Mid-America Apartment Communities Inc

NYSE:MAA

Earnings Call Transcript 2020-Q1

[Operator]

Good morning, ladies and gentlemen. Welcome to the MAA First Quarter 2020 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded today, May 7, 2020. I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA. Please go ahead.

[Tim Argo, executive]

Thank you, Keith, and good morning, everyone. This is Tim Argo, Senior Vice President of Finance for MAA. With me are Eric Bolton, our CEO; Al Campbell, our CFO; Rob DelPriore, our General Counsel; Tom Grimes, our COO; and Brad Hill, EVP and Head of Transactions.

Before we begin with our prepared comments this morning, I want to point out that, as part of the discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statement section in yesterday's earnings release and our '34 Act filings with the SEC, which describe risk factors that may impact future results. These reports, along with a copy of today's prepared comments and an audio copy of this morning's call will be available on our website.

During this call, we will also discuss certain non-GAAP financial measures. A presentation of the most directly comparable GAAP financial measures as well as reconciliations of the differences between non-GAAP and comparable GAAP measures can be found in our earnings release and supplemental financial data, which are available on the For Investors page of our website at www.maac.com.

I'll now turn the call over to Eric.

[H. Bolton, executive]

Thanks, Tim, and thanks to all of you on the call this morning for joining us. I know it's a busy day of earnings reports. So we'll keep our comments brief and get to your questions. I'd like to start by offering my appreciation and thanks to the hard-working associates at MAA. I especially want to thank our associates serving at our properties and working directly with our residents. Your dedication and commitment to supporting and serving our residents has been on full display over the past few weeks and has never been more important than it is today. I'm proud of work you're doing and the service that you're providing.

As noted in our earnings release, first quarter results were better- than expected with solid rent growth and strong same-store performance. Our comments this morning, however, will focus on April performance and early May trends. We're encouraged by the solid performance in rent collections for April as well as the early trends in May. We've taken a proactive approach to directly assist and support those residents who are financially impacted by the shutdown of the economy while also working to ensure that all other residents in various aspects of our operations are performing and functioning as expected. Given the severe pullback in the economy and the associated job losses, leasing conditions deteriorated beginning in late March. This is particularly evident in our leasing trends as it applies to new move-in residents. On the other hand, we're seeing positive trends associated with our existing residents electing to stay put and resident turnover continues to decline. Overall, we would expect these leasing conditions to persist over the next 2 to 3 months.

As you know, the reopening of local economies and businesses across our Sunbelt markets is now underway. Given the range of protocols being used by various states and cities to reopen their economies, it will be a choppy process. However, with unemployment claims across the majority of our states currently running below national averages, coupled with the active efforts now underway to reopen across the Sunbelt, we're hopeful that leasing conditions will start to improve later this year. As efforts to reopen Sunbelt economies are just now getting underway, it's difficult at the moment to gauge the pace at which employment conditions will improve. We hope to gain better visibility on the important underlying economic and employment market conditions during the second quarter and be in a more informed position as to the outlook for the remainder of the year when we report second quarter results. In the meantime, we're confident that our strategy focused on the appealing Sunbelt markets, supported by our strong operating platform and our strong balance sheet executed by a cycle-tested and proven team of associates, will enable MAA to continue to successfully navigate this down cycle.

That's all I have in the way prepared comments, and I'll turn the call over to Tom.

[Thomas L. Grimes, executive]

Thank you, Eric, and good morning, everyone. I'll offer a short recap on the first quarter and then move to trends that we have seen in April and May. First quarter of 2020 exceeded our expectations, and the results for the quarter put us in a strong position entering this disruptive COVID-19 period. Effective rents were up 4.2% and blended lease-over-lease pricing, including concessions, was up 2.6%, which was in line with seasonal expectations. Occupancy remained strong at 95.7%. Before shelter in place began in mid-March, occupancy was 95.9% and our 60-day exposure, which is all vacant units plus notices through a 60-day period, was just 7.6%. This was 40 basis points better than last year. In short, we headed into the COVID-19 disruption with strong occupancy, low 60-day exposure and good embedded rent growth.

During the quarter, we completed 1,440 interior redevelopment units and upgraded 8,017 units with our SmartHome technology package. We felt it was prudent to pause both of these programs in March. We'll monitor demand for these 2 programs and return to production when appropriate.

Moving on to April and May trends. Historically, April is a month of accelerating pricing growth as we move into the higher demand season of the year. As you will note from our lease-over-lease pricing, which includes concessions information listed in the supplemental data, you'll notice this year did not follow that trend. New lease -- leasing volume dropped 43% lower than prior year in the last week of March. However, the last 3 weeks, leasing volume has rebounded and is 6% higher than prior years -- prior year levels. Our teams have been effective at using our virtual and self-tour platform. We expect these practices to be further augmented by guided tours in May. As expected, our current residents are choosing to stay with us, and our resident retention plans are positive. Turnover for the month of April was down 8% versus April of last year. May, June and July renewal acceptance rates are all running ahead of last year at this time.

We have worked diligently to identify and support those who need help as a result of COVID-19. 1.3% of our April billed rent is on a 60-day plan to pay. It was established to aid those who are impacted by COVID-19. In addition to flexible payment plans for those affected by COVID-19, we have not charged late fees, frozen eviction proceedings and actively work to pair affected residents with local and national support resources. These changes will cause our late fee income to be lower than expected in the second quarter.

Collections have been a focus. In April, we have collected 98% of rent billed for April. When you add the 1.3% of COVID-19 resident -- affected resident payment plans that were mentioned earlier, we've accounted for 99.3% of April's billed rent. This is in line with prior year results.

May rent payment trends are slightly ahead of April's patterns. As of May 5, we have collected or executed payment plans for 94.2% of our May billed rent as compared to 92.6% of cash collections and executed payment plans at the same point in April.

I'd like to echo Eric's comments and thank our teams as well. They've served and cared for our residents and associates well as we've grappled with the constantly changing implications of COVID-19. I'm proud of them and grateful for their efforts and character.

Brad?

[Brad Hill, executive]

Thank you, Tom. We are certainly in unprecedented times, and the transaction market fully reflects this reality. The transaction market is generally in a wait-and-see mode, and the only transactions occurring are those that were either fully committed before COVID-19 hit with their debt and equity lined up or deals that have a strong buyer need to close, such as the 1031 exchange. Because of this slowdown in activity and in an effort to allow our associates to focus on our properties and our residents, we've elected to pause the disposition process of our Jackson, Mississippi properties, and we'll reevaluate the sale of those assets at a later date.

At this time, we have no insight into any potential cap rate changes due to the lack of activity. Going forward, due diligence processes will be extended, meaning it could be a few months before cap rates and pricing trends are more apparent. We believe the changes taking place due to COVID-19 will potentially lead to more attractive investment opportunities through each of our platforms: land sites for future ground-up development, prepurchase development where we partner with strong developers and acquisition of existing assets. It's too early to say when the opportunities will begin to materialize, but we continue to work closely with our network of brokers and developers to monitor a number of previously identified opportunities.

Since the pandemic hit, new development has shut down with most developers halting all predevelopment spending and many dropping land sites. Construction debt is nonexistent, forcing developers to shelf many shovel-ready projects. Due to our balance sheet strength and our available capital through our line of credit, we are receiving more calls from developers looking for capital. As we filter through all opportunities that come our way, we will remain very selective, cautious in our approach and disciplined in our underwriting. With a significant pullback in capital sources for new development, we expect new starts to decline significantly over the next few months, leading to a sharp drop in deliveries within our markets in a couple of years.

With regard to the acquisition of existing assets, we continue to monitor the fundamentals in our markets with a significant focus on newly delivered assets that are still in lease-up. This segment of the market is likely to experience the most pressure as rents underperform, concessions increase and stabilization is delayed. Additionally, agencies have pulled back on their funding of nonstabilized assets, limiting the buyer pool for this segment.

Finally, just a note on construction. We have been fortunate that all of the municipalities in which we operate have classified construction as an essential business, and we have seen very little impact to the construction schedule of our 7 development projects.

With that, I'll now turn the call over to Al.

[Albert M. Campbell, executive]

Thank you, Brad, and good morning, everyone. I'll provide some brief commentary on the company's recent earnings performance, balance sheet activity and then finally, a few comments on our outlook for the remainder of 2020. While the main focus of the call this morning is on April performance and May trends, it is important to remember that we did have a strong first quarter performance. Our reported core FFO for the first quarter of $1.62 per share was $0.03 per share above the midpoint of our guidance. Outperformance was essentially evenly split between favorable operations, primarily revenues and other items below NOI, primarily favorable interest expense for the quarter.

Given the significant economic uncertainty related to COVID-19, we formally withdrew our guidance in March and don't yet have enough clarity to reestablish full year guidance. But to provide as much information about current trends as we could, we added a COVID-19 update section in our supplemental data package, pages S11 and S12, which has a lot of information about April performance, including collections, leasing, occupancy and other key metrics and some additional very current information about our May collections. And as noted in our release for April and May, we provided flexible payment options and waived late fees for residents financially impacted by the pandemic.

Thus far, we've been encouraged by April and early May cash collections both for current rent and deferred payments. But as Tom mentioned, we do expect fee performance to reflect more pressure in the near term as partial resident payments are applied to rent first and because we waived late fees and certain lease termination fees for impacted residents. You can find details for April fees along with historical context from this in the supplement.

As Eric mentioned, our general expectation is for the current leasing conditions to persist over the next few months, continuing to impact revenue performance. However, overall, we expect operating expenses to remain fairly consistent with our original expectations as we expect our 2 largest expense areas, personnel and real estate taxes, to remain near early projections for the year with some benefits expected in maintenance costs from lower turnover perhaps offset by slightly higher utilities and marketing expenses. Also below NOI, we expect overhead and interest costs to trend somewhat lower than original expectations for the year as hiring plans and short-term borrowing costs will also be impacted by the current economic environment.

Finally, it's important to point out that many of the activities over the last few years to strengthen our balance sheet position us well in the current challenging environment. Our total leverage remains at a historically low level. We have a significant capacity provided by our $1 billion unsecured credit facility, which is expandable to $1.5 billion. Also, our debt maturities for 2020 are only $137 million. Our remaining development funding obligation for the year is a modest $175 million to $200 million. Although the capital markets have not fully recovered, recent transactions exhibit good access to public bonds and other forms of capital, especially for companies with strong credit metrics such as MAA. We're positioned to not only weather the current stress well but to eventually pursue opportunities that may result.

Now we are committed to our long-term leverage range. Given our current metrics, our rating -- we expect that we could immediately invest around $750 million in quality properties funded with debt alone. For the appropriate opportunity and plan, additional capacity is likely available as well.

So that's all that we have in the way of prepared comments. So Keith, we'll now turn the call over to you for questions.

[Operator]

[Operator Instructions] We'll take our first question from John Kim with BMO Capital Markets.

[John Kim, analyst]

Want to make sure on the 4% decline that you're seeing in May, if that's a good run rate going forward. And also on the renewal rates, is that something that you -- that's broad brushed? Or is it specific markets that you're pushing these renewal rates higher?

[Thomas L. Grimes, executive]

John, you were a little blurred on the first question. Was it, on the May delinquency, is the run rate what we expect to continue?

[John Kim, analyst]

Just a decline in new rental rates, so just if you'd provide any commentary by market and if that's a good run rate for the remainder of the year.

[Thomas L. Grimes, executive]

I wouldn't say it's a good run rate for the remainder of the year, but I think April and May are running pretty similar to each other at this point. Really, the run rate for the remainder of the year depends on how rapidly the economy recovers from the COVID-19.

[H. Bolton, executive]

And in answer to your second part of your question, the renewal performance, renewal pricing performance is pretty consistent throughout the markets in the portfolio. There's really no difference there.

[Operator]

Our next question comes from Neil Malkin with Capital One.

[Neil Malkin, analyst]

Can you just talk about the collections or the request from residents that had been financially impacted, how that sort of trended across your markets and asset quality and even submarket location?

[Thomas L. Grimes, executive]

Yes. I'll give you -- Neil, this is Tom -- just sort of a broad brush. As far as the request came in, they were a little higher in places that are affected by tourism, such as Orlando, Savannah and Charleston. They were as high as $7 million in requests, but $5 million of that has been paid off at this point. On asset quality, we're not seeing any difference at all. A is paid at 98.1% cash with 1.3% deferred and Bs were 97.9% with 1.3% deferred. So really on an asset class basis, and honestly, if you look at it by suburban/urban or high rise looking at mid-rise or at garden, those are fairly consistent. The differentiation really comes by market characteristic.

[Neil Malkin, analyst]

No, that's really helpful. I was wondering if -- your collections seem to be the highest for any of the apartment REITs that reported last night. I was wondering, do you -- what do you attribute that to? I mean I think some people have talked about the Sunbelt maybe not holding up as well as some of the tech-oriented coastal markets, but you seem to be doing, like I said, better than your peers. Kind of what do you attribute that to?

[H. Bolton, executive]

Well, Neil, this is Eric. I would tell you that it starts with a principle that we really want to help those people who need help. And I think one of the best ways that you help people that really need help is you also expect that the other aspects of your operation perform as they should and as they're capable of. And so what we've attempted to do here is to be very proactive at communicating with our residents and reaching out actively to those that need help and -- but also making sure that people understand that this is a program that's intended to help those who truly need help.

The other thing that we opted to do is really take more of a rifle shot approach to the market environment we find ourselves in. And rather than come out early when conditions were really just a lot unknown at the time and just suggest that we're going to treat everybody in the same way with these following programs, we really elected to instead take it sort of month by month, approach it on a case-by-case basis in some cases, which gives us the ability to adapt and change as conditions evolve. And so I think this -- we took a very measured approach to things, and a lot of communication went on with residents and with our associates at the properties. And I think through all that, it resulted in a collections performance that we feel pretty good about.

[Neil Malkin, analyst]

All right. Great. I appreciate that. One last quick one on the accounting side. Are you planning on recognizing the delinquency, sort of netting that against billed revenue? Or are you going to recognize that on a GAAP or FFO basis and then have some sort of straight-line offset in AFFO?

[Albert M. Campbell, executive]

Well, for the vast majority -- this is -- Neil, this is Al. We certainly expect, once we release our earnings for the second quarter, that we'll have a portion of -- we'll have a bad debt reserve that identifies what we think we'll ultimately collect on some of these. Important to note that the information we put in the press release this morning was on a cash basis. It really doesn't reflect any of that. And so anything we see in the second quarter and more flexibility will be a good thing for us. And it's also important to note that the commercial side of our business, you mentioned straight-lining the lease of the commercial side of our business, is much, much smaller, 1.5% of our revenues. And for those ones, we are taking a month and pushing it to the end of the lease like many of the commercial operators are and spreading that over the life of the lease. But for multifamily residents, we're doing a normal collection process with a -- ultimately have a bad debt reserve when we release second quarter earnings.

[Neil Malkin, analyst]

Okay. I guess what I'm trying to get at is, if you have, let's say, 2% delinquency, you wouldn't report that as like sort of 98% of rent collected. You'd reported it as 100% and then just discount it by whatever you think the uncollectible bad debt is. Is that correct?

[Albert M. Campbell, executive]

That's exactly right. I mean, so what we're showing you is -- what I'm -- the point I'm trying to make is the information we're showing in the release on April and on May is just gross, not collected rent at this point. 2.3% of our rent and fees together is uncollected, but from that, we have 1.3%, which is we have promises to pay, which we feel like we will collect the vast majority of and put us in a much better position. So when we report our earnings for the second quarter, we will have likely reported revenue for the largest part of that.

[Operator]

Our next question is from Austin Wurschmidt with KeyBanc.

[Austin Wurschmidt, analyst]

Just curious, Brad or Eric, the calls that you've received from developers looking for capital have been related to new starts, related projects that are under construction or projects that are in lease-up. And then can you give us a sense of where you think terms are for financing today, best guess?

[Brad Hill, executive]

Well, Austin, this is Brad. The calls we're getting so far are for new starts. I mean I think it's too early really to start getting calls for deals that are in lease-up, but as I indicated in my comments, I do think that there's going to be some pressure on the new lease-up segment, and we will start getting those calls. I don't know when that's going to materialize. We don't know when that's going to be. But the calls we're getting right now are from developers who thought they had their debt and equity lined up. And they're 2 months out from starting construction, and now they have no debt, and they have no equity. So those are the calls we're getting right now.

And as I said, we're getting a lot of those calls because we looked at a lot of those deals originally and may be another equity source, got the deal for whatever reason. But it's too early, we think, to really kick off any of those deals. We need a little bit more time to let kind of the clouds settle around us.

In terms of debt terms, they're certainly worse than they were before COVID-19 hit. I think, certainly, LTVs are down really across the board. There's additional requirements that are going to affect the proceeds that borrowers are going to get. They're looking at trailing 3 months operations, which are going to be impacted by what's going on around us, some more so than others. So that's going to affect the proceeds that folks are getting and should, as I said, lead to additional opportunities for us on the buy side. But there are other -- there are additional requirements that agencies are putting on buyers that are hampering their ability to get their max proceeds right now. But the spreads have come down from the end of March, so they're not as bad as they have been. They're getting somewhat better.

[Austin Wurschmidt, analyst]

So as you think about underwriting costs today, just curious, where do you think costs are today versus pre-COVID?

[Brad Hill, executive]

Well, contractors are not quick to lower their pricing. I think it's going to still take some time before we see a reduction -- potential reduction in price kind of come through the system. I mean, from a sub standpoint, they still have jobs that they're working on right now. I think, certainly, the new deals that they're pricing will start to trend down, but I think that's going to be a few months before you start seeing some cost reductions come through the system. It's not going to be immediate.

[Austin Wurschmidt, analyst]

That's helpful. And then as it relates to operations, you guys had previously focused on pushing rate at the risk of maybe losing some occupancy. And as you alluded to, I believe, occupancy is going to become more of a focus. Do you think there's room or enough demand to reramp occupancy in the coming months?

[Thomas L. Grimes, executive]

What we've seen with -- we made that shift pretty quickly. We saw a falloff in move-ins in late March. That has recovered, and we have -- our demand metrics are pretty good right now, right? Austin, what I'd say -- but I would say we're treading water at this point. We've got enough demand to hold on. And then it really just depends on how the economy shakes out, and that'll be -- that'll vary across the Sunbelt based on locations. But we will be looking at prioritizing occupancy. Exposure has flattened a bit, which is encouraging as we head into the higher exposure time of the year, so -- and cautiously optimistic on our ability to hold the line.

[Operator]

We will take our next question from Nick Joseph with Citi.

[Nicholas Joseph, analyst]

Maybe just following up on Austin's question there. Just specific to renewals, I mean we've seen NMHC and some of your public peers come out and say they're not going to have any rate increases on renewals, but looks like you were able to continue to push through with pretty healthy renewals in April. So first of all, how do you think about that relative to those recommendations? And then second of all, do you have a sense of what your private competition is doing in terms of renewals within your markets?

[H. Bolton, executive]

Well, Nick, this is Eric. Again, what I would say is that we are absolutely committed to helping those people that need help that have been financially impacted by this pandemic, and we really believe that the best way to help those people who need help is to expect the other aspects of our operation to perform as they should or as expected to the extent possible. And so what we elected to do is take this a month at a time. Conditions have changed radically in the last 60 days, and going out and making a 90-day commitment and taking kind of a shotgun approach and applying it to everybody just seemed to be -- to us to be not the right way to go. And in the end, as I say, we don't think it allows us to be as helpful as we could be to everybody that really does need help, so we elected to take more of a rifle shot approach and take a more measured approach on kind of a month-to-month basis.

The other thing I would throw in that I think is important to keep in mind is that we have a lot of confidence in our pricing platform and our pricing system. If you -- obviously, you recall. I mean we have the luxury of having been through a couple of pretty big mergers in the last few years, companies that were operating on the same system that we were operating on, in the same markets that we were operating on. We've learned a lot through that process. And we have a very active, very hands-on approach to how we think about pricing, and therefore, we think that, that system and all the input variables that drive those recommendations ought to be allowed to play out. And if our system suggests that all the conditions that we're looking at today support the ability to put through some level of rent increase, we're going to allow the system to do its thing.

Now having said that, in this environment, we're also very quick to provide ample space for our on-site folks to negotiate. We do not, in this environment, want to lose people that we don't really need to from a perspective relating to a rent increase. So we do negotiate at some level. But I think when you put all that together, it sort of drives the result that we have, and that's really how we think about it.

[Nicholas Joseph, analyst]

And then just the other part was on what your private competition is doing. Do you have a sense that they're also increasing renewals?

[H. Bolton, executive]

Be honest with you, I don't know what the private guys are doing. We've not heard any comments. I mean we monitor our comps very, very actively as part of our revenue management practices, and I'm certain, in some cases, there are some that are not putting through increases and some are. But it all factors into our pricing dynamic and market factors.

[Thomas L. Grimes, executive]

Yes. And Nick, I would just say, based on industry conversation here and there with private peers, it's the mix that Eric outlines.

[Operator]

And our next question is from Nick Yulico with Scotiabank.

[Sumit Sharma, analyst]

This is Sumit in for Nick. I guess focusing on expenses a bit. What drivers do you have to keep the costs at Q1 levels? Because I know you mentioned that you're looking at expense growth, which is still in line with -- both in line with prior guidance or prior trends. And you mentioned an increase in marketing spend, while some of your peers are actually reporting the opposite. So I just wanted to get a sense of how should we think about your expense growth for this year versus what you had stated earlier in the year?

[Albert M. Campbell, executive]

This is Al. I'll give you a few comments on that, and Tom may want to give something on the marketing as well. But for the first quarter, as you mentioned, I think the 2 areas, the biggest increase of all was really -- that made the biggest impact was property taxes is over 1/3 of our costs. And so as we talked about going into the year, that played out as expected. It grew 3.5%. Marketing also grew about 11% as you saw in the release, almost 12%. But as a dollar value, it's much smaller, the overall expense structure, so really had less of an overall impact. And Tom can talk about what our plans are there.

As we look at the rest of the year, as we talked about a little bit in the comments, we expect -- hard to know exactly what's going to happen this year certainly, but expenses are -- would -- we would expect to have less of an impact certainly than revenues. And largely, we expect our costs to be close to what we projected at the beginning of the year. The 2 major items are personnel and taxes in terms of size, and we don't see any reason right now that they would be significantly out of line of what our expectations were. And we also expect some of our repair and maintenance costs or our turn costs, if you would, maybe to be favorable because fewer people will leave us. And then offsetting that, we mentioned a bit in the comments was the marketing costs because of the competitive environment and maybe a little bit of utilities costs because people are with us and they're sheltering at home and those kind of things. But Tom, do you have anything to add?

[Thomas L. Grimes, executive]

Yes. I would just add on the operating side the opportunities. As Al touched on R&M, we'll probably see some relief as turnover lowers. And then as our self-touring platform gets into place and gets moving, we really understand what implications that has for efficiency, there may be some opportunity there. Marketing, as Al mentioned, is a lower dollar amount, but we're going to be competitive in the paid search area. It's probably never more important to be active in that area, and I don't see an opportunity for savings in that area.

[Operator]

Our next question is from Hardik Goel with Zelman & Associates.

[Hardik Goel, analyst]

As we think about the full year on the pricing power front, you guys mentioned sending out renewals around the 4% range. So would that mean that those are the renewals that will get booked in May and June? And is there a negotiation that happens where you don't actually book the 4%, you book something lower? Or is that a good bogey for what May and June renewals will look like?

[Thomas L. Grimes, executive]

Yes. We do, do some negotiation as that comes out, but it's generally between 50 and 80 basis points.

[Hardik Goel, analyst]

Got it. And just on the new lease front, what is the prospect on that becoming a positive number? How long does that take? Is that something that can snap back quickly in -- by 4Q? And I know it's really difficult because we don't know how the economy will recover. But right now we're seeing some negative numbers, and I'm just wondering how to think about that.

[Thomas L. Grimes, executive]

Well, no, it is -- it can be fairly responsive. I mean new lease rate is sensitive. So if the economy recovers quickly, that will shift to positive quite quickly, especially if it happens over the summer months if the economy is slower to get going, but that will stay negative for a period of time. And it's really just a function of the economy, and I don't have the goggles to see exactly how that's going to play out right now. But it is sensitive, and if it comes back, we will see it and we will adjust.

[Hardik Goel, analyst]

And lastly, if you'll indulge me for just one more, are you offering flexible lease terms on renewals? Or are you being careful about how your rent roll gets impacted? People want to move to a 3-month lease or 2-month lease. What are the options?

[Thomas L. Grimes, executive]

The options are multiple. As Eric mentioned, we've got a pretty sophisticated approach to this, and we price our units to really guide folks to the right term that fits with our lease expiration guideline. So it was more beneficial for them to rent in a month, where we have capacity in it, and it is more expensive to rent in a month that has less capacity. And they have quite a few options at renewal. And they can sort of -- they can decide what's best for them, and that generally guides to what's best for us.

[Operator]

Next questions is from John Guinee with Stifel.

[John Guinee, analyst]

Great. I'm just looking at your development page. Have you -- it might be too early. But have you re-underwritten your expected yield on costs and adjusting for expected, maybe a modest decrease in asking rents during lease-up?

[Brad Hill, executive]

Yes. This is Brad, John. No. At this point, we've not adjusted anything on our development underwriting at the moment. I think it's really just too early to tell on that frankly. The average period of stabilization for our deals is a couple of years out. So we've got some time on our development platform, really, to see how, as Tom said, the economy goes, and that's really what's going to affect our yields on those deals. So at this point, we've not adjusted anything there, and we think that our original underwriting is still intact given the amount of time that we have on these deals before we start hitting our lease-up periods.

[John Guinee, analyst]

So thinking about, say, The Greene in Greenville, South Carolina or Cooper Ridge (sic) [ Copper Ridge ] in Fort Worth, you're still essentially -- the same asking rents exist today that existed 3 months ago.

[Brad Hill, executive]

We're in line on those 2 properties, but I think it is worth monitoring.

[Operator]

Our next question comes from Rich Anderson with SMBC.

[Richard Anderson, analyst]

So I think, Eric, you said that in April -- or maybe it was Tom -- in April that your leasing activity is up 6% year-over-year. Did I hear that correctly?

[Thomas L. Grimes, executive]

Not for April, Rich. This is Tom. It -- but for the last couple of weeks, it is now -- our leasing is about 6% over prior year's levels. Yes but not for the entire month.

[Richard Anderson, analyst]

Okay. So how the heck is that happening? Sorry to put it that way. But I mean you're obviously operating with much fewer resources. How do you explain that?

[Thomas L. Grimes, executive]

It's a change in our behavior, and I think it's a change in our customers' behavior. And I suspected there's a little bit of a recovery where it was down close to 50% in late March. So Rich, we've really shifted the entire -- our offices are staffed but have been closed to the public in terms of visitors. But our teams are there to facilitate both virtual and self-tours, and that -- there has been incredible response to that. Our conversion ratios on the self-tours are very, very good as you would expect, but it's really just changing from probably a customer preference and gearing towards guided tours first to virtual and self-tours first, and those have gone quite well.

[Richard Anderson, analyst]

Has the fact that you've had a lot more tenant retention also aided that number?

[Thomas L. Grimes, executive]

I mean, those 2 numbers are standalone. That's helped us hold the line. Our leasing is up. Then move-ins will come up, and we've got a chance to sort of stabilize from there. But in the sense of, if fewer people give notice, we have fewer to lease, that is a good thing. But the 6% increase in leasing is really just on volume of new leases and is not related to the amount of turnover.

[Richard Anderson, analyst]

Okay. In terms of the sending out renewals at, I think it was 4% for future, so it's this month and next, how has been the response to that? I mean I imagine, in this environment, your tenants are expecting some handouts or what have you. Has there been some eye rolling? Or is it -- it's sort of like, okay, we get it type of response. I'm just curious, practically speaking, how is that...

[Thomas L. Grimes, executive]

Yes. Well, I mean, first, and as Eric outlined in some earlier comments, we're working really hard to identify who's affected by COVID. We're seeking them out. We are working with them, and we are doing everything we can to support them. So that group is being taken care of in that manner. On the response to the renewal offers in general, for May, June and early look in July, our accept rates are running 3.5 to 4 percentage points higher than this time last year. And so the response is, frankly, pretty good. Again, we are going directly to those folks affected by COVID by asking -- trying to identify and working with them. And then the other folks are responding to the offers quite well.

[Richard Anderson, analyst]

Okay. Great. In terms of the commentary around a lot of your states starting the process of opening up and getting the economy moving, are you -- but there are a lot of businesses behind that, that are going by their own rules and perhaps delaying out of abundance of caution or whatever. How will you as a company in that region respond? Will you just follow the guidelines of the states? Or do you have your own kind of more conservative approach to opening up, so to speak, your businesses?

[Thomas L. Grimes, executive]

Yes. We are -- it is different by market what is accepted and what is guided, and we are adjusting by market. Most of our leasing offices are opening this week for guided tours under sort of strict guidelines, social distancing, crowd kind of control, if you will, belt and stanchion, those kind of items. And then the amenities are really following the local guidance, and I would expect amenities to be opened by the end of May in most of the Sunbelt locations.

[Richard Anderson, analyst]

Okay. Last question for me. And this promise to pay sort of payment plan, 1.3% in April, how formalized is that? I mean are they signing something and that gives -- lends itself to perhaps more certainty? Or is this sort of like, I don't know, like a pinky swear type of thing?

[Thomas L. Grimes, executive]

No, no.

[H. Bolton, executive]

It's an agreement. It's an amendment to the lease. It's an executed legal document.

[Thomas L. Grimes, executive]

Yes.

[Operator]

Going next to Zach Silverberg with Mizuho.

[Zachary Silverberg, analyst]

Just a follow-up on Rich's. How high do you think retention can go? And how much benefit do you think that can have to the revenue and expense side here?

[Thomas L. Grimes, executive]

I mean there's what I hope for and what I know, and it is difficult to estimate. We're in a time period where rules that were normal have changed, and we've just got to wait and...

[H. Bolton, executive]

Well -- and I think what you have to recognize is when you start thinking about the reasons that people leave us, the #1 reason people leave us is because they make a decision to go buy a home. And we certainly think that, that reason is less of a pressure point today for all the sort of broad economic worries that are out there. That's unlikely to be ramping up anytime soon. But another big reason, and frankly, what has been slightly ahead of even people moving to buy a home lately, has been because of a change in their job, employment status change. And I think that, that continues to probably be the variable that will be the most impactful in terms of changing turnover behavior. And again, given the uncertainty in the economy, broadly right now, I don't think there's going to be a lot of job hopping going around. I mean, certainly, those that have jobs are probably glad to have them and going to hold on to them.

The third biggest reason people leave us is because they didn't want to pay the rent increase. And frankly, what we've been doing is backing off on that as we've been talking about here. So I think when you start to look at all the reasons behind it, it -- we're optimistic that we're going to continue to see turnovers stay fairly low for some time. I think we're going to have to see the economy really start to pick up before we begin to see turnover return back to where it was. And how low it goes or how high retention goes or how low turnover goes is kind of hard to say right now.

[Thomas L. Grimes, executive]

To add a data point to Eric's commentary, April turnover was down 8%. That was driven by a 13% decrease in job transfer.

[Zachary Silverberg, analyst]

Got it. Got it. I appreciate the color. And just one more. Can you guys speak to any -- or have you seen any benefits from your investments in technology in either the operations or leasing side? And then does this sort of prove any future ramp-up in investment or underwriting?

[Thomas L. Grimes, executive]

Yes. No, I mean the overhaul platform has performed quite well, and we're thrilled with that progress. I think the place that it points to, though, the most is continued self-touring and automation on the sales side of things. Our teams are handling that process quite well, and we would expect that to continue to develop at a good clip.

[Operator]

We'll go next to John Pawlowski with Green Street Advisors.

[John Pawlowski, analyst]

Al, do you have any early reads on how municipalities are going to be approaching property tax assessments the next 12 to 24 months? And are they going to back off? Or are they just -- are they going to keep coming for their money?

[Albert M. Campbell, executive]

No, it's a great question, John. We spent a lot of time trying to try to dig into that, and what we're seeing right now is it's just too early to tell. We are seeing, obviously, for us, the main states are Texas, Florida and Georgia. What we're seeing right now is most -- some of the states, Texas most prominently, is pointing back to the assessments for taxes are set at the beginning of the year, January 1, and the pandemic, most people are saying right now, doesn't apply for a change in that. So for 2020, they're going to stick to those plans, and any changes will roll through 2021. And we certainly expect there will be some pressure on that from people. There will also be pressure from states and localities trying to get their budgets balanced. So I think what we would say is 2020 is probably not going to change much from what our early expectations are. But as we roll into 2021, if economic impact continues to persist and revenues continue to climb, you'll likely see some impact.

And what we did see in the last downturn, we went back and looked, was in the states that are biggest, Florida, Texas, Georgia, we did see, ultimately, those guys gave pretty good reprieve, but it took 6 months to a year. It took the next cycle for them to do that. And so long story short, I think that's what we'll see this time.

[John Pawlowski, analyst]

Got it. That makes sense. And then last one for me. I'm trying to get a sense for what your guys' pricing power or cash collections would look like in a world without this fiscal stimulus cranking. And so any sense from late March or early April -- I know it's very tough to extrapolate weekly data points. But any sense for any guesses of what April occupancy or cash collections would have looked like without the unemployment insurance benefits hitting and some other fiscal stimulus measures?

[H. Bolton, executive]

No, I think -- John, this is Eric. I think what you have to recognize is that, frankly, a lot of our region of the country was slower to shut down than what you see happening in a lot of other areas of the country, and it's also showing signs of opening up faster. So we didn't really see the unemployment claims starting to trend up until really well into April and across a number of our states. And when you look at the kind of weight our performance of -- of our portfolio of states, if you will, we continue to run at unemployment claims as a percentage of the employment base that's at percentages lower than national average. And so I think that while certainly the unemployment claims ramped up starting in sort of mid-April, over the last part of April has been helpful, I think that -- we're -- we don't think that, that factor has been a huge tailwind for us. Certainly, it has helped.

But the other thing to keep in mind is that average rent to income of our portfolio at 20%, it's a pretty affordable region of the country to live in, and dollar goes a lot further in our region of the country. And so I think that -- we think that while certainly there's been some benefit from some of these federal assistance programs, I would suggest that it's not a huge tailwind for us.

[Operator]

We'll go next to Steve Brunner with RBC Capital Markets.

[Steven Charles Brunner, analyst]

Just a quick question about some of the redevelopment you're doing. In the earnings document, you call out the 10 properties you're currently working on. 5 of which you're -- looks like you're going through with, but 5 -- the other 5, you're putting on hold it looks like. Are there any indications or any sort of benchmarks you guys are looking for, for when you're going to restart or start working on those 5 properties? Or conversely, any indicators which would sort of incentivize you to push those out until next year?

[Thomas L. Grimes, executive]

Yes. No, I think it's a total of 10 properties and actually be working forward with 8 of those where we feel like the price-to-value gap we can still narrow in those markets. Even with pressure on the newer stuff in the high end, they're in great locations where we're a price/value alternative, and we can still make a difference. It will also -- they'll be delivering and finishing in the late fourth quarter, early first quarter of next year. We feel good about how they're coming. That pipeline of opportunity of, sort of, let's say, late 2000, early -- or late 1990s, early 2000 product that's extremely well positioned, we feel like that pipeline goes well beyond these 10 and we will be underwriting and looking for the next round as we move into 2021.

[Steven Charles Brunner, analyst]

So just to confirm, it looks like you're pretty much going to go through with 8 out of those 10, even worst-case scenario this year, and those other 2, I guess, you're just waiting to be opportunistic with what's going on in the...

[Thomas L. Grimes, executive]

Yes. We're just frozen on those 2. They'll likely tee up, honestly, in early 2021.

[Operator]

We'll go next to Rick Skidmore with Goldman Sachs.

[Richard Skidmore, analyst]

Just a couple of questions. First, just on the demand trends in late April and May and with your markets starting to open, are you seeing anything that would suggest migration out of urban to more suburban relative to the COVID pandemic?

[Thomas L. Grimes, executive]

I think there is anecdotal evidence for that, and we would expect that. But with such an early pickup in where our leasing is coming from, it is -- it's difficult to get that read. We'll have a better look at that in shifts as we finish the second quarter and the busy leasing season.

[Richard Skidmore, analyst]

Got it. Understood. And then just following up on Texas specifically. Are you seeing anything with regards to what's happening in the energy patch and how it might impact your markets in Texas? It looks like first quarter was actually pretty strong for you in Texas. But anything new on the margin in April and May?

[Thomas L. Grimes, executive]

We're monitoring Houston. That had a little bit higher level of requests for COVID-affected jobs there, and we're watching oil and gas there. And that is a bit of a worry for us, but Austin and Dallas are hanging in there with the portfolio.

[Operator]

And we'll go next to a follow-up from Hardik Goel with Zelman.

[Hardik Goel, analyst]

Just really quick. Can you just give us more color on the way traffic is calculated? Does it include the online traffic and the virtual tour traffic? And as a comparison, what would traffic be for the last couple of weeks with just the physical traffic being counted?

[Thomas L. Grimes, executive]

Yes. No, it's moved around a little bit. So what we have is leads, which is an expressed interest. We have traffic or visits, which is actually a physical visit to the property, and then we have leases, which is someone who signed an application. There's been a lot of moving around in that. So what I would tell you is leads and move-ins dipped as I outlined in late March, and leads and move-ins have grown -- have recovered to above 6% of normal levels. Traffic, which is visits to the property, has remained relatively low because more of our leases are being executed by virtual or self-touring, primarily virtual. So our closing ratio, which we used to think of as a method of visits to lease, we thought 20% is good. We're running 56% to 70% on that because if you're coming out to see us at this point, there's a very good chance that you will close. So I think we're kind of monitoring the lead side of it, and we're monitoring are we actually getting leases. Traffic or visits is a number that has less meaning today than it did 6 months ago.

[H. Bolton, executive]

We will certainly expect -- now that our leasing offices are opening back up the doors this week, we expect on-site visits to really start to ramp up. They've been nonexistent for the last few weeks because the doors were locked, and we were doing it all virtual. But as the doors are opening up this week, we think the traffic levels will start to pick up.

[Operator]

And it does appear we have no further questions. I'll return the floor to our presenters for closing remarks.

[H. Bolton, executive]

Well, we appreciate everyone joining us, and I'm sure we'll be talking to a number of you virtually for our upcoming June meetings with NAREIT. So thank you very much.

[Operator]

And this will conclude today's program. Thanks for your participation. You may now disconnect.