expected to be roughly 16 percent in July, with new lease rate growth of more than 17 percent and renewals of approximately 15 percent. While we expect tougher comps on new lease rate growth in August and September due to the exceptionally strong results from a year ago, renewals have been sent out at and still at a strong pace of 11 to 12 percent for these two months. July resident turnover is higher year-over-year given the loss-to-lease trade we've been willing to make, but remains below historical seasonal averages. And occupancy remains high at just under 97%. Portfolio-wide market rent growth was 5.2% from January through June, the highest over at least the past decade and 120 basis points above historical norms. Looking ahead, we expect to see more seasonal market rent growth trends as we enter the back half of the year. But the strong first half growth should continue to drive above average sequential growth through year end. Moving on, we continue to assess the fiscal health of our in-place and prospective residents given the evolving inflationary environment. Thus far, our leading indicators continue to suggest durable strength in near-term fundamentals. First, income growth remains robust resulting in portfolio-wide rent income ratios in the low 20% range, consistent with our historical ratios. We have not seen any material evidence of doubling up, and residents who turned over have been backfilled with rents at higher rates. Second, our in-place residents are increasingly paying rent on time. Collection rates improved sequentially in the second quarter, and long-term delinquents continue to decline. Third, Traffic remains strong, enhanced by the larger funnel generated by our shift to a self-service business model. Fourth, concessions are virtually nonexistent, with the exception of one week on average in specific submarkets of San Francisco and Washington, D.C. And last, multifamily has become incrementally more affordable versus alternative housing options. It is now approximately 50% less expensive to rent and own across our portfolio versus 35% less expensive pre-COVID. During the second quarter, move-outs to buy a home was only 8%, the lowest level we have seen in over 10 years of tracking this statistic, and 400 basis points below our historical average. These factors, along with having visibility on 85% of our full-year rent roll, led us to meaningfully increase our full-year 2022 same store revenue and NOI guidance ranges for the second time this year. We now expect to achieve midpoint growth of 11% for same store revenue and 14% for same store NOI on a straight line basis. Relative to our prior full year 2022 outlook, the drivers of our improved guidance ranges are as follows. First, we expect full year effective blended lease rate growth of approximately 12% to 14%, which is 300 basis points higher at the midpoint compared to our prior assumption from April. For the second half of 2022, we expect blended lease rate growth in the 10% to 12% range. Second, we continue to expect occupancy to remain stable at 97% plus, or about flat year over year. And last, we expect controllable operating expense growth to be 3% to 4%. This is 50 basis points below that of our overall same-store expense growth guidance, which we increased by 50 basis points at the midpoint, primarily due to the inflationary environment, higher resident turnover, and higher associate compensation to retain . As indicated earlier in my remarks, we are now forecasting a 5% turn-in for 2023 based on these drivers. which assumes market rent growth in the back half of 2022 follows a typical seasonal trend. Said differently, we would expect to achieve 5% same-store revenue growth in 2023 based on the leases we have already signed and expect to sign through year-end. Considering annual historical market rent growth averages 3% to 3.5%, we believe there is further upside to this number in 2023 depending on the macroeconomic environment. That said, the forward regulatory environment remains a wild card. Collections are incrementally improving, and our long-term delinquent residents are slowly declining. But we are approaching the end of government assistance in many states, and a macro hiccup could entice regulators to reinduce their COVID playbook in some areas. Our dedicated governmental affairs team remains closely in tune with any developments, and we continue to work with our residents to find the right apartment home to match housing needs and economic realities. Finally, our ongoing innovation continues to drive attractive results in differentiation versus peers. Key foundational technologies such as smart home tech, software robotics, AI chatbots, proprietary self-guided tour and resident apps, spatial analysis heat maps, and a unique data hub have already been integrated into our operating platform. These have improved staffing efficiencies at our communities by 40 percent, increased the number of apartment homes managed per employee by 60 percent, improved resident satisfaction by 25 percent, and resulted in controllable operating margin advantage of 325 basis points versus public peers at a similar level. Importantly, these foundational technologies have enabled more recent initiatives developed by our innovation team to move from concept to implementation more quickly. For example, it took us three years to capture the first 20 million of NOI upside from the rollout of our NextGen platform. Since the beginning of 2022, we have identified an additional 40 million, or an incremental 4% of NOI initiatives that we expect to capture by year-end 2025. Examples of these initiatives include building wide Wi-Fi, visitor parking, increasing the number of properties operating with no dedicated on-site personnel, improving our process to reduce vacant days, and leveraging big data to make better pricing decisions. Above and beyond these, we continue to make progress on improving the resident experience, which we anticipate will contribute far more NOI down the road through additional pricing engine optimization, better renewal forecasting, and increasing our share of the resident wallet, amongst other initiatives. In closing, I'm excited about our operational trajectory. A big thanks for the ongoing hard work of my colleagues in the field and at corporate. We have plenty more to accomplish, but your innovative and competitive spirit drives our continual growth and our desire to further improve how we conduct our business. And now, I'll turn over the call to Joe.

Thank you, Mike. The topics I will cover today include our second quarter results and our updated outlook for full year 2022, a summary of recent transactions and capital markets activity, and a balance sheet and liquidity update. Second quarter FFOs adjusted per share of 57 cents achieved the high end of our previously provided guidance range and was supported by strong same store revenue growth and further accretion from our 2021 acquisitions. For the third quarter, our FFOA per share guidance range is 58 cents to 60 cents, or an approximately 4% sequential increase and 16% year-over-year increase at the midpoint. This is supported by continued positive sequential same-store NOI growth and accretion from recent capital allocation activities, partially offset by increased interest expense given recent changes in the yield curve, and higher GNA to enhance innovation and retain talent. These same drivers led us to increase our full year 2022 FFOA and same store guidance ranges for the second time this year. We now anticipate full year FFOA per share of $2.29 to $2.33. The $2.31 midpoint represents a three penny or an approximately one and a half percent increase versus our prior full year guidance and a 15% increase versus full year 2021. The guidance range increase is driven by a four penny benefit from improved NOI offset by approximately half a penny each from higher interest expense and increased G&A. For same store guidance, we have increased our full year revenue and NOI growth ranges by 125 basis points and 150 basis points respectively to 10.5% to 11.5% and 13.25% to 14.75% on a straight line basis. In addition, we have lowered our capital uses by approximately $240 million for the year as we have proactively reduced our net deployment strategy and pivoted away from acquisitions and toward higher risk adjusted return land acquisitions and DCP investments. While these investments represent smaller dollar amounts versus traditional acquisitions, they present the opportunity for future value creation while preserving balance sheet strength. DCP investments often provide us with optionality around future purchase, while land purchases allow for gradual funding of development starts and implementing value creation mechanisms on our preferred timeline. Other guidance details are available on attachments 14 and 15D of our supplement. Next, a transactions and capital markets update. Our second quarter and third quarter to date external growth commitments totaled approximately $550 million and were split amongst acquisitions, DCP investments, and land sites for future development. Our DCP investments are generally funded over multiple quarters so we were able to match fund our current commitments with $350 million of proceeds from the settlement of 6.5 million shares under our previously announced forward equity agreements and approximately $80 million of proceeds from prior DCP maturities. External growth activity included, first, during the quarter, we acquired a 433 home community in suburban Boston for approximately $208 million at a mid-4% cap rate. Our predictive analytics framework identified Boston as a desirable market, and this property is located proximate to other UDR communities. These characteristics are similar to the more than $3 billion of acquisitions we have executed since 2019, where we have expanded yields by an average of 120 basis points to 5.7%, well in excess of what the market alone would have provided. Speaking broadly to the acquisition market, pricing on the majority of multifamily deals suggests cap rates are probably up 25 to 50 basis points from recent lows, depending on market and asset quality. Asset values are largely flat to down 10% versus earlier this year, as realized NOI growth has offset some of this cap rate increase. Second, during the quarter, we acquired three future development sites. one each in southeast Florida, suburban Dallas, and Riverside, California, for an aggregate of $135 million. Collectively, these sites are entitled for the development of nearly 1,300 apartment homes and represent likely 2023 or 2024 starts, dependent on market dynamics. And third, during the quarter, we committed to invest a total of $100 million into three DCP opportunities at a 10.5% weighted average return. Subsequent to quarter end, we fully funded an additional $102 million into the recapitalization of a portfolio of stabilized communities valued at $900 million at an 8% return. Because recapitalizations of stabilized assets have lower risk profiles, this is a relatively lower return rate versus our typical DCP investments. All told, we continue to have DCP development and redevelopment opportunities into which we can accretively deploy capital. However, volatility in the macro environment has led to an elevated cost of capital as compared against a couple quarters ago. Therefore, we reduced our 2022 acquisitions guidance to $208 million from the previous $600 million midpoint. This assumes no additional activity in 2022. Partially offsetting this reduction is a $200 million increase in DCP and land investment. The balance is comprised of the removal of previously assumed debt capacity utilization, which helps further improve our balance sheet metrics. Please refer to yesterday's release for additional details on recent transactions and capital markets activity. Finally, our investment-grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include, first, we have only $115 million of consolidated debt or approximately 0.5% of enterprise value scheduled to mature through 2024 after excluding amounts on our credit facilities and our commercial paper program. Our proactive approach to managing our balance sheet has resulted in the best three-year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multifamily peer group at 2.9%. Second, $1.3 billion of liquidity as of June 30th, which is comprised of approximately $1 billion of available capacity on our line of credit, and nearly $300 million of unsettled forward equity agreements, provides us ample dry powder and strength. Third, our leverage metrics continue to improve. debt to enterprise value was just 25% at quarter end, while net debt to EBITDA was 6.2 times, down more than a full turn from 7.4 times a year ago. We expect year-end debt to EBITDA and fixed charge coverage will further improve to the mid five times range after considering our decision to run a capital light external growth strategy this year versus previous guidance. By year-end 2022, Both metrics should be approximately a half turn better versus pre-COVID levels. Last, our approximately $370 million of developments in lease up have been a drag on 2022 earnings, but are expected to benefit future earnings by approximately $0.05 per share based on a 6.5% weighted average stabilized yield. Stabilization of these developments should improve our run rate EBITDA and further enhance our leverage metrics. Taken together, our balance sheet remains in excellent shape, our liquidity position is strong, our forward sources and uses remain balanced, and we continue to utilize a variety of capital allocation competitive advantages to create value.

With that, I will open it up for Q&A. Operator?

Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. So that we may address questions from as many participants as possible, we ask you to please limit yourself to one question and one follow-up question. One moment, please, while we poll for questions. Thank you, and our first question comes from the line of Nick Joseph with Citi. Please just use your questions.

Thanks. And I appreciate all the comments and thoughts on external growth. As you look at the DCP environment and opportunities today, how has it changed over the last three or six months, you know, just given kind of the lending environment, higher interest rates, and some of the other opportunities that may present themselves?

Hey, Nick.

It's Joe. Good morning. Good morning. So maybe a couple things, because there are some wrinkles within our DCP pipeline and the recent investment activity that you've seen here in this quarter and last. So we are starting to bifurcate that DCP portfolio into our traditional investments, which are visiting or preferred equity lending onto traditional developers and assets. And then you see some of these recapitalizations that have taken place. Subsequent to quarter end, we had a $100 million portfolio deal as well as back in 2Q we had the Portland deal. So we are starting to bifurcate that a little bit. I'd say on the traditional DCP deals, you still see plenty of activity and plenty of interest in that space. The returns really haven't moved up meaningfully. So they've ticked up a little bit, but not as much as a one-to-one ratio might imply if you thought about where is traditional cost of debt gone. And so returns there are still kind of in that 11% to 12% IRR type of range. And then when you come over to the recap space, we are seeing really good economics there. And so that space is a little bit different for us and that traditional DCP, we're really trying to go after the underlying assets at the end of the day and have that optionality in addition to the good returns. With the recap side, we're just viewing this as an opportunity to get really good IRRs on a risk-adjusted basis relative to the underlying real estate. And so those are generally in that kind of 8% to 9% range and a I think that area of the market has really come towards us in the last three to six months.

Thanks. And then just on the land, are you seeing any repricing of land just given where construction costs have moved? And then how are you thinking about underwriting the developments or the future developments on some of these land parcels that you acquired?

Yep. On land, no, we're really not seeing much repricing at this point in time. Traditionally, land prices remained much stickier. So you don't see as much volatility on that side. I would say, though, that when you look at the land acquisitions that we had in the quarter, a number of these are exceedingly long lead times. So when you look at something like the Riverside transaction, that's a transaction that we've been working with for probably five years now with a potential joint venture partner on the retail side. Ultimately, we have fixed pricing on our 50%, and we're able to buy that out at a discount as well as buy out the partner's 50%. Some of these are longer lead time in nature. But overall, not seeing a lot of volatility on that land price. When it comes to future starts, our nearest term start is going to be Newport Village. That's a densification play on an existing asset. So we're probably going to start that. That pricing will be probably $150, $160 million starting in third quarter for almost 400 units. As we think about the future starts, generally we run with about a 5% contingency for price purposes. and risk but we're also increasing expected pricing by about one percent per month at this point in time in our underwriting for the next year and so we get that newport village deal or a couple additional transactions we'll be looking at starting in 2023 we think we're pretty well covered from a cost and risk perspective and that's still allowing us to get to that low fives current yield and a mid to high five stabilized yield on those transactions thank you very much

Next question comes from the line of Austin Werschmitt with KeyBank. Please just use your questions.

Great. Thanks, guys. Mike, you alluded to this a little bit in your opening remarks, but maybe to put a finer point on it, if we take the 5% earn-in and assume that rent growth gets back to historical inflationary levels in 2023, is it fair to say 7% same-store revenue growth is achievable next year, assuming kind of the macroeconomic backdrop doesn't accelerate to the downside?

Awesome. I think that's fair, just taking the math of, again, that 5% earn-in. If we can get to 4% market rent next year, you use a mid-year convention, and, yeah, you get to 7% pretty quickly. That being said, I'd like to point out we've done a good job over the years of trying to be a little bit more innovative in nature, just going after other income. So there are other things out there that we are constantly looking at. And again, we have a pretty good pipeline at this point of ideas. So we think that we can continue to push that as well.

That's helpful. Thank you. And then I know strategically you guys have tried to draw down on your loss to lease, but Where does that figure stand today? And also, if we see things soften up a bit, do you think the loss to lease that some still have provides a little bit of a cushion in terms of how portfolio rents would start to roll over? Or in reality, if demand softens, do you think that disappears pretty quickly as people look to hold occupancy?

That's the thing with loss to lease. You want to capture it while you have it. And today, We've seen loss to lease continue to go up. And last time we talked, it was around high 9%, 10% range. Today it's sitting around 8.5%. And, again, that goes back to our strategy of really driving our rent roll. And you can see in both our market rents how that's played out on new lease growth. And really, especially on that renewal side, we've been able to push a little bit more aggressively. Again, that's leading into that earning of 5%. And frankly, today, we think we have very good visibility. I mentioned my prepared remarks of called around 85% of our leases for the year because we can basically see what's being sent out through September, October at this point. We see where our market rents are going. We feel really good about that 10% to 12% that sits out there in terms of blended growth in the back half. And so when we sit here and we talk about where we're trending, we'd have to be 0% growth in the fourth quarter to really move away from that 5% earnings closer to a 4%. Again, right now, 3Q looks like it's in the bag. It's close to 12% to 14% today. So we've got a lot of visibility, a lot of dashboards out there that we're looking at. And, again, it goes back to that innovative approach, a lot of green lights telling us to push go.

So we feel good about where we're at today. That's very helpful. Thank you for the time. The next question is coming from the line of Steve Sackler with Evercore ISI. Please proceed with your question. Hi, Mr. Sackler. Steve, are you there?

Hi, can you guys hear me?

Yep, you're good.

Hey, Steve.

Okay, I guess the headset died. Anyway, just to circle back on capital allocation, Joe, I think you said on these new land parcels that you bought, you thought the yields were maybe in the high fives, and I think you said your current developments are kind of yielding six and a half, and DCP is getting you kind of eight to ten. I'm just trying to think through with the economy softening and slowing, not clear how much. I mean, I guess how are you thinking about that capital allocation and, you know, maybe changing underwriting criteria and, you know, prioritizing kind of where to put the incremental dollar today?

Yep. Good questions. I'd say, first off, I think you see within the guidance the pivot that we have from a capital allocation standpoint. So, broadly speaking, pulling back on capital deployment, I'd say, while we're not always experts on the macro perspective, I think we are pretty good on pivoting and adjusting to cost capital and knowing when to pull back and really when to push forward. So we did net-net pullback deployment strategy. With guidance now at this point, effectively everything that we've done to date is reflected in the high end of those numbers. So we're not taking into account additional speculative activity from here. When you do think about that pivot, though, the DCP in development, i.e. land acquisitions, did tick higher. Part of the reason we like that is because they are smaller dollar amounts, and then they create future optionality. In the case of DCP, obviously you have better optionality on the back end to potentially monetize and acquire some of those assets. Historically, we've had about a 50-50 hit rate on that. And then development, while we are building up the land bank, we're not hit and go today. So all of those land parcels and development starts aren't starting in 3Q. We have Newport Village here to close out the year. The rest of our starts are really probably going to be 2023 decisions. So we think we got the land at a good basis. We got a good price there. We feel comfortable with the underwritten yields at low fives on a current basis, high fives on a stabilized basis. And that's factored in contingencies plus inflation. And so it does give us that optionality, though, if the macroeconomic environment continues to deteriorate, if cost capital changes. I think we'd reevaluate sequencing of those starts and think through sources and uses at that time. So I think for now you've seen most of what you're going to see out of us on the cap allocation side.

Great, thanks. And then this is a little more of a technical question. If we need to take it offline, we can. I'm just trying to think through the bad debt. And I know you've got a paragraph in here on page two. You talked about, you know, almost $13 million of bad debt. Recorded in the quarter, which if I'm doing my math right doing the math, right? It's about three and a half percent of revenue Which just seemed like a high number. So I guess I'm just really trying to clarify, you know, what was included in the You know second quarter and kind of what's in guidance for the back half of the year Yeah, yeah fair question so Number one, I hope within these bad debt discussions.

We don't lose sight of the broader trend here collections are actually doing fantastic and So June within 2Q was the best month of collections that we've seen since COVID started. And April and May weren't far behind as our second third. And then just looking at July, we're actually off to a better start in July than we were in June at this point in the month. So overall, I don't want any of the kind of bad debt account receivable reserve discussion to really mask any of that. And happy to take it offline too and go through any more detail. But that $12.8 million reserve, The way you should think about the implications to either sequential or year-over-year is to think about the incremental change in that number. So it's not the absolute $12.8 million reserve. It's just how much did that change versus prior quarter, as well as how much did we see as a change for former residents that we'd previously written off. And so those numbers on a year-over-year basis, we had about a 30 basis point drag on our year-over-year same store revenues. And on a sequential basis, we had about a 90 basis point drag 2Q revenue relative to 1Q. And that's really driven by 1Q. We had an increase in collections in 1Q as we saw better previous trends. I'd say just as you think about the methodology here, we have had a very, very consistent methodology since COVID started in terms of diving into individual resident by resident, understanding their own factors, understanding the regulatory environment they're in, and even understanding where they're at in the governmental assistance process. So by doing that, we get a much higher degree of conviction in where those collections are going to go over time, pulling them into our forecast and our reserves. And that's why I think you're seeing probably quite a bit less volatility on a quarter-to-quarter, year-over-year basis than you're seeing some of the others at this point in time. So hopefully keeping the surprises to a minimum here on our side and I think that's really credit to we've got some great business managers in the field that are in the weeds on this, as well as a regulatory team at corporate that holds biweekly meetings going through this detail. But if you want to go through more detail on methodology or anyone else does, happy to follow up after the call.

That's good. Thank you.

Our next question comes from the line of Chandi Luther with Goldman Sachs. Please proceed with your question.

Hi, thank you for taking my question. So you guys talked about cap rates up 25 to 50 bps and prices down 10% asset values. How much further do asset values need to come down in order for deals to resume given NOI is still pretty healthy? Like at what point do you think it starts to become more aggressive on acquisitions as we think about this environment.

Hey, John, it's Joe. So I think when you look at our playbook here the last three or four years, our playbook has really been contingent on where is our stock price? And can we go out there, find assets that meet the platform requirements, the asset upside requirements, CapEx requirements that we have? And can we do that accretively with our share price? And so I think our circumstances and what we need to see on cap rates are very different than the market as a whole. So what we're seeing right now is price discovery taking place for the broader market. And UDR and the REITs are not going to be the incremental price setter in that environment. We don't have a great cost of capital. I would say that while there's a lot of focus on cost of debt and how do these different groups finance themselves, a lot of our investor base spends a lot of time thinking about unsecured rates, which are higher at this point in time for the REITs. than the secured borrower. So secured borrowers today, a good quality borrower can borrow on a low leverage basis, you know, 4.3 to 4.5 probably, based off where treasury rates have moved. And so when you think about where cap rates are, I think that gives you a sense for kind of what the floor may be. So we still got to get through the price discovery phase, but near term, I don't think you're going to see much activity out of us given cost of capital, either on the stock price side or what we expose to the market on the disposition side.

That's fair. And so in terms of the remaining forward equity capital that you have that's already locked in, could you talk about potential deployment there? Do you think more DCP opportunities would be the right way to go about that? If you could please talk about your capital allocation priorities for the next seven to eight months on that forward program.

It's really identified and penciled in now at this point for opportunities that are already in process and committed to. So if you think about our development pipeline today, we've got about $200 million left to fund there. Within our DCP pipeline, we've got about $80 million left in terms of what you can see on attachment 11b, but then we had a subsequent portfolio DCP deal for about $100 million, so you've got $180 million there, plus some additional redev and technology spend. So you've got $400 plus million of committed spend that we're looking at. And so you've got $280 million of funding left to do on those forward equity settlements, plus free cash flow, plus we are exposing some assets to market to explore pricing and have potential proceeds coming there. And so we're not looking at that forward equity settlement as new dry powder or new capacity for additional acquisitions, DCP, DEV, et cetera. It's really now at this point penciled in for what we already have committed to.

Great. Thank you.

Our next question comes from the line of Brad Heffern with RBC Capital Markets. Please proceed with your question.

Hey, everyone. I was curious if you could talk about any change in behavior that you might be seeing from kind of the deal-seeking renters on the coast.

Hey, Brad.

It's Mike. I'll tell you, first and foremost, we alluded to in my prepared remarks, we are seeing some of the renter-based turnover just due to some of the rent increases. So when I mentioned that, 15% of them left because of the rent increases. We were receiving about a 30% increase on new lease growth. That being said, when you look at places like New York, as well as Florida for us, it was closer to 30, 35% were moving out because of that. And part of that is due to the concessions we were giving in that market last year in a place like New York, and then in Tampa, as well as Orlando, it's just a little more to keep. That being said, you can see it on Our rent trend, new lease growth is still very strong in those markets. So we're actually refilling with people that are able to pay those rents. Income ratios are staying pretty consistent. And what we're seeing on the move in and move outside of the equation, very similar to what we saw pre-COVID. So everything feels pretty healthy at this point.

Okay, got it. And then, Joe, is there anything left in the forward guide in terms of rental relief payments or is that largely played out?

There is an expectation that we will have additional receipts on government assistance, generally in 3Q. We do have a pretty good amount of visibility as to what's an application at this point in time, plus what we received in July. So I'd say you probably have $3 or $4 million of expectations out there for additional government assistance at this point. Yeah, there still is the possibility that there's ERAP reallocations, and so maybe we have something there that would be an upside surprise over time. There's also discussions taking place in California in the legislative body as to additional support for landlords for residents that haven't paid, but we have not factored in any of those items at this point in time.

Okay, thank you. Our next question comes from the line of John Polosky with Green Street Advisors.

Please, just use your question.

Thanks. Just a follow-up question on external growth. Last two or three years, acquisitions, have been really, really tilted towards the suburbs. And so I know suburban assets can provide a higher going in yield, but is there just a fundamental call on aging demographics here, going more suburban, or any other kind of macro overlay that's forcing you to tilt your portfolio more suburban?

No, there really wasn't. We want them to remain balanced, be it urban, suburban, A, B, etc., It just happens that when we went through all the parameters that we had laid out and we were going through the acquisition process and we wanted to make sure they were in markets that we had targeted for expansion, wanted to make sure that we could deploy at accretive cap rates, wanted to make sure the growth profile was better than our own portfolio, the international market growth or everything that the innovation and redevelopment CapEx teams do. So they generally just presented the best opportunities. Some of that has to do with the potting aspect. We've talked a lot about potting aspects I think when you look at our 21 acquisitions, I think the median distance was about two miles. So we did focus a lot on could we get more efficiencies out of an asset because of where it was located. And we don't get to dictate to the market what comes to market. We had to be a recipient of what we saw coming and took advantage of what we saw. So I wouldn't take that as a broader thematic or strategic shift. It just happened to be what was available at that point in time that worked with what we wanted to do.

Okay. Second question from Mike. Curious what your team on the ground has told you in terms of June and July kind of leasing trends in tech-centric markets, either Bay Area or life science clusters in Boston, San Diego. Any incremental anecdotes, layoffs, and how that's impacting traffic would be helpful to hear.

Sure, John. I think specific to San Francisco first, I pointed to 5.2% market rent growth as a whole for the company in terms of cumulative sequential market rent growth. When you think about San Francisco, we're around 13% to 14%. So we've actually seen more market rent growth, concessions starting to abate even more. See about two weeks downtown, two to four weeks in kind of the Mountain View area because of supply. So frankly, we've seen more traffic in San Francisco Our turnover has been relatively kept in check, and we feel better about our market rent today than we had in a long time. And we're actually back to call it pre-COVID numbers at this point, and we think we have more of a tailwind, if you will, going into next year because of where market rents have moved just in the last six months. San Diego, obviously, we have a very small presence there. Still seeing good trends, turnover staying relatively low, basically no concessions. And so we're not seeing much of a dip there. And then as far as Boston, as you can see in our release, Austin performed relatively well for us. And we actually expect to see even better numbers come out of Boston over the next two quarters.

Hey, John, it's Joe. A couple of additional thoughts, too, because we got the questions back at June and we've seen some of the notes on the tech, either layoffs or pausing of hiring. I do think it's important that while those get plenty of the headlines and we're seeing the same announcements in other industries as well. And so while job openings overall remain very strong, job growth remains strong, I do think that little bit of rate of change deceleration we're seeing, it is more broad-based than just tech where we see the headlines. So it doesn't seem that San Francisco is going to bear the brunt of it just because of that or because of the fact that the jobs did get more dispersed in the tech industry throughout the downturn. The other thing anecdotally that we keep hearing is that any of those announcements that you're seeing on the tech side they do seem to be driven by more of the support. So be it the sales, more of the back office, more of the help desk, less of the technical higher-paying jobs that are out there. It seems to be what we're hearing behind the scenes. So I do think there's that wrinkle as well, that the higher income is still there, so you're not losing that multiplier effect on the high-income jobs. Okay.

Understood. Thank you very much.

Our next question is from the line of Adam Kramer with Morgan Stanley. Please just use your question.

Hey, guys. Thanks for taking the question. Yeah, I guess first question is just on, and look, I really appreciate kind of the detail around, you know, the earn-in number one and then kind of expectations for market rent growth and kind of giving us some building blocks for 2023. I'm just wondering kind of on top of the 5% earn-in, you know, kind of that 3% or so market rent growth potentially, you know, what else kind of may kind of go into the blender, right? What other building blocks might there be, right? And, you know, whether that's development, I know we talked about bad debt earlier, maybe kind of how do you see bad debt playing out? Is that a headwind, a tailwind? And, you know, maybe kind of help us, help kind of quantify what some of those other building blocks of 23 may be.

Hey, Adam, it's Joe. You know, we talked about bad debt a little bit. I don't think we're going to see a material change at this point in time as you go into 23, right? We've still got some issues with eviction moratoriums and slow to open courts or pauses on eviction processes that make it more challenging. A lot of that's weighted more to the West Coast with Northern California, LA, and San Diego all having various forms of eviction moratoriums in place. So I don't think you're going to see a big shift in 2023 numbers coming from that side of the equation. You did mention one of them where we do think we have a lot of upside both next year and in the following years is on the development side. those deals called the four lease-up deals, roughly $370 million, they have an effective yield right now that's in the plus or minus 2% as they come into the lease-up phase and come off of cap interest. Those are going to go to about a 6.5% yield over the next couple of years. And so you've got five pennies of upside there. In addition, on the DCP side, you've seen our new commitments, both in 2Q and subsequent, I think that will earn in a little bit this year as the funding schedules continue to come in throughout the rest of this year. You'll see the full impact next year, so I think DCP sets up well for us from an accretion standpoint. On the acquisition side, while we just had the Boston deal that we announced this year, we still do have upside remaining on those 2021 transactions, and so those should help as they come into the same store pool. The other thing that's not necessarily additive, but it's less dilutive, I think, for us than peers, is when you look at that maturity profile, we've done a phenomenal job over the last couple years extending duration and really knocking out most of our maturities through 2024. We only have $100 million coming up over the next three years, and that's out in, I think, July of 2024. And so we're going to have less reset risk on the debt side. On the flip side, to be fair, we do have G&A and broader expense pressures that we're faced with. So in terms of retaining talent, continuing to add headcount around a lot of our innovation and ESG activities. I think you're going to be due for another tough year of GNA and expense growth. But that said, we do have a lot of efforts on the initiative side that Mike's focused on that should help on both expenses and revenues to help boost some of that revenue and a lot of growth in 23 and 24.

That's really helpful, Joe. Thanks for that color. I guess just a second and, you know, quick kind of follow-up question. And you kind of mentioned earlier, 11% at midpoint for kind of second half of 22, blended rent growth. Wondering kind of within that number, if you're able to kind of say, you know, hey, where do you think kind of the year-end that number sits, right? So I recognize that's kind of the average number. Do you think kind of blended rent growth, you know, at year-end is still kind of in the positive range? I'm just kind of trying to think about, right, you know, the comps kind of getting increasingly tougher here as we get through the year. So just wondering kind of how you guys are thinking about forecasting kind of year-end, year-end, blender-end growth.

Sure. Now, Adam, that's a really good question. Something as we think about that 10% to 12% we expect in the back half, again, we have very good visibility on basically 3Q at this point. I mentioned earlier I do expect anywhere from 12% to 14% growth based on everything I can see today, whether it's been signed or whether it's sitting out there that I notice it looks like it's in that 12 to 14% range. So that would lead you to believe that the back half, the fourth quarter, if you will, is around 7%. So we do see some positive momentum as we end the year going into next year, and we'll continue to try to drive that higher. Obviously we've been very focused, not only on 2022, but a lot of that's been based on how we can build that earn in for 23. So that's kind of where we sit today.

I do think it's important within that we do get a lot of questions on the affordability dynamic and the wherewithal of the consumer. It's important to keep in context that while these rent increases year over year feel relatively large, if you go back to 2019 and look at where income growth has been throughout our markets, income growth has averaged 4% or 5%, which is effectively right in line with where rent growth going back to 2019 baseline has been. With market rents up today, 15%, 16% within our portfolio versus pre-COVID. And so That's why when Mike talks about rent-to-income ratios, we're still holding relatively static in that low 20% range. And so consumers are still in a really good position. Wage growth has continued in those mid-single digits. And even when you look in the new moving activity in 2Q, the incomes for those residents relative to the residents that we were applying for last year, those are up high single digits, greater than the market as a whole. So we're attracting a better, higher-quality resident today.

Appreciate all the color, guys. Thank you.

Thanks, Adam. We're going to miss Rich, by the way, on these calls.

The next question is from the line of Neil Malkin with Capital One Securities. Please just use your question.

Hey, guys. Unfortunately, it's not Rich. It's just Neil. Just kidding. First question. That was so funny. Okay. Mike, you talked about, I believe, If I'm wrong, let me know. If not, can you just talk about what newer initiatives have been sort of added to the near-term docket and, you know, kind of what do those target?

Hey, Neal. So in terms of that number, the 20-plus million of initiatives, That still holds steady. So we're going to probably pull about 6 million of that into this year's number. And so that leaves anywhere from 15 to 20 million of additional initiatives as you think about what's out there and what we can still go after. There's a number of items within that, anything from third-party parking, additional package and placement there. There's identity and fraud detection. We're rolling out AI chatbots, text, voice throughout the portfolio and There's a bunch of vendor consolidation. There's more centralization and sites that we're going to run without individuals on site on a daily basis. So a lot of initiatives within that 20 plus million. I'd say the big new item that we have been vetting with the innovation team here for a while that we are in the process of rolling out over a three-year timeline is building wide Wi-Fi. And so something that we've looked at for the last five or seven years is And, of course, there's questions as to, you know, are we late to the game? Why have we not done the bulk Internet in the past when others have on both Internet and cable? I think there's a number of things that actually have changed over time for us that make it more interesting for us to roll out today. So, number one, this is not going to be a cable and Internet package. We are looking at Internet only. We don't view those past packages that included cable as being beneficial to the resident. The contract duration that we are looking at, is much shorter than the typical contract. Typically, those are seven- to ten-year contracts. We're looking at a five-year contract to present us with more optionality today. When you think about the Wi-Fi experience for the resident, very different today in that historically it's just been an in-unit setup and that you only have Wi-Fi in-unit. We are looking at ubiquitous or whole building Wi-Fi so that when you walk out of your unit, you have it throughout the portfolio. So you're going from your unit to the garage to the pool to the amenities. It's consistent, so it's a much better tenant experience. The other thing is that we have a much greater rev share than what's historically been offered. Historically, we were offered a very high fixed price with an inability to control pricing for that Wi-Fi, so a very small rev share and little control over what our profitability was. Because we are going to take control of the CapEx rollout and the costs on that over the next three years, we're going to take a lion's share of the revenue off of this and drive profitability pretty substantially. And so in totality, it helps us create a better customer experience. It helps us transition from what I'd say is a smart home concept to a smart building concept. And that's really foundational for what we have to do on SPTI and ESG and attacking that scope three perspective and giving the power back to the resident and to understand the dynamics in their unit and throughout the portfolio or property. And so total numbers, we're probably looking at about a $50 million spend over three years for this, but returns probably $15 to $20 million plus is what we estimate, but full rollout potential by 2025, so it's going to be a couple years. So long-winded answer to that innovation question of $20 million, but we've juiced it up to at least $40 million today and still have more to come that the innovation team is working on.

I really appreciate that. Thanks. Last one, Tom, you've been pretty quiet. Maybe a general question I've asked you a couple of times. You think about where you guys have been positioning incremental buys, kind of seeing what the markets have bared out in terms of rent growth, both on a year-over-year and a COVID-to-date basis. You factor in the hybrid model appearing to be a long-term paradigm and and people moving to states with, you know, less regulation, less issues, you know, more affordability, you know, the list goes on, right? Social issues, et cetera. I just wonder now that we've had, you know, a fair amount of time to kind of suss out how that kind of looks and potentially a new framework, if at all, are you, you know, is the company maybe taking a, you know, a different stance on how you, position of portfolio. I understand diversification is important to you guys. I get that. But, you know, based on everything that we know since 2020, do you feel like an incremental dollar is better spent in a Sunbelt market? You know, how do you kind of see that now that you've had some time to digest that?

You know, Neil, a very good question and a very thoughtful one. in a perspective of what have we really learned from COVID in the last three or four years. And what I think we learned still applies to the future, which is diversification is your friend in managing risk and cycles, political, environmental, whatever they might be. And so you're probably right. We will always continue to focus on it. What I'm grateful for is our investment in technology and portfolio management and data. And Chris and the team continue to pour through it, find better data sets to analyze trend lines where things are. And I think the conclusions of that we continue to share with the investment community every conference. And what they point to is we're in the right markets. Things are going in the right direction. And if we continue to operate, grow our margin, we're going to have cash flow growth and the enterprise is going to continue to prosper. And I think we'll stay on that template. I think it's challenging as we've all seen to lift portfolios and shift them. Hell, I had 10 years of experience with that and it's hard to get earnings growth and expansion. And so, you know, we're very comfortable with portfolio probably won't see a lot of shifting of markets. We continue to always look for new opportunities and you know, that's a, A long-winded answer, we like our hand at the table, and we're going to just keep playing it and continuing to expand our innovation and margin.

All right, thank you.

The next question is from the line of Juan Sanabria with BMO Capital Markets. Please proceed with your question.

Hey, guys. Just a question on the cost side. Is there any – change in the magnitude of growth on the cost, either on the controllable or non, that you're seeing between Sunbelt and coastal markets that is worth noting?

Ron, I think worth noting, I would say in the Sunbelt, we're seeing a little bit more pressure as it relates to some of the R&M side of the equation, as well as the personnel. And I think a lot of that has to do with the supply that's down there. So typically when that happens, it's pulling some of our service employees from us, and we're having to pay a little bit more to retain our talent, and we're seeing it just in terms of some of the third-party costs being pushed to us as well. So that's where I've seen a little bit of pressure on the controllable sides, but nothing really else material when you think about just urban, suburban, A's, B's. It's pretty consistent.

Juan, I think you can extrapolate that on the controllable side a little bit to the non-controllable over to real estate tax as well. we are seeing more pressure when you go into some of our Sunbelt markets, be it Texas, Florida, Richmond, Virginia. We are seeing more pressure on the tax side there relative to some of the coasts. Similarly, if you come full cycle back to discussion earlier on the development side, you are seeing more inflationary pressures really driven by labor down in the Sunbelt as well there. So a little bit more pressure on cost and development within the Sunbelt too. So Broadly speaking, Sunbelt's seeing a little bit more pressure.

And one more for me, just on the whole discussion about assumed blended lease rate growth in the second half of the year, and you guys are giving phenomenal color. Any offset we should be thinking about as you drive pricing on continued occupancy kind of givebacks with a bit higher churn? Is that going to stay stable or maybe tick down for the balance of the year?

Another good question. The way we've been looking at that and trying to communicate is we've been comfortable with call about 30 basis points of occupancy coming down. So we typically run just over 97% today. Today we're closer to 96, 8 to 97%. Again, it's a good trade if you think about 30 basis points for us. It's 150 units per month. And we've been targeting over the course of 2Q and 3Q. Run it this way, try to push our rent, see what we can get. We do expect vacancy loss of approximately $2 million. That being said, we do think we get around 1% to 1.5% pickup in rents. That, over the course of 12 months for us on our rents, is over $12 million. So it's a good trade, and again, it's one that we've been focused on doing to try to drive next year. So 2023 is in very good shape. That's kind of where we're at on that.

Great. Thank you very much.

The next question is from the line of Joshua Dinnerline with Bank of America. Please proceed with your question.

Yeah. Hey, guys. You know, it's interesting you named Patty as a chief ESG officer. Just made me curious where her focus will be in the first 12 months on the ESG front.

Hey, Josh. Good question, and very excited that Patsy's joining us. So if you had a chance to look her up and take a look at her background, absolutely phenomenal experience in the areas of ESG, sustainability, DEI, talent development. So there's a lot of areas that she's going to be able to help. She's been at some pretty big dynamic organizations in the past. And so I think near term, there's definitely a focus on the ESG side. So We've committed, as you know, to SBTI, and so she'll be helping us with that, along with a number of other individuals on the ESG committee, working through our SBTI strategy and the ultimate communication and execution of that. I think there's a good opportunity from a workforce diversity standpoint. We do have DEI initiatives in place for the executive team with compensation tied to them, so making sure that we continue to drive those efforts to enhance and diversify our workforce. And on the talent development side, just continuing to extend the HR strategy that's already in place, making sure we get good, high-quality talent in here, develop them over time, and bring them up throughout the organization. So she's got a pretty phenomenal skill set, and so excited to see what she's going to bring to the table and bring a new voice to us.

Josh, this is to me. I might add that, you know, we got an 86 last year on Gresby, led the industry, very proud of that. But the time to get better is when you're on top. And I think Patsy can drive us to another level.

Awesome. Appreciate the color, guys. I'll leave it there. Thank you.

The next question is from the line of Nick Yulico with Scotiabank. Please proceed with your questions.

Hey, it's Daniel Tricarico on for Nick. I'll keep it brief. I don't believe you started any developments in the quarter last How should we think about the development start pipeline over the next, say, 12 months? And how are you underwriting new development yields today versus cap rates?

Correct. We did not have any new starts in the quarter. So we've got the $700 million pipeline, about $200 million left to fund. But really, four of those deals out of these seven are coming through the lease up and effectively fully funded. And so you're really down to a relatively de minimis amount of risk when you think about what's in process today. In terms of new starts, in 3Q we're going to have Newport Village, which is a densification play, almost 400 units, about $155, $160 million development deal in suburban D.C. And so that will get into process in the second half. Beyond that, we've got really good optionality as we think about the pipeline. We do have a broader strategic objective to get back to plus or minus a billion-dollar pipeline, which sizing-wise is only about 3% or 4% of the enterprise value. So we do want to get back there over time, but that's going to be very much contingent upon where do we look from a sources and uses, macroeconomic environment, and cost of capital perspective. So we've got the optionality when you look at Attachment 9 with a number of land parcels that we'll be able to start next year, but those are going to be contingent on all those other factors. And so it's hard to say that we're going to move forward on exactly those same timelines as we previously planned, but we do have that optionality.

Thanks, Joe. Appreciate it.

The next question is from the line of Hondo Sanchez with Mizuho. Please proceed with your questions.

Hey, I guess it's good afternoon to you as well. So did I hear you say, I think, Mike, you said that move out due to rent levels and certain Sunbelt markets were in the 30% range or about 2x the portfolio. Can you share a bit more about where that is happening and Your comments made it sound like this is largely because of deal seekers. Am I rotating out? Had you been able to backfill with higher income tenants? Thanks.

Yeah. And so that's what I was mentioning. If you look at a place like New York, for example, our renewal growth of 21%, we were pushing pretty aggressively. And that was a case where people were getting more of a deal over the last couple of years with concessions. We've burned off of those. We're not offering concessions in that market anymore because And we've continued to push market rents. So we had the strategy in place since the beginning of the year to see what we could get on that. We think it's played out. We did see turnover kick up to some degree. But again, we were able to trade out at call it 30% on the new lease side. So it was a good trade for us. Places like Florida, that's where we saw it as well, where we started to push. And this is more of a function of we pushed last year. We're starting to anniversary off that and seeing it again this year. And some, some residents just couldn't take that increase. And again, we were able to backfill with higher new lease growth and what we're seeing in terms of rent to income ratios, they're relatively flat. So we are seeing people with higher incomes, the ability to afford it going forward. And we think that we have good prospects as we move forward.

Okay. That's helpful. I appreciate that. I guess, you know, we're all trying to figure out to a degree if affordability is an issue. Is it your sense that pricing power is still fairly even across your Sunbelt and coastal markets? And then maybe how does the rent to income ratio within those two regions compare today, maybe versus history? Thanks.

Sure. With that question, I'd probably point more towards our loss to lease. And you've seen us in previous pitches. We've thrown out there where we're at by region, I will tell you when I mentioned 8.5% across the portfolio today, it's pretty consistent. So we're starting to see a little bit of an increase in that lost lease in places like San Francisco, given we've been able to push market rents. But again, it's pretty consistent across the board. Haven't seen much of a change there as far as that goes.

Any color paths on the rent income? Is there a meaningful difference between coastal and sunbelt?

Minor, not very material. So where we see a little bit more of an increase, if you will, places like Monterey Peninsula for us, historically that's run in the high 20s. It hasn't changed to some degree. Places like the sunbelt, they're around 23% to 25% today. New York's just under that. So they're pretty consistent across the board.

Okay, that's helpful. Thank you, guys.

Our next question is from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi, hello. You mentioned a few times that you're attracting as higher income tenants as you seek to raise rents. Do you think these tenants may be newly priced out of the home buying market? And if it becomes easier to buy a home, would these be some of the percentage that may move out for home ownership?

Not necessarily, because another thing that we track and we've been looking at is the average age of our residents. And that's actually kicked down to some degree. So while it could happen, maybe, but we feel like we're in a pretty good place. And I mentioned in my prepared remarks, we've seen around 8% moving out to buy homes. So we're in a pretty good place today compared to historical averages.

Thank you.

The next question is from the line of Tayo Ocansana with Credit Suisse. Please proceed with your question.

My question has actually been answered. Thank you very much.

Thank you. There are no further questions in the queue. I'd like to hand the call over to Mr. Toomey for closing comments.

Thanks for your time and interest in UDR. We started off the call with a A quick summary, the strongest operating environment in my tenure, 16% FFOA growth year over year, a second in guidance increase this year. We appreciate the questions, but the big picture is our consumer is in great shape and we've reloaded our rent roll. We have pricing power. We continue to innovate and expand our margins. And it couldn't be a more exciting time to be in this business. The prospects look great today and in the future. So with that, I'll close and say we look forward to seeing you in the September conference season and wish that all of you take care.

This will conclude today's conference. May disconnect your lines at this time. Thank you for your participation.