NexPoint Residential Trust Inc (NXRT) 2017 Q1 法說會逐字稿

Good day, and welcome to the NexPoint Residential Trust Incorporated First Quarter 2017 Conference Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Marilynn Meek. Please go ahead.

Thank you. Good day, everyone, and welcome to NexPoint Residential Trust Conference Call to review the company's results for the first quarter ended March 31. On the call today are Brian Mitts, Executive Vice President and Chief Financial Officer; and Matt McGregor, 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 first quarter 2017 supplemental information is available for your review on the Investor Relations section of the company's website under Financial Materials. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are based on management's current expectations, assumptions and beliefs. Forward-looking statements can also be identified by words such as expect, anticipate, intend and similar expressions and variations or negatives of these words. Forward-looking statements include, but are not limited to segments regarding the company's guidance for financial results for 2017 full year and expected property dispositions and the use of proceeds therefrom. 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 most recent annual report on Form 10-K and the company's other filings with the SEC for more complete discussion of risks and other factors that could be -- could affect the forward-looking statements. Except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements. The conference call includes analysis of funds from operations, or FFO, core funds from operations or Core FFO, adjusted funds from operations or AFFO and net operating income or NOI, all of which are non-GAAP financial measures of performance. These non-GAAP performance measures should be used as a supplement to and not a substitute for net income loss computed in accordance with GAAP. For more complete discussion of FFO, Core FFO, AFFO and NOI, see the company's earnings release that was filed earlier today.

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

Thank you, Marilynn. I want to welcome everybody to the NXRT First Quarter 2017 Conference Call. I am joined here with Matt McGraner, Executive Vice President and Chief Investment Officer; and as Marilynn mentioned, I am Brian Mitts, Chief Financial Officer. I'm going to begin with some highlights from the quarter and discuss at a high level some of our Q1 results. Then I'm going to turn over to Matt and let him talk about the portfolio in some detail and some other items. We'll come back and discuss guidance for the remainder of 2017 and then turn it back to the operator for questions.

So let me get started on the highlights. We feel first quarter was a pretty solid start to the year. Just stepping back and looking at the stock price, where our price is up 11% through yesterday's close, 12% if you include the dividends, which we think is a good performance versus peers and the index. We reported GAAP net loss of $3.3 million, which was driven by an increase in depreciation of $2.8 million over Q1 '16, which is primarily related to the acquisition of the Houston portfolio at the end of 2016 and the Hollister Place property in February, as well as an increase in interest expense of $1.9 million, which is also related to the debt that we used to acquire both the Houston portfolio and Hollister Place. As we mentioned in previous discussions, disclosures and presentations, we utilized debt to acquire those portfolios with a plan to pay those down via reverse 1031 exchange, which has begun to take place in April and we'll get into that later on. Year-over-year Same Store revenue grew 7.3%, Same Store occupancy was up 60 basis points to 95% and Same Store NOI grew by 8.4%. We believe we continue to prove our value-add thesis through dispositions, and Matt is going to go into some detail on that here in a minute. And those netted high IRRs, we continued strong pace of renovations with high return on equity -- renovating 430 units in the first quarter at a return on equity of 21.1% on the leased units. To date, through March 31, we've completed rehab on 4,460 units at an average cost of $4,893 per unit with an average rent increase of $86 per month, which results in a return on equity of 20.7%.

Made 1 acquisition this year, which is the aforementioned Hollister Place. And through the end of April, we've sold 4 properties as part of the reverse 1031 tax deferred exchange to help fund the Houston portfolio acquisition we made end of '16. We entered into $100 million of interest rate swaps during the quarter, bringing our total swaps to $500 million. Subsequent to quarter end, in April, we entered into an additional $50 million interest rate swap. Together with the prior swaps we've now fixed at this point -- as of March 31, 75% were fully rate debt at an average rate of, across all of our debt, at 3.61% when you factor in all the various swaps. That's a higher number as far as the amount of debt that's now fixed versus floating once you take into effect the pay downs that we're making for the dispositions and the anticipated disposition. In general, we're using the dispositions to delever from the Houston portfolio acquisitions. We mentioned paying down $40 million in some of the shorter-term debt that we brought on and we did that in April. The Regatta Bay property is under contract. Once sold, we'll complete the 1031 reverse exchange for the Hollister Place property and net proceeds will be used to further delever.

For Q1 2017 financial results, we are reporting revenue of $37 million for the quarter, which is up 10.4% of our Q1 2016. We are reporting net loss attributable to common shareholders of $3.3 million or $0.17 per diluted share for the quarter, which included $12.4 million of depreciation and interest expense of $7.2 million. We are reporting NOI of, or net operating income, of $19.7 million for the first quarter '17 as compared to $17.7 million for the first quarter of 2016, which represents an increase of 11.4%. We are reporting FFO of $8 million or $0.38 per diluted share as compared to $8.6 million or $0.41 per diluted share for Q1 2016. We are reporting core FFO of $8.1 million or $0.38 per diluted share as compared to $8.6 million or 41% -- I'm sorry, $0.41 per diluted share for the first quarter of 2016. And we are reporting AFFO of $9.1 million or $0.43 per diluted share, which compares to $8.9 million or $0.42 per diluted share in the first quarter 2016.

Our Same Store properties continued to produce superior results in our opinion. We classified 35 properties in the Same Store properties for the first quarter of 2017. For first quarter, we increased rental income 5.6%, other income 19% and Same Store NOI 8.4%. Quarter ending occupancy was up 60 basis points to 95% as compared to first quarter of 2016. And Matt is going to get into some more detail around those numbers in his update. As of March 31, we had total cash of $53.7 million. Of that, $27.7 million is free cash on hand to use in day-to-day operations, paying the dividend, ongoing expenses and other corporate purposes. $26 million of that represent -- of the $53.7 million, represents restricted cash, which includes $11.5 million of cash earmarked for capital expenditures for our value-add program. As of March 31, our total debt outstanding was $797 million -- $797.6 million and as we discussed, that's come down since the end of the quarter through the dispositions we made in April. We continue to take that down further once we close on the Regatta Bay sale.

As of March 31, our floating rate debt is now 25% and our fixed rate debt is 75%, when you include the effect of the swaps. Adjusted weighted average interest rate on our outstanding debt, which we define as inclusive of the effect of the swaps is 3.61% when your factor in the pay downs in debt as well as the additional swaps that we entered into at the end of the quarter. With a pay down from the 4 dispositions, and the additional swaps that we entered into in Q2, plus the Regatta Bay sale and the delevering that we will do with that transaction, will effectively fix 90% of our debt in June. The second quarter 2016 -- '17, the board has declared a dividend of $0.22 per share, which is the same as it was last quarter for shareholder of record on June 15, 2017, payable on June 30.

As far as coverage for FFO, our coverage is 1.71x per diluted share, core FFO is 1.74x per diluted share and 1.95x, our AFFO per diluted share.

So with that, let me turn it over to Matt, to go through his comments.

Thanks, Brian. I'm going to dig deeper into the value-add results, the Same Store recap, some leasing activity and then some capital recycling. From the value-add perspective, as of today, and reflecting the 4 assets sold in the first quarter, all the remaining 35 active assets have some type rehab in progress. It's approximately 73% of all budget exterior and common area dollars have been spent and approximately 57% of all budgeted interior dollars have been spent. As we reported earlier, we completed 427 upgrades to the units for the quarter, portfolio wide, since its inception. Excluding the sold properties, we have now upgraded 4,460 interiors or about 33.7% of the gross portfolio for an average cost per unit of $4,800, achieving approximately 21% ROI and an $86 per month increased.

The Same Store recap as Brian mentioned, we reported 8.4% Same Store NOI growth over prior year. The Same Store pool has reached 87.5% of our properties or 11,409 units. Our rental revenue increased, as Brian mentioned, by 5.6%. Digging deeper into that number, we achieved the following results as compared to the prior quarter. Market rent was up 6% on the top line. We did better on loss to lease, recording a 22.1% reduction, also did better in vacancy loss, recording a 10.2% improvement there. Average rent increased to $857 in the Same Store pool, up from 813% -- or $813 or a 5.3% increase. Other income as Brian mentioned, was 19. -- 19% better year-over-year, led by strong upfront fees, which is $83,000 increase year-over-year or 20.2% increase. And then our valet trash program continues to help drive other income as well. That was $166,000 increase for the first quarter. The Same Store by market, Dallas was up 8.3%, Houston was up 3.3%, DC Metro area was up 5.5%, Atlanta was strongest at 12.6%, Nashville was 3.6%, primarily due to real estate tax adjustments. Charlotte was 5.4%, Phoenix was 9.3%, West Palm Beach was 7.1%, Orlando was 7.8%, Tampa at 9.2%. Same Store effective rent by market was also strong and continues to be robust with 5 markets producing 5.3% or better effective rents year-over-year.

On the leasing activity front, we saw strong effective rent growth across the portfolio year-over-year, same unit, new tenant, for the first quarter. Although being the slower part of the year, we saw 2.6% growth in new leases. Some of the markets with the highest were West Palm Beach at 7.23%, Atlanta 4.82% and Dallas and Orlando each pushing over 3.5%.

Renewal growth also continues to be robust with 4.89% overall on 1,339 renewals during the quarter. It's about a 42 average -- $42 average monthly increase. Nashville was the highest, 6.82% during the quarter. Atlanta was second with 6.68% growth on renewals. Charlotte came in third at 5.86%. And Tampa and Dallas rounded up to top 5 with renewal increases at each above 4.63%.

On the capital recycling front. As we previously discussed subsequent to the quarter, we sold 3 assets in Dallas, Miramar, Toscana and Twelve 6 Ten at the Park, for $56.4 million as well as one of our assets, or our last asset rather in Frederick Maryland, The Grove at Alban for $27.5 million. We generated gross proceeds from sales of approximately $83.9 million and then yielded an approximately levered IRR of 40%, and a 2.4x multiple on invested capital. Regatta Bay remains classified as held for sale, although it's currently under contract to be sold for $28.2 million. We expect that to close in early June.

Upon the closing of Regatta, we will have replaced the Senior Bridge loans taken out to acquire the H2 portfolio and Hollister Place with permanent first mortgages. In addition, we will have completely retired the $30 million term facility and payed down our revolver from $29 million to approximately $5 million. You know the competition for class B assets with value-add upside remains robust. We continue to be active in the investment sales market place and are increasingly focused on second chance opportunities with deals that are fallen out of contract. Given our cost of capital and positive liquidity profile, we'll continue to be opportunistic with a view toward doing more of the same. That is harvesting gains and redeployment the capital into high-quality covered land plays with value-add potential.

I want to spend a minute on a refinancing strategy that we've been implementing as of late and pursuing to improve the longer-term earnings profile of the company. Given the uptake in LIBOR and treasury market since the election, we know that some lenders have reduced spreads from the levels we saw last summer. For example, floating rates spreads, depending on leverage profile, particularly in our leverage category, have come in anywhere from 20 to 40 basis points. And given this tightening and as Brian mentioned, we decided to enter into $150 million of additional swaps on previously unprotected or unhedged debt, bringing our portfolio average index rate to approximately 1.25%. In the coming months, you'll see us plan to take advantage of these higher lending spreads by refinancing this $115 million of previously unprotected debt, while extending the term and maintaining the all-important prepayment flexibility.

And looking ahead, we're excited about how we are positioned to take advantage of the peak demand during spring leasing season, especially in our mid-market demographics. As of the end of April, for example, our portfolio sits at 94.2% physically occupied and 94.88% leased. Renewal activity continues to be robust in April and is currently posting a 6.2% increase. New lease growth over current effective rents was 4.1% in April alone showing great signs of keeping pace with last year's solid demand. That's all I have for prepared remarks. I'd like to thank our teams at NexPoint and [VH] for their continued hard work and execution.

I'd like to turn back over to Brian.

Thank you. So before we recap and then turn over to questions, let me go through our guidance. We are reaffirming our 2017 full year guidance as follows: Revenue low-end $142 million, a high-end $144 million for a mid-point of $143 million. Net income $26.25 million on the low-end, $28.25 million on the high-end for a midpoint of $27.25 million. NOI $75 million on the low-end, $77 million on the high-end for mid-point of $76 million. FFO per diluted share $1.55 per share in the low-end, $1.64 per share on high-end for the mid-point of $1.60 per diluted share. Core FFO on the low-end $1.58 per diluted share, $1.67 per diluted share on the high-end for a mid-point of $1.62 per diluted share. And finally, AFFO $1.80 per diluted share on the low-end, $1.89 per diluted share on the high-end for a mid-point of $1.85 per diluted share. Same basic assumptions last quarter, we're not projecting any additional acquisitions or dispositions beyond what we've already discussed. Obviously, as Matt discussed, we are engaging upon a refinancing strategy. These numbers don't necessarily reflect all of that. It does reflect the new swaps that we put in place. And the pay downs of the debt from the 4 dispositions as well as the anticipated pay downs from the Regatta Bay disposition.

With that, let me just give a couple of closing thoughts and kind of recap. We continue to focus on our recycling of capital in a tax-efficient manner, growing NOI, FFO, Core FFO and AFFO per share. We think that we've done a pretty good job of that here and as Matt mentioned, continue to be active looking for opportunities that fit into what we're trying to do. We're continuing to position the balance sheet, and capital stack for the future, locking in more certainty by fixing more -- a larger percentage of our debt, to try and take advantage of some of the things we're seeing in the market place there as Matt talked about. We're going to continue to use reverse 1031 exchanges and available lines that we have from credit to do acquisitions in the future to the extent that necessary and from time-to-time we may see, like this quarter, where interest expense spikes up, but we intend to bring that down. We'll have a plan in place prior to making those acquisitions. And just also, we continue to own a lot of this company and continue to add to that position, which we think obviously aligns us with shareholders and continue -- we anticipate to continue to increase our holdings of this company into the future.

So with that, let me turn it over to operator for any questions.

(Operator Instructions) We will take our first question from Daniel Donlan from Ladenburg Thalmann.

Just wanted to dig a little bit into the guidance. Is the additional $150 million of interest rate swaps, was that originally part of your thought process when you put out guidance? Or is that kind of -- is that acting as a potential head or potential plus kind of versus what you originally expected?

Yes, it wasn't in the original guidance we put out in March. So that's new for this quarter. But we felt with some other changes that overall guidance was right in line with where it was before. Also as mentioned, and Matt talked about in a little detail, that it's kind of done in conjunction with the refinancing strategy to take advantage of tighter spreads. So it's kind of a net wash ultimately.

Okay. It sounds like fundamentals are maybe better than you expected when you put it out and that's probably making it a net wash, is that fair to say?

Yes. I think that's part of it. Then also the decrease that we expect to get from refinancing, some of that debt that these swaps are covering.

Okay. And then the jump in Same Store maintenance cost, I think a competitor of yours pulled forward some of their repair and maintenance expenses in the winter months. Was just kind of curious if that's something similar was going on with you guys, or is this something that we should expect to remain elevated in future quarters?

There are 2 components. One is a higher turn cost. We had a higher turnover ratio in the first quarter than it had been in the past. So that was a decent component of it. The other part was sort of an implementation or continued expansion of some of the other income items that have to hit the R&M bucket based on our policy. For example, valet trash, and we're rolling out valet trash, there was an immediate expense taken to the rollout of the program, but then it's recaptured through the other income bucket. The net effect of it is for every dollar that we spend on valet trash and other income buckets, we get about $1.63 back. But it does have increase in the line item.

Okay. I think you've talked about in the past that you might be able to get some tax reductions at the Houston properties given what you paid versus what the prior owners paid. Was just kind of curious when you think that those benefits would hit and how you're progressing towards that goal?

Yes, so we're actively working on it. It's a good question. I would say it's a portfolio wide question that we're currently working on. We think that the numbers, the real estate tax numbers in our guidance and our budgets are conservative. So we're hoping to beat those, notwithstanding the municipalities robust interest in fighting us. That being said, for the Houston assets specifically, the H2 and Hollister Place, we think that we'll have some clarity on those by the end -- beginning of the third quarter.

Okay. Appreciate that. And then I'm sorry, I got on a little bit late, there's a lot of calls this morning, but was just kind of curious if you could characterize the current acquisition environment, it certainly seems to be pretty competitive. But you know, you do have a lot of capital available to you whether it's equity or debt. I'm just kind of curious, your general appetite for acquisitions going forward and kind of where you see -- if you see opportunities out there and is it more one off? Or is there any potential smaller portfolios you think you can pick up, especially given that there has been some big trades and often times when that happens, there are couple of properties that may shake out that may not be viewed as core to somebody else, but could be core to you.

Yes, that's a good question. Let me first start by saying that we think there is a robust market for demand in the middle -- in the middle income renter profile, which is where we play obviously, and we don't see that waning off anytime soon. So we still like the market a lot, and we're still pursuing acquisitions or being under the 10 if you will in a number of opportunities. But we're also being patient. I'd say that for smaller deals, sub $30 million, though the competition is still very robust, you have 10, 12 offers. Everyone can close and sometimes you have 1031 person that just throws out a stupid number and beats everyone. So we've seen that a lot. We've also seen that on the sales side and we're continuing to take advantage of it. Where we focus mainly is the $20 million to $50 million equity check range where few folks can play, especially for these types of value-add assets. We're outside of the Core fund, and then we're outside of the -- the Core or Core plus fund guys and then we're outside of the private regional guys as well. So we're focusing on that $20 million to $50 million equity check range and don't have anything yet, but we're certainly trying to dig up opportunities, and they exist.

Okay. And then just curious going back to your comments about the maintenance costs being elevated this quarter because of higher return, is there any trend there that you can maybe point to? Maybe it was just like one or two assets, but it is -- what's you think has been driving -- what drove that higher turn in the first quarter relative to kind of maybe past quarters?

Yes, I think, in past quarters or at least with respect to this time over Q1 of 2016, we upgraded more units and we're pushing -- we're not pushing people out, but we're certainly trying to push rents at a higher clip. And that in March was pretty much I'd say the biggest impact of that. And that's typical with spring leasing season, March, April, May, June, is when you're going see higher turn, but you should also see higher rents which as I've said in my prepared remarks, April was incredibly strong for us and we don't think that's going to stop anytime soon.

(Operator Instructions) We will go next to Ryan [Milliker] with Canaccord Genuity.

Thanks for a lot of the good color earlier into Dan's questions. I just want to talk a little bit more about Houston, you talked about property tax dynamic that could unfold at Houston as well as the rest of your properties. Just wondering when you think about Houston specifically, what are you seeing across that market, do you think that fundamentals are going to start to turn positive soon in a meaningful way? Do you think -- is it just that the second derivative and the pace of deceleration has subsided, and are you seeing that start to impact valuations?

Very good questions. I would say it's a tale of 2 cities and the tale of 2 assets or class sizes or class types. So tale of 2 cities, the eastern and the western portion. The western portion is still challenged regardless of its Class A or B, but B's are stronger and then the eastern portion continues to be strong. An example is our sale in Regatta Bay that's going to sell for -- assuming it does sell, sell for about a 5.5% cap rate. On T3 over T12 adjusted so that's on a nominal basis. And then within sort of the tent, I think I may have mentioned this on the first quarter call or on the fourth quarter call, a lot of people are focusing again on Houston, they think that there is a bargain, which is increasing the size of the transaction activity. And the number of people focusing on trying to get a discount. So there are no shortage of buyers in that market today. At least as it pertains to Class B assets. I think that you've heard Eric Bolton at Mid-America say this, that they're focusing on the lease-up opportunities in Class A, which seems like a strong smart strategy because there are going to be those opportunities I think this year, but just not our bailiwick so to speak. As far as demand -- in part of our H2 acquisition, we think that the '17 deliveries are still going to be probably net neutral because there are still going to be some. But '18, the supply really falls off a cliff. And again, if you get any sort of stabilization in job growth there which we're seeing and when we'll publish that on this for our REIT week presentation. I think that the market is going to trend positive in the early to mid half of 2018.

Great, that's helpful. And then just one other quick one we had was, you gave some good color surrounding interest expense and what you guys are doing from a refinancing perspective. Obviously, you sold some assets, paid down some debt more recently. As we think about how the next 3 quarters are going to trend from an interest expense perspective, you know -- can you give us some guidance in terms of what we should expect, is it going to be moderate and we're going to be at a run-rate basis comparable for three consecutive quarters in a row? Or is it gradually going to wind down based on how swaps come into play and when -- as you execute your refinancing strategy, et cetera?

Yes, I think going forward into this second quarter, you'll see a decrease based on the debt we've paid down already and we'll continue to pay down. And then I think, given the assumptions that we're making, which is no additional acquisitions or dispositions, you'd see it kind of moderate and get on a run rate. The difference would be if we did some acquisition and didn't raise any equity and did what we did with the Houston and Hollister portfolios where perhaps we used leverage to fund them and then use the sale after the fact to pay down that additional debt. So you may see a jump for a quarter, but it'll come back down. And that may be something that happens over time but it's an increase and then a decrease back down to a more normalized run rate.

We would take our next question from (inaudible) with Jefferies.

Just a quick question on the M&A call, you did have some commentary about new supply in many of the Sun Belt markets and I think that's one of the key reasons that took down the Same Store revenue guidance. Granted you guys are not focused on the exact same type of properties, but could you just talk a little bit about kind of what you're seeing in your markets and specifically, what you're seeing in regards to the product type that you're targeting in regards to supply headwind?

Yes, absolutely. So our 2 largest markets, Dallas and Atlanta, are certainly seeing supply, Dallas especially. Most of that is, in the case of Dallas, the uptown area. Some in Plano, some in Frisco, but the majority of it is sort of in the CBD uptown area. Same thing as it relates to Atlanta in perimeter and [bunkhead]. And it's all at the top-end. It's all at the Class A or Class AA luxury and for the most part. As that relates to our products, we've said in the past that a new developer in our markets needs $1,500, $1,700 rent for a one bedroom to get 4% stabilized yield. We need $800, $850 to make it 6%. So there's still that significant rent delta between Class A and B in our markets and the market just doesn't allow for new construction of affordable housing, which is the segment that we focus on. And -- unless you're a tax credit developer in which case you're in the different probably demographic and areas of the city in general. So we think that seeing new construction in our markets is good. Because it just helps show that, that rent demand is there. All that being said, it is still very, very difficult or increasingly difficult to get a construction loan, whereas 1 year or 2 years ago, you could get a construction loan with 25%, 30% equity, today it's 40%, 50%. So we're seeing -- we're seeing some tighter lending standards and wage and labor costs have continued to rise and then there is less land available. So all that seems to be pointing to signs of moderating supply in our markets. Still has strong permitting data, but eventually I think that that -- that those factors will lead to less supply.

As far as our strategy goes, as Matt mentioned in a prior question, we're trying to play in that $20 million to $50 million equity check range where there is less competition. So if you take the supply question out of it and focus on who's bidding for our assets, there's not a lot of people. And I think we are, because of being a public REIT and our lower cost of capital, well-positioned to compete in that area, particularly in these markets.

Okay. Just one other one from me, could you talk about your DC and Arizona on your Phoenix markets where you have negative year-over-year growth in rental rates and kind of what's happening with market dynamics?

Yes, absolutely. So DC is a market that I'd say was our weakest, the Frederick Maryland submarket was our weakest asset market and obviously with the sale of our second asset there, Grove at Alban, which we made money on and credited a decent return, you know, we're out of. So those were asset specific, it doesn't speak to anything about the DC Metro area in general. With respect to Phoenix, so Phoenix is again an asset-specific topic. One of our -- 2 of our largest properties there, Colonnade and The Pointe at the Foothills, are larger properties that we are focusing more or have focused more on it or did in the first quarter and then to the fourth quarter of making sure we had heads in the beds. Such that we can start implementing our business plan, turning units and upgrading units on turns as they roll. And then the total revenue in Phoenix if you look at just from both net effective rents and in other income was actually up 6.7% in the quarter. So while we were moderating to get people in the door, and occupancy up to stabilize those 2 properties at a higher, 93%, 94% clip, you did see the pretty significant outperformance in total revenue there.

And we have a follow-up from Daniel Donlan with Ladenburg Thalmann.

I'm just kind of curious what acts as more of a supply for you guys in terms of people looking when they are moving out, is it more -- is single-family rentals more of a supply issue for you guys? Or more of something people move into or are you seeing people upgrading to going to more Class A or maybe Class B+ or Class A- type of assets? Just kind of curious how we should think about that?

Yes. It's a good question. I would say if you're single, you're going into Class A- garden style unit, we're at 850 average or 888, those you can rent for anywhere from $1,150 to $1,300 in the general areas around us. If you want to newer type of deal with maybe the modern -- more modern amenities that you are willing to pay $300, $400 more, that's where you go. If you're a family, I would say that that's consistently being a theme and why the single-family rental market has such an appeal and people are considering moving out to have a yard and have their own amenities, to treat it like a home. So I think, yes again, if you're a family that's what we're seeing as far as the supply issue. But it's not so impactful that we're losing -- in other words, it's not just as impactful to a Class A REIT as merchant builders are. So sort of just a complementary property type that they compete -- but I wouldn't say it hurts us in any way.

That concludes today's question-and-answer session. At this time, I will turn the call back to Mr. Brian Mitts for any final remarks.

Yes, thank you. We appreciate everyone's time. Very good questions. Hopefully, we got some good color out there and help people kind of think about what's ahead here in 2017. We look forward to -- I imagine seeing everyone at NAREIT in New York and then we'll be back in August on Q2 call. So thank you very much.

This does conclude today's conference. Thank you for your participation. You may now disconnect.