UDR Inc
NYSE:UDR
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UDR Inc
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Greetings, and welcome to UDR's Third Quarter 2020 Earnings Call. [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.
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.
Thank you, Trent. And welcome to UDR’s third quarter 2021 conference call. Presenting on the call with me today are Senior Vice President of Operations, Mike Lacy; and Chief Financial Officer, Joe Fisher, who will discuss our results. Senior officers, Harry Alcock, Matt Cozad, Andrew Cantor and Chris Van Ens, will also be available during the Q&A portion of the call.
Our third quarter FFOA, results achieved the high end of our previously provided guidance range, and we raised full year, samestore and FFOA guidance for the fourth time in 2021. But the raise was driven by strong widespread multifamily fundamentals. The benefits we are realizing from the platform initiatives and accretive capital allocation decisions. Currently occupancy remains elevated, rate growth is as strong as I've seen during my 31-year tenure in the multifamily industry. And we continue to successfully source rental assistance for many residents in need.
As we move into 2022, we anticipate that our unique operating acumen and ability to accretively allocate capital across a wide range of markets should continue to differentiate us versus public and private peers. These value creation drivers include first our best-in-class NextGen operating platform, which widens our operating advantages versus public and private peers and broadens acquisition and capital allocation opportunities. The platform focuses on self-service, enhanced resident satisfaction and expanding our controllable operating margin.
Through our associate's hard work, we have successfully reduced our on-site staff by approximately 40% since 2018 and rationalized the rest of our cost structure. Both put us in an inviolable position as inflationary pressures mount. Platform 1.0 initiatives will continue to yield bottom line benefits through 2022, but we are already looking ahead to a new suite of initiatives that will drive additional revenue growth and margin expansion. Mike will provide further details in his commentary.
And second, our market selection and capital allocation year-to-date, we have sourced nearly $1.2 billion of equity at an attractive cost and $300 million of property sales at favorable cap rates to creatively acquire nearly $1.5 billion of high-quality multifamily communities in desired markets. These acquisitions are outperforming initial expectations due to strong market rent growth, proximity benefit for sourcing the deal next door and the implementation of our numerous and repeatable capital allocation value creating drivers. While business conditions are as strong as we've ever experienced, sorted regulatory restrictions continue to limit our ability to fully capture the economic benefits of our current demand trends. Still the regulatory environment continues to slowly trend in our favor and we expect to recapture deferred income resulting from emergency restrictions as we move through 2022.
Moving on, earlier this month, we published our third annual ESG report. In it we summarized the company's progress towards its ESG goals, introduced enhanced greenhouse gas emissions and energy use reduction targets and highlighted UDR's culture, as well as the support provided for our associates and residents during the COVID-19 pandemic. Our actions resulted in UDR being named the number one ESG performer in 2021 GRESB survey amongst publicly listed residential companies worldwide with a score of 86. I thank GRESB for their recognition of UDR as a global leader in sustainability and our teams for the ongoing ESG progress we continue to make.
In closing, our success is driven by many factors, but a key one remains UDR's innovative and adaptive culture. This insight was recently validated in our biannual associated engagement survey, which was conducted following the implementation of platform 1.0. Primary takeaways from the 97% of the associates that participated included first UDR engagement and enablement scores are well above the norm for high performing companies at 80%. Second, 94% of the respondents felt a strong sense of culture. Third, nearly 90% feel those with diverse backgrounds can succeed at UDR. Thank you to our associates across the country who shared honest and open feedback as we continue to improve our business practices, which enhance our status as well as being recognized as an ESG industry leader.
With that, I will turn the call over to Mike.
Thanks Tom. Strong demand for multi-family housing coupled with our operating platform, advantages led to all time high occupancy, accelerating rate growth and significantly reduced concessions during the third quarter. These trends have persisted thus far in the fourth quarter postponing typical seasonality to mid- to late-October or two to three months later than would be normal.
To begin strong, samestore results supported third quarter FFOA per share at the high end of our previously provided guidance range. Key components of our 5.3% and 6.3% year-over-year, samestore revenue and NOI growth included weighted average occupancy of 97.5%, 200 basis points higher than a year ago; effective blended the lease rate growth of 8.2%, which sequentially accelerated by 730 basis points versus the second quarter. Year-over-year other income growth of 5.1%, traffic that average 35% above pre-COVID levels as we continue to open the perspective resident funnel with our Next Gen Platform and drive additional pricing power. And annualized turnover of 54%, which declined by more than 1,100 basis points versus a year ago and was approximately 1,000 basis points below our historical third quarter turnover rate, driven by strong demand.
Sequential samestore revenue grew 3.6% in the third quarter. And as implied by our improved guidance, we expect sequential samestore revenue growth to be positive in the fourth quarter as well.
Regarding key operating metrics for October, occupancy remains elevated and has averaged 97.1% as we continue to see robust demand well into what is historically a seasonally slow period of time. Our slightly lower sequential occupancy as compared to our all-time high, third quarter reading has been by design. As we've continued to drive rate growth to strengthen our 2022 rent rule.
Our 2.6% anticipated earn in for 2022 is in line with our highest earn in over the past decade and is approximately 150 basis points higher than our average earn in between 2016 and 2019. Currently, our weighted average loss to lease is in the low teens. We are capturing this upside by driving rental rate higher, which has led to blended lease rate growth of roughly 11.5% in October or 330 basis points above what we achieved in third quarter.
Roughly 15% of our NOI comes from markets that presently have some form of regulatory restriction on renewal rate increases, but we are utilizing unique UDR attributes such as our various other income initiatives to drive revenue growth. We believe we have an extended runway to capture additional embedded rent growth throughout the fourth quarter and into 2022.
Next, concessions have virtually evaporated and are only being used in select submarkets and at a handful of UDR communities in the San Francisco Bay Area, downtown LA and the 14th Street Corridor in Washington DC. Our strategy of offering upfront concessions and maintaining gross rents during the pandemic is playing out as expected. Residents are already accustomed to paying full rent, which translates into better pricing power and higher retention at renewal. As a reminder in the fourth quarter, we will anniversary peak COVID concession levels of 3.5 to 4 weeks on new leases. As such and with only nominal concessions today, we are poised to capture rent growth that is 7% to 8% above market growth, which translates into mid-to-high teens expected new lease rate growth during the fourth quarter.
Last we've continued to realize broad based strength across our portfolio in October. Our Sunbelt commute which comprise approximately 25% of NOI have been generating better than 20% year-over-year market rent growth. While harder-hit urban centers ever been sharply off the bottom. It will take time for these markets trends to show up in our reported results due to our lease expiration schedule. But 20 of our 21 markets now have rents above pre-COVID levels. The San Francisco Bay Area, our sole [indiscernible] should join this group in the next couple of quarters.
Moving on our success as a first mover in accessing rental assistance programs continue to benefit our collections. And during the third quarter, we reverse 3 million of cumulative bad debt reserve. Year-to-date we have sourced more than 19 million in assistance for residents in need with nearly 10 million of this coming during the third quarter. We have another $11 million of applications in process. Additionally, we are finding early success securing funds from former residents in California and the state of Washington whose unpaid balances were previously written off. Due to our outreach programs former resident balances totaling over 2.5 million are in the rental assistant application process or have access funds. We hope to give more former California and Washington residents to apply during the fourth order, while also participating in new programs, such as the one New York recently introduced.
Next, we have fully wrote out Version 1.0 our next generation operating platform across all of our markets. We believe the self-service model we have implemented over the past three years is unique in our industry and the numbers prove this out. Since the second quarter of 2018, we have permanently reduced headcount at our communities by 40% on average, thereby providing a strong hedge against elevated inflationary pressures. Realized controllable expense growth has been 360 basis points below the pure average over the last three years, which has driven our controllable operating margin 250 basis points above what a company at our average rate level would expect to produce.
Delivered products and services in the formats, our residents prefer as exhibited by a 24% increase in our resident satisfaction score and an overall 97% usage rate for self guided perspective resident tours. Generated the best same store revenue growth in roughly 45% of the markets we share with peers versus a 30% average win rate among the peer group and generate more than $15 million of incremental NOI on our legacy communities with another $5 million expected through 2022.
In addition, we have demonstrated ability to consistently drive outsize growth at the communities we acquire by implementing our platform and other unique value creation initiatives. Thus far, we have expanded the weighted average yield on our nearly 1 billion of third party acquisitions from 2019 by 55 basis points, through the roughly 2.5 billion of third party acquisitions we completed between 2019 and 2021, we have on average grown revenue by 14% and NOI by 20% compared to the prior owner. Reduced controllable operating expenses per unit by 7% and expanded our controllable operating margin by 400 basis points. I credit Harry and our transaction team for finding acquisitions where we can create value to our platform capabilities.
In our view, Platform 1.0 has been a game changer, but we are not done. Our innovation team which is comprised of various UDR leaders continues to explore and implement a variety of new initiatives that should drive elevated revenue growth and margin expansion in the years to come. These initiatives rely on advanced data analytics and include reduced days vacant, better identifying retaining more profitable residents, further rationalizing our cost structure, optimizing our price engine and increasing resident satisfaction. While too early to give specifics, we believe these initiatives could potentially dwarf the economic benefits of Platform. 1.0. We look forward to updating you on our progress as we roll out these value creating initiatives.
Looking ahead, we are excited to close out a stronger than expected 2021 and move on to 2022. I want to thank my colleagues for their unwavering commitment to changing and improving the way we do business. Our culture rewards innovation, and I'm excited for our next steps as we continue to evolve and succeed.
And now I'll turn the call over to Joe.
Thank you, Mike.
The topics I will cover today include our third quarter results and our improved outlook for full year 2021, a summary of recent transactions and capital markets activity, and a balance sheet and liquidity update.
Our third quarter FFO is adjusted per share of $0.51 achieve the high end of our previously provided guidance range and was supported by strong same store revenue growth and accretive transactions. For the fourth quarter, our FFOA per share guidance range is $0.52 to $.54. The $0.02 per or 4% sequential increase at the midpoint is driven by our expectation for continued positive sequential same store NOI growth, and accretion from recent capital allocation activities. When combined with our year-to-date results, this positive momentum supported the increases to our full year 2021 FFOA and same store guidance ranges.
We now anticipate whole year FFOA per share of $2 to $2.02 with the midpoint representing 2 penny or 1% increase from prior guidance. This increase is driven by a 2 penny benefit from a 75 point midpoint improvement and same store NOI growth, a half penny benefit from accretive transaction activity offset by a half penny from increased G&A expense.
For same-store guidance we are now forecasting full year 2021 revenue growth of positive 1.0% to 1.5% with concessions on a cash basis, and negative 1.0% to negative 0.5% 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. Additional guidance details, including sources and uses expectations are available on attachments 14 and 15D of our supplement.
Next, a transactions update. Our gross 2021 acquisition activity is on pace to total approximately $1.5 billion. During the quarter and subsequent to quarter end, we accretive acquired seven communities for $900 million and sold one community for $126 million. Two of our recently completed acquisitions were sourced from our DCP portfolio, illustrating the embedded optionality we have with these investments. One of these DCP acquisitions was partially funded through the issuance of OP Units, demonstrating our ability to utilize a variety of creative capital sources.
Most of our 2021 acquisitions have been in markets that are predictive analytics framework identified as desirable. Nearly all are located proximate to other UDR communities; all have been matched funded with attractively priced sources of capital. As Mike discussed, we can generate outsized yield expansion at these communities through our multiple value creation drivers, which enhance year one yields as well as future growth. Please refer to yesterday's release for additional details on recent transactions.
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 settled approximately 11.4 million shares of common stock under previously announced forward equity sales agreements for a combined $500 million of proceeds, which to be used to equitize completed transactions. During and subsequent to quarter end we entered into forward sale agreements for approximately 6 million shares of common stock for a combined $320 million of future expected proceeds. We anticipate using these funds on a creative acquisitions, DCP investments and land site opportunities which we expect to close in the coming quarters.
Second, we have only $290 million of consolidated debt or less than 1.5% of enterprise value scheduled to mature through 2025. After excluding amounts on our credit facilities and our commercial paper program. Our proactive approach to managing our balance sheet has resulted in the best three-year liquidity outlook in the sector and the lowest weighted average interest rate amongst the multifamily peer group at 2.7%. Last during the quarter we expanded our credit facility capacity to $1.3 billion from $1.1 billion extended its maturity to January 2026 and increased our commercial paper capacity to $700 million from $500 million. We also extended the maturities of our $350 million term loan and $75 million working capital facility to January 2027 and January 2024 respectively.
For each of our credit facility term-loan and working capital facility we reduced the interest rate spread by 5 basis points. As of September 30th our financial leverage is 25% on enterprise value, inclusive of joint ventures and our liquidity totaled $1.6 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. 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?
Thank you. [Operator Instructions] Thank you. Our first question comes from Nick Joseph with Citigroup. Please proceed with your question.
Thanks. Appreciate the commentary and the earning for 2022. I was hoping you could walk through some of the other building blocks as we look to next year in terms of capturing the current loss. At least can you discussed occupancy comps, other income and normalization of bad debt?
Sure. Hey Nick, this is Mike. I'll take a first crack at this one and yes, we did talk a little bit about that earning just to put it perspective for everybody. This is again, one of the highest we've seen and experienced over the last 10 years; I'll call it 2.6% as we end the year. And as you know, we've been actively working on driving our rent roll even higher. So as you can see, last month we had around 97.5% occupancy we're down closer to 97.1% today and a lot of that has to do with just driving those rents. And so, as you see going forward we do expect that the rent growth should be about the same, if not a little bit better as we go into call it November and December.
And then as we move into next year, we expect a little bit of the same. So on the rent side, feel very competent. And then as far as it goes, other income we've been driving our initiatives. We're back into a place where we're seeing double-digit rent growth when it comes to parking, as well as our short-term furnished program. And even things like the amenity rental spaces as they are starting to really take off. So we expect other income to be a pretty driving factor as we move into 2022. And then just, I know we're talking earnin, but just to give you an idea of cost control, that's another thing that's high on our mind and something we continue to focus on as we continue with our platform. So 2022 is shaping up to be very strong and I would – I'd even go as far as to say that it looks like the highest NOI potential I've seen in my 15-year career based on all the different factors that we have played today.
Thanks. That's very helpful. And then you mentioned the seasonality expectations and now it's been pushed out a few months. How are you seeing that in terms of demand? I think you mentioned towards the end of October where we are today. What are the expectations over the next few months just as normal seasonality maybe starts to kick in?
Sure. We're starting to see a little bit more of that seasonality at play today. And it's really happened in the last couple of weeks, but again, going back to just the different driving factors other, our occupancy should be call it 97% as we go forward, we feel like we're in a pretty good spot and we can sustain that. And again, our rent rolls in a very good place. So we think that traffic, while it's coming down slightly, a lot of that's due to our own push on our rents today. So we hope you like we have plenty of traffic coming through the door and again, we'll continue to optimize both occupants and rents going forward.
Thank you. Our next question is from Rich Hightower with Evercore ISI. Please proceed with your question.
Hey, good morning guys. I want to drill down just a second on the occupancy question and maybe just help us understand maybe the magnitude of the trade-offs where obviously you've got a revenue strategy that seeks to maximize rent maybe at the expense of occupancy right now. And then you've got some potential move-outs as people that have stopped paying rent or haven't paid rent those become revenue producing at some point, hopefully sooner than later. So just help us understand maybe some of the moving parts and as that translates into revenues for next year?
Sure. Rich, I will start. I think first the thing I'd point to and something that we've been not only very pleased with, but surprised to some degree is our turnover. So the fact that we've had call it a thousand less move outs during the quarter, and I can tell you, October is starting to look very similar. We think we have probably around 250 last move outs on a year-over-year basis. That allows us to get a little bit more aggressive when it comes to both our renewal increases as well as our market rents. So we do feel like even though occupancy's coming down to some degree, we've been able to buck that trend as we push our rents. And again as long as that turnover numbers in our favor, we think we can continue to get pretty aggressive on all fronts. So some markets, a little different than others, but I'll tell you right now, they're all kind of compressing in that anywhere from 96.5% to 97.5% range across the board.
Rich, this is going to be Toomey first and then Joe will clean me up. You are absolutely right. Normally during this seasonal period, we would be dropping rents and trying to move that occupancy up, and it's just the opposite in this window of time. And that's how unique this pricing opportunity is for us. The net net benefit to next year, yes, we might trade 50 bits on occupancy for a couple of million dollars of pricing power to hold that rent level high as we come into the January first quarter type renewal, as well as new traffic pattern. And I think this is a benefit partly and due to the strong economy slash our business, but also the platform and ability to drive more traffic. We have a lot more confidence in the future to drive a lot more traffic to gain that occupancy back at minimal cost.
Hey, Rich. Lastly, just, you had a comment within your question related to non-paying residents and the potential vacancy, potential there. Just wanted to put it in context where we sit today because we really don't see it is being a material issue. We've had a lot of success at this point, working on the government assistance programs, working with our residents, trying to get them current. So we're down to at this point in time, only 250 residents throughout the portfolio that have been long-term non-payers and they are not applying for government assistance and if we could today, we would work them through the eviction process. And so that's less than 50% of our overall occupancy. So over time relatively immaterial amount especially compared to all the government assistance dollars that $20 million that we've been able to get in, the $10 million in application and the $3 million that is in process with former residents. So a lot more momentum on that front in terms of reducing that AR, the bad debt reserve and increasing the collections.
Okay. That's great color guys, and thanks, Joe for betting clean up on that one. And I guess just maybe a broader question on demand. I mean, right now every metric that you guys mentioned in the prepared comments is pretty much off the chart. But as we think about demand in 2022, I mean, is it arguable that maybe we're up against tougher comps because it's some of the sort of anomalies that exist right now with return to office, multiple cohorts of college grads, people decoupling from mom and dad's basement. I mean, is there something unique about 2021 that's not going to be replicated in 2022 as far as just underlying demand in your portfolio?
Yes. Rich, its Joe. I would maybe starting off with kind of the most unique number that is out there that supports the forward case for additional pricing power. When you look at our rent to income ratios relative to pre-COVID, they have not moved. So we've seen wages throughout our portfolio go up by approximately 7%. Our market rents are up by roughly 7% versus pre COVID. So the renter today is no worse off sitting than our multifamily communities than they were pre-COVID.
Now that you mentioned on a couple of the tailwinds, on the demographic side clearly very strong council formation. We have a different immigration policy in place today than we did over the last four year. When you look at the decoupling piece, still a lot of individuals and roommate situations and living at home. When you get to the income and balance sheet side, the biggest driver of rents in our markets is always been the ability to increase income, and we are seeing incomes go up. We see much better balance sheets, individuals, much better cash positions.
So I think where with all to pay is much better. And then the relative affordability piece is a huge driver too. And we feel very good about our business, but single family ownership and rental have been doing extremely well over the last two years. But when you look at rentership affordability relative to single family, it's actually gotten about 15% cheaper relative to pre COVID. And so the value proposition is much better for renters today, which obviously helps us keep the back door closed as well as keeping individuals coming in the front door. So net net feel very good about the demand environment going forward over the next 12 months and that's already, when we have that lost to lease that Mike mentioned of low-teens that we can already start to earnin and build-off of.
Rich, one thing I would add. This is Toomey. Unique this cycle inflation, broad based inflation has been something we haven't seen in America in a couple decades in my view to this level. And I think it's making a significant difference, not just in asset price seen, but throughout the business – are all businesses. But that most of all, and most importantly it's probably causing wages to increase dramatically.
Thank you. Our next question comes from Rich Hill with Morgan Stanley. Please proceed with your question.
Hey, good morning guys. I appreciate some of the disclosure and the prepared remarks about rental assistance. I was hoping you could drill down a little bit more and maybe help us understand what was included in absolute dollars in 3Q? And if anything's included in the guide for the full year, what I'm ultimately trying to get at is sort of what is a clean same store revenue number look like as we think about – what that might look like in 2022?
Yes. Rich, this is Joe. So try to give you a couple more stats on that, of the $20 million that we referred to as being collected on behalf of our residents, approximately half of that came through in 3Q. So you had over the last 30 days, perhaps another $3 million or so, and then the rest of that would've been in 2Q. So those are the kind of stats in terms of what's embedded in those numbers. Clearly it's been beneficial in terms of seeing AR come down, the reserve come down a little bit, seeing our collections in the quarter and after quarter come up. In terms of a clean number for 4Q, we do expect a continuance of the trajectory where we've seen our ability to get to 98% or so collected as proven out when you look in the press release and the footnotes. Yes, we've been able to get to 98% for past quarters, about 90 to 120 days after. We think that holds as we go into 4Q. So the implied revenue guidance we're looking at probably 8% cash revenue in 4Q, about 5% straight line revenue that factors in that collection percentage.
That's very helpful, Joe. That's exactly what I was looking for. Just a question on the leasing spreads for a second. A note that you – that it was mid-to-high teens for new leases, if mid – if new leases are there, why can't you push renewals even more so than you are right now? Is there any reason that those can't trend closer to where new leases are in time?
That's a great question, Rich, and part of it has to do with the regulatory environment, so we still have about 15% of our NOI that is kept, and so we just can't go out there with anything higher than call it zero to 1% in most cases. So that has something to do with it. And then I would tell you that the way that we do our pricing is we're looking about 75 days in advance and market rents move so quickly that we just never could have guessed that they were going to go that high. That being said, as you go into call it November, December we're starting to see those double-digit renewal increases start to show up. So we feel like we're in a pretty good place to capture more of it going forward and actually see more of a compression between new and renewals.
Thank you. Our next question comes from Brad Heffern with RBC Capital Markets. Please proceed with your question.
Yes. Hey everyone, maybe for Joe, just to follow-on to the rental income conversation. I would imagine that there are a lot of regional differences there whereas the average maybe hasn't changed, but you have a market like Tampa where you have 25% increase in new lease growth. I guess, how do you see a market like that behaving in 2022, where I would imagine that rent income has to have degraded over time?
Yes. Mike can take the – some of the rent to income specific, some of the outliers within our markets, but as you've seen, Tampa has been absolutely phenomenal market for us. And that's one that we would identified back in 2019 and that since then from a portfolio strategy perspective, we have been looking to grow. I think we've grown that portfolio thereby couple of hundred basis points in terms of percentage of NOI.
Just through acquisitions as well as development in the last several years. And the market that continues to screen well for us today on the quant side. Similarly actually on the supply side, Tampa is one of the few Sunbelt markets where we think supply actually looks better. As we going to 22% and 23% given past permit activity, and current pipeline expectations. So still found very good about Tampa, but Mike, you can go through a little bit on the rent to income side.
Yes. I would tell you that Tampa today actually feels pretty good. As it compares to maybe 2019, it is slightly elevated and still in that 22% to 23% range. And a lot of that has to do with some of the wage growth that we're seeing within that market. So we're actually seeing over just in the last call trailing three, trailing 12 months, about 8% to 9% wage growth. So that's helping to offset all the increases we're seeing in rents.
Okay. Got it. Thanks. And then just more broadly on Sunbelt versus coastal. Can you talk about if there are any notable differences in terms of the leasing trends you're seeing in either one?
Sure. Yes. Let me give you a little color there. As it relates to coastal versus Sunbelt, just to put in perspective first, coastal exposure for us it's about 75% of our NOI. And I'll tell you during the quarter, we did see occupancy about 97.3% and blended growth of about 7.1%. As it compares to the Sunbelt obviously that’s about 25% of our NOI, we’re running closer to 98% occupancy and our blended growth was right around 11.5% to 12%. So we did see more growth in the Sunbelt. But I would tell you when you look at As versus Bs and even urban versus suburban, we are seeing that compression across the board. I think another one to note is what we're experiencing with urban versus suburban today. And just to put it in context again, urban exposure is about 30% of our NOI. And during the quarter, we had occupancy of 97.1 blended growth of about 7.6%. And that compares to our suburban portfolio, which ran closer to 97.7 occupancy and blends were around 8.5%. So, we're definitely seeing a compression across the board.
I think it even bread we're still going through the preliminary budgeting processes as we look into 2022, obviously we're far enough along at this point that Mike can give you a pretty convicted statement earlier that this will be the best year, next year in his 15 years of managing ops here. So, we still feel very good about next year, but I think when we look at [indiscernible] would be a coastal Sunbelt, east-west, they're all converging relatively to a similar bunched up revenue growth number on a year-over-year basis. So, we don't see any big outliers for the most part next year, at least from a thematics perspective by region.
Thank you. Our next question comes from Chandni Luthra with Goldman Sachs. Please proceed with your question.
Hi, this is Chandni Luthra. Thank you for taking my question. My first question would be around just understanding, you talked about this broad placed inflation environment, but as we think about the repercussions here, in terms of, not just inflation, but also supply chain headwinds across all channels of the economy, how do you think that is impacting use that you are underwriting say for your DCP program or for your acquisitions? I mean, how do you think this broader inflationary environment in supply chain headwinds are impacting the business?
Hey Chandni its Joe. So I'll start that off and then maybe Harry can kind of dive into the development side as well, how we're thinking about that related to current and future development pipeline. But I think as Dan mentioned earlier, one of the benefits of being in the multifamily space is we are an inflation hedge, so as we see wage inflation come through, as we see broader expense inflation come through 12-month leases we should be in a really good position to continue to drive forward the top line. And then Mike kind of talked a little bit on the expense side too, in terms of what we're trying to do. We have a 50 plus initiatives at this point in time, they're both focused on top line and bottom line that's beyond Platform 1.0 [indiscernible] drive additional rents, additional income, as well as constraint expenses. And so we are trying to continue to get ahead of that and differentiate as we have done in the past in terms of controllable expenses and expanding that margin.
On the asset value side, Tom mentioned earlier in a very good place, given the wallet capital in terms of, forward appreciation for the assets that we own. From a balance sheet perspective, to the extent that you believe the rate expectations are driven both by nominal and real growth. You would expect potentially some pressure on the long end at some point in time, but given the proactive liability management that we've had for the last three years we really don't have any debt coming due for the next three years and we have minimal floating. So we don't really see any pressure on the business from the financing perspective.
Lastly, I’ll just turn it to Harry and he can take you through a little bit on the development pipeline, what we're seeing on the supply side there in terms of the channel.
Sure. So, if you think about our existing development pipeline, just start with that those projects that are under construction, we have fixed price contracts with the general contractors. So there is no price issue there. If you think about it, we should benefit from inflationary environment in terms of rents with fixed price cost numbers on the existing development pipeline. As we look forward hard costs are probably up on average 10%, materials are up 10% to 15% and lumber, copper, gypsum products, PVC, are all up significantly. And there's a lot of volatility in the market. So, as we're pricing new projects the subcontractor base is pricing in that risk until they can lock down material pricing.
But just to provide context the hard costs are up 10%. That's 6% to 7% of all-in cost increased. The rents are also up in most of these markets. So a $100 to $125 type rent increase that will neutralize that price increase. So, as we think about the viability of projects going forward, I'm very optimistic about our development pipeline looking forward.
I do think too, on the development pipeline, one thing dimension, as you look at our next restarts, I think, they all have pretty unique attributes in terms of, we've talked a lot on the acquisition side about the deal next door. But we have another phase down in Dallas with Vitruvian, more of a townhome style product that's on existing land. We have a densification play out in Northern Virginia taking 30 units offline and putting up almost 400 units. So again, a densification play and adjacent to existing product. And then in Tampa, we have a project there that's going to be going up right down the street from one of our purchases from several years ago. So all these have platform or legacy land as well. So that helps from a yield perspective.
Great. And then as a follow-up you took down your DCP guidance for the year by $20 million. So, could you talk about what are the DCP opportunities that you're seeing right now in how have yields and sort of how has the volume changed there? Thank you.
This is Andrew Cantor. Year-to-date, we've closed on three new DCP deals and acquired two of the historical deals. We continue to underwrite numerous transactions that meet both our market and our underwriting standards. At this time we are seeing additional competition. We're working on several additional underwritings right now and hope to have some additional transactions to announce in the near future.
And then just Chandni, in terms of the guidance commentary there, in terms of it coming down $20 million on attachment 11B one of the subsequent transactions that we announced is the purchase out of the DCP portfolio of assets down in Orlando. So, if you look on 11B, you can see that outstanding balance was roughly $18 million at quarter end. So it's really the pay-off of that, which brought down our DCP investment guidance by $20 million. So that's really the driver, it's not that we're seeing fewer transactions available in the marketplace for us to invest on.
Thank you. Our next question is from Amanda Sweitzer with Baird. Please proceed with your question.
Thanks. Good morning. Wanted to follow-up on DCP. Could you talk about your current DCP balance and do you expect to see greater early redemptions within the existing pool as maybe developers seek satchel liquidity events today?
Yes, Amanda that's a good question. We do have when you look on 11B within the supplemental a number of transactions that are coming up with one year to maturity, I will say one to call out specifically when you look at 1200 Broadway there in Nashville, a balance of approximately $60 million, just over 12% pref return, while the maturity is a year out, they do have the ability to pay off starting in January. And so, we do think that we'll likely see it pay off earlier next year, given the robustness of that transaction market and the value that's been created on that deal. So that's one that could be paid off earlier in the year.
That from an earnings perspective creates a little bit of a hiccup, maybe in first quarter, second quarter, but as Andrew mentioned, we are very active in terms of trying to back fill the pipeline and not just backfill, but really grow from the plus or minus $350 million today, we'd like to get up into the $400 million to $500 million pipeline, because one, the economics; two, the cycle of [indiscernible], a good time to be doing those, but really three, as you saw on demonstration this quarter, the ability to get at some of these assets. We've had about a fifty-fifty track record on being able to buy out of this piece of the business. And aspects that I mentioned earlier.
Great example of that when you look at in going yield, that's about a 46 in going yield to us, that was really a win-win for us with the developer given that we had a lockout there, it allowed them to get access to liquidity. They were able take LP units from us and that transaction and get a very strong IRR for their investors. And we’re able to buy it at a point in time when no one else was able to given the lockout. So that 46 that we're getting in year one is definitely an above market yield. And so the more of those that we can do obviously the better for our investors.
That's helpful. That makes sense. And then you've talked recently about some of the positive and migration trends that you've seen to the hardest hit urban areas. Can you quantify where that migration is coming from at all? Are you seeing people predominantly move back from the suburbs or are you seeing migration from different metro areas?
Hey Amanda, this is Mike, let me back up. I'll give you a little color on what we're seeing, both in our move ins and move outs. First of all, move outs in general, move outs from 3Q 2021 showed more former residents staying within their metro areas. It's really in line with pre COVID stats. As it relates to move in, I'll tell you, first and foremost, the lack of move ins needed in 3Q with turnover far lower than both 2019 and 2020. That was a little bit of a surprise.
But again, overall, we're seeing a slight reversal of the trends in 2020 and about 40% of move-ins came from outside of the MSA, first 23% last year. A couple of examples, New York, today is around 45% versus 11% last year; San Francisco, 37% versus percent last year; and then Boston is around 36% versus 18% last year. So again, we are seeing more people migrate back into those areas.
Thank you. Our next question is from John Pawlowski with Green Street. Please proceed with your question.
Hey, thanks for the time. I wanted to go back to the lost lease conversation, just so I get a better sense for how much growth will come 2022 versus 2023. So, Mike or Joe what percentage of leases either from regulatory issues or just from the sticker shock of a massive increase, what percentage of leases will be brought to market in kind of a first year versus a two-step process?
When you break it down on the regulatory side, John, you have 15% Mike mentioned that have rent freezes in place. In addition, when you go to markets such as California, where you have AB-1482, which is CPI plus five that's about 20% of our overall NOI, all of that within California. In Oregon you have CPI plus seven, you have a percent or two there that's capped.
And then there still is the business decision, right. If someone's 15% under market, we may not move them to 15%. You may move on to 10% because the cost of the turn in terms of downtime and the R&M expense, you got to factor that in. So, there's a business or a bottomline cash flow decision too.
So, yes you are right. Some of this could play out over a year or two. We'd hope to do as much as we can in terms of driving bottom line results here next year. But some will probably take a couple years because of those issues.
Okay. And then Mike, I believe you mentioned renewal increases being sent out today are doubled digits. Could you just give us a kind of the specific average rental rate renewals you're sending out? Sorry, the specific growth rate?
Guidance number. Dig into my pocket here for some pretty big of details there, John. But I think right now, what we're seeing is I would say low double digits across the Board.
Okay.
And I think it's a different aspect when you go by markets, obviously in a place like New York, where we were high on concessions, this time, last year it'll be on an effective basis, but on a gross basis, it's closer to call it 2% to 3%. So we're capturing a lot of that concession back as people stay. And then when you get to the Sunbelt, that is more of a fundamental, driving market rents, and still seeing call it 10% to 12% growth on renewals in places like that.
Okay, great. Thank you very much.
Thank you. Our next question comes from Juan Sanabria with BMO Capital Markets. Please proceed with your question.
Hi, good morning. Thanks for the time. Just curious on how you see rental rate growth across the markets in in 2022? You kind of talked about significant wage growth in Tampa. But just to play the devil's advocate view, I mean, do you think you can actually get high single digit rent growth? And is that predicated on a view of what wage inflation is doing?
Hey, Juan, it's Joe. So we're going to back up a little bit here because we're going to have a lot more commentary on that in three months, when we get into guidance. Right now, we're going through those preliminary budgets and trying to run them through both our top down and bottom up processes to figure out where we think revenue should shake out as well as the rent growth that drives that revenue. What we did say earlier was, I think, on a year-over-year revenue growth we are landing pretty similar by region, but I think we're going to hold off in terms of getting into what's the underlying rent growth and assumptions that drive that and just kind of keep it at that high level for now.
Fair enough. And then just on the, the regulatory restrictions on rent increases to in place customers, is there a way to quantify what your same store revenue would have been had those restrictions not been in place?
Yes, I mean, overall, we said it be between all of the regulatory restrictions, meaning our inability in some cases to collect rent and revert back to a normal period of collections and delinquency, the impacts that other income have historically had on us and of course, the renewal increases. We've kind of said $6 million to $8 million seems to be the dollars that we've been impaired that hopefully over time we're able to recapture price six of that is roughly related to the collections piece of running around 98%. The other several million has to do with the renewal increases.
Thank you.
Thank you. Our next question is from Austin Wurschmidt with KeyBanc Capital Markets. Please proceed to your questions.
Hey, good morning everybody thank you. So, hitting Juan’s question a little bit differently, you have talked about the converging trends between markets next year and demand certainly has driven stronger increases in the Sunbelt. And I'm sure that there's an above average market to market there, but has the dynamic in your view changed between Sunbelt in coastal markets as far as weight growth looking forward where coastal has historically been stronger, do you think that'll still be the case or does that converge as well?
I think over the longer term when we look at it from a, you know, four- to 10-year perspective, there is likely to be a little bit more convergence there, meaning that if historically San Francisco had the monopoly on tech-oriented jobs in the high incomes associated with those, if New York had a monopoly on the finance jobs of the world, we think that while those two remain hubs of that activity on the margin, if you think about the rate change maybe they lose a little bit. And so you do see more of these satellite offices, the whole full scale remote work from anywhere really is somewhat immaterial. But as you do have some of these remote offices that go to different locations and Sunbelt or other coastal cities you do see a spreading out of the income likely over the next four to ten years, which, maybe levels the playing field a little bit for some of the Sunbelt markets.
But at this point in time, you are also seeing a lot of capital flow into those markets, which is good from an asset value perspective. But when you look at supply environment supply is going to be up for the Sunbelt next year. And I think 2023 honestly when you start to see more of that divergence as a lot of the permitting activity that we saw back during 2020 and early part of 2021 where Sunbelt just kind of powered through and the coastal markets pulled back, you start to see those deliveries in 2023. And so probably more of a headwind in 2023 from a supply perspective relative to the coast.
Yes, that's helpful color. Thanks. And then another one for you, Joe. You guys have over equitized the acquisitions here to four and you've highlighted the focus on maybe bringing leverage down a bit, but at what point do you think you'll fund future investments on a more balanced basis between debt and equity?
Yes, it is a great question, Austin. It's one we've been actually discussing quite a bit internally. We're going to be discussing a little bit with our board in the next several days. As you mentioned, we have been trying to fully equitize our external growth efforts over the last year. What that's done for us is bring debt to EBITDA down another point or two 1.2 times at the expense of call it a percent of earnings growth that we could have otherwise seen. And so the discussion that we're having now is we feel very, very good about the trajectory of EBITDA, feel very good about the incremental NOI and FFO we're receiving from our external growth. And we feel very good about the path that we've laid out in terms of, we think we'll be the 6.5 times debt to EBIDA by year end, closer to low six’s, high five’s by year end next year. And so we feel very good on the balance sheet side, given all the work that we've done there.
So, we are getting closer to being able to fund in a leverage neutral manner, I think, on a go forward basis as we continue to hopefully find accretive opportunities to deploy into. But yes, still up for discussion and something we're wrestling with right now.
Great. Thank you very much.
Thank you. Our next question comes from Rich Anderson with SMBC. Please proceed with your question.
Hey, thanks. Good morning, everyone. So, I just want to isolate on one commentary early on the call. I think you said high teens, new lease rate – new lease growth is how the math works for the fourth quarter. And part of that is concessions burning off and that will last forever. Obviously, that's when you calculate the year-over-year growth, that becomes declining factor as things settle. You obviously have wages and a strong economy and people rushing to get back near their office and schools, but all that stuff a year from now will kind of be a wash in the year-over-year growth calculation. So, my question is what's the repeatability to jump on that topic again of this strong fundamental picture. You're obviously not going to say that you're going to do high teens, new lease rate growth forever.
So, is this environment, sort of kicking out the concession element and the stuff that's not repeatable figure to be more like a single digit type of growth, still very strong, but not fair to call this repeatable, correct.
Yes. I don't know at this point, Rich, it's something we've been discussing a lot, because I'll say as we look at the first half of next year, really high degree of conviction that our numbers are going to be pretty fantastic in terms of running from 4Q of this year into the first part of next year, given that earn and that loss to lease. A lot of the discussion we're having as to what does the second half look like, because it depends a lot on your question there? I think there's attributes that when you say it's going to be a wash it can't be repeatable. There are aspects to it that could continue to support our efforts in terms of supply, it really doesn't pick up all that much next year it's probably up 10% or so in our markets, which is around 1.7% of stock.
The cost you're looking down around on the 1% range in the Sunbelt, you're kind of 3% to 4% range. So supply's not going to be a big headwind for us next year. I think that relative affordability piece still exists next year in terms of single family versus multifamily and the value proposition that exists there. I think when you look at the amount of job openings exist in the market today, and the fact that that is driving a substantial amount of wage inflation that should drive above average wages and therefore above average rental rate growth. So it kind of remains to be seen between, can it be up in the mid-teens again by the time we get to second half of next year that would be a phenomenal outcome for us. It would be an outlier. We'll probably revert them back a bit, but still a lot of good tailwinds behind us.
Rich, it’s Toomey. A couple of other factors in listening to your commentary and Joe's, don't forget, I mean, we still have a lot of markets that are COVID impacted either on a regulatory or businesses opening up. And if those slide into the second quarter of next year, we should be able to go to full pricing power on those markets. And then right now we can't contemplate or see that, but it sure feels like the pressure is going to mount to open up those cities, bring the entire workforce back into the office and lift restrictions in regulatory type environment. And if that were to occur, that would be a very powerful tool towards the second half of next year. And while a lot of people are talking about the first of the year, I find politicians go to sleep at the first of the year and don't wake up until February, March. And so, we'll see how that plays out, but that's a big factor if you will, in our looking at 2022 and how we might guide for that.
Okay. And then second question is this is all great, but who's the loser in this environment because everyone can't win. And I'm wondering if what's happening to high-end multifamily like that, which you own, and the clientele that you have as residents who have the money to afford, [indiscernible] but are you exposing inequalities in the country whereby the people that can't afford it, that probably has long-term negative consequences like, which we've seen, I guess you could say in San Francisco, as of late. Is there a risk that you come out of here with a pretty substantial hangover and how do we avoid that?
So, Rich I’ll stay away from the societal questions and leave that to people that have a bigger paycheck than I do to solve. But you see from the balance and how we've constructed our portfolio, we have a high exposure to a B type portfolio in a number of markets, as well as SMA. And so yes, people will reprice themselves down into more of a mid-market type product and they'll double up. And that's the activity that we would anticipate if we push too hard, we'll be sensitive to that. I mean, we make a lot of money off of renewals and keeping our day's bacon down.
And if you think about our business model is really as simple, we got 21 million available rentable days. How many of them do we keep people in apartments paying us rent? And so I won't venture back to your question directly, but I think as positioned as a company, we benefit from up cycles and down cycles, and we'll always construct ourselves in that way.
I think the doubling up responses is – attacks the question pretty well, actually. Thanks very much.
Thank you. Our next question is from Neil Malkin with Capital One Securities. Please proceed with your question.
Hey, good morning, everyone. First question I forget if you said this in your prepared remarks Tom, or it was in the commentary from the press release last night, you talked about capturing outside share demand from marketing strength and various NextGen initiatives. You also talked about opening up the funnel with regards to the NextGen platform, I'm hoping I don't know, Mike or Joe could you maybe elaborate on what you mean by that and the kind of at least maybe near-term initiatives or things that you're doing to drive the leasing traffic at such a impressive level?
Yes. Neil its Mike, I'll kick it off, and first really good question, really appreciate it. We are very pleased first and foremost we've officially rolled out all of our markets across the portfolio in terms of Platform 1.0. I think you've heard us talk before; we definitely have a culture of innovation and a track record of execution. So we've done a really good job putting that behind us and I will tell you, we're more excited about what's to come. And you've heard us talk a little bit about it today on the call. Joe mentioned that we 50 initiatives that we're currently working on. We're constantly looking at different ways of improving the business. And while we're looking at those things, we're really focused on some of the big things. And Tom just mentioned one of the bigger ones, not a new concept necessary as it relates to vacant days, but as he mentioned, we do have around 20 million, 21 million vacant days or rentable days.
And if you think about it, 3% vacancy on that is about 600,000 homes where you have opportunity. Our average daily rent is about $70 a day. So when you think about it, that's $42 million. We're not going to capture it all, but we do feel that we can improve our process, whether it's on the turn time or whether it's moving people in faster, there's a lot of opportunity there. On opening the funnel and improving our pricing strategy over the last year or so we've done the heat maps that's created about $6 million in value for us, and we feel that there's more things to come on that front. We like to think about it in terms of creating more buyers versus shoppers. How we utilize that demand? How we get it to our pricing team faster and he has leveraged our website. So we are starting to open up that funnel. We're seeing it in traffic and we're seeing it in pricing power.
And I'd say probably last but not least continuing to work on the cost side of the house and being more efficient as it relates to using bots artificial intelligence, things like that. And ultimately what you're going to continue to see us do is utilize our data analytics, excuse me, capability, to continue to innovate. We have a lot of opportunity with the data that we're capturing today, whether it's with our consultants that we're working with, or whether it's with our own internal guys that we have crunching data today; so a lot of opportunity to come.
I think, give a couple stats. So everyone's heard us talk about our 97% self touring, but in terms of what that does, in terms of the average tour time and then how many more tours we can now take a day, go through some of those stats. Because those are helpful in terms of how much more traffic can you drive to a community on daily basis.
Yes. We've used some examples in the past where typically one of our leasing agents, if you will could see upwards of six to eight people in a day because the average time that it takes for somebody to tour is about an hour. Now we're seeing that about 3X to 4X that they can send three or four people out at the same time and manage all of the while, having them go out there and it typically takes about 20 minutes for somebody to tour our property at 60 minutes on average. So we're able to maximize our people's time and energy, and we're starting to see more efficiencies, not only at the property side of the house, but also here in our former office where we have our centralized team that are able to work more apartment homes at any given time.
Neil, this is Toomey. I always love piling on this one, because it's just so much fun. Think about it. You go down and you buy a car and the salesman just keeps talking to you and talking to you to the point that you just want to say, just get out of my way. And that's really what we were doing to our customer. We were taking them on a one-hour expedition and the truth is it turns out they really want 20 minutes. They've already figured out a lot of things and they don't want us in the room when they're talking about their decision on where they want to live. They actually just want to buy. And we've been trying to sell and convince them that that one-hour is valuable, and the truth is they've said 20 minutes, I can make up my mind.
And so this is about making the benefit for our customer, making it easier to do business with us. And I don't know any business on this planet right now that's not trying to do the same thing, make it easier on the customer to transact with you and the funnel becomes bigger for us. We can push more traffic, but what that does is we create an open dialogue towards the resident that says 10 people looked at that apartment today. You need to buy it at this price on this date or we're going to the next one. And our pricing engines are build off of no forecasting, but a solve for occupancy, they're first generation pricing engines. The next ones will be much more data driven and if you will a buy decision, not a sale decision. And that's just the power of what we're looking at.
Now, we have control of the data. We have a broad enough set of facts that we can actually generate a different pricing concept and scheme. Will it work all the time? No. Will it work in the vast majority? Certainly. And I think that's kind of one example, the days vacant another and the innovation team has a list of 50 different projects and I'm expecting a hell lot out of them, not just small ideas like we've done in the past, but big ideas. Sorry to get on my soapbox, but I really love the topic.
No. I appreciate it. I think everyone on the call appreciates the – how best in class and how far ahead you guys are of the pack. So kudos to that. Other one for me is for Mr. Van Ens who's sitting there quiet or I imagine sitting. Can you just talk about the – how you guys are thinking about or handling the coastal markets regulatory uncertainty and or just the restrictions and by that, I mean, Seattle let get the renewal increase, I believe moratorium, but the Mayor extended the evictions through the end of the year. Do you see something similar? New York extended the eviction through the end of the year. I think California, I think fairly open now. So can you just maybe talk about how you see those things playing out near-term and what you're kind of strategy and policy is around that? And then maybe if I'm lucky you can tell me, how you guys think about or if you're worried about this whole idea of vaccine mandates potentially impacting large swallows of the police and fire departments in some of these cities?
Sure. Neil, so a little bit to impact there. Listen, we continue to handle it exactly as we have been, right. We've been facing these eviction moratoriums, renewal rent, increased limitations, a variety of other COVID restrictions for the last 1.5 years in lot of these coastal markets. So it hasn't really changed our operating philosophy. I think where you're seeing a difference now is just in some of these bridge moratorium markets. So when you look at State of Washington, for example California, et cetera we still do have plenty of restrictions for sure over the next two to three months as complex as what the original regulatory environment was and or the programs that obviously we've been participated in for rental assistance. But we're working through it on a day-to-day basis.
We have a team as you know, that's dedicated here. Kudos to David and Camille have done a fantastic job of keeping all of us just in the know with what's happening out there, so that Mike can adjust operating strategy when he needs to. As far as what's going to happen going forward, I mean, it's a little bit difficult to say, I mean, its geez going into this year, we would've thought that we would've already been through most of the regulatory stuff. Right now, as Tom said, some of these things are going to bleed into at least midyear next year. Whether that's some of the eviction moratoriums that continue to get extended, we still face those in New York, Seattle property you mentioned Boston proper, New Jersey under 80% AMI, and then to a certain extent in DC whether it's other restrictions that we're going to face, we'll just have to see, but we're going to continue to work on them.
And then I don't know if Joe has any thoughts on vaccine mandates and as far as police forces and all that kind of stuff, but I guess we'll just – we'll just have to see what happens there. I mean, we don't want to get into the politics of anything like that, and so we'll be monitoring it just like you are.
Thank you. Our next question is from Joshua Dennerlein with Bank of America. Please proceed with your question.
Yes. Hey everyone. Hope everyone's doing well. Wanted to folks send on the non-uncontrollable operating senses in particular real estate taxes? Any early kind of indication on maybe how those are going to trend going forward; I know with price and real estate prices, it feels like maybe municipalities might take advantage of that?
Yes. Hey Josh, it's Joe. We are putting together those budgets at this point and are working with third-party consultants throughout our different markets. I'd say at this point in time preliminary view is that throughout the portfolio, we're probably a plus or minus 4% to 5% overall growth next year. Yes, you have California at the low end of that at 2%. The Northeast looks to be a little bit lower where we don't have any exemptions in place. Places that we do have, some of the exemption burn ups, might put a little pressure on some of the asset specific numbers, but overall Northeast a little bit lighter where we see more risks today a market like Austin, some of our Florida markets. So generally speaking a little bit more pressure in the Sunbelt, so you're kind of low end 2%, high end on the Sunbelt probably 6% or 7%, but blending to that 4% or 5% based off what we see today. Today, I think we have probably 30% or 40% visibility into overall real estate taxes for next year. So we do have some insights into that at this point.
Okay. That's super helpful. And then maybe just wanted to touch base on some of your opening comments about collecting prior rent that you wrote off as bad debt expense, so what's driving your success there and maybe what's the opportunity set that New York program you mentioned?
Yes. Yes. It's, I think in terms of what's driving the success, it really goes back to the innovative mindset that Mike talked about in terms of, like we've had a history of picking up [indiscernible] (0:17:45) items that take a lot of work, rolling up the sleeves and going after what are sometimes considered immaterial dollar amounts, but when you spread them over 55,000 units, they really start to add up. And so putting the task force in place probably what was eight or nine months ago now to really go after this opportunity, getting a pretty good jump on it, making sure we had the resources available and then making sure we had the communicate with the residents. It has been a constant dialogue and a constant effort, both with current residents, as well as former residents to make sure they understand what the resources are available to them, both from government assistance, but also our own willingness to work with them and try to get them through this time.
So I think it just comes back to putting the resources to it. That's what allowed us to get ahead start, I think on the rest of the market in terms of being out there on the collection side. In terms of the former resident opportunity, California and Washington are really the two big ones today that are up and running. Today we've, I think we have 3 million or so that have been received or an application that's out of roughly 14 million overall that AR balance related to those two markets from the covered period. New York really hasn't got off the ground yet, and I believe it has a lower dollar amount. I think they allocated $125 million to that program. So little bit less of an opportunity there and honestly less of an AR balance associated with that market. So hopefully over time we see continued momentum there and hopefully we see some of these other markets utilize some of their excess capacity from the current resident program and reallocate some of it to the former resident programs to help them as well.
Thank you. Our next question comes from Haendel St. Juste with Mizuho. Please proceed with your question.
Hey there, thank you. A couple of quick ones from me. First on the acquisition side, obviously you guys have been stepping up your activity there, notably in the mid-Atlantic where it looks like you sourced half for a little bit more than half your volume of the $900 million. So I guess I'm curious first on that the cap rates, the IRS, your underwriting, and then more broadly a question on the opportunity set with, say MetLife. It's been a few years since you guys did the asset swap, I think in 2018, I think there is 2013 assets left there; curious on the opportunity there, your level of interest or any conversations? Thanks.
Hey, Haendel its Joe. Maybe start at a high level in terms of the market selection. I'd say we kind of have three tiers of conviction within our broader process. We have conviction in terms of our market selection through the portfolio strategy process, high degree of conviction in terms of our transaction team's ability to identify assets that fit well with the platform. And thirdly, really high degree of conviction in terms of our ability to operating our performance to deal next door. And so when you look throughout the assets that we've been acquiring, yes, we started a high level and we had maybe a third of our markets in a given time that we would say are by orientation. And so the markets that you're seeing on here in terms of the buys typically represent those DC, Baltimore, Philly all the Tampa and Dallas work that we've done this year.
So it started that level, but then it's really getting into the wheels and trying to identify, can you find a deal next door, where you have greater scalability and greater efficiencies of headcount? And then can you layer in a lot of the operational upside. The core blocking and tackling the initiatives, putting in a capital program in some cases, overriding the platform and so, it's really how we kind of approach it in terms of the yields and IRS that you reference. Typically we've been in the mid-4s type of range. That's a year-one unlevered FFO yield. So prior to management fee, prior to CapEx and so typically mid-4s and that's married up with a cost-to-capital, that's been low-4s to high-3s. So that's where some of the initial accretion comes from, and then these assets always have additional upside in years two and three and keep expanding that margin.
Lastly, you just asked about met; really no updates there continue to be a fantastic partner for us. We did shrink the portfolio there a couple years ago and had a win-win off the truck. We executed with them. But you see in the presentation, the momentums starting to come back in that portfolio bit more urban, little bit more A+ so see a good momentum in that portfolio; when you look on attachment 11a.
Yes. Notable and appreciate the color there. You guys provided a bunch of helpful stats on the coastal versus Sunbelt, urban versus suburban. Can you guys discuss rent-to-income levels in some of those regions? How you're feeling there? Your ability to push pricing given, especially Sunbelt we've seen, I think rents, I think you mentioned being up 20 brand lease rates up 20% over the past year. So maybe some color on rent income, and just thoughts on relative pricing power amongst the region? Thanks.
Sure. Haendel its Mike. I will tell you for the most part, it's pretty consistent across the board. We have a couple of markets that are outliers. Monterey Peninsula for us has always been the one market that runs a little bit higher and even with that stat, it's about 25%, 26%, so it's still – still well below that 30% threshold that we watch. And then you have other places like Austin, Baltimore, and even Philadelphia and Portland for us, that's sub-20s. They're around 17%, 18% average rent income ratio. So again as a whole, we're right around that 20% to 21%, and it's very consistent with what we've experienced over the last couple of years.
It's helpful. Thanks guys.
Thank you.
Thank you. Our next question is from Daniel Santos with Piper Sandler, please proceed with your question.
Hey good afternoon. Thanks for us digging around and taking all the questions. My first question is I was wondering if you could comment specifically on your thoughts on the potential for good cause eviction legislation in New York and what that might do to your views on whether or not you want to sell all down exposure. And if this effect is effective rent control is implemented, would you expect any sort of savings on property taxes?
Yes, good question. It is something that definitely isn't new to us in the regulatory team. It's item they've been tracking in that market. Most of the legislative sessions at this point have shut down for the year. And so as they fire back up in 2022 we do expect in New York specifically that you're referring to as will some of the other resident friendly markets will have series of rental-oriented topics that they'll be debating and discussing. So it's something that we are keeping an eye on and that from operational perspective, we'll be ready for in terms of the implementation of that and how we operate. It is definitely a factor though, in terms of when you reference, buy and sell a lot of our work hinges on our predictive analytics platform, but we do have a qualitative overlay and regulatory is one of those key factors that we look at. Obviously a market like New York, or LA, or San Francisco does not screen well on that factor.
But we do have a number of different factors. We got to juggle when making these decisions. It's no different than looking at climate change down in South Florida, it's no different than looking at the big supply picture that we see in Austin and Nashville. There's factors in every market that we have to mash them all together and figure out what's the best potential outcome on a go forward basis. So it does play into our thinking, but it's not going to cause us to necessarily sell down. But it does definitely continue to drive forward the value creation piece of why do we want to be a diversified platform. Clearly for reasons such as this demand supply, regulatory, they can all get out of whack at certain different points in the market cycle. So being diversified clearly is the right path for us to stay on.
Perfect. That's helpful. And then one last one for me and sorry, if you already covered it, it's been a long call. How much more of benefit are you expecting from smart rent? And what might be the timing there? I assume that there are some sort of lockups and you're exiting would be synchronized with your partners.
Yes. Good question. So, we've got a couple items that you can kind of look through for reference within the supplemental. Primarily on Attachment 1 we do have a footnote in there, down at the bottom footnote three that refers to what the unrealized mark-to-market was in the quarter. That was almost $15 million both on balance sheet and through our investment in the funds through two separate investment areas. If you go to 11A you can see what the balance is for RATV1 and 2 of approximately $44 million. Within that and within our on-balance sheet valuation for our smart rent investments, it's about $34 million today. If you look at our ownership percentage and current stock price, debt investments probably worth $75 million to $80 million. And so, you are so somewhere in the $40 million, $45 million left over time, obviously there is liquidity constraints and yes, we will try to align with our partners on that investment in terms of how we move forward with it.
So net-net very pleased with it. I think the bigger two issues coming out of it, one phenomenal to hit a grand slam here on it is that $75 million to $80 million basically pays for all of our smart rent installs as well as all of that $30 million initial investment in our platform. So taking care of that investment is fantastic. As well as you think about this being a critical piece of the found infrastructure for the platform, being able to help set up the self-guided tours that drive that larger funnel. It's been a huge win-win for us, as well as the residents given it helped us from an expense control standpoint, helped get us additional revenue that obviously helps the resident in terms of controlling their living environment and their overall resident experience with us.
So I've been very pleased with smart rent and the partnership we've had with them.
Thank you. Our next question comes from Alex Kalmus with Zelman & Associates. Please proceed with your question.
Hi, thank you very much. Just turning back to the eviction process throughout your diverse portfolio, can you describe how that process is playing out versus a baseline where the moratoriums have been listed?
So, I guess starting with a couple of numbers Joe talked about, there's only about 50 bips or so of kind of long-term non-payers debt. If we could move right now we would move or have moved on. You have to remember these are people that have been wholly nonresponsive really over the entire period of COVID. We've reached out to them consistently. They just won't talk to us, they won't apply for rental assistance. Eviction for us is really a tool of absolute last resort and is really to try to get them either into the application process or just get them once again to work with us on some sort of payment plan, et cetera.
So, we are a little bit more, I guess I would say free from an eviction type process in places like Texas, Florida, et cetera, that don't have moratoriums anymore. However, we also had significantly less delinquency down there. So the numbers are fairly de minimis. They do a lot more handcuffs when it comes to coastal markets, especially those with the moratoriums still or effective moratoriums in the form of kind of bridge regulatory, restrictions. Continuing to work towards that really the biggest piece in a lot of those coastal markets is that if you are trying to move forward or trying to get someone to work with you, you have to apply for them. And after that maybe you can move on them.
So we're working through that resident by resident, as we've talked about, we want to work with everyone we can, we want to help everyone we can. We want to source assistance for everyone we can. But at the end of the day, some people just will not work with us.
Got it. Thank you. And just starting to more generally on the acquisition market, there has been a lot of well-funded, permanent capital vehicles that are open ended and how is that playing out into competitive environment today? And do you think that translate to in the long term in terms of your ability to acquire new assets and dispose off at attractive prices?
This is Harry. Yes, you touched on a major point that’s driving cap rates down. So, you think about the sort of three legs. One is interest rates, which have been low; two is projected operating performance which is now very positive; and previous capital flows, which are enormous. And so you've seen a cap rate response as cap rates yields have gone down and values have gone up. From our perspective, I mean, the way we think about it is we're not going to buy everything. There will be call it $150 billion to $200 billion in institutional type apartments that we’ll sell in 2021 and 2022 will probably be something very similar.
We continue to focus on the types of assets that we've talked about on this call and really over the last year or two, where over the last year, we've bought a dozen properties for $1 billion, $6 billion, $7 billion. And candidly, over the last two and a half years, we've invested $3.5 billion between acquisitions, development, DCP. We've invested in 13 markets across that time. So that, gives us a fairly wide brush where we can source our deals. And I'm not suggesting that it's easy, that it's getting easier. It certainly is not, but we only need a few to continue to deploy the capital that that we raise.
Thank you. There are no further questions in the queue. I'd like to hand the call back over to Chairman and CEO, Mr. Toomey, for any closing comments.
Well certainly, and thanks to all of you who have been on the call for your time and interest in UDR. As you can tell, we're really excited about our business and the prospects for the future. But I want to remind you, we remain focused on continuing to execute our strategic plan, as well as a high execution rate on our differentiated value creators.
Couple of closing, other thoughts. I'm very pleased with our team and our culture we built, which was really evident in our associate engagement, both in the response and the feedback, I’m very proud of that. And thank all of my associates for what they've been doing through COVID, but what we've built for the future. And lastly, for the recognition by GRESB as UDR as an ESG leader.
With that, we look forward to seeing you at Nareit and hope you take care.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.