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Mid-America Apartment Communities Inc  (NYSE:MAA)
Q1 2019 Earnings Call
May. 02, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen. Welcome to the MAA First Quarter 2019 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, the companies will conduct a question-and-answer session. As a reminder, this conference is being recorded today, May 2, 2019.

I will now turn the conference over to Tim Argo, Senior Vice President, Finance for MAA. Please go ahead.

Tim Argo -- Senior Vice President and Director of Finance

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

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

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

I'll now turn the call over to Eric.

Eric Bolton -- Chairman and Chief Executive Officer

Thanks, Tim, and good morning. We're off to a good start for the year as the first quarter's growth and effective rent is the highest that we've captured over the past eight quarters. Resident turnover remains historically low levels and rent growth on renewal transactions continue to be strong. The increase in combined new and renewal lease rates on a lease-over-lease basis was 240 basis points ahead of the performance in Q1 of last year. We're, of course, just now entering the important spring and summer leasing season, but we certainly like the trends that we're capturing as the compounding benefit of steady rent growth continues to make a growing and positive impact. Strong expense control continues to be evident, particularly in the areas of repair and maintenance cost and utility expenses.

Our property and asset management teams continue their record of innovation and expanding use of new technology while also continuing to leverage the benefits of the larger scale of our platform. Beyond these encouraging trends with the same-store portfolio, our new development portfolio, our current lease sub-property portfolio and our redevelopment pipeline, all continue to come online and will make increasing contributions to FFO over the next couple of years. Our high-growth Sunbelt markets continue to capture steady job growth and solid demand for apartment housing. As pressures surrounding high housing cost and related cost of living challenges continue to influence population growth and migration trends across the country, we continue to favor our regional focus.

Across our portfolio, average rent as a percentage of monthly income continues to hover in the 20% range, a very affordable relationship. We believe that three to four cycle, our regional markets will drive job growth and resulting demand for apartment housing that will outperform other regions of the country. As a recap in our recently published annual report, after two years, with a heavy focus on significantly retooling and integrating our operating platform, we believe that MAA is now even stronger and better positioned. We're excited to now be fully focused on capturing the opportunities associated with the enhancements that were made. We look forward to continued positive momentum over the coming year.

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

Thomas Grimes -- Executive Vice President and Chief Operating Officer

Thank you, Eric, and good morning, everyone. Our operating performance for the year started off well. We've continued momentum in rent growth, strong average daily occupancy and improving trends. Effective rent growth per unit was 3.1% for the quarter, this was the fourth straight quarter of improving year-on-year growth. For perspective, in the first quarter of 2018, this number was 1.4% from 1.7% in the second quarter, 2.1% for the third quarter, 2.4% in the fourth quarter and now up 70 basis points sequentially. Said another way, in the last year, we've doubled our effective rent growth rate. We're pleased with the positive trend of this steady compounding driver of long-term revenue growth. This, of course, is led by a steady momentum and blended lease over lease pricing.

Blended lease over lease rents for the quarter were up 3.9%, which is 240 basis points better than this time last year. Average daily occupancy remained strong at 95.9%. Expense performance was steady for the first quarter up just 2.1%. And marketing growth rate stands out in our report, but that was a result of a credit in last year's numbers. Adjusting for this anomaly, marketing expenses would be flat with prior year. As a reminder, our annual operating expense growth rate since 2012 has been just 2. 4%, well below the sector average. The favorable trends continued in April. We're on track for another month of strong blended lease-over-lease pricing. April blended lease-over-lease rates were up over 4%, which is well ahead of the 2.8% posted in April of last year.

Average daily occupancy for the month continued at a strong 95.9%. Our 60-day exposure, which represents all vacant units and move-out notices for a 60-day period is 8.4%, which is in line with last year. On the redevelopment front, in the first quarter, we completed about 1,700 units, which keeps us on track to redevelop 8,000 units in 2019. This is one of our best uses of capital. On average we spend $6,100 per unit and achieve an additional 11% in rent, which generates a year one cash-on-cash return in excess of 20%. Our total redevelopment pipeline now stands in the neighborhood of 16,000 units to 17,500 units.

The latest market delivery information is on with our prior forecast. Job growth in our market is expected to be 2.1% versus 1.6% nationally. As long as demand remains strong, we expect the positive rent growth will continue to build. Our teams are pleased to have the work of 2017 and 2018 in the rearview mirror. We're encouraged with the momentum in rent growth and excited to have our transformed platform fully operational. Al?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Thank you, Tom, good morning, everyone. I'll provide some additional commentary on the company's first quarter earnings performance, our balance sheet activity and then finally, an updated guidance for the remainder of the year. FFO of $1.58 per share for the first quarter was $0.11 per share above our guidance for the quarter. Excluding two items not included in our forecast, a gain on sale of the land parcel and preferred share adjustment, which we'll discuss more just in a moment. FFO for the quarter was $1.51 per share which was still $0.04 per share above the midpoint of our guidance. Operating results were $0.02 per share favorable to our prior forecast, with positive contributions from both same-store revenue and expense performance during the quarter. A continued strong occupancy supported the favorable rental pricing trends outlined by Tom, while favorable repair and maintenance and utilities cost also continued pressure from real estate taxes during the quarter.

The real estate tax expense growth was 6% for the quarter, includes the impact of some timing of appeals and we still expect our total cost to grow in the range of 3.75% to 4.75% for the full year. Favorable performance for interest expense and other income during the quarter primarily related to our recent bond deal and casualty gains combined to add the remaining $0.02 per share to FFO for the quarter. We also sold a small land parcel located in Atlanta during the quarter, which was acquired in the post merger. The parcel was not a viable development for us and was sold as an alternative use. Given significant uncertainty regarding ultimate closing of the sale, the gain of $0.08 per share was not included in our original guidance for the year. In addition, we incurred non-cash expense of about a $0.01 per share during the quarter related to the market-to-market adjustment of our preferred shares, which consistent with our practice was also not included in our forecast.

During the quarter, we completed a significant portion of our financing plans for the full-year with the issuance of $300 million in new 10-year public bonds and the effective rate including the impact of settled swaps of 4.24% and with the closing of an additional $191 million of fixed rate mortgages priced at very attractive 4.43% for 30 years. The proceeds were used to pay down our unsecured line of credit, which will be used to provide the majority of financing needs for the remainder of the year. We also continued to make progress on our development pipeline, funding $15 million of construction cost during the quarter. We expect to fully complete two communities this year and also likely start additional projects as part of our $100 million to $150 million total projected funding for the full year. Now we continue to expect the combined stabilized NOI yield on our development pipeline to be in the 6% to 6.5% range.

Our balance sheet remains strong, we ended the quarter with low leverage with 32.6% debt-to-total assets with over 85% of our debt fixed or hedged against rising interest rates at an increased average maturity of eight years. At quarter end, we had over $967 million of cash and funding capacity under our line of credit and our current forecast is leverage neutral. Finally, we are revising our FFO guidance for the full-year to reflect first quarter performance as well as our updated projections for transaction and debt financing plans for the remainder of the year, which are now expected to reduce FFO by about $0.03 per share compared to our previous forecast.

Also, just as a reminder, we do not forecast any future non-cash adjustments to the valuation of our preferred shares. FFO for the full year is now projected to be $6.11 to $6.35, or $6.23 per share at the midpoint, which is an $0.08 per share increase of our previous guidance. We also announced net income per diluted common share to be $2.19 to $2.43 per share for the full-year.

We're certainly encouraged with a strong first quarter performance, but we still have very important leasing season ahead of us, a busy leasing season ahead of us and our comparisons do become a bit more challenging over the remainder of the year. We're maintaining our previous same-store guidance and we plan to revisit these projection with our the second quarter earnings release.

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

Questions and Answers:

Operator

(Operator Instructions) And our first question comes from Nick Joseph with Citi. Please go ahead.

Nick Joseph -- Citigroup -- Analyst

Thanks. Al, you mentioned the current development pipeline and NOI yields of about 6% to 6.5%. How does that compare to the new starts expected this year and the recently land acquisitions?

Albert Campbell -- Executive Vice President and Chief Financial Officer

So you're talking about the new Phoenix deal that was a pre-purchase that we announced, Nick, is that -- what the comparison of that?

Nick Joseph -- Citigroup -- Analyst

That will be the development starts later in the year and then the land that you acquired in Orlando. Are you also underwriting the 6% to 6.5% for that?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Right, right. And was the intent of the comments to say really we've got -- the current deals we have under way as well as the ones we plan to start later this year. All of those will be in the range of 6% to 6.5% in general and the total pipeline then would obviously in that range as well. So none we see below that low end of this point.

Nick Joseph -- Citigroup -- Analyst

All right. Perfect. And how does that compare to cap rates in those markets today?

Eric Bolton -- Chairman and Chief Executive Officer

I would tell you, Nick, for the quality of assets that we're looking to develop, I mean, those cap rates are going to be 4.75 -- 4.5 to 4.75 is routinely what we're seeing today.

Nick Joseph -- Citigroup -- Analyst

Thanks. And Eric you mentioned the strength in the markets, I'm wondering if you're seeing from new residents and I'm sure you track where they're moving from. Any population flows or any change in trends from the Northeast or other high-tech states just driven by the change in tax loss?

Eric Bolton -- Chairman and Chief Executive Officer

I'm going to let Tom mention that. Tom?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

I mean, Nick, sort of the best -- I mean, certainly we're seeing some shift in change and we're seeing strength in the Sunbelt. Honestly, the best explanation I've seen of this is a third-party firm tracks U-Haul Rentals and it costs 25% less to move back up north than it does to move to the Sunbelt, but we are -- we don't have specific information on exactly that. But it is -- the trends are positive.

Eric Bolton -- Chairman and Chief Executive Officer

I would tell you, Nick, that we continue to -- I think Nashville is going to continue to see some migrations inflows if you will coming out of Northeast particularly as the Alliancebernstein now begins to shape up. I think the Raleigh area continues to attract a lot of particularly technology-based jobs both from the Northeast, West Coast, of course, Austin has been doing that for some time. So I think that we don't particularly track, exactly as Tom says, where people come from necessarily but just anecdotally based on the information and the conversations we're having with the residents. We're seeing growing evidence that folks are moving out of some of these higher cost areas of the country.

Albert Campbell -- Executive Vice President and Chief Financial Officer

And then in Phoenix we see -- Phoenix, Denver, Dallas, Austin, we see inflows from California as you would expect.

Nick Joseph -- Citigroup -- Analyst

Thanks.

Operator

And our next question comes from Trent Trujillo with Scotiabank. Please go ahead.

Trent Trujillo -- Scotiabank. -- Analyst

Hi, good morning. Thanks for taking the questions. So within the last months a roughly $1.5 billion suburban class A Sunbelt portfolio traded for what looks like a high-4 cap rate. How interested were you in that portfolio? And how do you view the pricing with respect to, I guess, one, other transactions you're seeing in the market and two, perhaps, as a validation of the value of your portfolio?

Eric Bolton -- Chairman and Chief Executive Officer

Well, I mean, see Trent, we didn't look at it. That's not really what asset quality that we're looking to add to the portfolio for the kind of growth rate we want to achieve, organic growth rate we want to achieve going forward. So older portfolio then typically we take a look at. Having said that, certainly based on the pricing that we are seeing, that pricing is in line maybe a little bit aggressive. I mean, routinely the new product that we're looking at still lease-up or just recently stabilized in the markets throughout our region are trading anywhere from 4.5 to 4.75 cap rate. So high-4 call it a 5 for that portfolio is probably about right in line with the market. It just depends on, frankly, what sort of upside opportunity they saw in the portfolio from either CapEx, redevelopment or operating perspective.

Trent Trujillo -- Scotiabank. -- Analyst

Okay. Thank you for that. And quick follow-up. So I think we all appreciate the year-over-year and even sequential improvement in rate growth, which is great at a fundamental level, but it doesn't seem to be translating yet into accelerating same-store revenue growth that we saw sequentially. So maybe if you could talk about how the improved pricing will flow to the bottom line? And then, considering some persistent supply pressures in some of your larger markets, how confident are you that this improving spread can persist? And what that may imply for the rest of the year? Thanks.

Eric Bolton -- Chairman and Chief Executive Officer

Well, I mean, we feel pretty good about the ability for these rent growth trends to continue based on everything that we're seeing. Supply levels, while they remain high in the number of markets, they don't appear to be getting any higher if you will. And I would suggest that we're at a point broadly where supply levels are likely to show stability to slight moderation over the next, call it, couple of years. As long as job growth continues to be as robust as it is, I think it sets up for the ability to sustain the kind of trends that we're seeing.

The ability for that rent growth trend ultimately make us way to the overall revenue line if you will is a function of also the other two variables and how they're performing, namely, occupancy and fees or other income. And we saw occupancy, effective daily occupancy trade off a little bit from last year. As we contemplated in our guidance for the year, we think that's the right trade-off to be making at this point in the cycle. And I'm comfortable with that assumption and I'm comfortable with what we're seeing.

I think that as we get later in this year and particularly into next year, the occupancy performance likely starts to stabilize on a year-over-year basis. And therefore, the rent growth trends start to drive more directly to the bottom line. To some degree the other area that we've seen underperformed in terms of rent level are in terms of growth year-over-year in the revenue area versus other fees and the fee area in general. And because turnovers, we're not seeing termination fees and other kinds of related fees associated with move-in to move-out, like we see in the past. So the occupancy variable year-over-year and the fee variable year-over-year has worked against if you will the rent growth variable to result in the revenue performance that you see. We think those are the two variables, a fees and occupancy, probably will start to stabilize going into next year and the rent growth becomes more impactful.

Trent Trujillo -- Scotiabank. -- Analyst

That's very helpful. Thank you very much.

Operator

And our next question comes from John Kim with BMO Capital Markets. Please go ahead.

John Kim -- BMO Capital Markets -- Analyst

Thank you. On the rented lease growth, it sounds like you have about 4% year-to-date through April. I realize you have several comps at the second of the year. But what would get you down to the deceleration that implies at the midpoint of your guidance of 2.7%?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yeah. John, I mean, obviously, what we're talking about is as we're very encouraged with what we've seen through, all the way through April, as Tom talked about it. And it will take a number quite lower than that to get us down. I think what we're seeing is as we look at the next few months or next two quarters, that's when we face the biggest part of our exposure, the vast majority of our leases. So at this point we're not seeing -- we certainly believe and expect to continue push pricing. But the question is going to be, are we going to be able to hold the occupancy while we're doing that? We think at this point, we will. But as we talked about in the guidance, we're leaving ourselves room to work through those two quarters and then we'll have more say about that and more clarity at the end of the second quarter.

John Kim -- BMO Capital Markets -- Analyst

Okay. So that occupancy, that's more of a same-store revenue concept rather than the blended lease growth rate. But you're saying if you have additional vacancy that might impair --

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yeah. I'm saying, it would offset the rent. I mean in other words, we're going to continue pushing price and we believe we can hold that occupancy at strong 95.9%. But that's the question as we hit the busy leasing season.

Eric Bolton -- Chairman and Chief Executive Officer

John it's Eric. If your point is are we likely to continue to perform at the upper end of our pricing assumptions, lease-over-lease pricing assumptions that we put out there, the answer would be yes. We think that the pricing trends are likely to continue, which would put us more likely to not well above the midpoint in terms of our assumption for pricing trends alone.

Albert Campbell -- Executive Vice President and Chief Financial Officer

Right.

John Kim -- BMO Capital Markets -- Analyst

This quarter you broke out revenue enhancing and redevelopment CapEx. And can you just remind us what constitutes the difference between the two?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yeah. I mean, we just wanted to give more information there and really provide as much clear as we could there John. I mean, revenue enhancing is the more typical CapEx that you do the normal that you would you do every year in the portfolio to continue to maintain it.

John Kim -- BMO Capital Markets -- Analyst

The reinvest (ph) recurring.

Albert Campbell -- Executive Vice President and Chief Financial Officer

I'm sorry.

John Kim -- BMO Capital Markets -- Analyst

That's recurring.

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yeah, recurring. I'm sorry. I said redevelopment. Apologize. Recurring is typical. Redevelopment is the capital. But we actually that we measure and we add our returns to our growth and we've talked about it. And as Tom talked about some of the best uses of our capital that we have. We've had a program going on for many years now. We're able to spend fairly limited amounts of capital on interior units, and it's really strong returns. So that's really the difference. I think we have on redevelopment -- we have redevelopment, we have revenue enhancing and then we have recurring. And we just want to give you clarity of those three buckets. And so revenue enhancing is additional capital that is not specifically measured, but it's things that we do to think add to the value of the community over time. So those are three buckets.

John Kim -- BMO Capital Markets -- Analyst

But are the redevelopments units kept in the same-store folks and then this quarter you have --

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yes. Yes, they are. And when we've approached it because we do not -- we do them -- we don't force turns. We do them on turn. So I think, over time, we feel like that's the best and keep it in the same store portfolio. And if we have situation where we did entire community at one time, force the turn and felt like it was going to be extremely disruptive. We would pulled out. I think we have done in the past but the current pipeline that we are doing, we don't expect that and we are not taking out of the same-store.

John Kim -- BMO Capital Markets -- Analyst

Thank you.

Operator

And our next question comes from Austin Wurschmidt with KeyBanc Capital. Please go ahead.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Thanks. Good morning, everyone. Just curious what you guys would attribute the lease rate success that you've achieved thus far in the year to whether its operating on a single revenue management system? Is that you're starting to see increased contribution from the redev? Or just maybe a more benign supply environment? Can you kind of break out the pieces of that and tell us what do you think is driving the success you've had so far?

Eric Bolton -- Chairman and Chief Executive Officer

Sure. Austin, I think at a macro level where we've certainly shifted from a ramp-up in supply and a stabilization in supply. We feel like we've got our legs under us from a market standpoint a little more stable but it is still high. And we can push on that. Then the other piece of the puzzle is really the improvement I would tell you on the Post portfolio and that is our systems and being operating on one system. And let me give you an example of that. So in first quarter of 2017, the gap between blended lease over lease rates and the Post portfolio and blended lease over lease rates in the Mid-America portfolio was 290 basis points. Now it was (ph) sort of it's our first quarter of having the Post portfolio. That gap has closed to just 50 basis points. And that's a result of both portfolios climbing over that timeframe.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

And so when you look across markets, is it fewer concessions maybe in some of those Post markets that had the supply? Where are you seeing the success in driving blended lease rates?

Eric Bolton -- Chairman and Chief Executive Officer

I mean, early on the first thing to take was renewal rates where we move those from four to close to six now. And now it is new lease rates coming to bring stability on -- just on the year-over-year basis, it's primarily the new lease rates, though we're still up a little bit in renewals on a -- going back to 2017, it's really both on the Post portfolio.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Got it. Appreciate that. And then just last one for me. Al, when you kind of strip out those onetime items in the first quarter and you look at what drove the beat versus your internal guidance, what line items would you attribute that to?

Albert Campbell -- Executive Vice President and Chief Financial Officer

We put it temporarily two major groups, $0.02 per share. If you strip out those kind of unusual items, you get to about $0.04 per share outperformance from our guidance. $0.02 of that was operations, which was same-store, pretty evenly spread between revenue and expenses, I would say. We're encouraged with both sides of that performance. The other $0.02 was interest and other income, that was a little favorable to what we expected primarily related to the timing of the bond that we did a little better on the interest rate than we thought there. And then we had other income from casualty gain that we've had during the quarter that we've had some income from that. That's really the insurance proceeds over the cost of the books that we wrote off for that casualty loss. So those were the primary pieces.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Thank you.

Operator

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

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Good morning, guys. Tom, any markets that performed notably above or below expectations on a year-to-date basis?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

Nothing really stands out on the below expectations, Dallas we expected to be challenging, but it's coming along honestly. On the above, we're quietly pleased with how Austin's coming along.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Any markets or what -- which markets, I guess, would you expect that you could see a positive new lease growth in 2019 on at this point?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

Seeing positive new lease growth?

Rob Stevenson -- Janney Montgomery Scott -- Analyst

(Multiple Speakers) Yeah. Obviously, the renewals are pretty healthy but the new lease option?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

I would tell you, Nashville, begins to look better in the back half of the year I think. It supplies moderating a little bit there. And as Eric mentioned, Alliancebernstein just moved them in Nashville as a booming market in that that has the potential to exceed our expectations I think.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Okay. And then lastly for me. Where are you guys in the sort of technology spend, I mean, it seems like all of the apartment, the large apartment guys these days are in an arms raise to get being able to have a Alexa rent their units rather than have people in the locations and all of the automation that they want to put again to make leasing able to do from phones et cetera. How far down the road are you guys in terms of where you want to get to over the next couple of years? And what's the spend and what's the trade-off in terms of expenses that you could take out of the business from that?

Eric Bolton -- Chairman and Chief Executive Officer

Yeah. Rob, I mean, we're currently testing working on and evaluating pretty much everything that you've heard out there. Smart rent -- smart homes, enhanced residential services portal, tech mobility, leasing automation in those service features. We are still at the point where we are not talking about it a ton. We're really trying to find out exactly what those economics are. Early results are good, especially on the smart home testing. And we think that they have the potential to make a difference, but we're really in the testing phase at this point and we'll have more to share as the year winds on, I would say.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

What are you spending this year on that, roughly?

Albert Campbell -- Executive Vice President and Chief Financial Officer

The majority of our spending that is -- we're part of this real estate technology venture fund, which you probably saw on our 10-K, Rob. And so we spend -- we're a part of that with lot of -- some of your peers that really is designed to -- it's an investment is designed to select, view all of these companies are coming forward and select the winners and be a part of the discussion when it happens. So in terms of our normal spend and our investment in driving that technology right now, that's normal spend, that's part of our overhead or G&A that we budget this year that we talked about always improving our platform. We are testing these programs this year as Tom talked about and probably roll out a little bit more next year when we drive these programs to the portfolio.

Thomas Grimes -- Executive Vice President and Chief Operating Officer

And Rob, some of that investment is bundled in the total IT overhaul that we did as part of the merger. So things like maintenance mobility and the resident portal improvements, those are embedded in the transition that we just went through. And then we're spending -- the most direct spend is on the smart home or rolling units out at about $1000 a unit or so. And we've got plans to test that this year.

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Okay. Thanks, guys.

Operator

And our next question comes from Hardik Goel with Zelman & Associates. Please go ahead.

Hardik Goel -- Zelman & Associates -- Analyst

Hey, guys, thanks for taking my question. One of the things I wanted to ask about, I've got two for you is G&A, so we know G&A is going up a little bit, we discussed at last quarter. But looking at the cadence of G&A typically, the first quarter was still little heavier than guidance would imply. Are you guys still in line with your initial guidance range?

Albert Campbell -- Executive Vice President and Chief Financial Officer

We are. That's a great question. I think and I'll point you to one of the things that we talked about and put out as we came off of year-end and discussed our guidance for the year is one of the presentations that we had done -- we're out doing on the roadshows and some of the conferences, we put a slide and talked about that we expected first quarter to be the highest quarter for that. There's several expenses that fall in the quarter, some leisure and conference things, some year-end audit things, few things that typically in the first quarter. So we had expected first quarter overhead to be about 28% (ph) of the year came in right in line with that. And so we feel very comfortable with our full year projection. I think what you would -- you should put in your mind when you're thinking for the next three quarters, obviously, to get to our run rate to -- our full year run rate is more like 24% of the total of our guidance for the year.

Hardik Goel -- Zelman & Associates -- Analyst

Got it. Yeah, I saw those I just wanted to confirm. The second one I have for you is on your same-store expense growth estimates you guys talked about revenue. But on expenses, it seems like it would be pretty tough for you guys to not comment at the low end of your guide on expenses given that you guys outperformed even though taxes were higher. Is there a tax headwind through the rest of the year? Or do you expect -- what do you expect on the expense side?

Albert Campbell -- Executive Vice President and Chief Financial Officer

There's two things I think it's important to consider here. This is Al. Let me start with that. But really, R&M was favorable during the first quarter and utilities cost -- when I say R&M, repair and maintenance, excuse me, utilities cost. And so repair and maintenance was really favorable in the first quarter. We've got some remaining synergies from the post merger which were good to see. We're glad to get that. But I think we expect that that sort of where we come to the end of that we expect for the remainder of the year for those cost to be more normalized, call it in 3% range. And then on utilities, they were lower than expected because we had a mild season in the first quarter, mild seasonal cost structure in the first quarter. I think that will normalize more as we go into the year. So I would tell you as we look at the remaining three quarters a year, we should consider something more in that 3% range put everything together, but taken the first quarter performance and that together, we are probably we are going to be below the mid-point of our current guidance. But still in that guidance for the year.

Hardik Goel -- Zelman & Associates -- Analyst

Got it. Thanks. That's helpful. That's all for me.

Operator

And our next question comes from Drew Babin of Baird. Please go ahead.

Drew Babin -- Robert W. Baird -- Analyst

Hey, good morning. I wanted to talk about on capital recycling. It sounds from the way that fundamentals are unfolding across Sunbelt potential for distressed acquisitions things like that might not be there yet as it really hasn't done for a couple of years. And I guess I was hoping on an update on, are you seeing that any where you're seeing developers maybe looking to to sell more assets? How is your pipeline looking as it pertains to things that I just mentioned?

Eric Bolton -- Chairman and Chief Executive Officer

Drew this is Eric. Our deal flow continues to be incredibly high. I mean, we're looking at more deals on a quarterly basis now than we have over the last five years. So it -- there's a lot of opportunity that continues to come into the market. We continue to see what we believe to be incredibly aggressive pricing that continues to -- in our mind, at least, make it a little bit more difficult to pull the trigger on some of these opportunities that we're looking at. So we are staying active. We are in conversations on two or three opportunities right now that I hope will come together over the course of this year and we're optimistic. But we're also staying disciplined and I think that given the operating environment that we're in, and what appears to be the prospect to sort of stable interest rate environment going forward. The sector continues to attract a lot of capital. And we see values holding up quite well. If anything, value is going up a little bit as the consequence of improving NOI performance. So we are patient and we got to remain that way. We've got delved into our assumptions this year, as you know, call it midpoint about $100 million of dispositions, which we think it's important to maintain that discipline, we'll be working through that process later this year. We've got the funding that we've identified as it relates to what we do think we'll do on acquisitions and development funding. So we've got sort of uses -- sources and uses of cash sort of identified, obviously, just recycling with what we have in combination of dispositions and free cash flow. We certainly don't see a need for equity this year, but I'm continue to be hopeful that the acquisition environment will become easier.

At the end of the day, I mean, our focus is really built around trying to ensure that we are going to create a stabilized NOI yields that's accretive to our existing portfolio and create a return on capital that will be accretive to our shareholders versus what we expect to get out of the existing portfolio. So today's pricing, it continues to be a challenge. Having said that, we continue to roll in some of these technologies and some of these other operating focus items that we've talked about. We think that's going to continue to work in our favor to perhaps start to make some deals would be more compelling as we go into the year. So deal flow was high, pricing is still aggressive.

Drew Babin -- Robert W. Baird -- Analyst

Thanks for that Eric. And on the disposition side, remind me, are those likely to be just non-core assets or potential exits from some smaller markets? I just forget if that was mentioned on the last quarterly call?

Eric Bolton -- Chairman and Chief Executive Officer

We're taking a look at that right now and trying to finalize that. But more likely than not, these are going to be just -- I mean, we really approach it on a asset-by-asset basis and look at situations where we think the go-forward after CapEx NOI growth rate is likely to show not the kind of growth trajectory consistent with the rest of the portfolio. And more often than not, that translates into some of the older assets than we've had. We very much liked the footprint that we have. As I mentioned earlier, we like the -- broadly the markets we're in. But given the history of the company and when you think about some of the older assets are there probably are a few outlier smaller markets that you'll continue to see us exit from.

Drew Babin -- Robert W. Baird -- Analyst

Thanks, Eric. And then just one question for Al on the balance sheet. There is another three-year secured mortgage executed during the quarter. I was curious whether that was on sort of properties that was previously encumbered by secured debt? And also to I think last quarter there was $300 million very short-term unsecured term loan. And I guess my question is, does the new secured mortgage kind of directly replace that or pay that down? What are the moving parts there?

Albert Campbell -- Executive Vice President and Chief Financial Officer

I wouldn't necessarily put it direct. But I think -- overall, if you think about what we had outlined last year is our financing plans. We had said we're going to about $600 million, $300 million more in the 10-year, maybe 30-year in the -- I mean, sorry, $300 million in a 30-year. I think if you look back last year the markets kind of collapse in terms of public bond financing in -- at the late in the year-end. And so what we did is, we've moved earlier in the year, we get -- saw an opportunity in the secured market to do 30-year. We did two deals and combined over $300 million at a very attractive rates.

They are secured with seven properties for this one we just did. And I think the similar number of properties for the first one. But I wouldn't directly rate them. I'm just saying it's part of the long-term plan we were able to adjust and just continue to perform on pushing our duration of our maturities out a little further. It's a 30-year debt in there. But also not get too much secured debt as good. We obviously are very glad to be done that. We're glad to continue to increase our relationship with the partners we have there. But I think you'll see us manage our balance sheet, 90% of our NOI is still unencumbered, unsecured right now and so you'll see us continue to protect that. But within proper parameters do both types of debt over time. So that was piece of the overall plan. On a $300 million term loan we'll likely we'll pay it off this year. And as you've heard us talk about, we're now thinking about part of our plans for this year is may be potentially do another bond deal late in the year, because the market's wide open and really to handle that and to bring some future maturities forward potentially.

Drew Babin -- Robert W. Baird -- Analyst

Great. Thank you. Great quarter.

Operator

And our next question comes from John Guinee with Stifel. Please go ahead.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Great. Few curiosity questions. Looks like you sold one acre of land on Peachtree Road in Atlanta for $9 million. Is it really only one acre? And one is land worth $9 million in acre in Atlanta? And then also any more color on the Poplar Avenue office building?

Eric Bolton -- Chairman and Chief Executive Officer

John this is Eric. Yeah, this acre of land (Multiple Speakers) it's actually less than acre but, I mean, candidly it's above on Peachtree road right next to Lenox Mall. I mean it's the heart of Buckhead. This is a residual piece of land associated with the condominium development that posted on many, many years ago. The site is incredibly tight, it will be incredibly get difficult. We thought to the multifamily on. And we were approached by someone who has a different plans for how they intend to use that land and we worked it. We're cautiously optimistic but frankly skeptical that when get it done, therefore it wasn't in our guidance. But we are most happy to get that done in the first quarter. So it is just what it's -- just what you're reading. And it is was a big win for us. The Poplar Avenue site, this is -- we've been in the same office building for 24 years. And we -- I had owned the building it was part of the IPO. And we long outgrew that space and had our corporate staffs put into two different locations for the last five years. And so we finally had an opportunity to get everyone back together. And a new building and close proximity to our location, we don't own them. We just running office space. But we sold it and rather use that capital in apartments. So we've been in it for a long time and glad to be gone.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Okay. And then the second question. Sync36 in Denver, it looks like Phase I cost you about $280,000 a unit, but the budget for Sync, the Phase II is about $310,000 a unit. Did the cost really go up 10% that quickly? Or there are some allocation things we should think about?

Eric Bolton -- Chairman and Chief Executive Officer

It was really -- more -- no cost had not gone up that much. There was -- really there was some allocation. When we negotiated the transaction with the developer, they had this one adjacent piece that has some unique aspects to it that created the cost numbers that you're seeing. But --

Albert Campbell -- Executive Vice President and Chief Financial Officer

It's also a lower of number of units that we view the project as a whole. So you kind of have to put them together to think about that. And so when we underwrote it -- we underwrote it together in that whole project is when in line with our expectations and our plans. And so it's a allocation thing, but in total it works well.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Is it a podium or a draft?

Eric Bolton -- Chairman and Chief Executive Officer

It's actually a surface park product.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Wow. For $300,000 (ph) a unit? Okay.

Eric Bolton -- Chairman and Chief Executive Officer

Yeah, I mean -- (Multiple Speakers)

Albert Campbell -- Executive Vice President and Chief Financial Officer

That's only -- that's a small -- the second one is a small number of units, the first stage is much largest one. When you blend it down, you're going to be under $300,000. So --

Eric Bolton -- Chairman and Chief Executive Officer

But you also -- Denver -- that's why Denver -- it's normal for Denver. You look at a cost per unit in the market like Denver and that's pretty routine.

Albert Campbell -- Executive Vice President and Chief Financial Officer

For a high-quality products.

Eric Bolton -- Chairman and Chief Executive Officer

Yeah.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Surface park?

Eric Bolton -- Chairman and Chief Executive Officer

Yes.

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yes.

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Wow. Okay. Thanks. Good quarter.

Eric Bolton -- Chairman and Chief Executive Officer

Thank you.

Operator

And our next question comes from Buck Horne from Raymond James. Please go ahead.

Buck Horne -- Raymond James -- Analyst

Hey, thanks. Good morning. Just wanted to go back to guidance for just a second, Al if you could. I guess, sort of we raised the guidance $0.08 for the non-cash gain on the land sale. But I think there was also you mentioned that offsetting $0.03 drag from just the timing of the transaction activity. Just can you elaborate on just the moving parts there and just the changes on the timing of acquisition dispositions that drove that change to the guidance?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Yeah, absolutely, Buck. That's a good question. I think so the outperformance in the first quarter was $0.11 per share. And so we just put that performance into -- obviously roll that in as as-performance. So what we talked about was on the back part of the year we did have some changes to our transactions and into our debt plans that costs us $0.03 per share. So net that out as $0.08 and I'll give you the details of that as about $0. 01 for I talked about just a minute ago we're planning and potentially doing another debt deal later in the year to take care some of our -- may be our future financing as well as paid our term loan that we've talked about earlier. We also had $0. 01 per share of earnest money forfeiture from that land sale that we talked about.

I mean we had -- actually as we talked about didn't have it in our guidance because we were really uncertain about the closing and we had actually included in our plans that likely would fall apart and we could get the earnest money. So that's about $0.01 per share actually that comes out in the back part of the year. And then the remaining $0.01 is just transaction timing, acquisition, disposition plan as we continue to adjust those as we're selecting properties and we see clearly the deals we may buy in the year. So that costs us about $0.01. So together that's a $0.03. We beat $0.11 in the first quarter and took $0.03 out of for those things.

Buck Horne -- Raymond James -- Analyst

Got you. That's really helpful. Thank you. And secondly just looking at some of the activity and the added development project in the Phoenix area. Looks like you're trying to enhance or considering enhancing the presence in the Southwest a little bit further. So I'm just wondering how you're thinking about your current scale in the Phoenix marketplace or if you -- is there anything else you want to do to optimize your scale there or -- and would you consider reentering the market like Las Vegas if the right deal came along?

Eric Bolton -- Chairman and Chief Executive Officer

Buck this is Eric. I would tell you I mean we like Phoenix a lot. And I think that both Phoenix and Denver continue to have a very promising outlook over the next call it 10, 15 years. I think both of these markets are much more affordable than what you see on some of the West Coast markets. I think both markets are going to continue to attract lot of job growth and population growth migration trends. So we are very comfortable continue to scale up our presence in the Phoenix market as well as obviously in the Denver market as well.

Vegas is a little bit of a different story I think. And we like very much the two properties that we have there. They're doing great. That's a market that is doing pretty well right now. I don't see that economy as probably diversified as I do at Phoenix and in Denver. Vegas, obviously, is -- I have lot of entertainment employment base as well as military that drives a lot of it. And you're seeing some other back office call centers. I think that you don't get the wage growth in that market like you do in Denver or Phoenix. So I wouldn't think that you'll see us scale up in that particular market in Vegas, but the other two for sure we would.

Buck Horne -- Raymond James -- Analyst

Okay. Thanks.

Operator

And our next question comes from John Pawlowski with Green Street Advisors. Please go ahead.

John Pawlowski -- Green Street Advisors -- Analyst

Thanks. Tom or Al, could you remind us what the left -- the revenue left for full year 2019 is from just the earning on redevelopments?

Albert Campbell -- Executive Vice President and Chief Financial Officer

Earning on redevelopment? So redevelopment is typically 25 basis points to 50 basis points in our -- in any year in our program as this year is consistent with what it was last year, so probably in the 25 basis points, 35 basis points --

Thomas Grimes -- Executive Vice President and Chief Operating Officer

I mean that would be what it was if we took it out. But since it is similar to what we did last year.

Eric Bolton -- Chairman and Chief Executive Officer

It's not part of the -- (Multiple Speakers)

Albert Campbell -- Executive Vice President and Chief Financial Officer

That's the built and what you guys are going to think is that built-in impacted that over time if that's what you're asking, John, I think that's what we would say.

Eric Bolton -- Chairman and Chief Executive Officer

Yeah. On year-over-year basis, we've been pretty steady at the same number of unit --

Albert Campbell -- Executive Vice President and Chief Financial Officer

Same program.

Eric Bolton -- Chairman and Chief Executive Officer

The year-over-year change is really not meaningful at all. But the overall impact on an permanent basis is the 25 basis points, 35 basis points.

Albert Campbell -- Executive Vice President and Chief Financial Officer

Before wrapping the program up it would be -- in this year it would be at the higher end of that. But we've had this consistent number this year and last year. We did ramp up in last year some from pretty pre-post merger. But that;s what we would expect as built-in at this point.

John Pawlowski -- Green Street Advisors -- Analyst

Yeah. The question to be more clear as if you didn't do any redevelopments in the last few years, how much lower would --

Albert Campbell -- Executive Vice President and Chief Financial Officer

25 basis points. 25 basis points to 30 basis points.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. And --

Albert Campbell -- Executive Vice President and Chief Financial Officer

That's kind of built in on an recurring -- on an ongoing basis.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. And that kind of probably ramps next year a bit?

Albert Campbell -- Executive Vice President and Chief Financial Officer

No. I think, I mean, I would only ramp if we ramped our program up next year. And I think right now we expect to do about the same number of units next year that we did last year and the previous year. So the best part of the contribution from that program. Now we certainly -- we're hopeful we'll have continued pricing performance and other things. But that's from that development program specifically that we expect next year.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. And then, Tom, I was hoping you could give some color on the demand side of the equation in Houston heading into peak leasing season. It's tough to just to entangle what's organic structural improvement on market versus just the market that still just coming out of the basement of it. So how bullish or concerned or kind of middling in feelings do you have of Houston right now?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

I would say, I mean, their jobs to completions are still in a healthy range at 9 to 1 (ph). I would expect Houston to still be steady from a growth standpoint, John. But I don't think we'll see the blended rate growth change that we saw between 2017 at 2018. Certainly one of our more stable and steady markets. But I think it was like a 800 basis points change in blended rents last year and that will moderate to more normal.

John Pawlowski -- Green Street Advisors -- Analyst

So does it stay in that mid-4% revenue growth range in next few years?

Thomas Grimes -- Executive Vice President and Chief Operating Officer

So far blended's hung right in there.

John Pawlowski -- Green Street Advisors -- Analyst

Okay. Thank you.

Thomas Grimes -- Executive Vice President and Chief Operating Officer

You bet.

Operator

And it does appear that there are no further questions over the phone at this time. I would like to go ahead and turn it back to the speakers for any closing remarks.

Eric Bolton -- Chairman and Chief Executive Officer

Well, thanks everyone for joining us and appreciate you being on the call. We'll see most of you at NAREIT in a few weeks. So, thank you.

Operator

This does conclude today's program. Thank you for your participation. You may disconnect at any time.

Duration: 51 minutes

Call participants:

Tim Argo -- Senior Vice President and Director of Finance

Eric Bolton -- Chairman and Chief Executive Officer

Thomas Grimes -- Executive Vice President and Chief Operating Officer

Albert Campbell -- Executive Vice President and Chief Financial Officer

Nick Joseph -- Citigroup -- Analyst

Trent Trujillo -- Scotiabank. -- Analyst

John Kim -- BMO Capital Markets -- Analyst

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Rob Stevenson -- Janney Montgomery Scott -- Analyst

Hardik Goel -- Zelman & Associates -- Analyst

Drew Babin -- Robert W. Baird -- Analyst

John Guinee -- Stifel, Nicolaus & Company -- Analyst

Buck Horne -- Raymond James -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

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