NexPoint Residential Trust Inc (NXRT) 2016 Q2 法說會逐字稿

Good day, and welcome to the NexPoint Residential Trust, Inc., Second Quarter 2016 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Marilynn Meeks, please go ahead.

Thank you. Good day, everyone, and welcome to NexPoint's conference call to review the Company's results for the second quarter ended June 30. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; and Matt McGraner, Executive Vice President and Chief Investment Officer. As a reminder, this call is being webcast through the Company's website at www.NexPointliving.com. Additionally, a copy of the Company's second quarter 2016 supplemental information is available for your review on NexPoint's Investor Relations section of the Company's website.

Before we begin, I would like to remind everyone that this conference call contains forward-looking statements that are based on management's current expectations, assumptions, and beliefs. Forward-looking statements can often be identified by words such as "expect," and similar expressions and variations or negatives of these words.

These forward-looking statements include but are not limited to statements regarding NexPoint's guidance for financial results for the 2016 full year. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed in any forward-looking statements.

Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the Company's Form 10-K for the year ended December 31, 2015, and Form 10-Q for the quarter ended June 30, 2016, that will be filed with the SEC on or before August 15, 2016. Final information statement and NexPoint's Form 10 registration statement filed with the SEC for a more complete discussion of risks and other factors that could affect forward-looking statements. Except as required by law, NexPoint does not undertake any obligation to publicly update or revise any forward-looking statements.

The conference call includes analysis of adjusted funds from operations or AFFO, funds from operations or FFO, and net operating income or NOI, all of which are non-GAAP financial measures of performance. These non-GAAP measures should be used as a supplement to and not a substitute for net income/loss computed in accordance with GAAP. For a more complete discussion of AFFO, FFO and NOI, see our Form 10-Q for the second quarter 2016, which will be filed with the SEC on or before August 15, 2016 as well as our Form 10-K for the year ended December 31, 2015.

I would now like to turn the call over to Brian Mitts. Brian, please go ahead.

Thank you, Marilynn. We want to welcome everybody to the second quarter NXRT earnings call. We had a very strong quarter to talk about here today. It's going to be myself and Matt McGraner, as usual.

Let me start it off by going through some of the Q2 results. I'm going to then turn it over to Matt to get the detailed discussion of the portfolio, some of the things we're seeing in the market and, kind of, what we see here for the remainder of 2016, and then I will finish it up with our guidance for the remainder of 2016 as well as some closing thoughts before we turn it over for questions.

For the second quarter, our AFFO was $22.5 million, which is $1.06 per common share. That's compared to $8.9 million, or $0.42 per common share in the first quarter. Of significant note here is that included in the AFFO is $16.4 million of gains, which we will talk about here a little bit later.

FFO for the quarter was $7.2 million, or $0.34 per common share. That's compared to $8.6 million or $0.41 per common share last quarter. The difference there is the three properties we sold in the second quarter.

NOI was $17.4 million for the quarter. That's compared to $17.7 million for the first quarter. Our NOI performance for the second quarter was 2.4% better than the guidance we issued of $17 million at the midpoint, which we think it's pretty strong given that we did sell three properties during the quarter.

Rental income was $29.4 million for the quarter, which is flat, again, due to the disposition of properties. So the fact it was flat is a strong number. Excluding those three properties, our quarter-over-quarter growth is 2.55%. Net income for the quarter was $16.6 million, or $0.69 per common share. That includes depreciation and amortization of $8.1 million, interest expense of $6.5 million and, again, the $16.4 million gain on sales from the quarter.

We finished the quarter with an $830 average effective rent per unit and 93.7% physical occupancy across the portfolio. Matt's going to walk through the details around that in his section.

We successfully completed the sales of our Meridian asset in Austin, Park at Regency and Mandarin Reserve assets both in Jacksonville, Florida, for combined sales proceeds of $62.5 million. Same-store properties continue to outperform the peer group, in general. We've classified 35 properties this quarter, which is about -- in our same-store pool it's about 83% of the units that we started with at the beginning of the quarter.

We increased rent on the same-store's 8.1%, other income 26.3%, for a total NOI increase of 11.0%, same-store over last year. Quarterly occupancy was up 87 basis points to 93.9% on the same-store pool. So let me wait to turn it over to Matt to give more details around the portfolio. Let me touch on our capital structure as of 6/30.

As of 6/30, we had total cash of $62.8 million that is comprised of $28.6 million of free cash flow that's used for day-to-day operations, paying the dividend, et cetera. We had $34.2 million of what we call restricted cash. Of that amount, we had almost $16 million that was earmarked for future rehab programs.

For now, we intend to fund our acquisitions from the free cash flow on hand and excess operating cash flow. Given our high FFO and AFFO coverage over our dividend and the fact we have little amortizing debt, we believe we can generate substantial excess cash flow, going forward, as we've done in the past.

We anticipate using the $16 million at this point for the value-add rehabs as we talked about in prior quarters. If we're seeing very strong organic rent growth in some of our markets, we may hold those resources and not put them to work immediately. Matt's going to go through the details around the rehabs in Q2, which was very strong.

On June 6th, we entered into a $200 million credit facility with Keybanc. It's a five-year term with an interest rate of LIBOR+220 basis points. Its full-term IO, interest only. We immediately drew $191 million on that credit facility to refinance 11 of our properties. Those 11 properties currently were -- had a mortgage with Friday, so we're able to refinance those into this new facility without any prepayment penalty and ended up lowering our overall interest costs on those deals.

In August 2nd, which was a few days early, we ended up retiring the bridge facility with Key that we used as part of the Phoenix acquisition last August. That was a $29 million bridge. We paid down the majority of it by the end of the second quarter with a $2 million remaining balance that we then paid off in full on August 2nd. Our total debt outstanding as of June 30th was $660 million. Of that, 93% was floating.

However, during the quarter, we did enter into three separate interest rate swaps of $100 million each for a total of $300 million. We ended up getting a weighted average fixed rate of just a little bit over 1% on those three deals, so with that, that purchase of the interest rate swaps, we effectively have 52% of our debt is fixed at this point.

So we think, overall, we've made some nice balance sheet moves to both delever as well as fix more of our debt, and we've done it in a way that doesn't impair our flexibility, which is why we've historically used the floating rate debt so that as we sell deals, we don't incur the yield maintenance or the fees that you'd otherwise see, but with these interest rate swaps, we've been able to effectively fix a large portion of our debt.

Our weighted average interest rate as of June 30, was 2.64%. This does not take into consideration the swaps. As LIBOR moves up, we still have an increase in our interest rate expense until we hit the amount that we capped it at, the 1% swaps.

I want to also kind of highlight, again, as we've done in past quarters, our internal management holdings, which as of June 30th, were 17.28%, which is a 46-basis point increase since the last quarter. So we continue to buy our shares. We did announce a share buyback in June. We bought some shares back during the quarter. There's only a few days in there, but we continue to have that as a tool to effectively increase our holdings as well as kind of express our view of where the value -- the portfolio is versus what this trading in the market.

The second quarter dividend was the same. The Board has announced the third quarter dividend at the same amount, just under $0.21 a share. With our current prices, we're down to about a 4% yield at this point.

We still maintain high coverage on FFO and AFFO. FFO is 1.64x our dividend. AFFO is a high 5.13. Most of that is related to the gain that we added back in there. If you take that out, our FFO coverage is 1.78x.

So as we mentioned, very strong balance sheet moves this quarter. We plan to continue that in the future. One of our main goals is to continue to delever the portfolio both through paying down debt but also in doing the value added program and increasing the value of our portfolio. So enterprise value will continue to delever. And then we think we've got plenty of cash and access to capital to do any near-term purchases that may come down the pipeline.

So with that, I'm going to turn it over to Matt to run through some of the details in the portfolio and then we'll come back, walk through our guidance for the remainder of 2016 and then turn it back to the operator for questions.

Yes, thanks, Brian. I'm going to run through some value-added results, operating metrics, talk about some dispositions and acquisitions, and then the market, in general.

Our value-added results to date -- in the quarter we did 550 units in upgrades portfolio-wide, and since its inception, we've now done 3,580 interiors, or about 25, just north of 25% of the gross portfolio, an average cost of just under $4,700, achieving approximately 21% ROIs in a $97 per-month increase.

On the same-store numbers, Brian went through the highlights. I'll go through the markets a little more in detail. Dallas was 13.1% on a same-store basis. Houston was -- or one property in Houston was 7.7%. Atlanta was 9.1%; Nashville, 5.4%; Charlotte was 17.2%; Jacksonville, 15%; Orlando, 5.2%; Tampa, 9.5%; and Florida, in general, was 8.3%.

I want to quickly highlight some of the rent growth we're seeing by market. Nashville led, in general and overall, at 9.05% growth; Atlanta was second with 8.7%; Tampa, third at 8.4%; Charlotte, fourth at 7%; Houston enjoyed 6.75% growth; and Jacksonville was just under 6% as well.

New lease growth, which is same unit, new tenant, was also very strong. 7.61% overall on 1,638 new leases during the quarter. That's a $62 average monthly premium with eight markets seeing 7%-plus growth on new leases, and Nashville was number one, again, of 13.17% during the quarter. 72 leases there signed at 100+ premium. Atlanta saw new lease growth of 11.58% during the quarter; Tampa, 10.60% growth; West Palm Beach, 10.5%; Jacksonville running out the top five with 8.44%.

On the renewal front, 3.52% overall on just over 1,000 renewals during the quarter. Charlotte saw the highest growth on renewals of 10.16%; Atlanta in the top three again, 7.53%; and then West Palm and Orlando, kind of, run up the top four with an increase of just about 4%.

Talking about a little acquisitions, we didn't buy anything during the quarter, but subsequent to the quarter we used 1031 proceeds from the sale of Meridian Austin to acquire CityView, which is a 217-unit property in West Palm Beach right down the street from a brand new construction asset, a Whole Foods in the immediate vicinity, et cetera.

We expect our year-one economic cap rate to be 5.75, and then to have that asset enjoy double-digit NOI growth in the first three years consistent with our overall portfolio.

On the disposition front, the private market still very strong for B assets. As Brian mentioned, we sold three at just under 6 cap at 40%-plus levered IRR returns during the quarter. We did make a couple of changes to the NAV slide. I want to go over them with you here on the cap rate front.

So we had a 50 basis point cap rate compression for Charlotte in West Palm Beach, both adjusted to a range of 5.75 to 6.25. Support for that was -- there was a Lone Star portfolio marketed in Charlotte. Six properties comparable quality location vintage. The broker ask was 5.25 cap and expected to trade at 5.50 to 5.75 on trailing unadjusted numbers.

West Palm Beach, the Green Street 4 cap rate estimate as of 6/30 was in that range, and then we had a price discovery from the CityView acquisition, which is why we took that down as well. For Nashville, we brought down cap rates by 25 basis points, adjusted to a range of 5.75 to 6.25. That's in line with the Green Street 4 cap rate estimate as well. And then we chased a couple of deals during the quarter and then saw a couple of purchases. Steadfast purchase, a deal called Landing at Brentwood in May for a 5.62% on trailing numbers, and then another deal we saw trade -- or get under contract, rather, Arbors at Brentwood, a very strong B value-added deal in the market is under contract for just south of 5.75.

So even with those adjustments I still think we're being conservative, realistic and just wanted to give you the color in case you had questions later on.

So looking ahead as of today, we sit at 94% physically occupied with $837 average effective rents, that's up 27 basis points and $7, respectively, from the end of the quarter. We remain pleased with our progress. I think BH is doing a great job as well as our team allocating capital, but are satisfied, think we can do more.

We'll continue to dispose of assets in noncore markets. We have five assets all for sale on the balance sheet. We intend to allocate capital to retire the debt, delever the balance sheet, buy back stock, and make accretive one-off acquisitions with the proceeds. Specifically and with respect to the acquisitions at this time in the cycle, we're really trying to be disciplined and focused more and more on covered land plays in close proximity to new construction, particularly where we think we can reasonably expect to achieve outsize NOI growth based on the rent deltas between A and B assets in the market. Again, our goal here is to generate outsize NOI growth. We're also being resilient to new supply and broader macro factors while delevering the balance sheet.

As we've mentioned previously, we still believe the fundamentals with the apartment business were strong, especially in the B space where the rent delta is still significant between A and B assets. We're aware of the new supply and deliveries in our markets but virtually all of it's at the higher end luxury in the market that requires $1,000 and more in rent to just make the returns [pensile].

So at the end of the day, we've said this a lot and, basically, all we need to deliver a 6% unlevered return is an $800 average effective rent to our investors. That feels pretty good in an environment where our assets are literally infeasible to replace at current land values and construction costs. And you add to that our ability to drive rents through value-added programs, you can see why we're still constructive and continue to be constructive on our Company and the prospects.

I want to thank the BH team and our guys here for their continued hard work and effort and that's all I've got.

Great, thanks, Matt. Let me finish up the prepared remarks with our guidance for full-year 2016.

For revenue on the low end, we are projecting $130.6 million from a high end $132.6 million. For NOI, we are projecting on the low end, $68 million; on the high end, $70 million. FFO per share on the low end $1.38; on the high end $1.47. AFFO per share on the low end, we project $1.46 per share; on the high end, $1.55 per share, and that number is excluding the gain that we mentioned earlier.

Our guidance is based on, essentially, our portfolio as it stood at 6/30, and then making no assumptions on acquisitions or dispositions throughout the remainder of the year. So as we continue to devaluate sales and acquisitions and, obviously, these numbers could change in accordance with that.

So, with that, I'll just close it by saying that we continue to execute the strategy that we've been talking about here for a year and a half. It looks like the market is starting to reward that and see the value there. We had a nice run with stocks towards the end of the quarter and into the first part of the third quarter. So -- happy with that. We continue to be big believers in our own Company, and express that through our purchases of the stock. And we continue to see that as being something that we're going to do in the future as well.

So, with that, let me turn it back to the operator and open it up for questions.

(Operator Instructions) Michael Kodesh, Canaccord.

Hey, good morning, guys and nice quarter. I guess just starting off with operating expenses. They were a little elevated in the quarter, up 9.2% on the same-store. It looks like it was mostly driven by payroll and real estate taxes, but I wanted to get an idea of whether or not that -- if there is something going on there, or if maybe that's more of a trend that we should expect, going forward? Thanks.

Yes, I'll take it. I think the majority is driven by the real estate taxes. I think the trend as long as asset values continue to appreciate that we'll see pressure. We've stated before that we'd literally fight, you know, and in most cases sue the municipalities to try to get our -- to get our assessed values down as much as we can. So that's something that's in the "non-controllable" bucket that we'll deal with and fight it as best we can.

On the controllable side, there's really payroll. It's used with respect to labor that we're seeing across, really, Texas and Tennessee, Florida, but primarily our Texas and Tennessee markets just good maintenance techs are hard to find, so you're seeing a little wage inflation there. I do expect that to moderate with sort of some of the supply burning off and more jobs in the market for construction. So I think, from a controllable side, I think I wouldn't expect that to continue as high.

Thanks, that's helpful color. And then, sort of, a general question here. So with the stock now kind of trading within your published NAV range, I guess I just wanted to get your idea of your appetite for growth. I'm wondering what acquisition opportunities you're seeing out there? Are you guys still finding deals and how competitive is that space? Thanks.

I'll let Matt comment on the acquisitions and kind of potential deals we're seeing. What I would say, right on where the stock is versus our NAV range and kind of how we think about that, it's a combination of where is our NAV at the current moment versus the stock price? Do we think that we can raise the capital and put it to work in an accretive manner? And do we have other sources that we can tap to do that?

And, at the current time with some of the sales we've done, some of the sales that we're looking to do, and we've still got some assets held for sale on the balance sheet and it's just not a near-term thing. We haven't filed a [shelf] or anything at this point, so let me let Matt address the acquisitions and what we're seeing out there.

Yes, the market is increasingly still very active from private capital. What I will say is we've seen the ability to source a couple of deals, and they continue to be one-off deals that fit our profile in that, kind of, $10 million to $20 million equity check range, which, you know, below $10 million you're not fighting the private syndicator guys and then above, you know, kind of, $50 million where you're falling in line with Blackstone and Starwood and those guys.

So that space is an area where we flourish and kind of show our outperformance. And so we continue to chase those, but we're still being disciplined. I mean, just because our cost of capital is lower doesn't mean we need to be in a rush to get a deal done just to get a deal done. So we're trying to delever the balance sheet and still maintain NOI growth around the same levels while paying off debt, and that's helping the market cap grow.

But I think, you know, I think we'll be able to see, kind of, two or three more for the year. You know, we're working on some things that are off market that fit our bucket and our wheelhouse and to the extent we can find them and get them closed, we'll always do them. But I don't expect us to run out and buy a portfolio or anything like that in the near term.

Fair enough. And then, so you kind of mentioned deleveraging there, and you're looking at the balance sheet. Just for that $190 million-plus that you just put on the revolver, do you have any long-term plans for that? And then, kind of, how does that pair with your long-term view of leverage given especially where the stock price is now?

Yes, I think one of the things that we've determined is the best way to create value in this company is through a thoughtful deleveraging program. By our calculations, we're at about 60% debt on an enterprise value basis. And if we could start to bring that down in to the 50s, we think that looks pretty attractive. There's no near-term plans with the $191 million that we put on the revolver with Key other than to keep it there. That revolver, by the way, we can upsize the $300 million if we hit certain things.

So we view that as kind of a longer-term solution, and it's a five-year interest-only type of facility with a nice rate in spread that we've essentially capped with the swap. So we view that as a near-term/long-term solution.

Okay, that's helpful. And then just two more quick ones on the renovation portfolio. In terms of CityView, do you guys have a renovation plan set in place for that?

Yes, absolutely, and it's to continue what we've done, really, at Bayberry, which that property has seen some great outperformance in the market. We had the same kind of BH team overseeing that asset, which also drove the performance of the Jacksonville numbers, and you saw how those assets traded.

So the general, kind of, three-year plan is to do 60% of the units over the first, kind of, three years, and then leave a little meat on the bone for the next guy. I think we've budgeted, I think, almost, kind of, $7,000 a unit for interiors and exteriors. We'll probably be $4,700 into $5,200 a unit for interiors. I think I mentioned this on the prepared remarks, but it's literally next door to a brand-new Class A construction deal that's getting $700 in rent premiums above where we are. So I feel pretty good about our ability to drive rents there.

Great, that's helpful color. And then, finally, I'm trying to (inaudible) the questions here. Just with the Pointe at Foothills, I noticed that hasn't started its renovation process yet. I think you guys acquired it in 3/2/15. Just, could you provide a little color of what's going on there?

I think that's a larger asset, you know, one of the biggest ones in the portfolio. So we kind of shelved what we were going to start because we thought we could get more rent premiums than what we originally budget if we spent a little bit more money. So we kind of went back to the drawing board. The BH team, design team, and CapEx team went back to the drawing board and kind of came up with some better plans.

We are absolutely going to perform the CapEx there, and get the value added. We just thought we could do more, so that's why we haven't really pushed it as much.

That's all for me. I'll jump back in queue with anything else. Nice quarter.

Thanks, Mike.

Thank you.

Dan Donlan, Ladenburg Thalmann.

I just wanted to ask you guys about what you have held for sale? What are you, kind of, budgeting from an economic cap rate on the sale? What's a good general range for us to model?

Yes, I'll think you will find that we're trying to basically, in the NAV slide capture where we're thinking, that range is kind of where our BOV ranges are and where we expect it to play out. So, hopefully, we hit the lower end of the cap rate range on those, and I think that's where we would transact.

Okay, and then as far as timing goes, do you think end of the third quarter or, really, just then?

I would, if I had my druthers, I think I'd have them all closed by the end of the third quarter, yes.

Okay, okay. And then sticking with the cap rate discussion, as we think about new acquisitions, should we think about potentially the cap rates that you're going to be acquiring as coming in kind of below the minimum -- the range that you gave there just because there has been rehabs done? And whereas this as a range you're giving is a more "somewhat stabilized" cap rate for properties? Is that a fair way to think about it?

It's an entirely fair way to think about it, and I would expect them to be lower on the purchaser's numbers, right -- or, excuse me, on the seller's numbers, you know, I would expect them to be, kind of, in the 5% to 5.5% range today, which really is kind of a poor measure, if you will, [going in yield]. What we like to look at is our economic effective year-one cap rate and what our unlevered return is going to be based upon our year-one economics with our CapEx, and that's kind of our starting point in the way we look at it.

Okay, that makes sense. And then as far as the held for sale, you guys, I think you talked about potentially doing two or three more acquisitions. That's just going to be funded directly with what you have held for sale, which is, I think about $6 million or so? Is that a fair way to think about it?

Yes, I think if we use the proceeds to buy back stock delever and make 1031 acquisitions, I think we can accomplish all those with those five deals plus what we have on the balance sheet and still grow the market cap pretty well. So that's the plan for now. That's the most accretive way, non-dilutive way to do it, and so that's what we're focused on.

Okay, and then lastly, how do you -- I know you guys kind of don't have a shelf out there, but depending upon what you believe your NAV is, you're starting to kind of get in the range of trading at a premium, maybe, to the midpoint of your range or maybe a slight discount. How do you view equity at these levels, and if your stock continues to rise, is this something where you think you could essentially issue and accretively invest? You know, just, kind of, curious as you guys look to potentially get bigger or what your thoughts are?

Yes, I think as we start to narrow in on where we think value is, it certainly becomes part of the conversation. When we had this call last time, I think we're kind of at the 14 range. So there wasn't a lot of discussion around it. I think the other piece of it is in the shorter term we have access to capital in the shorter term through our revolver. That takes us in the opposite direction on the deleveraging, at least shorter term, but it gives us the flexibility to make a move if we needed to. And then we could go into the markets at the right time and write some (inaudible).

I think the key is that we've always tried to maintain the flexibility so that we didn't have to go to the public markets, and then we'd kind of get hijacked a little bit and that's going to put downward pressure on the stock. So I think we've done a good job of maintaining that flexibility.

I think the other piece of it is, and Matt can probably speak to this a little bit more is if we're going to raise capital, we want something to do with it. We could delever, clearly. We could find some other uses of those proceeds but until we have something that's compelling, there's not a lot of impetus or motivation to raise equity.

Yes, I just think we need a use, right? We need an accretive use to consider it, and, you know, as of now, everything that we use, you know, we can fund with what we have. So it's a conversation we don't take lightly given our ownership levels and what we continue to own. So it's something that's -- it's increasingly becoming a conversation, but it's not on the table.

Right, no, that makes complete sense. I guess the follow-up question to that would be -- I mean, have you seen any type of moderation in cap rates these days for some of these Class B portfolios? I know it was really competitive, call it, late last year or early this year, but I was just kind of curious if you've seen any type of pullback there or maybe even just gotten even more competitive?

Yes, I mean, it's a great question. I think -- and this kind of gets back to the use, like, so there's two that I know of. There's a 14,000-unit portfolio out there, and then there's another kind of 10,000-plus unit portfolio. That's something that's just not -- I mean, that's something that we're just not even going to kind of consider. To the extent we found something for a use, we'd want it to be smaller and, kind of, [lag] into it, I think.

That being said, cap rates -- we don't see them going down very much, but I can tell you in, like, a Dallas or Atlanta or Nashville, even, if you get a well-located B deal, you're going to have 25 offers on it, and you're going to be around a 5% cap rate. So it's a great seller's market with that respect.

But I don't see cap rates going down, but I also don't see them going up very much. I think it's still a really good time for apartments, a great time for B assets, and a lot of people have been -- I know the EQR and the Avalons and those guys are coming out saying there's softness and there's deliveries and everything else. But what people aren't really talking about, which what we're seeing anecdotally and, kind of, firsthand is credit-tightening right now for construction in multi-families is almost non -- I mean, it's been very dramatic.

Now some lenders are requiring 45% to 50% equity. So the merchants guys are just kind of, like, you know, kind of scratching their heads and not building as much. So I think that that gives possibly more room to run. I mean, I know we're kind of talking on our book here, but I think it gives a little bit more room for apartments to run in the near term and cap rates to remain moderate.

Thank you. (Operator Instructions) Jim Lykins, D.A. Davidson.

For the rehabs, I believe previously you talked about doing about 300 per month, or at 550 for the quarter. Can you just give us a sense for how to think about that for Q3, Q4, or maybe what we might want to use as a run rate, going forward?

Yes, I think 400 is a good run rate. It ramped in this quarter, particularly, because we had some decent weather, some good turnover. I think Q3 will probably be on the same sort of -- it will be higher than 400 -- 400 or higher, I think. Q4, you run into seasonality issues, so that will be lower. And then that's basically the end of the -- you know, I guess through the end of the year.

Okay. And also could you just give us a sense for what you're seeing with leasing into Q3 with (inaudible) going out?

Yes, Q3 today, from what our first month is still very strong. We're kind of at or above on the levels that I gave in the prepared remarks in each of our markets. The kind of outliers, surprising outliers to the upside are Charlotte and Nashville, which is -- we've said that's been strong for a while -- but even Dallas. Dallas has become -- it's kind of gotten another leg up recently, at least in the B space. So I would expect that 4% or above to the majority of the portfolio.

And you're still seeing some of the A property renters continuing to migrate to the B properties?

We're seeing -- yes, we're seeing a little bit of that. We don't really -- I'd say we don't really compete at all with the A renters generally, but there is a -- we are seeing some flight to the suburbs from the younger renter just as a function of location and jobs. In Dallas, for instance, there's Plano and [Frisco] job centers that are asked to located to that, you know, maybe you have an entry-level worker, a younger worker that will want to live at our deal over a Class A. I mean, we're seeing some of that.

Thank you. There are no further questions at this time. Please continue.

I assume there are no more questions in the queue?

There are no further questions in the queue, please continue.

Okay, well, we appreciate everyone's time. Look forward to a strong third quarter and finish to 2016. We will, I'm sure, see many of you at the next NAREIT and on the next call. Thank you.

Ladies and gentlemen, this does conclude the conference call for today. You may now disconnect your line and have a great day.