Elme Communities (ELME) 2023 Q3 法說會逐字稿

Hello, and welcome to the Elme Communities Third Quarter 2023 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Amy Hopkins, Vice President, Investor Relations. Amy, please go ahead.

您好，歡迎參加 Elme 社區 2023 年第三季財報電話會議。提醒一下，今天的通話正在錄音。現在，我想將電話轉給投資者關係副總裁艾米霍普金斯 (Amy Hopkins)。艾米，請繼續。

Good morning, and thank you for joining our third quarter earnings call. Today's event is being webcast with a slide presentation that is available on the Investors section of our website and will also be available on our webcast replay. Before we begin our prepared remarks, I would like to remind everyone that this conference call contains forward-looking statements that involve known and unknown risks and uncertainties which may cause actual results to differ materially, and we undertake no duty to update them as actual events unfold. We refer to statements of these risks in our SEC filings. Reconciliations of the GAAP and non-GAAP financial measures discussed on this call are available in our most recent earnings press release and financial supplement, which was distributed yesterday and can be found on the Investors page of our website. And with that, I'd like to turn the call over to our CEO, Paul McDermott.

早安，感謝您參加我們的第三季財報電話會議。今天的活動將透過網路直播並提供幻燈片演示，您可以在我們網站的投資者部分查看，也可以在我們的網路直播重播中查看。在我們開始準備好的發言之前，我想提醒大家，本次電話會議包含前瞻性陳述，涉及已知和未知的風險和不確定性，可能導致實際結果存在重大差異，我們不承擔將其更新為實際事件的責任展開。我們在向 SEC 提交的文件中引用了這些風險的聲明。本次電話會議中討論的 GAAP 和非 GAAP 財務指標的調整表可在我們昨天發布的最新收益新聞稿和財務補充資料中找到，並且可以在我們網站的投資者頁面上找到。說到這裡，我想將電話轉給我們的執行長保羅·麥克德莫特。

Thanks, Amy. We delivered solid third quarter operating performance and the operating trends that we are seeing today align with our expectations and guidance for the remainder of the year. Therefore, we are maintaining the midpoint and tightening our FFO guidance. In terms of our recent company updates, we closed on the acquisition of a 500 home apartment complex in the inner suburbs of Atlanta for $108 million on September 29. This acquisition rounds out our Atlanta footprint and improves our future growth profile. I'll talk more about this acquisition in a minute.

謝謝，艾米。我們實現了穩健的第三季營運業績，並且我們今天看到的營運趨勢與我們對今年剩餘時間的預期和指導一致。因此，我們維持中點不變並收緊 FFO 指引。就我們最近的公司動態而言，我們於9 月29 日以1.08 億美元完成了對亞特蘭大內郊一棟擁有500 套住宅的公寓大樓的收購。此次收購完善了我們在亞特蘭大的業務，並改善了我們未來的成長狀況。我稍後將詳細討論這項收購。

Additionally, we welcomed a new member to our Board of Trustees. Susan Carras is an accomplished leader in the real estate industry who brings extensive multifamily transaction experience and a deep network of relationships. We look forward to the valuable insights that she will bring to our Board. I'll focus my prepared remarks today on our recent acquisition and future external growth expectations. Tiffany will cover our operating trends and growth initiatives, and Steve will discuss our balance sheet and guidance updates.

此外，我們也歡迎一位新成員加入我們的董事會。蘇珊·卡拉斯 (Susan Carras) 是房地產行業一位卓有成就的領導者，擁有豐富的多戶住宅交易經驗和深厚的關係網絡。我們期待她為我們的董事會帶來寶貴的見解。今天我將把準備好的發言重點放在我們最近的收購和未來的外部成長預期上。蒂芙尼將介紹我們的營運趨勢和成長計劃，史蒂夫將討論我們的資產負債表和指導更新。

Turning to our recent acquisition, we acquired Elme Druid Hills at a forward yield above 6%, including the impact of leveraging our existing expense base. We were awarded the deal for a competitive bidding process where our ability to provide certainty of execution as an all-cash buyer work to our advantage. We expect the acquisition to become accretive over the next 12 months. This is an attractive real estate deal for Elme for the following reasons.

談到我們最近的收購，我們以超過 6% 的遠期收益率收購了 Elme Druid Hills，其中包括利用我們現有費用基礎的影響。我們透過競爭性投標過程獲得了這筆交易，作為全現金買家，我們提供執行確定性的能力對我們有利。我們預計此次收購將在未來 12 個月內實現增值。對 Elme 來說，這是一筆有吸引力的房地產交易，原因如下。

First, it fits squarely into our Class B value-add strategy, which targets communities with rent levels that are 85% to 95% of the market median with renovation potential. This provides the opportunity to grow rents and create value over time without directly competing with new supply. Elme Druid Hills offers the opportunity to renovate all 500 homes as Class A homes in the surrounding area are priced about at a 21% premium above our in-place rents, leaving more than enough room to renovate and capture our targeted return. Furthermore, the area is somewhat insulated by new supply with only 1 new delivery since 2021 and limited new supply under construction within a 3-mile radius.

首先，它完全符合我們的 B 級增值策略，該策略針對租金水平為市場中位數 85% 至 95% 且具有改造潛力的社區。這提供了隨著時間的推移增加租金和創造價值的機會，而無需與新供應直接競爭。 Elme Druid Hills 提供了翻新所有 500 棟房屋的機會，因為週邊地區的 A 級房屋的價格比我們的現有租金高出 21% 左右，為翻新和獲得我們的目標回報留下了足夠的空間。此外，該地區在一定程度上受到新供應的影響，自 2021 年以來僅交付了 1 個新供應，並且 3 英里半徑內在建的新供應有限。

Second, it's located in an affluent area with a growing job base. North Druid Hills offers seamless accessibility to over 550,000 jobs within a 3-mile radius and is close to Atlanta's most important new medical developments. Children's Healthcare of Atlanta, and Emory Healthcare's Executive Park expansion, which has generated over $3 billion in investments. Employment in our targeted income band grew more than 17% over the past 5 years in the Briarcliff submarket, where average household income is $98,000 supporting an average rent-to-income ratio for Elme Druid Hill residents of 20%.

其次，它位於富裕地區，就業基礎不斷擴大。北德魯伊山 (North Druid Hills) 在 3 英里半徑內提供了超過 550,000 個工作崗位的無縫銜接，並且靠近亞特蘭大最重要的新醫療開發項目。亞特蘭大兒童醫療中心和埃默里醫療中心的 Executive Park 擴建項目已帶來超過 30 億美元的投資。過去 5 年，Briarcliff 子市場的目標收入範圍內的就業成長了 17% 以上，該市場的平均家庭收入為 98,000 美元，支持 Elme Druid Hill 居民 20% 的平均租金與收入比率。

Third, rent growth at Elme Druid Hills has outperformed the submarket and broader Atlanta market average on a trailing 5-year and 10-year basis. Fourth, it is an expansive property that sits on nearly 50 acres. Elme Druid Hills is the second largest multifamily property acreage within a 3-mile radius, yielding a ratio of approximately 10 homes per acre, which is a significantly more land per unit than the average for new deliveries over the past 5 years and offers longer-term redevelopment options. This community is a rare find in a mature a fluid inside the perimeter location.

第三，在過去 5 年和 10 年的基礎上，Elme Druid Hills 的租金成長優於子市場和整個亞特蘭大市場的平均值。第四，這是一處佔地近50英畝的廣闊地產。 Elme Druid Hills 是 3 英里半徑內第二大多戶住宅地產面積，每英畝大約有 10 套住宅，每單位土地面積明顯多於過去 5 年新交付的平均土地面積，並提供更長的使用壽命。期限重建選項。這個群落是在周邊位置內的成熟流體中罕見的發現。

Finally, this is an exceptional price representing a deep discount to replacement costs of over 30%, and we believe that this acquisition will perform very well over time and drive long-term shareholder value. We onboarded Elme Druid Hills onto our operating platform and retained the entire community team, providing continuity for existing residents. The Elme Druid Hills team joins us with extensive local community management and leasing experience, and we could not be more pleased to welcome them to our company. And with that, I'll turn it to Tiffany to discuss our operating trends and growth initiatives.

最後，這是一個特殊的價格，比重置成本大幅折扣超過 30%，我們相信，隨著時間的推移，這項收購將表現得非常好，並推動長期股東價值。我們將 Elme Druid Hills 納入我們的營運平台，並保留了整個社區團隊，為現有居民提供了連續性。 Elme Druid Hills 團隊擁有豐富的當地社區管理和租賃經驗，我們非常高興地歡迎他們加入我們公司。接下來，我將向蒂芙尼討論我們的營運趨勢和成長計畫。

Thanks, Paul. I'll start by reiterating that our outlook for the same-store multifamily NOI growth remains in the high single digits, which represents very strong performance during a year of transition. We generated effective blended lease rate growth of 3% during the quarter for our same-store portfolio comprised of renewal lease rate growth of 5.1% and new lease rate growth of 0.1%. Renewal rates remained strong throughout the fall, and we continue to experience very strong resident retention, averaging 61% during the quarter. Thus far, we assigned renewal offers for October and November lease expirations of 5.5% on average, representing a stable trend compared to the third quarter average.

謝謝，保羅。首先我要重申，我們對同店多戶型 NOI 成長的預期仍維持在高個位數，這代表了轉型一年中非常強勁的表現。本季度，我們的同店組合實現了 3% 的有效混合租賃率增長，其中續租率增長了 5.1%，新租賃率增長了 0.1%。整個秋季續訂率依然強勁，我們的居民保留率持續保持強勁，本季平均為 61%。到目前為止，我們對 10 月和 11 月租賃到期的續約報價平均為 5.5%，與第三季平均值相比呈現穩定趨勢。

We expect blended lease rates to moderate over the remainder of the year towards the low single digits. Our focus on building occupancy earlier this year put us in good position heading into the winter and we continue to experience the pricing power needed to maintain occupancy within our targeted range. Same-store occupancy averaged 95.6% during the quarter, up 20 basis points compared to the prior year. Same-store multifamily average effective rent per home increased 4.9% in the third quarter compared to the prior year.

我們預計今年剩餘時間內混合租賃利率將趨於低個位數。今年早些時候，我們專注於提高入住率，這使我們在進入冬季時處於有利地位，並且我們將繼續體驗將入住率維持在目標範圍內所需的定價能力。本季同店入住率平均為 95.6%，較去年同期成長 20 個基點。第三季同店多戶住宅平均有效租金較去年同期成長 4.9%。

Turning to renovations. We achieved an average renovation ROI of approximately 14% year-to-date, and we're on pace to complete over 300 renovations this year. Including the renovations we expect to complete at Druid Hills starting in late 2024, our pipeline now stands at approximately 3,300 homes, which represents more than enough runway to drive renovation-led value creation for the foreseeable future.

轉向裝修。今年迄今為止，我們實現了約 14% 的平均翻修投資回報率，今年我們預計將完成 300 多項翻修。包括我們預計將於 2024 年底開始在 Druid Hills 完成的翻修工程在內，我們目前正在建設的房屋數量約為 3,300 套，這足以在可預見的未來推動以翻修為主導的價值創造。

Turning to rent to income. The rent-to-income ratio for new residents remains in line with our historical average. The average rent-to-income ratio for new leases signed in the third quarter was 24% and indicating that our rent levels are affordable to our new residents. Furthermore, our communities continue to offer a compelling value proposition versus Class A product, a cornerstone of our strategy. Even as new supply has caused rent compression between Class A and Class B communities in our market, particularly in high supply areas, the affordability gap between our communities and new lease-ups in their submarkets remains greater than 30%.

轉向租金收入。新居民的租金與收入比率仍與我們的歷史平均值一致。第三季簽訂的新租約的平均租金與收入比率為24%，這表示我們的租金水平是新居民可以負擔的。此外，我們的社群繼續提供與 A 類產品相比令人信服的價值主張，這是我們策略的基石。儘管新增供應導致我們市場中A 類和B 類社區之間的租金壓縮，特別是在供應量較高的地區，但我們的社區與其子市場中的新租賃單位之間的負擔能力差距仍然超過30%。

The durability of these gaps exist due to our acquisition discipline, targeting communities well below market median price points and allocating capital to submarkets that are not as impacted by new supply. Only 1/4 of our submarkets currently have a community in lease-up. Moving on to our growth initiatives. We have completed the transition of community-level operations while retaining 93% of our community teams which has positioned us to now focus on driving operational improvements to increase profitability.

這些差距的持久存在是由於我們的收購紀律，目標是遠低於市場中位數價格的社區，並將資本分配給不受新供應影響的次市場。目前，我們的子市場中只有 1/4 的社區處於出租狀態。繼續我們的成長計劃。我們已經完成了社區層面營運的轉型，同時保留了 93% 的社區團隊，這使我們現在能夠專注於推動營運改善以提高獲利能力。

Thus far, we have achieved interest expense savings by accessing rent payments earlier, began capitalizing on new fee income opportunities, revised our vendor payment process to take advantage of rebates, identified opportunities to share resources and team members amongst communities that are located in close proximity, and we are 75% of the way through our smart home technology rollout. We are pleased with these initial accomplishments and the progress we have made thus far, and we are excited about the opportunity to make continued progress next year.

到目前為止，我們透過更早支付租金實現了利息支出的節省，開始利用新的費用收入機會，修改了供應商付款流程以利用回扣，確定了在鄰近社區之間共享資源和團隊成員的機會，我們的智慧家庭技術部署已完成75%。我們對這些初步成就和迄今為止的進展感到高興，並且對明年有機會繼續取得進展感到興奮。

We continue to expect to generate between $4.25 million $4.75 million of FFO from these initiatives above what we would have otherwise generated through 2025 with additional opportunity beyond that based on centralizing components of the leasing and maintenance process. We look forward to providing more details as we continue to make progress on our centralization plans. And with that, I'll turn it over to Steve to cover our balance sheet and outlook.

我們仍然預計從這些舉措中將產生 475 萬美元的 FFO，高於我們在 2025 年之前本應產生的水平，此外還有基於集中租賃和維護流程組件的額外機會。隨著我們繼續在集中化計劃上取得進展，我們期待提供更多細節。有了這個，我將把它交給史蒂夫來討論我們的資產負債表和前景。

Thanks, Tiffany. Our balance sheet is in very good shape with no secured debt and no debt maturities until 2025, with options to extend our 2025 term loan maturity another 2 years. Our annualized adjusted net debt-to-EBITDA remains in line with our targeted range and is expected to trend to the mid-5s by year-end. Following the acquisition of Elme Druid Hills, our liquidity position remains strong with approximately $550 million or 80% of the total capacity available on our line of credit.

謝謝，蒂芙尼。我們的資產負債表狀況非常良好，在 2025 年之前沒有擔保債務，也沒有債務到期日，並且可以選擇將 2025 年定期貸款期限再延長 2 年。我們的年化調整後淨債務與 EBITDA 比率仍符合我們的目標範圍，預計到年底將趨於 5 左右。收購 Elme Druid Hills 後，我們的流動性狀況依然強勁，約 5.5 億美元，占我們信貸額度可用總容量的 80%。

In terms of our capital allocation strategy going forward, we are focused on finding opportunities to recycle capital out of lower growth, higher CapEx communities and furthering our geographic expansion. Now turning to our outlook for the balance of the year. We are tightening our core FFO guidance range to $0.97 to $0.99 per fully diluted share. As Tiffany discussed, our operating fundamentals are trending in line with our expectations, and we are seeing stable traffic and occupancy trends into the winter. We are confident that we will achieve high single-digit same-store NOI growth for the year, and we are reiterating our same-store NOI guidance range of 8% to 9%.

就我們未來的資本配置策略而言，我們的重點是尋找機會，從成長較低、資本支出較高的社區中回收資本，並進一步擴大我們的地域擴張。現在轉向我們對今年剩餘時間的展望。我們將核心 FFO 指導範圍收緊至完全稀釋每股 0.97 美元至 0.99 美元。正如蒂芙尼所討論的，我們的營運基本面趨勢符合我們的預期，我們看到冬季的客流量和入住率趨勢穩定。我們有信心今年將實現同店 NOI 高單位數成長，並重申同店 NOI 指引範圍為 8% 至 9%。

Inclusive of Elme Druid Hills, we now expect our non-same-store multifamily NOI to range from $13 million to $13.75 million. We are tightening our guidance ranges for other same-store NOI, which consists of Watergate 600 and G&A. We are updating our interest expense guidance to reflect the impact of acquiring Elme Druid Hills. With the internalization of community-level operations now behind us, we will no longer be recognizing transformation costs going forward. And finally, we continue to expect our core AFFO payout ratio for this year to be at or below our mid-70s target.

包括 Elme Druid Hills 在內，我們現在預計非同店多戶型 NOI 範圍為 1,300 萬至 1,375 萬美元。我們正在收緊其他同店 NOI 的指導範圍，其中包括 Watergate 600 和 G&A。我們正在更新利息支出指導，以反映收購 Elme Druid Hills 的影響。隨著社區層面營運的內部化已經成為過去，我們將不再認識到未來的轉型成本。最後，我們繼續預期今年的核心 AFFO 派息率將達到或低於 70 年代中期的目標。

In terms of our valuation, the public markets are valuing our multifamily business at an implied cap rate in the mid-7% range, which we do not believe reflects the long-term embedded value of our multifamily portfolio. As we advance our operational initiatives, execute value-add renovations and strong returns, capitalize on smart home technology investments and continue to identify opportunities to improve and grow our portfolio, we expect to improve our valuation and earn a lower implied cap rate over time. And now I'd like to open it up for questions.

就我們的估值而言，公開市場以 7% 中間的隱含資本化率對我們的多戶型業務進行估值，我們認為這並不能反映我們多戶型投資組合的長期內含價值。隨著我們推進營運計劃、執行增值改造和強勁回報、利用智慧家居技術投資並繼續尋找改進和發展我們的投資組合的機會，我們預計隨著時間的推移，我們的估值將會提高，並獲得較低的隱含資本化率。現在我想公開提問。

(Operator Instructions) Our first question is coming from Jamie Feldman with Wells Fargo.

（操作員說明）我們的第一個問題來自富國銀行的 Jamie Feldman。

So I guess just to start, you gave good color on the Atlanta acquisition. You talked about potentially doing more in other markets. Can you just talk about what you're seeing out there? I think if you just kind of leave the narrative we've heard so far in earnings. And even we did a call with RealPage a couple of weeks ago. I mean, they're actually seeing more pressure on B -- RealPage just seeing more pressure on B. I think UDR is saying the same thing, just because you've got developers of new supply that are getting really aggressive trying to fill it and they're taking tenants away. It sounds like you're not seeing that, but can you just give more color across your submarkets and tie it into kind of what you might see in the acquisition market along those lines?

所以我想首先，你對亞特蘭大的收購給了很好的描述。您談到了在其他市場可能採取更多行動的可能性。能簡單談談您在外面看到的情況嗎？我認為如果你只是放棄我們迄今為止在收益中聽到的敘述。甚至幾週前我們還與 RealPage 進行了通話。我的意思是，他們實際上看到了B 面臨更大的壓力- RealPage 只是看到B 面臨更大的壓力。我認為UDR 說的是同樣的事情，只是因為新供應的開發商正在非常積極地試圖填補它他們正在把租戶帶走。聽起來您沒有看到這一點，但是您能否為您的子市場提供更多色彩，並將其與您在收購市場中可能看到的情況聯繫起來？

Sure, Jamie. So this is Grant Montgomery talking. Just wanted to give you a heads up on that because we really did look into that data as well that RealPage published and I think one of their points that they made is that depending on the level of new supply coming into market, there was definitely an impact that was registered in that closing of the rent gap between Class A and B across the country nationally. And so we looked at it in a similar methodology. And what we saw is that in their data, they showed that in some markets where you had new supply, annual supply, net inventory ratios of 1% to 3%, they were measuring about a 21% gap between Class A and Class B.

當然，傑米。這是格蘭特蒙哥馬利在演講。只是想提醒您注意這一點，因為我們確實也調查了 RealPage 發布的數據，我認為他們提出的觀點之一是，根據進入市場的新供應水平，肯定會有全國範圍內A 類和B 類租金差距的縮小所產生的影響。所以我們用類似的方法來看它。我們看到的是，在他們的數據中，他們顯示，在一些新供應、年度供應、淨庫存比率為1% 到3% 的市場中，他們測量到A 類和B 類之間的差距約為21%。

In our submarkets, we were having that same methodology of looking at new lease-ups versus our product. We have actually a 30% gap in our submarket. So that's been a key part of our strategy overall is really positioning ourselves at that below the 95% market meeting rents, so that we're not competing head-to-head. Our most recent analysis of the data using RealPage information shows that we're really only competing, for example, in Atlanta up about -- against about 13% of the new product is priced below that point. And so we although certainly are in markets where supply is having an impact, we are seeing direct -- really less direct head-to-head because we've been disciplined since the beginning and are priced significantly low with those new price points.

在我們的子市場中，我們採用相同的方法來研究新的租賃與我們的產品。我們的子市場實際上有 30% 的差距。因此，我們整體策略的關鍵部分是將自己定位在低於 95% 市場租金的水平，這樣我們就不會正面競爭。我們最近使用 RealPage 資訊對數據進行的分析表明，我們實際上只是在競爭，例如在亞特蘭大，大約 13% 的新產品價格低於該點。因此，儘管我們確實處於供應產生影響的市場中，但我們看到的是直接的——實際上不那麼直接的正面交鋒，因為我們從一開始就遵守紀律，並且在這些新的價格點上定價明顯較低。

Okay. No, that's very helpful. Yes, I figured it had more to do with the supply risk in your submarkets was just different than some of these others, but that makes a lot of sense. Can you comment on blends renewals and new lease spreads in the non-same-store Atlanta portfolio?

好的。不，這非常有幫助。是的，我認為這與你們子市場的供應風險有更多關係，只是與其他一些子市場不同，但這很有意義。您能否評論一下亞特蘭大非同店組合中的混合續租和新租賃價差？

Sure. So I would say in the -- well, let's start with the same-store portfolio and then we can move into non-same-store. For the same-store portfolio, we're expecting renewals to continue to trend in the 3% to 5% range. And then for effective new lease rates, we're seeing that the D.C. Metro is trending kind of slightly negative, and Atlanta is trending towards the negative mid-single digits by year-end. So on a blended basis, we're expecting the D.C. Metro area to be between 3% to 4% and Atlanta to be approximately kind of 1%. You would see those same trends that I talked about for Atlanta carrying into the non-same-store portfolio.

當然。所以我想說的是——好吧，讓我們從同店投資組合開始，然後我們可以進入非同店投資組合。對於同店產品組合，我們預計續訂率將繼續保持在 3% 至 5% 的範圍內。然後，就有效的新租賃率而言，我們看到華盛頓特區的地鐵呈現小幅負成長趨勢，而亞特蘭大到年底則呈現負中個位數趨勢。因此，在混合基礎上，我們預計華盛頓都會區的比例將在 3% 至 4% 之間，亞特蘭大約為 1%。您會看到我在亞特蘭大談到的那些相同趨勢也融入了非同店組合中。

Okay. So I mean what are your early thoughts on '24 rents if you're seeing rates are negative?

好的。所以我的意思是，如果您看到利率為負值，您對 24 小時租金的早期想法是什麼？

Yes. So we're going to give our guidance in February. So we're going to be able to provide a lot more detail on the trends at that time. But overall, I would say right now, it varies significantly by market and by submarket. What we're seeing today is a continued gradual normalization of rate growth as we head into the typical winter leasing season. Our D.C. Metro portfolio is performing very well and showing the stability that we would expect and that we've seen in our core markets over the longer term.

是的。所以我們將在二月給予我們的指導。因此，我們將能夠提供有關當時趨勢的更多詳細資訊。但總的來說，我現在想說的是，不同市場和次市場的情況差異很大。隨著我們進入典型的冬季租賃季節，我們今天看到的是利率成長持續逐步正常化。我們的華盛頓地鐵投資組合表現非常出色，並顯示出我們所期望的穩定性以及我們在核心市場中長期看到的穩定性。

In Atlanta, we're seeing more of an impact of kind of timing of addictions as we work through our addiction pipeline which still includes some leases that were underwritten before we owned the properties and improved our credit standards. So the impact of backfilling addiction-related vacancy has created more near-term impacts on rates and occupancies. However, overall, we're still seeing very high retention and very strong renewal rates in our Atlanta Communities. And so we are working through the current addiction pipeline, which is going to set us up well for 2024.

在亞特蘭大，當我們處理成癮管道時，我們看到了更多成癮時間的影響，其中仍然包括一些在我們擁有房產並提高信用標準之前承保的租賃。因此，填補與成癮相關的空缺的影響對房價和入住率產生了更多的短期影響。然而，總體而言，我們在亞特蘭大社區仍然看到非常高的保留率和非常高的續約率。因此，我們正在研究目前的成癮管道，這將為我們在 2024 年做好準備。

Okay. And then I guess just last for me. I mean this was the first quarter post internalization and internalization expenses. I mean as you think about just running the business in the platform, is there anything left to get done, any other initiatives or this is absolutely kind of new sailing from here in terms of the organization?

好的。然後我想這對我來說只是最後一次。我的意思是這是第一季的內部化和內部化費用。我的意思是，當您考慮在平台上經營業務時，是否還有什麼事情需要完成，是否有其他舉措，或者就組織而言，這絕對是一種新的航行？

Jamie, this is Steve. And you're right. From a transformation cost perspective, we had those hit in the third quarter, and we're saying that we don't expect anything as far as transformation costs going forward. Everything is internalized and we are focused on now running the business, running it well and efficiently, getting our policies and procedures in place. And Tiffany talked about the $4.25 million to $4.75 million of upside, really focused on achieving that over the next 24-plus months.

傑米，這是史蒂夫。你是對的。從轉型成本的角度來看，我們在第三季遇到了這些打擊，我們說我們預計未來的轉型成本不會有任何變化。一切都已內部化，我們現在專注於業務運營，良好且有效率地運營，使我們的政策和程序到位。蒂芙尼談到了 425 萬至 475 萬美元的上漲空間，真正專注於在未來 24 個多月內實現這一目標。

Okay. But are there any like other initiatives you guys are thinking about that might come up in '24? Or do you feel like...

好的。但你們有沒有考慮過 24 年可能出現的類似其他措施？或者你覺得...

Yes, I would say absolutely. And I think it really revolves around all of the different initiatives that go into creating that $4.25 million to $4.75 million of operational upside. And more specifically, the 5 kind of key areas that we see making up that FFO upside, first of all, smart home packages. We've -- as I said in our prepared remarks, we've already installed smart home technology packages and 75% of our units expect to complete the remainder through this year. So that will have a positive impact starting in 2024.

是的，我絕對會說。我認為它實際上圍繞著創造 425 萬至 475 萬美元營運收益的所有不同舉措。更具體地說，我們認為構成 FFO 優勢的 5 個關鍵領域，首先是智慧家庭套餐。正如我在準備好的演講中所說，我們已經安裝了智慧家庭技術包，我們 75% 的單位預計將在今年完成剩餘部分。因此，這將從 2024 年開始產生積極影響。

We're also very focused on occupancy. We are changing our processes and procedures around premove-in inspections, marketing, et cetera, to help improve our occupancy and our days vacant. And then we have a lot of different fee income opportunities that we're working on and looking at strategically that will bring new fee revenue into the portfolio. We're also working on cash management and other expense initiatives now that we have everything in house, we've been able to take advantage of the earlier collection of rents and then we are very focused on centralization related opportunities and opportunities to share staff across communities, which we can now take advantage of since the operations are in-house. So those are kind of the 5 key areas that make up that FFO upside. And as we've said before, about 20% of that will be recognized this year. And then the remainder will be recognized across '24 and '25.

我們也非常注重入住率。我們正在改變入住前檢查、行銷等方面的流程和程序，以幫助改善我們的入住率和空置率。然後我們有很多不同的費用收入機會，我們正在研究和策略性地考慮這將為投資組合帶來新的費用收入。我們也致力於現金管理和其他費用計劃，因為我們已經擁有了一切，我們已經能夠利用早期收取的租金，然後我們非常專注於與集中化相關的機會和跨部門共享員工的機會社區，我們現在可以利用這些社區，因為業務是在內部進行的。這些是構成 FFO 優勢的 5 個關鍵領域。正如我們之前所說，其中大約 20% 將在今年得到認可。然後其餘部分將在 24 年和 25 年期間得到認可。

(Operator Instructions) Our next question is coming from Alan Peterson with Green Street.

（操作員說明）我們的下一個問題來自 Green Street 的 Alan Peterson。

Tiffany, just a question on the Atlanta market. I know that you touched on addictions there. Total portfolio occupancy of 91.6% at the end of the quarter. Is that the floor for occupancy due to bad debt issues? Or are you guys still working through additional or incremental bad debt issues within the market?

蒂芙尼，只是關於亞特蘭大市場的問題。我知道你談到了那裡的成癮問題。截至本季末，投資組合總入住率為 91.6%。這是由於壞帳問題而導致的入住率下限嗎？或者你們還在解決市場上額外或增量的壞帳問題嗎？

I would say, overall, we are still working through the addiction pipeline. But on the back end, we are also putting in place effective new lease incentives to help drive occupancy of the portfolio and new marketing initiatives to make sure that we are backfilling those vacancies as quickly as possible. And then I think it's very important to note that in addition to that, we have put in place new credit screening criteria that is also helping improve the credit quality of the residents that we're backfilling in those vacancies.

我想說，總的來說，我們仍在努力解決成癮問題。但在後端，我們也實施了有效的新租賃獎勵措施，以幫助提高投資組合的入住率，並實施新的行銷舉措，以確保我們盡快填補這些空缺。我認為值得注意的是，除此之外，我們還制定了新的信用篩選標準，這也有助於提高我們填補這些空缺的居民的信用品質。

So out of that 91.6%, how many more units or what percentage of the portfolio is still delinquent within Atlanta?

那麼，在這 91.6% 中，亞特蘭大境內還有多少單位或投資組合的拖欠比例是多少？

I think that overall, the bad debt within the Atlanta portfolio is going to continue to moderate and we are going to continue to see that bad debt improve month-over-month as we head into the remainder of this year and then into 2024.

我認為總體而言，亞特蘭大投資組合中的壞帳將繼續放緩，隨著今年剩餘時間和 2024 年的到來，我們將繼續看到壞帳逐月改善。

Understood. Maybe just shifting over to the acquisition. Paul, I know that you mentioned that you guys are looking at a 6% yield. Is that 6% yield on a year 1 basis? And I know that you talked about some of the renovation upside. And it sounds like there's some potential densification or even expansion over the next, call it, 24 months at that property. How are you guys thinking about it from call it, a year 3 and beyond yield standpoint in terms of the underwriting there?

明白了。也許只是轉向收購。保羅，我知道你提到你們正在考慮 6% 的收益率。第一年的殖利率是 6% 嗎？我知道您談到了裝修的一些好處。聽起來該房產在接下來的 24 個月內可能會出現一些潛在的緻密化甚至擴張。從承保的角度來看，你們如何看待第三年及以後的殖利率？

Yes, Alan, this is Steve, again, and I'll kind of start with that and then transfer to Paul to kind of talk about the upside in the out years. But the 6% is in an internal yield based on what we expect over the first 12 months. So yes, it's year 1, and we think that this becomes accretive within those 12 months. So from a cap rate perspective, we're pretty excited about that. We're obviously very excited about the real estate and the opportunities here. And I'll turn it over to Paul to talk about renovations and where we see the upside.

是的，艾倫，我又是史蒂夫，我會從這個開始，然後轉到保羅來談談未來幾年的好處。但 6% 是基於我們對前 12 個月的預期的內部報酬率。所以，是的，現在是第一年，我們認為這會在這 12 個月內不斷增加。因此，從資本化率的角度來看，我們對此感到非常興奮。顯然，我們對這裡的房地產和機會感到非常興奮。我會把它交給保羅來討論翻新工程以及我們看到的好處。

Thanks, Steve. Yes, Alan, and I'm going to draft a little bit off of Grant's comments on RealPage and what he saw. When we look at this, and I think we've set the bar appropriately high for our acquisitions criteria, I mean this is the only one we've seen in probably 12 plus to 18 months where we thought it had the potential that we think it has aside from the spread between Class As, we look at the demographics of the North Druid Hills market. How much capital has gone in there, the amount of jobs around our property that are continuing to go. We think we're going to be dealing with a higher credit profile here in that, the income band for the demographics we are targeting has increased 17% over the last 5 years. But when I look at the property itself, and we think this was a great real estate deal. The property itself, we're looking at 10 units per acre right now. And if you look at the deliveries over the last 5 years, all the properties in that submarket have averaged 75 units per acre.

謝謝，史蒂夫。是的，艾倫，我將根據格蘭特對 RealPage 的評論和他所看到的內容起草一些內容。當我們看到這一點時，我認為我們已經為我們的收購標準設定了適當高的標準，我的意思是，這是我們在大約12 到18 個月內看到的唯一一個我們認為它具有我們認為的潛力的公司除了 A 級之間的差異之外，我們還關注北德魯伊山市場的人口統計。有多少資本投入其中，我們的房地產周圍的工作數量仍在繼續減少。我們認為我們將面臨更高的信用狀況，因為我們目標族群的收入範圍在過去 5 年裡增加了 17%。但當我審視房產本身時，我們認為這是一筆很棒的房地產交易。對於房產本身，我們現在正在考慮每英畝 10 個單位。如果你看看過去 5 年的交貨量，你會發現該子市場的所有房產平均每英畝 75 套。

So we really do believe that there are densification opportunities here and that this can be kind of looked at as a covered land play. But I think for us right now and just we've been banging on this market for a while, when we looked at buying this at $216 a door, we think replacement costs depending on land prices, entitlements, et cetera, it's probably somewhere between $310 and $340 a door. So we looked at this as a 33% discount to replacement costs. So we think that actually sets us up for a nice land basis if we did want to do some type of densification moving forward. But I can tell you, just because there's been a lot of discussions about cap rates, et cetera, we were not the highest -- the feedback we've gotten, we were not the highest bidder on this asset. I think what the distinguishing feature for us was being all cash, offering our sellers certainty of execution. And it was our observation to move now and create the value while we could. So that's why we move forward with Elme Druid Hills.

因此，我們確實相信這裡存在緻密化機會，並且可以將其視為有蓋土地遊戲。但我認為對我們來說，現在我們已經在這個市場上摸索了一段時間了，當我們以每門216 美元的價格購買這個時，我們認為重置成本取決於土地價格、權利等，它可能介於兩者之間每門310美元和340美元。因此，我們將此視為重置成本的 33% 折扣。因此，我們認為，如果我們確實想繼續進行某種類型的緻密化，這實際上為我們奠定了良好的土地基礎。但我可以告訴你，僅僅因為有很多關於上限利率等的討論，我們並不是最高的——根據我們得到的回饋，我們不是這項資產的最高出價者。我認為我們的顯著特徵是全現金，為我們的賣家提供了執行的確定性。我們的觀察是，現在就行動起來，趁還可以的時候創造價值。這就是我們推進 Elme Druid Hills 的原因。

I appreciate those comments. Maybe, Steve, just on the 6% yield comments and the accretion there, you guys drew down the line, and I'm assuming the lines and, call it, the mid-6% range in terms of a funding source. Is there a longer-term funding plan that gets you to that kind of accretion mark for Druid Hills?

我很欣賞這些評論。也許，史蒂夫，就 6% 的收益率評論和那裡的增長而言，你們劃下了界限，我假設這些界限，並稱之為資金來源的中間 6% 範圍。是否有一個長期的資助計劃可以讓你達到德魯伊山的那種成長目標？

Yes, Alan. So our line is actually at 6.25% right now. And we're certainly evaluating options and could look to term out a portion of our line of credit balance with the secured or unsecured debt. And we'll see what the Fed does in the coming couple of months. But we do see the secured and unsecured debt market out there as far as (inaudible) made, but the pricing is challenging. So for now, we're certainly comfortable keeping the balance on the line, and we still have ample capacity on our line to do anything additional if we wanted to. But we'll continue to monitor the markets and look to do something longer term if we were to make sense.

是的，艾倫。所以我們現在的利率其實是 6.25%。我們當然正在評估各種選擇，並可能考慮以有擔保或無擔保債務來確定我們的部分信貸餘額。我們將看看聯準會在未來幾個月會做什麼。但我們確實看到了有擔保和無擔保的債務市場（聽不清楚），但定價具有挑戰性。因此，就目前而言，我們當然願意保持生產線的平衡，如果我們願意的話，我們的生產線仍然有足夠的能力可以做任何額外的事情。但如果我們想要有意義的話，我們將繼續監控市場並尋求做一些長期的事情。

All right. Maybe one last one for me in terms of forward external growth plans. I understand the comments on recycling out of higher CapEx assets into geographic expansion. Across the best use of funds today, would it be to continue to scale the platform into geographic expansion or potentially look at buyback opportunities considering where the stock is trading at?

好的。就遠期外部成長計畫而言，也許對我來說是最後一個。我理解有關將較高資本支出資產回收到地域擴張的評論。在當今資金的最佳利用方面，是繼續將平台擴展到地理擴張，還是考慮到股票的交易價格，潛在地尋找回購機會？

Yes, Alan. So obviously, we do consider stock buybacks and look at that. But we remain focused on a couple of things. One is we've built out a platform that is scalable and looking at growth to scale the company. But we also look at maintaining the strength of our balance sheet. So when we think about additional things that we can do, obviously, where we said that we're trending to a mid-5s by the end of the year. So we're very comfortable with where we're trending from a leverage perspective.

是的，艾倫。顯然，我們確實考慮股票回購並對此進行研究。但我們仍然關註一些事情。一是我們建立了一個可擴展的平台，並著眼於擴大公司規模。但我們也著眼於維持資產負債表的實力。因此，當我們考慮我們可以做的其他事情時，顯然，我們說到今年年底我們將趨向於 5 歲左右。因此，從槓桿角度來看，我們對目前的趨勢非常滿意。

Additional diversification, we could certainly recycle assets. We've got some assets maybe in the D.C. area that might be lower growth, have higher long-term CapEx needs that we could recycle into higher-growth assets in the Sunbelt. In addition to that, we've kind of mentioned all of these, but we also have the operational upside, the $4.25 million to $4.75 million that we're focused on executing on.

進一步多元化，我們當然可以回收資產。我們可能在華盛頓地區有一些資產，這些資產的成長可能較低，但長期資本支出需求較高，我們可以將其回收到陽光地帶的高成長資產。除此之外，我們已經提到了所有這些，但我們也有營運方面的優勢，也就是我們重點執行的 425 萬至 475 萬美元。

With the acquisition of Elme Druid Hills, now we have our renovation pipeline of 3,300 units. The smart home technology, which we started rolling out this year, we're going to continue that and doing Phase II, which allow us to do self-guided tours. So we think that we've got a lot of growth drivers embedded in our portfolio that we're looking to execute on and anticipate that, that will allow us to earn a lower implied cap rate over time. And then we'll look to grow with our cost of capital when it makes sense. Obviously, it doesn't pencil that right now, but if it makes sense in the future, we'll certainly look to do that as well.

收購 Elme Druid Hills 後，我們現在擁有 3,300 個單位的翻新項目。我們今年開始推出智慧家庭技術，我們將繼續進行這項技術並進行第二階段，這使我們能夠進行自助遊覽。因此，我們認為我們的投資組合中嵌入了許多成長動力，我們希望執行這些成長動力並預計，隨著時間的推移，這將使我們獲得較低的隱含資本化率。然後，在合理的情況下，我們將尋求隨著資本成本的成長而成長。顯然，它現在還沒有做到這一點，但如果將來有意義，我們當然也會考慮這樣做。

And if there are no further questions, I'd like to turn the floor back over to management for any closing comments.

如果沒有其他問題，我想將發言權交還給管理層以徵求結束語。

Thank you. Again, we'd like to thank everyone for your time and interest today, and we look forward to speaking with you and seeing you in person over the next few weeks. Thank you, everyone.

謝謝。再次感謝大家今天抽出寶貴的時間和興趣，我們期待在接下來的幾週內與您交談並親自見到您。謝謝大家。

Thank you. This concludes today's conference, and you may disconnect your lines at this time, and we thank you for your participation.

謝謝。今天的會議到此結束，此時您可以掛斷電話了，感謝您的參與。