UDR Inc

NYSE:UDR

Earnings Call Transcript 2021-Q2

[Operator]

Greetings, and welcome to UDR's Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only. A question-and-answer session will follow the presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Director of Investor Relations, Trent Trujillo. Thank you, Mr. Trujillo. You may begin.

[Trent Trujillo, Director, IR]

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 during this call, which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in 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.

[Tom Toomey, Chairman & CEO]

Thank you, Trent, and welcome to UDR's Second Quarter 2021 Conference Call. On the call with me today are, Mike Lacy, Senior Vice President of Operations; and Joe Fisher, Chief Financial Officer, who will discuss our results. Senior Officers, Harry Alcock; Chris Van Ens will also be available during the Q&A portion of the call.

Our second quarter results were at the high end of our guidance expectations. In addition, our third guidance raise this year was driven by rapidly improving multifamily fundamentals across all our markets, combined with our competitive advantages, which include our best-in-class operating platform, our market selection and capital allocation acumen and a variety of additional value creation mechanisms. Mike and Joe will further address these topics in their prepared remarks.

During our first quarter earnings call, just over 90 days ago, we laid out why we thought a strong broad-based multifamily recovery may be imminent. Since then, our upside scenario has largely played out. From a macro perspective, additional fiscal stimulus, improved vaccination rates, normalized business conditions and a return to office have driven jobs and wage growth. We have actively captured this incremental demand as evidenced by quarter end occupancy of 97.5%, a new high watermark for the Company.

Ongoing regulatory restrictions continue to hamper our ability to fully operate our business, but these are now beginning to sunset at an accelerating rate. As this occurs, we anticipate recapturing temporarily lost income from limits on renewal rate growth, charged fees, collections and operating initiatives that were artificially constrained during the pandemic.

Moving on. Our innovative next-generation operating platform continues to drive a wholesale change in how we approach our customers and run our business. Since the platform initially came online in mid-2018. Its self-service attributes have allowed us to gain significant cost efficiencies by reducing our on-site staffing by nearly 40%.

Our slim down workforce is better compensated, has more opportunities for career advancement and can more effectively concentrate their efforts on resident satisfaction and profitability as well as new opportunities for UDR. I count this as a win for our associates, our residents and the Company and certainly our stakeholders. To everyone in the field and at corporate, keep up the good work, you're doing a great job. I look to more progress in our future.

In closing, I remain highly confident in the strategic direction of our company and our team's ability to execute on the opportunities ahead of us. We have a demonstrated ability to generate strong results over time throughout our diversified portfolio. In particular, a better core operations, repeatable revenue-enhancing initiatives, our innovative next-generation operating platform and certainly our accretive capital allocation.

This is driven average earnings growth in seven of the last nine years and total shareholder return that consistently outperforms widely recognized industry benchmarks. 2021 continues to shape up well and our actions and approach to capitalizing on the ongoing recovery are poised to set us up for continued growth in the years ahead.

With that, I will turn the call over to Mike.

[Mike Lacy, SVP, Operations]

The pace of recovery in our business since the depths of COVID has been incredible and nearly the inverse of what we experienced a year ago. While we expected a positive inflection during the second quarter for our portfolio, in aggregate, the rapid rebound in multifamily demand and core operating trends has surpassed our expectations and led us to raise guidance for a third time in approximately 90 days.

First, let me take you through our second quarter results with a focus on key operating trends. Second quarter results came in at the high end of our guidance range with occupancy reaching all-time highs of 97.5% in June, effective blended lease rate growth accelerating 580 basis points sequentially versus the first quarter, and same-store revenue growth improving 180 basis points sequentially.

Strong underlying demand has persisted into July with market rents above year ago levels in all UDR markets. Current market rent growth is a forward-looking indicator of leases to be signed, and this strength gives us confidence that 2021 and 2022 results will continue to benefit from the ongoing recovery. In terms of demand, same-store traffic during the second quarter was well above the comparable 2020 and 2019 periods. This was driven by two primary factors.

First, our self-guided tour capabilities have allowed us to accommodate higher levels of traffic; and second, a continued migration by residents back to harder hit urban areas, which is best evidenced by sequential occupancy gain of greater than 200 basis points in both New York and San Francisco during the quarter. Our 30-day occupancy, which assumes no new leases are signed over the next 30 days currently averages 97% portfolio-wide and compares favorably to the 96% three months ago.

Our elevated occupancy has translated into stronger pricing power across all our markets. As such, we are willing to accept somewhat higher near-term turnover to lock in higher rents and further strengthen our future rent roll. During the quarter, sequential improvements in our blended lease rate growth was widespread and averaged 580 basis points higher versus the first quarter.

Currently, our weighted average loss to lease is approximately 10% on a gross basis and higher on an effective basis. This is a material improvement versus just a few months ago when our average loss to lease was hovering near 2% and a complete reversal versus the fourth quarter of 2020 when our gain to lease reached 6%. August and September renewals have averaged 7% thus far or roughly double what we achieved in the second quarter.

For the third quarter, we are forecasting effective blended lease rate growth accelerating to the mid- to high single digits, driven by ongoing strong renewals and effective new lease rate growth portfolio-wide. Additionally, concession pressures continue to abate. Our strategy through the pandemic has been to maintain gross rents and offer upfront concessions to better preserve our rent roll for the anticipated rebound.

At peak concession levels during the fourth quarter of 2020, we granted 3.5 to four weeks of concessions on average on new leases. That declined to approximately 2.5 weeks in April and less than half a week on average today. As each week of concession equals to roughly 2% effective rate growth, we have effectively improved our since late 2020. On top of market, I expect this dynamic to continue throughout the third quarter when we re-priced about 1/3 of our portfolio.

Moving on. As we discussed on our first quarter call, emergency regulatory restrictions reduced our quarterly total NOI by approximately $8 million to $10 million or $0.03 per share at the highest COVID. Most of this shortfall came through lower collections with a minority and reduced other income and restrictions on renewal rate growth. This is now turning around.

First, regarding collections, we've had success being a first mover and working with our residents to access state and local rental assistance programs and obtained reimbursement on accumulated background and prospective rent. Year-to-date, collections from these programs have totaled approximately $10.4 million, and this is prior to California, the state of Washington and New York contributing much due to their late starts or delays. We currently have another $12 million of applications under review and are optimistic that we can continue to recover delinquent balances.

And second, growth has resumed in certain fee income streams. For example, demand for short-term furnished rentals is back to 2019 levels, and we expect our common area rentals to return to 75% of 2019 levels during the third quarter. Fee income now totals approximately $60 million in revenue when annualized, a number similar to 2019 levels. However, applying a standard growth rate of 3% 2019 fee income would imply a 2021 estimate that should be closer to $65 million. As such, we believe there is additional fee upside as regulatory restrictions continue to sunset across our portfolio.

Moving on. Our next-generation operating Platform version 1.0 has now been fully rolled out to 18 of our 21 markets and over 85% of our roughly 55,000 apartment homes. Our residents have embraced our shift to a self-service model as evidenced by approximately 97% of year-to-date tours being self-guided or touch-less.

On-site UDR associates now spend five minutes on average with a prospective resident during a property tour versus 55 minutes previously. The widespread introduction of automated self-touring and easy-to-use resident interfaces across our communities has driven average headcount reductions of approximately 40% compared to early 2018 staffing levels, primarily through natural attrition.

Our approach to staffing and the adoption of various technologies establishes a permanent reduction in our cost structure, that helps to neutralize wage inflation and allows our employees to manage our communities more efficiently. To give some hard numbers, at the beginning of 2018, we had one associate for every 31 apartment homes including corporate employees.

Today, we have one associate for every 42 apartment homes and see a pass to achieving one associate for every 44 homes managed in the coming quarters. Importantly, these achievements have come in tandem with higher customer service as evidenced by the 24% improvement in our resident satisfaction scores since the formal implementation of Platform 1.0, three years ago. The efficiencies we can realize through our operating expertise and platform are also central to our acquisition strategy.

On the revenue side, the implementation of advanced revenue management capabilities, better-than-expected market rent growth in certain markets, and our platform's ability to accommodate more prospective residents on tours have resulted in occupancy and rate growth ahead of our underwriting expectations for our 2020 and 2021 acquisitions. This is especially true for the more than 2,500 homes we have acquired in Florida and Texas since the start of 2020.

Our portfolio strategy approach helped to identify attractive growth markets, and I credit Harry and our transaction team for finding communities that optimized our platform capabilities. Proximity to legacy UDR assets is key to maximizing the benefits our platform provides and realizing outsized yield expansion from our multiple value creation drivers.

For example, at the six communities that we have acquired since the fourth quarter of 2020, on-site staffing has been reduced by 30% on average and is tracking to a pro forma 45% reduction on average, while still maintaining a high level of service. In total, we believe our operations first approach is a competitive advantage that should continue to drive strong growth in our legacy portfolio and acquired properties.

Finally, I want to thank my colleagues in the field and at corporate for their dedication to the platform vision. UDR has a culture that empowers our associates and we continue to evolve based on your feedback. Through the team's collective efforts, we are well on track to achieving our original incremental NOI growth target of $15 million to $20 million by 2022 from Platform 1.0 initiatives.

As we continue to improve and refine has already been rolled out, I am confident in our ability to generate an additional $10 million to $15 million in run rate NOI by the mid-2020s from the next round of platform-related ideas.

In particular, initiatives from Platform 1.5 are designed to improve resident satisfaction, increased retention, reduce days vacant and create a better pricing model that is driven by proprietary, data analytics and heat maps.

To my UDR associates listening to this call, you have done a great job of fostering innovation, and I'm excited to work with you as we continue to enhance our platform. Keep up the great results.

And now, I'd like to turn the call over to Joe.

[Joe Fisher, CFO]

Thank you, Mike. The topics I will cover today include our second quarter results and our improved outlook for full year 2021 of recent transactions and capital markets activity and a balance sheet and liquidity update.

Our second quarter FFO as adjusted per share of $0.49 achieved the high end of our previously provided guidance range and was supported by same-store revenue growth at the high end of our expectations. For the third quarter, our FFOA per share guidance range is $0.49 to $0.51. The $0.01 per share sequential increase at the midpoint is driven by our expectation for positive sequential same-store NOI growth and accretion from recent capital allocation activities.

Our year-to-date results when combined with our expectation for continued sequential improvement throughout the year drove the increases in our full year 2021 FFOA and same-store guidance range cited in our release. We now anticipate full year $1.97 to $2.01 with the midpoint representing a $0.02 increase from our prior guidance. This increase is driven by a $0.02 benefit from an 88 basis point midpoint improvement in same-store NOI growth, a $0.01 benefit from accretive transaction activity and lower interest expense, offset by $0.01 from increased G&A expense.

For same-store guidance, we are now forecasting full year 2021 revenue growth of negative 0.25% to positive 0.75% with concessions on a cash basis and negative 2.25% to negative 1.25% with concessions on a straight-line basis. This difference is primarily due to the residual impact of concessions amortizing during 2021 that were granted in 2020.

As Mike discussed, we are encouraged by the positive trajectory and sustainability of our operating growth, but a portion of the upside we are currently realizing will likely manifest in 2022 as opposed to this year. Additional guidance details including sources and uses expectations, are available on Attachment 15 and 16D of our supplement.

Next, transactions update. During the quarter, we accretively acquired three communities and one land site for a total of $406 million. Subsequent to quarter end, we completed one acquisition and are under contract to acquire two additional communities for a total of $410 million. All acquisitions are in markets that are protective analytics framework identified is desirable, are located proximate to other UDR communities and have been match-funded with accretively priced sources.

Please refer to yesterday's press release for additional details on recent transactions. Should these transactions all close as expected, our year-to-date 2021 acquisition activity will total approximately $900 million. There are two takeaways to be aware of when considering our recent acquisitional growth.

First, we believe we can generate outsized deals expansion at these communities in the coming years through our multiple value creation drivers. These include improving core operations, implementing legacy operating initiatives, overlaying our next-generation operating platform, driving proximity centric efficiencies and renovating apartment homes in common areas. We have already successfully used this playbook on our nearly $1 billion in third-party acquisitions completed in 2019 and 2020.

Second, our willingness to source accretive capital and put it to work through the first seven months of 2021 has proven as asset values have generally increased 5% to 10% on average over the past 60 to 90 days. We continue to look for accretive opportunities to deploy the previously raised equity into, which will grow our earnings per share and create value for our stakeholders.

Moving on. Our investment-grade balance sheet remains liquid and fully capable of funding our capital needs. Some highlights include. First, during the quarter, we entered into forward sale agreements for approximately 8.7 million shares of common stock for a combined $425 million of future expected proceeds. We anticipate using these funds on accretive acquisitions, DCP investments, and land site opportunities, which we expect to close in the coming quarters.

Second, we have only $640 million of consolidated debt or less than 3% of enterprise value scheduled to mature through 2025, after excluding amounts on our credit facilities. Our proactive approach to managing our balance sheet has resulted in the best three-year liquidity outlook in the sector, the lowest weighted average interest rate amongst the multifamily peer group at 2.7% and a weighted average years to maturity expanded to 7.5 years from seven years a year ago.

Last, as of June 30, our liquidity totaled $1.5 billion as measured by our cash and net credit facility capacity and including the future expected proceeds from the settlement of our forward equity sale agreements. Our financial leverage was 27% on enterprise value, inclusive of joint ventures, and our net debt-to-EBITDAre was 7.4x on a consolidated basis, but would be 6.8x if approximately $400 million of outstanding forward equity agreements were settled during the quarter to fully equitize acquisitions that were recently closed.

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 options to create value.

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

[Operator]

Thank you. And at this time, we will be conducting our question-and-answer session. [Operator Instructions] Our first question comes from Nick Joseph with Citi. Please state your question.

[Nick Joseph, Citi]

Maybe just sort of on the federal rent relief program, I think you mentioned $12 million in applications right now. How much is guidance assuming that you collect for the remainder of this year?

[Joe Fisher, CFO]

Nick, it's Joe. I appreciate the question. I'd say first off in terms of how we approach this because we are pretty proud of the efforts that we put for so far. So when this came out in the first two stimulus packages, we looked at that and saw really a win-win for both the resident and the investor base in terms of been able to get full payments to get some of these residents off their past due rents as well as, of course, get cash under the investor.

So approach just like we do in the initiative, we have platform, parking, common area rentals, et cetera, and through a team behind it and went after it pretty aggressively. So very pleased with the $10 million we've gotten to date. Actually, I just got an e-mail again this morning another $600,000 in from California overnight, so continue to see momentum on that front.

In terms of the opportunity set and kind of how it plays in the guidance, at point, we have $12 million out there in application. Team continues to work with residents on trying to get more and more of them signed up as they have for the last several months. So roughly half of our AR balance right now is an application.

In addition, above and beyond that, we do have $20 million approximately related to former residents that's out there from the COVID-affected period. And effectively, half of that $10 million or so is in California and Washington, who have recently announced plans to potentially start assisting former residents with being able to get off of their past due rents from when they moved out with us. So, we have a team focused on that as well.

So in terms of impacts on guidance, it's a little bit of science with this. We are picking up about $700,000 a week and expect that trend to continue. So in terms of what we factored in the back half, we do expect collections to start picking up. We've eventually gotten to around 98% on past quarters. We think that picks up into the mid-98s as we get into the back half here. And then hopefully, as we get into the next part of next year, we see that continue to improve as kind of some of the regulatory restrictions come off and we continue the efforts with the past due residents. So hopefully, you'll see that pick up into '22 as well.

[Nick Joseph, Citi]

That was very helpful. And then just on the operating platform rollout, it sounds like 1.0 is almost done. How much has it changed? Or how much feedback have you received as you roll out in each individual market versus the initial rollouts?

[Mike Lacy, SVP, Operations]

Nick, it's Mike. Appreciate the question. To your point, we are happy with that rollout and extremely happy to see the efficiencies start to play out as evidenced by that 2% controllable expense number. And I can tell you, the first thing that we're looking at is just going out and talking to all of our residents, talking to our prospects. And I've been going out and talking to the employees, and they're starting to really embrace it.

And I think one that I would point to is that, 97% of our tours are self-guided. That tells you right there that people want the self-guided tours, they want that self-service and it's something that's not going to go away. I'd say, second, we continue to run our properties with less people. And we believe we can do more. And you heard me in my prepared remarks, we're close to one employee per 42 apartment homes at this point, and we're tracking closer to the one per 44.

And the last thing I'd say is, pleasantly surprised with where this is going. We're pretty excited to see that traffic continue to increase. The funnel is wide open at this point, starting to see that pricing power play out, and we think there's more efficiencies to be gained.

[Nick Joseph, Citi]

Mike, what about your NPS scores?

[Mike Lacy, SVP, Operations]

NPS score is up about 24%. So, we're continuing to see that our residents are embracing and this is what they want and happy to do business with us.

[Operator]

Our next question comes from Jeff Spector with Bank of America. Please go ahead.

[Jeff Spector, Bank of America]

Thank you and congratulations on the quarter. First question is on market just given some of your peers have announced entering new markets, markets that you're already in. What are your thoughts on, on your footprint and expanding into markets? I haven't seen anyone announced Phoenix which has been a hot market.

[Joe Fisher, CFO]

Jeff, good morning, it's Joe. I think we're in a great position already. When you look at diversified portfolio, be it the 20 markets, the 65-35 mix on suburban, urban, the roughly 50-50 AB. So, we're kind of coming from a position of strength on this one, where we don't feel compelled add new markets, aggressively reduce or expand certain markets. So, the way we've approached it is really utilize the portfolio strategy work, both the predictive analytics and the qualitative overlay to try to guide us a little bit in terms of where we direct our capital and our human efforts and our resources that we have here and make sure we focus on markets that we think are going to outperform and then incrementally deploy capital into those markets.

But the real value add within all that comes from what we're doing at the asset level. So when Harry and Andrew and their team get together with the team and put together the business plan on these assets, it's making sure that we continue to find assets that have those competitive advantage and value creation levers that we have, be it the core ops, the initiatives, the platform focused on the proximity of the assets to existing assets, so we can really the approach and get more efficiencies and then find capital programs that maybe the prior owner had neglected or don't have capital for. So the market is helpful for us, but I think the true recurring advantage we have on the external growth front comes back to what we're doing here on the ops and the platform side.

[Jeff Spector, Bank of America]

Very helpful. And my second question is, can you comment on supply over the next 12 to 18 months? Is it too soon to say exactly your thoughts on supply for '22 at this point?

[Joe Fisher, CFO]

No. I think we've got a decent read on supply at this point. As you start to head into '22, obviously, there will be some slippage throughout the year. But you did see permits come off a decent, not as much as we would have hoped during the downturn. But as we look into '22, I'd say that overall, our markets are looking like they're probably flat to down maybe 10 or so percent. That applies to the submarket level as well.

The markets that we feel better about from a supply perspective going into next year really Boston, Dallas, Tampa, three of the markets that we've definitely been the most active in as well as Orlando, Denver, Northern California markets may be a little bit more concerned about New York City has a little bit longer lead time in terms of how long it takes to get through the construction and delivery process.

So New York may be still a little bit higher next year. And then some markets like Nashville, D.C. looks to hold steady, Baltimore may be up a little bit. But overall, we feel pretty good that supply coming off maybe a little bit. Similarly as you kind of look at recent permit activity, permits are still down in our markets, call it, 10% or so from the peak back in kind of late '19, early '20.

So a little bit of a reprieve there on multifamily supply, but I think as you've seen, plenty of demand out there as well for single-family, so single-family permit activity is up. So as you kind of go into late '22, '23, maybe it starts to level out a little bit there, given the permit activity that we're looking at.

[Operator]

Our next question comes from Rich Hightower with Evercore ISI. Please go ahead.

[Rich Hightower, Evercore ISI]

Joe, I can see that the full year guidance assumes full settlement of the forward shares. But can you help us understand maybe a little bit better around the timing of pairing the settlement against new acquisitions? And I think you mentioned that it may go on for several quarters. Obviously, the expiration of those agreements is June of next year. So just help us understand the sort of the cadence and all that?

[Joe Fisher, CFO]

Yes, absolutely. Thanks, Rich. You are correct. Guidance does take into account the settlement of those forward equity agreements within the second half. I think it's fair to assume at this point, roughly 50-50 in 3Q and 4Q. When you look at the uses that we have teed up, within the press release, we announced the acquisition of Brio, up in Seattle as well as under contract on two assets for net equity needs of around $300 million for those three transactions. In addition, you have dev and redev DCP funding, but that leaves roughly $400 million to identify and deploy capital into, which should take place in the second half.

We're really looking at three avenues for that one, its acquisitions, acquisitions of existing DCP investments and then new DCP investments. And so, I would say on the acquisition side, continue to utilize those, value creation mechanisms, spoke about a little bit ago in terms of new acquisitions and feel good about the pipeline there and continue to deploy in a diverse set of markets and get the accretion that we've been able to get in the past. We are having a number of discussions with existing DCP equity partners, potentially buying some of those assets underlying those DCP investments.

So, as we've talked about those in the past, DCP, we love the economics. Love where we're at in the cycle to continue to deploy it into that. But one of the big reasons we like that piece of the business is the optionality it creates. And so having the seat at the table and maybe buying some of these assets, is another good opportunity for us to maybe create some value on those; and of course, still looking to grow the DCP pipeline. So when you roll it all together, second half settlement, 50-50 is probably fair to assume for your models at this point, though.

[Rich Hightower, Evercore ISI]

Okay. That's helpful, Joe. And my second question, we've talked on a couple of calls in the last couple of days just about the strength in rent or demand that seems to have surprised a lot of people. Maybe help us understand renter psychology right now where you've got a lot of people sort of coming off the sidelines for various reasons, sort of the reverse of what happened during COVID. And there's almost this scarcity mentality. We see it in New York and maybe some other places. So how long do you expect that mentality to persist? And what are you guys seeing in that regard?

[Joe Fisher, CFO]

Yes. Maybe I'll start and others can jump in. I'd just say from a macro perspective, obviously, you're seeing a lot of household formation picking up. So, as the consumer psyche improves and they get more confidence in the economy and the recovery, going out there and forming new households in multifamily or single-family, clearly helpful. So you have a lot of pent-up demand be from individuals that moved home, doubled up with friends, more recent college grad that, obviously, in the last couple of years didn't get out into the workforce and form a new household, so plenty going on there.

The migration side, clearly, you're seeing more immigration take place within this political regime than the past one, and so definitely beneficial on the multifamily side for us. And then you get into the psychology of the renter, you look at where wages have gone. There's significant wage inflation taking place out there. I think our markets are plus or minus 5% or 6% above pre-COVID levels at this point in time, so more money in their pockets on that side. The average stimulus check for most of our renters, were around $3,000, which equates to 1.5 months or so of rent. And so, they have a better balance sheet, more cash that they're sitting on today.

And then you get back into the return to office piece of the equation, which has started, but we think in some of these markets, there may be a second wave here into kind of post-Labor Day environment that helps give us continued pricing power a little bit deeper into the season than in the past. So, I think you roll it all together, and it's good demographics, it's a good economic recovery and a more stable and more cash heavy consumer than we've seen in the past. So, I expect this trajectory to continue, obviously, through the rest of this year, but definitely into next year as well.

[Operator]

Our next question comes from Rich Hill with Morgan Stanley. Please go ahead.

[Rich Hill, Morgan Stanley]

So guys, I want to just talk about your guide for a second. It's a pretty -- I think it implies north of 4% same-store revenue for the second half of the year. And when I look at what you're putting up for July in terms of rent growth or lease growth around 5% to 6%, why can't same-store revenue be even better than the 4.2% that's implied in the second half of the year? What's holding that back?

[Joe Fisher, CFO]

I think two things. One, you do have the stair step. As you think of the 4% implied in the second half, we're going to go from our minus one this quarter to likely something less than four in the third quarter and something more than four in the fourth quarter. So there's a stair-step taking place. When you think about the year-over-year, you do still have the earn-in of the prior rent roll, meaning that blends have flipped a positive, which we're very excited about.

I think in Mike's script, talked about blends continuing to get better in the third quarter. And given the comps that we run into in 4Q, the concessions we had then, probably not a stretch to imagine that blends continue to get better in the fourth quarter. That said, we did have blends that were negative earlier in the year as well as in fourth quarter last year, which still pulled down that 3Q and 4Q year-over-year number.

So, that's why there's kind of the disconnect between what we're seeing today in blends and the lagged impact of when it eventually gets into the same-store revenue number. But what we're doing today on blends obviously builds into '22. So, a lot of focus at this point on how do you continue to price and perhaps a little bit less so on 3Q and 4Q are going to be.

[Rich Hill, Morgan Stanley]

Toomey, how much of your rent roll for '22 have you already priced?

[Tom Toomey, Chairman & CEO]

That's right around 50%. So by the time we get to the end of, call it, September, we'll be around 80% priced and that will be approximately 40% of our 2022 earn-in.

[Rich Hill, Morgan Stanley]

In your loss to lease?

[Mike Lacy, SVP, Operations]

Loss to lease is very strong today, sitting in around 10% to 11%. And the way we're thinking about that today is that's your base rents, your market rent. And then if you think about what we were doing last year with our strategy around concessions, we're starting to offer that, call it, three to four weeks. We're getting very close to offering next to nothing at this point. we should see anywhere from 4% to 8% growth on an effective basis moving forward if we can maintain that on top of whatever we can get on this market rent side. So we're looking at some pretty big increases as we move forward.

[Tom Toomey, Chairman & CEO]

Coupled with your fee recovery, et cetera, government regulations coming down, Rich. It's Toomey. It's really hard for us to map a number out for the second half of the year and next year when it's accelerating at such a pace, and you have on potential recoveries from your ARs and the priors. And so, I wouldn't get too much tied up into the 4.2 or 4.5. It's probably in a different ZIP code. We'll see where it plays out.

[Rich Hill, Morgan Stanley]

Yes, that's exactly what I was getting at. And what you just went through is very, very helpful. It just brings me up to another question. I just want to play a double advocate here for a second. Some of the pushback that we get is that you've outperformed your peers on a growth basis in 2020 and so far in 2021, given your diversity of portfolios. And doesn't that mean that you're going to have not as steep of recovery on the other side of COVID, yet you continue to prove that otherwise with inflections that are stronger than the peer group. I guess the question is, how are you doing that? Is it really the best of both worlds where you're getting the strong inflection in the coastal markets, but you're also getting absolute high level of rents and continued rent growth in the Sun Belt and suburban markets. What's your secret sauce? I know you talked about it, but it's pretty impressive what you're doing. And so I'd just like to hear it maybe one more time.

[Tom Toomey, Chairman & CEO]

Yes, sure. Rich, I appreciate the question. I'll start. But I think the difference has been this: one, the culture of the place continuing to innovate and the execution of the platform. And if you think through the platform, if we can give a tour in five minutes, which is what the customer is desirous of or a 15-minute tour, we can run a number more on the demand side through the front door, which increases our pricing power conviction. And literally, if you say to a customer, we had 240 tours last week.

And by the way, we only have 20 apartments, when would you like yours because these are the dates you have to take it. We've all been in that mode in other aspects of our retail hotel travel schedule. And when you put it to a customer that they have to take it on the date that you desire, you increase your pricing power and your days vacant come down, and that's a significant outperformance. And just one of the things that we're learning with the use of the platform is that a clear example. So I think it's culture, the platform execution. Joe, anything else you'd add?

[Joe Fisher, CFO]

I know, Rich, performance continued to perform well there relative to peers. But I don't want to lose sight either of FFOA and cash flow performance, which lion's share is driven by operational performance, but we have been by far the most active over the last three years on the external growth front. Being able to utilize this platform that we've built, being able to utilize the skill sets of the transactional team to go find these one-off assets and keep driving performance.

The 2019 deals that we've talked about in the past, I think we talked about last quarter, talked about it within the presentation at NAREIT, which hopefully everybody could take a look at. The building blocks there have definitely come to fruition and driven a lot of upside NOI off of 2019. If you look at the 2020, 2021 acquisitions, if you just look at the market rents today and if those hold, we're 50 to 75 bps above pro forma at this point in time.

So we're already capturing year three type of numbers in year one given how quickly market rents, have moved. So being aggressive during the down cycle and others warrants is definitely paying dividends for us. Similarly, on the DCP side, that market dried up a little bit in terms of participants that were out there, but equity was still looking for capital. We went out and did four transactions during the downturn, a 13%, 14% target IRRs.

Obviously, NOIs and asset values have moved aggressively since then. So hopefully, the IRRs when we get all said and done are actually better than that. And so being there and having the balance sheet ready and being able to step up and continue with external growth and utilize the balance sheet, utilize the skills of the Company, that's driving more FFOA on top of the core ops that Tom is talking about. So, I don't want to lose sight of that kind of virtuous cycle that we have going right now.

[Rich Hill, Morgan Stanley]

Yes. I'll just summarize with what you said. I think what you're saying is you have real earnings power rather than this just being a base effect, which we would completely agree with.

[Joe Fisher, CFO]

I think that was a much simpler way of putting it than I did. Thanks, Rich

[Operator]

Our next question comes from Amanda Sweitzer with Baird. Please go ahead.

[Amanda Sweitzer, Baird]

Following up on those DCP deals, you got your full year guidance hasn't changed, but clearly rank it highly as the use of capital. Can you just provide more information on the opportunities that you're seeing today to increase those investments, both in terms of yields in the market and volume?

[Harry Alcock, CIO & SVP]

Sure, Amanda. This is Harry. I mean, overall, the number of opportunities remains elevated. There is a lot of developers looking for this type of capital. However, the pushback is that capital overall continues to look for yield, meaning there's new players that are in the prep equity market. The market overall is very competitive.

So as Joe mentioned, our expectation is that overall returns are probably coming down. We've done 20 deals since 2013. We were low double digits and total return for a number of years, loaded up to 13% to 14% the last two or three years, and now we're probably back into the double-digit again.

We do expect to be able to continue to deploy capital in DCP. We closed three deals this year, committing about $70 million. We have a track record, and we'll continue to access existing relationships. We're currently at $310 million in capital committed to DCP. And our expectation is that we'll add another $100 million to $150 million over the next year or so.

[Joe Fisher, CFO]

Yes. And Amanda, I think I mentioned earlier, too, the optionality on some of these, we are having conversations on actually $300 million pipeline back in through acquisitions. So they don't all have options. We do have backside participation on 80% of these or so. But we also have a two-year lockout typically post certificate of occupancy, which makes us the only potential buyer during that two-year window.

And so, a number of these equity partners are IR driven, they want to take advantage of the pricing that's available in the market, and they want to get that cash back to redeploy into the next set of development on their side. So there are win-win potentials here for us potentially, get access to some of those assets as well. So that may influence the size of the DCP pipeline from quarter-to-quarter as well if we can buy some of those out.

[Amanda Sweitzer, Baird]

Yes. That's interesting. And then sticking on capital allocation and some of your recent acquisition activity, can looks to be a new submarket for you, and it's a bit outside of your recent strategy, I think, of buying near your existing clusters. Can you just talk about the opportunity you saw in that market in particular and maybe those properties as well?

[Harry Alcock, CIO & SVP]

Amanda, this is Harry. I think I mentioned that while we acquired a single asset in the second quarter, we have another one tied up under contract. So we're going to add the second property with 544 homes, a mile from the first property with 468 homes, with 1,000 homes with a mile one another. And then again, we're going to implement our capital program and $20 million plus in those two properties, implement the operating platform. Again, we look at those operating synergies given the scale of those two acquisitions.

[Operator]

Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Please go ahead.

[Austin Wurschmidt, KeyBanc Capital Markets]

Just curious what your analytics are really telling you about Southern California today is. It seems like you guys have sold a couple of assets this year. You've got another one under contract. What's sort of the right exposure here? And does it make sense still to over-index to the region?

[Joe Fisher, CFO]

Austin. So, following up on that and maybe closing out to Amanda's question as well, Suburban Maryland and the D.C. region as a whole screen very well for us on the predictive and the qualitative side. So in addition to everything Harry said about deal specifics, the cost trading in the submarket, the market as a whole screens well there. I'd say Southern California, generally kind of the middle of the pack, Inland Empire and San Diego screen better for us, Orange County and L.A. kind of middle of the pack from a standpoint qualitatively given the regulatory environment there, obviously not a positive when we look at the qualitative side.

So, we have lightened up a little bit. Orange County is an outsized market for us, being the second largest in the portfolio of [indiscernible]. So, it makes sense to perhaps lighten up a little bit there. In addition, we've been able to get pretty phenomenal pricing on a couple of these transactions, both in Orange County, going back to last year to a couple of Seattle deals, been able to get generally kind of pre-COVID type of pricing and pricing that relative to our internal expectations was a little bit better. So, when you mold it all together, it made sense to source a little bit of capital from those.

[Austin Wurschmidt, KeyBanc Capital Markets]

That's helpful. And then there's been a lot of discussion on calls around whether or not we get an extended leasing season this year. And I'm curious, what you guys ascribed to as far as this theme goes? And would you say it's reflected in your guidance? Or do you expect more seasonal patterns because it's a little difficult to tell with some of the easing comps and just curious how you kind of thought about market rent growth and occupancy through the back half of the year?

[Mike Lacy, SVP, Operations]

Austin, it's Mike. Thanks for the question. I think we're seeing different things in different markets. And just to take a step back, first and foremost, looking at some of our leading indicators, it's really that market rent growth, and it's our 30-day trend. So in a lot of cases, when we're running 97% to even 97.5%, 30 days out, we have a lot of ability to push rents. We're seeing that people are renewing at a faster rate.

We don't have an issue with turnover in the future. So we think that there's opportunity there. And then in some of these urban areas, where we're hearing more and more that people wouldn't be coming back to work, call it after Labor Day into October. We do expect that there will be a second wave of demand coming there. And so we're doing a lot of things with our pricing today to make sure that we capture that.

[Joe Fisher, CFO]

I will say from a 30,000-foot view. So bringing it back to guidance in terms of what's embedded there, there is a more typical seasonality that we have embedded within that number at the midpoint. When do you go to the upside, it kind of goes into what Mike's talking way of the sustained pricing power traffic into the post Labor Day period. So that kind of gets you from midpoint to high point, if you will.

[Tom Toomey, Chairman & CEO]

Austin having done it for a while, it's hard to ever see a period where we're having this type of pricing power on a national basis. And I think you have a fair question, when do we think New York will be fully back online, but you're at 98% occupied today. San Francisco has turned back on. What's striking to me is as people, when they go out and new apartment and move, they're not finding the pricing or the deals, so they're going to stay put through leasing season.

And so, Mike's looking forward on notices to vacate. He's actually got very limited inventory that he's going to be able to present to the market -- a new market rent, but he's got extreme pricing power on renewals. And so, it's going to be an interesting fourth quarter for us. You may not see a lot of leases signed, but you may see some really eye-popping renewal numbers.

[Mike Lacy, SVP, Operations]

I would say that, and on top of that, just places like Tampa today, the demand is so good, that some of the trends we're watching and things that we're tracking, people are signing property. So our closing ratios are off the charts. People are locking them in quicker. And there's a lot of opportunity there.

[Operator]

Our next question comes from Brad Heffern with RBC Capital Markets. Please go ahead with your question.

[Brad Heffern, RBC Capital Markets]

Just sticking to the theme of the last question. What do you think ultimately causes that pricing power to go away? Is it supply? It sounds like you're seeing it effectively across the entire market, but obviously, the population hasn't grown a lot. So I guess what do you think kind of the fundamental driver is and what makes it stop?

[Tom Toomey, Chairman & CEO]

Combination of things, this is Toomey. One, supply, we don't really feel threatened by supply at this point; the second would be a recession either focused on a national level or industry-specific that would reduce employment pictures. I don't see either of those on the horizon right at the point. People are very mobile, looking for a job and we're trying to hire people here in Denver, and it's becoming very challenging, both from a recruiting and a wage standpoint, which tells me we have one of the unique things that hasn't happened probably in 25 years, which is we have rapid wage inflation, which translates to rapid pricing power on rents.

[Brad Heffern, RBC Capital Markets]

Yes. Okay. Got it. And then, Joe, you talked about a little bit earlier in the call, but I just wanted to go through it again because I wasn't sure I had it. On bad debt, can you just talk about how that's improved and whether the numbers that you were saying before included the resident relief funds or if that's just day-to-day collections improving?

[Joe Fisher, CFO]

Yes. It's going to be a little bit of both, to be honest. You have the resident relief funds coming in, which helps with current collections as well as our historical collections, which I'll get into in a second. But you also have just individuals going back to work as we recycle and bring new residents in and get good residents in after others have either skipped or decided to depart us. It's a little bit of a blend of everything. It's hard to get too exact.

I would say within the second quarter, I believe our government relief funds were approximately $6 million. And then quarter-to-date here in July, you're around $3 million. We did have a little bit back in the first quarter as well. I would highlight, if you just take a look at Page 3 of our press release, we do have a table in there that shows collections in the quarter than subsequent to.

And there are two different methodologies within the sector of reporting collections, so just to highlight what our approach is. When a dollar comes in, we allocate that dollar over all former balances and the period in which that balance was billed. And so if a dollar comes in a day for someone that's 12 months past due, 25% of that is going to be in the current quarter, 75% will reapply to prior quarters.

So when you look at the footnote below that table footnote one, you can see all our prior quarters continue to improve. If we had just simply taken the approach that some of the others do of dollar in the quarter equals recovery for the quarter and collection for the quarter, our numbers go up to about 98.5% collected at this point in time. So I just want to highlight that there are differences when you're comparing collection rates within the industry.

[Operator]

Our next question comes from Juan Sanabria with BMO Capital Markets. Please state your question.

[Juan Sanabria, BMO Capital Markets]

Good morning guys. Just hoping to talk a little bit more about the acquisitions. And if you could talk about the growing in yields versus what you're targeting on a stabilized basis [indiscernible] your platform for, I guess, the second quarter deals and what's pending? And are those yields of product of any sort of distress in the market, which I don't suspect? And if so, how long do you think that opportunity last for you, you could hit while there's some unique opportunities?

[Harry Alcock, CIO & SVP]

Sure, Juan. This is Harry. Yes, we expect to be able to continue to execute as we have in the past couple of years. And just to give a couple of numbers, we're around 4.5% in terms of our year one underwritten yield. But we expect that to grow more than 20% over the next couple of years into kind of a mid-5s by the third year. There certainly is no distress in the market. These are very competitive situations.

And again, as we've talked about on the call and Joe has mentioned a lot, we're looking for individual deals, where, we believe, we can push the NOI above -- well above the growth of the market will provide us. And I can tell you, just as we look back at 2019, for example, over the last couple of years, back in 2019, we acquired eight properties for around $900 million.

As we look at what happened, and Joe mentioned it earlier, we acquired those with a 4.75% going in yield. Today, that's grown by nearly 10% up to about 5.2%. So even through COVID by implementing these various value-creating mechanisms, we've been able to grow NOI and yields by nearly 10%

[Juan Sanabria, BMO Capital Markets]

Great. And then just a quick follow-up on the restrictions that have been put in place for sun-setting, how much of a headwind was that in the second quarter with regards to your reported financials? And what's assumed for the balance of the year? Is there a difference between kind of the high and the low end of your guidance range?

[Joe Fisher, CFO]

Yes. Juan, it was probably around $6 million to $8 million in the second quarter. When you look recognize in terms of revenue on the collection side relative to total build, you're a couple of percent short there. So there's kind of $6-plus million on the collection side as we move forward in the next year that we hope to. Obviously, we covered some of those sunsets and we get back to 99.9% collected as we have historically.

In addition, you still have renewal caps, so call it, 15% of the portfolio. And you hear what Mike's talking about in terms of the strength of renewals and how those continue to move up. And so, we continue to see a benefit there. And then on the fee income, I also see that coming back pretty strongly. So you probably have $6 million to $8 million of run rate that should be a pickup as we move forward.

[Mike Lacy, SVP, Operations]

And just to add -- this is Mike. We do have about 400 people today still that we could go and evict them, we would. We're working on that. We're working with them to try to secure these funds. And obviously, that's an opportunity for us going forward as well.

[Operator]

Our next question comes from Neil Malkin with Capital One Securities. Please go ahead.

[Neil Malkin, Capital One Securities]

I guess, maybe, Tom, for you, you can start. This quarter, last quarter, this morning, in particular, UDR, EQR and [Avalon] that's some of the biggest coastal have, really talked about paring down the coastal market, talking about being less desirable, regulatorily challenged and then going pretty decisively into Atlanta, Raleigh, Charlotte, you name it, Texas. And I just wondered because management teams don't come out and just say that kind of stuff. And we talked before and you said, look, you don't want to panic or move too hastily. But kind of seeing the very strong results from the Sunbelt and some very large peers making moves there, does that -- is that a reflection do you think on -- or how did that look to you guys? Do you -- are you changing your view there on the San Francisco and New York? Are you comfortable with your positioning? Or are you also have the same sort of view about some of the core gateway markets that appear in

[Tom Toomey, Chairman & CEO]

Yes. Neil, I'm sorry, to be a little bit of liberty in talking about this subject. I guess the first thing is, I really don't comment on other company strategy or their execution. Why? Because I think our greatest value add is focusing on what we control and what we do. And so I won't address any of the comments with respect to what other people are saying or doing. With respect to our actions and strategies around portfolio composition, I really credited a great deal of this to Chris and Joe and the teams they have working with them on their data analytics, and seeing through windows where markets blip and not letting your bias create a reaction.

And certainly, we continue to give input on the ground through our acquisitions and operations. But the discipline about using analytics to give us a better lens into the future, and you can look at it. Years ago, they identified Baltimore as a market that was coming back, and we went at it pretty hard, Florida, as well. And so we are tending to look at it as a guiding tool towards where we should tilt our investment activities. And then on the sourcing of capital, every portfolio has a handful of assets that you kind of say don't meet the grade, don't -- we've rung out the value, and we should sell those.

So, we're going to stay disciplined using our model and our analytics and not let our individual bias or a moment in time or a press release drive our behavior pattern. And believe that, that really is what it's there for, is to smooth us out, give us a action with fax based, not emotions. And we want to keep our footprint broad, where we can apply all of our value creation mechanisms because markets will have disruptions and we want to be able to pivot to a footprint that we can always create value, no matter where we are in the cycle. And that's what you're seeing as a company. We -- Joe has coined the phrase, a full cycle investment. That's our goal. Grow cash flow through being a full cycle investment.

[Neil Malkin, Capital One Securities]

Yes. I appreciate that, Tom. The other one, you had zero reserves, I think, this quarter for the delinquency. And I guess I just want to be clear, is that because you're attributing that to the funds you're going to get from either California, paying everyone's debt and the federal subsidies related to the stimulus. That's number one. And then the second part is, you don't record that on GAAP, right? Like just because -- I mean, if you recorded as a delinquency before and then you get the money, that's just cash on the balance sheet, that doesn't run through the income statement again. Like in other words, you're not going to show like 102% collection or something like that and then have the benefit on the income statement. I just wanted to make sure I got that.

[Joe Fisher, CFO]

Yes. So just to make sure. So Neil, on the second one, no. So what we do is -- or maybe I'll start it the first, actually, why didn't it incrementally go up? You still have an $18 million AR balance or reserve against a $26 million AR balance. If you go back to first quarter, those are roughly the same numbers. So we've actually seen the AR balance level out here over the last quarter. So you don't have any additional delinquency from 1Q to 2Q. Therefore, you really don't have any additional reserve.

There's a lot more detail and discipline behind it within the process and the assessment of each resident. But that's the high level is that no additional delinquency from end of first quarter to end of second quarter equaled no more incremental reserves, so 18 million on 26 or so. We're still about 70% reserved overall on the delinquent balances. When we do receive $1 it's really going to depend on what was reserved against that.

So if we've already reserved 90% of that dollar, and we received that dollar, you basically reversed 90% of that reserve or all of the reserve and you get $0.90 of that dollar of benefit to revenue. So it really depends on if you've already reserved for that individual residents balance yet or not. If we hadn't put a balance up against it in terms of the reserve, then no, you wouldn't recognize that. You've already recognized it once.

[Operator]

Our next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.

[Alexander Goldfarb, Piper Sandler]

Just two questions here. One, Joe, on the fall, so it sounds like overall, you guys see great demand, you're going to push to either force vacancy or get people to market. The rents that are already there, so the people who have the free rents, the free rent was given upfront, right? These people are now paying a full freight so that when you're going for the renewal, they're already paying whatever the full freight rent is. And therefore, the increase is just based off of that. It's not based off of an effective rate, correct?

[Joe Fisher, CFO]

That is accurate. They were given upfront, and that was the strategy last year that Mike and team employed on a view that the market would rebound and we'd be able to move those residents back up to the gross market rent, and we're seeing that renewals are ticking up. The residents are staying and they are coming back and asking for their concession again. So we're seeing that in the renewal

[Alexander Goldfarb, Piper Sandler]

Okay. And the second question is, I was out in Seattle recently, meeting with the multifamily folks. And it sounded like Washington State, unlike California, does not have any program in place to help landlords recoup the money and that basically the landlords were on their own. So I just wanted to double check and see is that the way the -- is that accurate? And if so, how are you guys planning to deal with that?

[Joe Fisher, CFO]

Yes. No, that's -- it's inaccurate, unfortunately, but it's -- they actually do have a program in place. I'll say that themselves along with California and New York, just happened to be in terms of getting those programs off the ground, whereas states like Virginia, Massachusetts, a lot of the Sunbelt states, really were proactive at getting them set up quickly. So that could be, the disconnect, but they do have a program in place.

We are applying through it and getting resident funds for that. In addition, they're one of only two states, I believe, at this point that have a program set up for former residents departed during the COVID period, so trying to help those that have gone on to elsewhere, but still have a balance with us. They've set up that program as well. I think it's -- Chris, correct me if I'm wrong, capped at $15,000 per resident at this point, whereas California does not have a cap on the program they just set up in the last week or two.

[Chris Van Ens, VP, Operations]

Yes, just for the former. Yes.

[Alexander Goldfarb, Piper Sandler]

Okay, okay. Joe, listen, thank you for the clarification.

[Joe Fisher, CFO]

Thanks Alex.

[Operator]

Our next question comes from Rob Stevenson with Janney. Please go ahead.

[Rob Stevenson, Janney]

What markets are you seeing the most significant acceleration in operating fundamentals since June 1, last couple of months?

[Mike Lacy, SVP, Operations]

Rob, it's Mike. I would tell you that the greatest rate of change has actually been in places like San Francisco, New York and Seattle, just when you look at 1Q numbers from a blended basis to where we are today. But that being said, we're seeing pretty equal strength in places like Tampa, Richmond, Baltimore, where we're seeing double-digit market rent growth today. So frankly, we're seeing kind of across the board.

[Rob Stevenson, Janney]

Now is that because of the removal of the concessions? Is that what's turboing, juicing those markets in particular?

[Mike Lacy, SVP, Operations]

It is. Yes. So it's a different -- in the Sunbelt area, you're definitely seeing it on the market rent side. We didn't offer concessions last year. So that's pure growth that's building up our earn-in. But to your point, yes, the urban areas where we were offering big concessions, we're starting to see those come down. To Joe's point earlier, we're seeing the retention levels go up. And it's just a different way of getting there, but strength in both areas, if you will.

[Rob Stevenson, Janney]

Okay. And then last one for me, Joe. How much is your nonresidential revenue off today versus prior to the pandemic? How much has that recovered? And how much do you still have left to go? And how material is that overall?

[Joe Fisher, CFO]

Rob, it's Joe. So non-resi runs at about 2% of total NOI. So call it $4 million, so let's say it's a $16 million run rate right now. I think pre-COVID was probably around $18 million. So it's off $2 million. We have seen that coming back quite a bit in terms of LOI activity and demand for the space. So we feel pretty good about the trajectory on that side as well, as well as trying to get some of these tenants that were delinquent, trying to get them current again and back on their feet. So that piece of the business is actually moving along pretty good for us.

[Rob Stevenson, Janney]

Okay. And then how much is the growth today in fees on the resi side versus what you were seeing before? I mean, are you basically back to full fee levels and then continuing to grow that at something maybe not as much as the market rents, but something significant? Or are you basically still being a little cautious there?

[Mike Lacy, SVP, Operations]

What we're seeing is we're basically back to where we were in 2019. That being said, we should have been growing at least 3%. So we think there's still about $5 million in that line item. I am seeing strength in our short-term rental program as well as kind of those common areas where we're seeing levels back in that 2019 and even greater at this point, where I can tell you on the short-term furnished program alone, we're signing about 20 leases a week. I think we're around 200, 220 occupied today. And just as a comparison, that was around 120, 130, last year. So definitely seeing that business pop back quickly, and that's really happened over the last 30 to 45 days.

[Operator]

Our next question comes from Alex Kalmus with Zelman Associates. Please state your question.

[Alex Kalmus, Zelman Associates]

So looking at -- given the transaction market is extremely competitive and kudos for getting it a little early as you alluded to. What kind of cap rate compression have you seen from the quarter prior to today? And just referencing that you're specifically targeting communities approximating your current portfolio, what kind of cap rate advantage would you guys say you have versus the competition?

[Harry Alcock, CIO & SVP]

Alex, this is Harry. Well, I have to tell you, talking about cap rates and cap rate compression on these calls. But in any event, we all know cap rates have come down a lot, from the beginning of the year, perhaps 50 basis points, I'd say the last couple of months, perhaps as much as 25 basis points. I can tell you that as we look at future transactions and as we're in the market looking to source deals, you're correct that if we buy a property within a mile or so of another UDR property, that's probably 20 to 25 basis points just through operating synergies.

We think we can add a similar amount in certain cases through redevelopment. We think other legacy operating initiatives, platform, et cetera, can add a little bit. So we have a lot of tools in our tool belt that allow us to achieve returns above what the market is going to provide. I'll tell you the other thing. We do have access to a number of markets. So we have a pretty big playing field to play in.

If we look back in the $3 billion or so capital we've deployed over the last two years or so, we've actually deployed capital in 12 markets. So we're focused based on what the analytics are going to provide us. We do currently operate in 20 markets. We've been deploying capital over the last couple of years in 12 of those, and that does give us a pretty wide to look at transactions.

[Joe Fisher, CFO]

I think the one other piece, Alex, the team continues to look at when you look at the six transactions to date, either closed or under contract, half of those have actually had in place debt on them. So in terms of the ability to kind of thin out the bidding pool and find a little bit less competition, that has been helpful, having a balance sheet that can absorb the secured debt and take those assets on because we have improved unencumbered NOI within the balance sheet quite a bit in recent years. So being able to play in that space as well where a typical levered buyer wants to put their own leverage on potential floating, potential short duration, may shy away from those types of assets. So we've had a good amount of success on that front, too, to help out with the yields.

[Alex Kalmus, Zelman Associates]

Got it, makes sense. Thank you and one on operations. Given the strong demand and low turnover, you referenced earlier, the limited inventory in the market. I'm curious what the role of eviction moratoriums play as well, maybe not necessarily in your portfolio, but just broadly, how that constrains the supply today and what your expectations are for the future?

[Mike Lacy, SVP, Operations]

Yes. I'd go back to for our current portfolio, again, we have about 400 people that if we could evict today we would, it's less than 1%. So when you're sitting here at, call it, 97 to 97.2 on a 30-day trend, if that opened up and we're able to get access to those units, we're still in a very good position in terms of occupancy. So we're not necessarily worried about where we're at with the supply-demand curve on our front. And we do expect that when these open up other people will be bouncing around to. So, there will be more demand when that happens.

[Joe Fisher, CFO]

I think, too, as you look at that $400 million, some of those individuals are just non-communicative individuals that will not communicate with us, that have not signed a declaration of hardship from COVID that, in many cases, have the ability to pay those rents. So as you worry about them exiting our side of the equation and going back into the homeownership or household formation part of the equation, they have the ability to pay in many cases. They have simply taken advantage of the system. And so, they'll result in demand where they end up going. So, I don't think it's that they disappear from household formations, and it's a net decrease in demand in many cases.

[Tom Toomey, Chairman & CEO]

Alex, this is Toomey because I can do this and get away with it. Those 400 people, the monthly rent number is about $1.5 million, $1.6 million a month. We're fully reserving that today. So, the challenge for us in the future, we'd like to get the unit back, re-price it to market and get that revenue stream back online. That being said, we will work with any other resident on their hardship and programs to take advantage of government aid or keep them in our apartment homes, but we are anxious to get those 400 units back online in terms of revenue.

[Operator]

And there are no further questions in the queue. I'd like to hand the call back over to Chairman and CEO, Mr. Toomey, for closing comments.

[Tom Toomey, Chairman & CEO]

Well, thank you. And I know the call ran over a little bit today, but I thought it was very productive. And I certainly appreciate your time and interest in UDR. As you've read and heard on this call today, we're very enthusiastic about our business today and certainly the future.

While we're enjoying broad market strength, I think we're most excited about our company, its value-creation mechanisms, its portfolio and our culture to continue to find ways to create value as the economy and our interactions with our residents continue to grow.

We look forward to continuing to execute and certainly delivering the cash flow growth that we provided in our guidance and find a way to even exceed that. Thanks. With that, appreciate your time today. Take care.

[Operator]

Thank you. This concludes today's call. All parties may disconnect. Have a great day.