UDR Inc (UDR) 2014 Q4 法說會逐字稿

Welcome to UDR's fourth-quarter financial results conference call. Our fourth-quarter press release, supplemental disclosure package, and updated two-year strategic outlook document were distributed yesterday afternoon and posted to our investor relation section of our website, www.udr.com.

In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirements.

Prior to reading our Safe Harbor disclosure, I would like to direct you to the webcast of this call located in the investor relation section of our website, www.udr.com. The webcast includes a slide presentation that will accompany our two-year strategic outlook commentary.

On to our Safe Harbor. Statements made during this call which are not historical may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

With that, I will turn the call over to our President and CEO, Tom Toomey.

Thank you, Chris, and good afternoon, everyone, and welcome to UDR's fourth-quarter conference call. On the call with me today are Tom Herzog, Chief Financial Officer; and Jerry Davis, Chief Operating Officer, who will discuss our results, as well as Senior Officers, Warren Troupe and Harry Alcock, who will be available during the Q&A portion of the call.

We will present our updated two-year strategic outlook following prepared remarks. In 2014, we again met or exceeded all primary objectives of our plan, and to date have meaningfully outperformed versus our initial three-year plan and last year's update. Tom will address this outperformance in detail later in the call.

In short, 2014 was another great year for UDR. We continued to see strength in all aspects of our business. A quick recap of our team's accomplishments during the year. First, operations continue to run on all cylinders and delivered strong same-store results across the board, with 5.2% NOI growth.

Second, the $480 million of developments we delivered in aggregate leased up well, with rents and trended spreads hitting our targets. Third, we accretively funded our growth through the sale of $368 million of well-priced and well-timed non-core dispositions, and $100 million of equity issued at a premium to consensus NAV.

Fourth, we continue to improve the quality of our portfolio, growing portfolio revenue per occupied home by 7% year over year. Fifth, we further improved our balance sheet metrics, hitting the marks for leverage and net debt to EBITDA we set forth at the beginning of 2014. Our successes were recognized with a credit rating upgrade from Moody's to Baa1.

Last, we grew cash flow per share by 10%, a strong rate, which resulted in an 11% dividend increase and meaningful NAV per-share growth. We continue to believe that growth in these two metrics translates into strong total shareholder return over time.

As we enter 2015, we feel very positive about the business and our prospects. Multifamily fundamentals remain firmly in our favor. Steady job growth, capable of absorbing forecasted new multifamily supply, augmented by stagnant single-family housing market remains our base case scenario.

Secondarily, the majority of new multifamily construction lending is concentrated in the heavily regulated banking industry, making it easier to turn off the capital spigot if necessary. Our balanced geographic mix of A and B quality communities should continue to generate strong operating results. Our sub-market locations are top notch, with better than average walk scores versus the peer average in the vast majority of our markets.

Our development pipeline is expected to generate the incremental cash flow and value creation we originally forecasted. Expected additions to the pipeline in 2015 are also forecasted to be highly accretive. And we will continue to improve our debt metrics.

In the nearly 15 years that I've led UDR, I do not remember being more upbeat about our prospects. We believe that 2015 and 2016 will look a lot like 2014, and that January results only solidify this belief. There remains a long runway for growth at UDR and we have the right plan and the team in place to capitalize on those opportunities.

With that, I'd like to express my sincere appreciation to all my fellow UDR associates for their hard work in producing another strong year of results. We look forward to a great 2015. And I will now turn the call over to Tom.

Thanks, Tom. The topics I will cover today include our fourth-quarter and full-year 2014 results; a balance sheet, debt maturity and capital markets update; a development update; a transactions update; and our full-year 2015 guidance. Our initial 2016 expectations will be addressed in the upcoming three-year plan commentary.

First, our fourth-quarter earnings results were in line with our previously provided guidance. FFO, FFO as adjusted and AFFO per share were $0.40, $0.39 and $0.34, respectively. A couple of items to note when moving from NAREIT FFO to FFO as adjusted in the quarter.

First item, we moved certain legacy assets out of our TRS in 2014 in a tax-efficient structure. Completed in the fourth quarter, this resulted in the recognition of a $5.8 million, one-time income tax benefit that was included in FFO. We excluded this benefit from FFO as adjusted and AFFO. Note that we are forecasting $3 million to $5 million of run rate tax benefit in 2015 relating to the remaining communities in the TRS versus the $9 million recognized in 2014, net of the one-time fourth- quarter benefit.

Second item, we backed out a $2.2 million after-tax impairment from FFO as adjusted related to the 50% sale of our 3033 Wilshire land parcel to MetLife. Our seven-year hold period on the parcel and cost capitalized subsequent to acquisition led to the write-down, but we can earn back this impairment if certain return hurdles on the development are met.

Fourth quarter same-store revenue, expense and NOI growth remain strong at 4.2%, 1.9% and 5.1% respectively. For full year 2014, FFO, FFO as adjusted and AFFO per share were $1.56, $1.52 and $1.35, respectively. Full-year same-store revenue, expense and NOI growth of 4.3%, 2.5%, and 5.2% exhibited continued strong demand for apartments and were above our initial expectations provided last February.

Next, the balance sheet. At year end, our financial leverage on an undepreciated cost basis was 38.6%. On a fair-value basis, it was around 30%. Our net debt to EBITDA was 6.5 times; inclusive of pro rata JVs, it was 7.4 times. All metrics improved as planned.

On the capital markets front, $325 million of 5.25% unsecured debt matured in January. We intend to refinance some or all of this debt in the first half of 2015. We did not issue equity during the fourth quarter, despite trading above consensus NAV, as our capital needs were met through asset dispositions. In January, we issued $78 million of equity net of fees through our ATM at a premium to consensus NAV.

Moving forward, we will consider all capital options when funding our growth and will utilize the most advantageous source, depending on our strategic objectives, market conditions and price-in. At year end, our liquidity as measured by cash and credit facility capacity was $763 million.

Turning to development, we completed two development projects located in Alexandria, Virginia, and Huntington Beach, California, for $184 million in the quarter. Both are leasing well and bring a differentiated product to the respective sub-markets. We also commenced construction of our $107 million, 3033 Wilshire development in Los Angeles in a 50/50 joint venture with MetLife.

In addition, we increased our ownership to 50% in two UDR/MetLife I JV land parcels, Crescent Heights and Wilshire La Jolla, both located in Los Angeles. Additional details are available in our fourth-quarter press release.

At year end, our underway development pipeline totaled $875 million, was 72% funded, with an estimated spread between stabilized yields and market cap rates near the upper end of our targeted 150 to 200 basis-point range. As to future development, we continue to underwrite opportunities and will take advantage of our land bank.

Next, transactions completed in the fourth quarter. We acquired a future development land site in Boston Proper for $32 million through a 1031 transaction. We believe this deal will generate significant value and should commence construction in 2016.

Regarding dispositions, we sold three wholly-owned, non-core communities in Long Beach, California, Port Orchard, Washington, Puyallup, Washington, for $91 million at a weighted average cash flow cap rate of 5.5%. The weighted average IRR for the dispositions was 12%.

We also sold MetLife a 49% interest in our $110 million, 13th & Market property in San Diego, and a 50% interest in our recently started 3033 Wilshire land development parcel in Los Angeles, for an aggregate total of $62.5 million. 13th & Market generated a strong IRR of approximately 16%.

In January, we completed the disposition of our 20% interest in our Texas JV. We expect to realize net proceeds of $43 million on the sale, inclusive of a promote and disposition fee of approximately $9 million. These will be recognized in the first quarter and full-year 2015 NAREIT FFO, but excluded from FFO as adjusted and AFFO. This disposition was well-timed, as it eliminated our exposure to Houston, reduced our exposure to Dallas, and generated a strong IRR of approximately 14%. Additional transaction details are available in our fourth-quarter press release.

On to the first quarter and full-year 2015 guidance. Full-year 2015 FFO, FFO as adjusted and AFFO per share is forecast at $1.60 to $1.66, $1.58 to $1.64, and $1.41 to $1.47, respectively. For same-store our full-year 2015 revenue guidance is 3.75% to 4.25%, expense 2.5% to 3% and NOI 4% to 5%. Average 2015 occupancy is forecast at 96.5%. Other primary full-year guidance assumptions can be found on attachment 15 or page 27 of our supplement.

First-quarter 2015 FFO, FFO as adjusted and AFFO per share guidance is $0.41 to $0.43, $0.38 to $0.40, and $0.35 to $0.37, respectively. Finally, we declared a common dividend of $0.26 in the fourth quarter, or $1.04 per share when annualized. With our release today, we have increased our 2015 annualized dividend to $1.11 per share, 7% above 2014's level and representing a yield of approximately 3.3%.

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

Thanks, Tom, and good afternoon. In my remarks, I'll cover the following topics. First, our fourth-quarter portfolio metrics, leasing trends and the continued success we realized in pushing rental-rate growth again this quarter and into January. Second, the performance of our primary markets during the quarter and expectations for 2015. And last, a brief update on our recently completed and in lease-up developments.

We are pleased to announce another strong quarter of operating results. Our fourth-quarter same-store revenue growth of 4.2% was driven by an increase in revenue per occupied home of 3.6% year over year to $1,631 per month, while same-store occupancy of 96.7% was 50 basis points higher versus the prior-year period. Total portfolio revenue per occupied home was $1,795 per month, including pro rata JVs.

A robust full-year same-store revenue growth of 4.3% was driven by a 60-basis point improvement in occupancy and a 3.8% increase in revenue per occupied home. We see strong rate growth continuing in 2015.

Turning to new and renewal lease rate growth, which is detailed on attachment 8(G) of our supplement, we continue to push rate in the fourth quarter. New lease rate growth totaled 2.1%, or 80 basis points ahead of the fourth quarter of 2013. Renewal growth remains resilient, improving 10 basis points year over year to 5.3%. This year-over-year acceleration was accomplished with only a 10-basis point sequential decrease in occupancy.

Importantly, our leasing momentum continued into 2015, with January new lease rate growth of approximately 350 basis points ahead of January 2014, and strong renewal growth of 5.2% during the month. This, when augmented by stable current occupancy of 96.5%, the 2% rent growth that is already built into 2015 as of the end of 2014, the continued strength in multifamily fundamentals and the additional $100 of discretionary income the average American has on a monthly basis due to lower gasoline prices, has resulted in us starting the year slightly ahead of what we initially budgeted three months ago.

Next, rent as a percentage of our residents' income rose slightly to 18%. Moveouts to home purchase were up 120 basis points year over year at 15%, in line with our long-term average. Importantly, our full-year 2014 resident turnover rate declined by 140 basis points versus 2013. Even with the renewal increases at a robust 5.3%, only 5% of our moveouts gave rent increase as the reason for leaving in the fourth quarter.

Moving on to quarterly performance in our primary markets. These markets represent 65% of our same-store NOI and 71% of our total NOI. Orange County and Los Angeles combined represent 16.5% of our total NOI. Orange County posted sequential revenue growth of 60 basis points and continues to outperform our budgeted expectations early in 2015.

Los Angeles is slightly weaker due to our heavy concentration in the Marina Delray sub-market, but we are encouraged by new job growth in the immediate area, specifically from Yahoo. Our current expectation is that both of these markets will generate revenue growth greater than 4.5% in 2015, slightly in excess of 2014.

New York City represents 13% of our total NOI. Our downtown assets posted strong revenue growth of 5% in the fourth quarter. We expect continued strength in 2015, as technology, finance, media and advertising employers expand in Lower Manhattan, although our 2015 forecast revenue growth of 4.5% is expected to slightly decelerate versus 2014.

Metro DC, which represents 13% of our total NOI, posted positive full-year revenue growth of 50 basis points. We expect slightly better full-year revenue growth in 2015, above 1% currently, as we will continue to benefit from our diverse exposure of 50% B assets and 50% A assets, located both inside and outside the Beltway.

San Francisco, which represents 11.5% of our total NOI, shows no signs of slowing down, as renewal and new lease rate growth in January point to another strong year for Northern California. Revenue growth is expected to increase 6% to 7% in 2015, a slight deceleration from the 8.2% growth we realized in 2014.

Seattle, which represents 6.5% of our total NOI, benefited from strong growth from suburban B assets that are less exposed to new supply than A assets downtown. Although new supply will challenge us somewhat in downtown Seattle and Bellevue, we expect 2015 to be similar to 2014, or roughly 6% growth.

Boston, which represents 5.5% of our total income, should continue to see new supply pressure downtown, but our suburban assets in the North and South Shore markets should fare relatively better in 2015. Long term, we like the downtown market and look to continue to grow through development in this sub-market. Current 2015 revenue growth forecasts are between 4.5% and 5%, right in line with 2014.

Last Dallas, which represents 5.5% of our NOI, posted 4.2% year-over-year revenue growth in the fourth quarter. We expect new supply pressure in uptown and Plano in 2015. January results indicate that these sub-markets are performing slightly better than initially budgeted expectations. The 2015 revenue growth is still projected to slow to roughly 3% from 4.4% in 2014.

As you can see on attachment 7(B) of our supplement, our 467-home Bella Terra community located in Huntington Beach, California, and our 255-home Capitol View community located in Washington, DC, will join the same-store pool in 2015.

Turning to our recently completed and in lease-up developments, Beach & Ocean, our 173-home, $52 million lease-up in Huntington Beach was 53% occupied at quarter end. And as of today, is 67% occupied and 79% leased, after welcoming our first residents just four months ago. We are currently offering one month of concessions at this community and leasing has been very strong in January, with 35 applications taken during Huntington Beach's slow season.

Los Alisos, our 320-home, $88 million lease-up in Mission Viejo, California, was nearly 90% occupied at quarter end. We are on budget and meeting our lease-up expectations.

Finally, DelRay Tower, our 332-home, $132 million lease-up in Alexandria, Virginia, remains challenged by the weak DC market, but we are confident in its long-term prospects. We are currently offering concessions of two-plus months in this oversupplied sub-market in order to hold rate and maintain leasing velocity to reach our budgeted occupancy.

Of note, in a typical development project, a one-month concession through the lease-up period is fairly standard. When a sub-market is seeing lease-ups offer less than one month, it normally indicates excess demand versus supply, and vice versa when lease-ups are offering more than one month. If you ever want to gauge sub-market strength, shop a sampling of lease-ups in the area and see what level of concessions are being offered.

With that, I will remind those listening that there is a link to our updated two-year strategic outlook document on the investor relations page of our website. We will pause for a moment so that everyone can gather the two-year outlook materials, as we will lead you through the document page by page.

I will now turn the call back over to Tom Toomey.

Thank you, Jerry, and I hope all of you have the presentation up. We'll go page by page with our comments directed to those, highlighting the page numbers we're on.

Starting with page 3, a couple high-level thoughts. First, we view this year's update as a continuation of last year's plan, with a few minor tweaks. We believe this continues to be the right plan for UDR, and here's why. The plan primarily objective is to drive high-quality cash flow growth while incrementally improving our balance sheet and portfolio. In other words, consistent, sustainable growth that is funded in a safe, low-risk manner. We believe that successful execution of these objectives will drive strong total shareholder return.

With solid apartment fundamentals as a backdrop in 2015 and 2016, we believe that UDR still has a long runway of accretive growth ahead. Whether that growth comes from operations, where we work daily to drive efficiencies through our organization, or external growth, where we are still finding plenty of development opportunities that create significant value, we will continue to capitalize on the opportunities available to us.

So how have we performed versus the plan presented in 2013 and 2014? In short, we have met or exceeded all primary operational and financial objectives previously set forth. Some of this upside resulted from strong fundamental backdrop I referenced earlier, but a focus on excellence in execution, listening to and serving our customers, and continuously improving the business process from the C suite to our community level staff, also played a major role.

Growing cash flow to optimize shareholder return, while also ensuring a great customer experience at our communities, and making UDR a great place to work are our most important objectives and we remain fully focused on executing them.

With that, I will turn it over to Tom to discuss the details of the updated outlook.

Please turn to page 4. As Tom mentioned earlier, we have met or exceeded all of the primary financial and operational objectives to date, as set forth in our previous two plans published in 2013 and 2014. In particular, our same-store growth over the past two years has outperformed and, along with our successful development deliveries, has served as the primary driver of our better-than-expected cash flow growth and improvement to leverage metrics.

Turning to page 5, perhaps the most important driver of UDR's value creation strategy is our best-in-class operations. We are continuously implementing new revenue growth and cost efficiency initiatives throughout the organization to improve how we do business. As is evident on this page, we have generally produced better top-line growth in our primary markets, which comprise approximately 71% of our NOI over the past one- and three-year periods. But market wins represent the true measure of our operational accomplishments.

Winning a market is defined as ranking first among peers in same-store revenue growth in a quarter. The chart at the bottom of the page illustrates our success since 2008, winning a larger percentage of our markets than the peer average in each year. This is a testament to the organization that Jerry and the team have built and the culture of continuous improvement that is promoted inside UDR.

So how have we maintained our operational advantage and how do we intend to keep it in the future? Please turn to page 6. Many listening to this call are familiar with the primary revenue generation and expense control initiatives we have implemented over time. These, along with potential future initiatives, are presented in the table on this page.

Importantly, all of our growth and efficiency initiatives have one thing in common. They either provide our customer a wanted service or allow our associates to do their jobs better. Our past initiatives, which primarily focused on moving customer services online, were a significant success. Current initiatives, as will become evident on page 7, should continue to drive our bottom line for years to come and our list of potential future initiatives is extensive.

Operations has been and will continue to be a significant competitive advantage for us. This is not just because of our superior blocking and tackling in the field, but also because of the creativity our operations team employs to continuously improve the business.

Please turn to page 7. This page lists some of our operational projects that have been implemented over the past couple of years and their potential impact on our NOI. As is evident, we have made solid progress on each initiative to date and our bottom line has benefited greatly. As we look into 2015 and 2016, there are still opportunities to increase the efficiencies as these initiatives further.

Finally, we launched a new website at the end of 2014. This is the third major revision of udr.com and represents a complete rebuild of our online presence. It is a result of several months of research, including the input from customer focus groups that indicated their preferences in an online shopping experience.

The new website features elements such as online appointment scheduling, enhanced neighborhood information and comparison shopping tools, all of which are available through any device the customer chooses. To date, we are exceeding our initial targets for the site by converting a higher-than-expected amount of traffic to community visits.

Turning now to capital allocation and development on page 8. Development remains a vital component of our value creation strategy. While not as many deals pencil in today's environment, development remains accretive and will continue to be a primary means through which we improve our portfolio and grow our Company. Our underway and completed non-stabilized development totaled $875 million and was 72% funded at year end.

Most of this pipeline is concentrated in our primary coastal markets. In 2015, we expect to deliver over $325 million in projects. Our annual targeted spend of $400 million to $600 million per year and our targeted trended spread versus cap rates of 150 to 200 basis points have not changed.

While construction costs continue to increase, so do rents. To mitigate market risk, we employ a few tactics. First, prior to the development commencing, we demand full drawings and a GMAX contract, thereby locking in costs.

Second, we diversify our geographic exposure. Our goal is to commence a new development in a target market as the previous development is leasing up. Third, we utilize conservative top-line growth assumptions to underwrite our projects.

In 2015 and 2016, we will continue to mine our current land bank as well as add new land sites, such as our Graybar site in Boston. We are planning four to five starts in 2015, which include one large wholly-owned project, Pacific City, and three to four smaller 50/50 JVs with MetLife. As of year end 2014, our shadow pipeline was approximately $1.2 billion at our pro rata ownership and represented $400 million to $500 million of value creation, assuming current spreads.

Please turn to page 9. We anticipate that our underway and completed developments as of 12/31/14 will average $0.035 of drag offset by $0.055 of accretion annually in 2015 and 2016. Upon stabilization, which occurs at different periods for each project, the pipeline is expected to generate accretion of $0.08 per share with growth thereafter. On an NAV basis, we expect our pipeline to generate $2.50 per share at stabilization, or approximately 35% to 40% value creation over costs. Page 10 exhibits some of our recent developments.

Please turn to page 11. As focused as we are on operations and development, maintaining a strong and flexible balance sheet to optimally fund our business is just as important. We exceeded the balance sheet metric goals provided in our 2013 and 2014 strategic plans and we expect further improvement in 2015 and 2016.

This has also been acknowledged by the rating agencies. In 2014, we received a credit upgrade from Moody's to Baa1 and revised to positive outlook from S&P. On the capital markets front, our 2015 and 2016 capital needs will be funded through a combination of asset sales and new equity and debt, the mix of which will depend on availability and pricing at the time the capital is needed.

Please turn to page 12. The primary objective of publishing this plan is to illustrate how we intend to drive high-quality cash flow and NAV per share growth in 2015 and 2016. In 2014, our AFFO per share growth was a very strong 10%.

In 2015 and 2016, AFFO per share growth is expected to average in the 5% to 8% range, which will continue to be driven by favorable same-store growth, development earn-in and favorable debt refinancings versus in-place debt. This was somewhat offset by higher trending interest rate assumptions, a lower tax benefit from our TRS and potential dispositions. We expect the business to drive 8% to 10% NAV growth in both 2015 and 2016.

Please turn to page 13. This page provides our 2015 guidance, initial 2016 expectations and detailed modeling assumptions. In 2016, we are expecting solid same-store and cash flow growth based on still-strong third-party job growth expectations against moderating new multifamily supply growth in our markets. In addition, our expected asset sales in 2015 combined with our 2016 entrants to our same-store pool will enhance our same-store mix toward higher growth markets.

And finally, page 14. Our 2015 top-line growth assumptions for our markets are presented on the map. We expect the West Coast and Northeast to grow at a rate above the portfolio average. The Mid Atlantic will continue to struggle, but is still expected to outperform relative to our peers due to our 50/50 mix of As and Bs in DC and less direct exposure to new supply inside the Beltway.

With that, I will open it up to Q&A. Operator?

(Operator Instructions) We'll go to our first question from Jana Galan with Bank of America Merrill Lynch.

Can you discuss the strategic positioning of the MetLife transactions in the fourth quarter and January? Are you fine-tuning your geographic exposures or were you looking to backfill the 2016 development pipeline? And then do you expect to continue growing with MetLife maybe in a joint venture III?

Thank you for that question. This is Tom.

With respect to Met, we established this relationship many years ago and see it still as a strategic benefit for the enterprise in that Met brings us opportunities, we discuss them and we're going to continue to undertake that on a go-forward basis.

With respect to the quarter, you really have a series of transactions here where we bought into two land sites that were part of the land bank that Met owned. We had started at 4%, bought up to 50%. We typically do that and we'll probably look at those other remaining sites in the future after we have a pretty good clarity about the product, the zoning and the good use of capital.

On the other side, we sold an interest, or 49% of a San Diego community, which is right across the corner from Strata, and as a result, felt that was a good alignment of interests at a great price and welcomed Met into that asset and feel that that's a good investment for both parties.

And lastly was a development site that we had for about seven years in Koreatown in LA, and looking at expanding our deployment of capital across the platform. We thought it was a good addition by having Met come to that.

So on the future, I think we take them as we go. I know that we'll look at the land sites as we get them zoned and more detail around them, about investing in them.

On a Met JV III, I don't know if I see that. I like our 50/50 platform that is in Met JV II. It's a good alignment of interest and we'll continue to have ongoing conversations with Met.

Thank you, Tom. And Jerry, can you give the new and renewal stats for January and renewal asks for February and March?

Sure. January new leases repriced at about 3.6% higher than the prior residents were paying. And I would tell you that is actually about 350 basis points higher than we were last January.

Renewals in the month of January were up 5.2%, which is slightly above where it was last January, call it 10 to 15 basis points. And as we look out over the next two months, we see an acceleration in renewal rate growth. Currently, on about half of the renewals being signed that we would expect for the month of February, we're up in the 5.5%, 5.6% range.

And as we look at the call it 20% to 25% of March renewals that we would expect to have completed, those are actually pushing north of 6% right now. So we see an acceleration actually in renewal growth, which is making us very optimistic.

And it's also showing us that new lease rate growth is probably going to follow. We've spent much of the last six months setting ourselves up to have outsized rate growth. And we did that after we achieved high occupancy in 2014.

We've been pushing market rate on new leases mostly to set a new mark so that we come in later and start realizing that on the renewal side. So our renewal growth has lagged a bit over the last four months or so. But as we look out over the next three to four months, we're starting to see that acceleration on the renewal side also.

Thank you. Very helpful.

We'll take our next question from Nick Joseph with Citigroup.

Thanks, appreciate the strategic outlook.

Tom, you mentioned the long runway for growth and the outlook expects same-store growth in 2016, generally in line with 2015. Can you talk about what gives you the confidence that growth in this cycle will remain above historical trend? And can you talk about the largest risk to that base case?

Hi, Nick, it's Herzog.

When we look at 2015 and 2016, I think we said it looks a lot like 2014. We continue to see good fundamentals across our markets. We use third-party data and our individual market knowledge when considering what we think 2016 growth will look like in arriving at these numbers.

And we've looked at -- in third-party data providers both jobs and supply. We have a tendency to use Axio and Moody's. From a jobs perspective, and I know a lot of you have these numbers, but we saw 1.9% job growth in 2014. Looks like it's probably going to be, at least according to the data providers, 2.1% in 2015 and probably going to 2% in 2016.

When we look at supply, on the other hand, in 2014, we were at somewhere around 1.5%. We're expecting 2015 to be somewhere around 1.5% growth and it probably declines a bit in 2016 to 1.2%. As we've used this data historically, we have a tendency to look at the jobs-to-supply in a 5-to-1 ratio, but we look at them market by market to make them more specific.

And in 2014, we had a positive ratio of 1.2, meaning that there would be more new relative jobs to supply. In 2015, we see that ratio, and according to the data experts being about 1.4, 1.44. In 2016, it is yet higher, but probably will be tapered back down a bit as the full supply comes to pass.

So as we relate that to our markets, job growth looks better than the national averages with slightly higher supply growth. So we'll call that maybe a push, but still as a whole, very net favorable. All the same things you've heard, household formations, demographic trends, homeownership. We see a lot of runway when we look into 2016, so we feel favorable about it.

Yes, I would add one thing, Nick. This is Jerry. In addition to all of the national and market factors that Herzog just spoke about, I would include Harry's been developing a pipeline in high rent growth markets, many of which properties will go into our same-store pool as we go into 2016. And at the same time as we use some sales to pay for the development pipeline, those sales will probably come more from our slower growth markets. So you're going to net out with new higher growth properties coming in and slower growth properties being sold.

Great, thanks for all the detail on that. And then with regards to the Boston land site that you purchased, can you talk about what was attractive about that site and how it fits in with your existing Boston portfolio?

Sure, Nick, this is Harry. First of all, it's 32 -- it's located in the south end of Boston, which is a dynamic location. It's an edge location now, but there's a lot of new activity in that area, including a 50,000-square foot Whole Foods across the street that just opened. It's two blocks from Tufts Medical Center. It's a seven-minute walk to the Back Bay of Boston.

As we've talked about in the past, we want to complete one project in a market and then at some point thereafter start a new one. We're going to complete our Pier 4 project in Boston during 2015. We would expect to start the Graybar project in 2016, meaning we'll be delivering sometime in late 2017, early 2018. $32 million price, just under 600 units, so $55,000 a unit; land basis we found attractive as well.

Thanks. And then finally, Jerry, in terms of the DC outlook, it sounds like you're expecting 2015 to be better, slightly better than 2014. When do you expect to actually start to get pricing power in that region?

I would tell you actually, Nick, it's starting to come now. I won't call it power, but I will tell you this. We feel like we bottomed in the fourth quarter. Our revenue growth was a negative 0.6%. I've got early indications and I've actually seen my January numbers and they actually pop back into positive territory.

But we are seeing new lease rate growth in the B product, mostly that's outside of the Beltway, is going positive. Inside the Beltway, new lease rate growth is still slightly negative. And renewal growth in both of those product types are in the 3% to 3.5% range.

I would tell you this, too. When I look at that 0.6% or so that I've realized in the month of January and I bifurcate it between Bs outside the Beltway for the most part and As inside the Beltway, the Bs outside the Beltway are probably coming in at about a 2.5% positive. And my As inside the Beltway are about a negative 1%, negative 1.25%. So there's still a difference between who's adding the new supply.

But again, we feel better about DC. We think it will accelerate slightly from where we came in last year. And we definitely feel like the negative revenue growth that we put up in the fourth quarter was our bottom.

Thanks.

Go next to Karin Ford with KeyBanc Capital Markets.

Jerry, a question on the 2015 same-store revenue guidance. It sounds like you've got 2% already earned into the rent roll. You're having a really good January. The same-store pool is getting better. Just curious as to why the midpoint of guidance on revenue is a deceleration from what you saw in 2014, given all those factors?

That's a good question, Karin. I would tell you, when we look at what makes up revenue growth, it's really two components. First is rent per occupied home. And the second is change in occupancy.

Last year we had a change in occupancy that -- of a positive 60 basis points. And as we look into 2015, we see a decrease in occupancy, down to 96.5%, which is a 20-basis point drop.

The more important factor we're looking at is rent per occupied home. And we have been driving rate for the last six months. And we see that actually increasing by 40 basis points.

Now, you're right. The midpoint of our revenue is about a 30-basis point deceleration from last year, most of it coming from no occupancy benefit. But I'd tell you we are very encouraged with where we stand in the month of January and what it looks like going forward.

We currently have a loss-to-lease of 3.4%. A year ago, my loss-to-lease was 1%, so it's 240 basis points higher. So that gives us hope and really good prospects for the next couple of months of gaining that.

I would also tell you, when I look over the last four or five years, we've seen market rents typically go up sequentially each month from January through August. Then we start to give some of it back each month. We have not seen any month that we did not have a gain in market rent since December of 2013. So it's continuously grown over that time period.

And like I said, when I look at how January has started, we're very encouraged by the way we're performing today. And compared to what we budgeted just three months ago, we're excited about 2015. We think things look very strong right now.

Karin, before you get into the next question, it's Herzog again. Speaking to the 2014 to 2015 same-store guidance, I'd like to add to it, that we had a few different pieces that were issued that indicated that folks felt that our AFFO growth looked a little bit light compared to the strength of the business. And I'd like to address that for just a moment.

If you looked at consensus, it's showing, and this is for 2015, it's showing $1.63. But I'll remind you that when you look at consensus, it's always a mixed bag. Some are going for FFOs, some FFO as adjusted, and some their own creation of what they believe the appropriate funds from operations is. So it's always hard to measure, but we're at $1.61 against $1.63.

As you guys are modeling, I would ask you to consider there are a couple of items, just to make sure it's in your model. One is last quarter we had mentioned that upon the sale of the Texas JV, which was obviously a favorable transaction for us, that reduced our FFO as adjusted by close to $0.01 per share.

And the second thing, and it's something that we mentioned about a year ago, or I mentioned about a year ago, that we're going to be moving certain TRS assets out of the TRS up into the REIT, through some tax structuring and that was going to reduce the tax benefit. That's about a $0.02 difference, as well.

So you add those two together, that's $0.03. That equates to about 2%, and that would certainly bridge the gap, plus $0.01 probably against consensus, no matter how you measure it.

And the other thing is, we show 5% to 8% AFFO, or excuse me, FFO as adjusted growth during the 2015 year. $0.03 equates to 2%, so that would equate to 7% to 10% growth. And as you know from our strategic plan, we've indicated strong cash flow growth as being one of the things that we're working hard toward; a 7% to 10% growth rate is certainly consistent with what we've been seeking to accomplish.

So I just wanted to add that in as you're considering your modeling. Karin, let me turn it back to you for the question, though.

Thank you, I really appreciate the color. I think you mentioned also, Tom, in your opening remarks that the strategic plan was essentially unchanged, but that there were some minor tweaks. Can you give us a quick summary as to what you think the tweaks were from last year's plan to this year's?

Really minor in scope and nature. I think you're going to continue to see us with our development spend was probably a little bit less than it was in prior years. Asset sales last year exceeded plan. This year we put forth some guidance as total capital requirements. The mix may change upon that. That's probably where I think the tweaks are.

That's helpful. And then the last question is on the operating initiatives that you guys were so successful on last year. How much of that NOI benefit do you think you guys have harvested and are there additional initiatives that you're planning to implement for 2015?

Yes, Karin, this is Jerry.

I think there's still legs on quite a few of the initiatives we started last year. And if you looked at page 7 in the two-year strategy, we started out on reducing vacant days, if you will, back in 2012 when we were averaging about 26 days. We've so far cut 5 days off of that and we're down to averaging 21 days in 2014.

We're going to try to get a few more days off of that this year and our long-term goal today is 18 days, but we're going to reassess when we get to that point. So we still think there is some room to pick up some reduction there.

The biggest item, or one of the big items, is increasing staff efficiency. We first looked at this several years ago, we deemed our maintenance teams were probably inefficient about three to four hours a day, where they were predominantly walking from place to place. And we've introduced technology and standards to capture 50 minutes of that, which adds about an annual almost $3 million to NOI.

We think there's another 1.5 hours to 2 hours to get, so we think we're only 40% of the way there this year. And I can tell you as I look at the components of what make up my expense growth next year, our expectation is R&M expense is going to go down again for the third year in a row by a little over 1%. So there is some juice there.

Then the third large initiative that we'll continue this year that we started last year was our outbound call center, what we called in the two-year document resurrecting discarded rental leads. We picked up 400 incremental leases last year, we feel, from this group, which boosted our occupancy about 50 basis points. We've increased the size of that group, but our intent is not to increase occupancy.

It's actually to increase traffic, which will probably result in a lower closing ratio at the site, but we think it'll drive rate. So we're not going to have to be the cheapest place to live. We can hold out for quality, high paying renters, drive rate more. So whereas last year it was an occupancy pickup, we think this year it's going to be more of a rate pickup.

I would tell you there's are few things we're working on that are in this document. It's hard to tell if we'll make much money in them this year, but it's problems we know we have to solve. And that's the resident package lockers or delivery systems, electronic locks we've been working on for several years, haven't come up with a good solution. But we think when it does, it's going to increase staffing efficiency, as well as being amenities for the residents.

And we think another big one that we've really -- we've dedicated some resources here in our Denver office to is reputation management. Not doing -- we think we need to get our scores better, even though they're better than average for the industry.

But we realize a lot of our demographic looks at that metric before they make a buying choice. So we want to work to get our scores up, but more importantly, we want to listen to what our residents are saying about us and make the UDR community a much better place to live.

So those are the things that are on the immediate pipeline. I can tell you we've got about 50 to 60 different items, some that take years to prepare for implementation. But we'll tell you about those once we get them rolling.

Thank you.

Next question will be from Rich Anderson with Mizuho Securities.

Great call. Great outlook. Way better call than Pete Carroll's. (laughter) A couple quick ones. First, did you mention this one-time infrastructure repair cost and what that was?

Did I mention it? No, I didn't.

And what is it? And when is it?

Yes, it's going to be throughout 2015. It pertains to two projects that we have, one that involves a repiping and one that involves a garage structural repair that's fairly significant. They're both one-time. They're both not going to add or provide a return. And so we felt it appropriate to break it out separately in schedule 15, which is where you'll find that guidance.

And I know your next question's going to be, are we going to include that in our recurring CapEx? And the answer is no, because of the one-time nature of it and the nonrecurring nature.

So will it be ratably throughout the year, or specific quarters, or what, just for modeling perspective?

Rich, this is Jerry. I think you're going to see first quarter is more planning. I think the bulk of the spend is going to come in the last three quarters.

Okay, all right. Next question is on the 1031 exchange, is that -- by buying land, I wasn't aware you can -- that satisfied the 1031 exchange requirements. Is there something you have to do with that land in a specific period of time to satisfy that tax issue? Or is that legal? Not legal, but just buying land is enough of a like kind exchange?

Rich, this is Harry. The 1031 works, or functions the same whether it's an operating asset or a land asset, but both work equally as well.

Okay, I wasn't clear on that. And then maybe a big picture question for Toomey or whomever, but a lot of shifting around; some complexities with things moving from one bucket to the next with the MetLife relationship. Do you foresee some of those moving buckets, some of that moving activity slowing down in future periods?

It does create some noisy situations in certain quarters. I was wondering if you could comment on that and what the long-term objective is and where you want to get to in terms of your ultimate relationship with MetLife.

Well, certainly. With respect to Met, I think the long-term goal about four years ago was try to move it to a 50/50 platform. And as you can see, every quarter we chip away at that. The remaining aspect to get there is probably about six parcels of land that are currently going through rezoning efforts.

And so over probably the next year, two years, you'll see us evaluate those as the more clarity about the investment opportunity is understood and then move to a 50/50. At that point, I think we pretty much have completed the, what I would call Hanover/Met/UDR transition will be done, Rich. And I think that's a great position to be.

You can see we took steps to simplify the organization this quarter, with certainly the sale of the Texas JV and realizing a great return. So I think these -- while might add some complexities, Tom has done a fabulous job of laying out the path, the value created in each of them, and we think that's a continual effort going forward. But certainly thinks they've been worth undertaking and certainly have benefited to our shareholders.

Okay. So maybe some moving parts, some noise for this year, but then it starts to die down and you get to where you want to be?

Yes, sir.

Okay, great. Thank you very much.

We'll take our next question from Dave Bragg with Green Street Advisors.

Thank you for your initial thoughts on 2016. And Jerry, I wanted to follow up on a point you made earlier, which is that your asset sale and roll in of new assets into the same-store pool could move the needle a little bit. So to help us have a clear perspective on what 2016 could look like relative to 2015, how much does that impact your 2016 revenue growth, if you think about the same same-store pool as this year, what's that growth rate in 2016?

Dave, I don't have the exact number. I can tell you as we've looked at potential dispositions and the assets that are going to come in, we think it's going to be fairly de minimus. Call it 10 to 20 basis points probably at most.

All right, that's helpful. Thank you.

And then a question for Herzog, when we look at page 11 of the plan, you have debt, equity and sale proceeds grouped together. Your peer AvalonBay provides a cost of capital heat map, which really provides their view of relative attractiveness of each of those three sources. Could you talk about that from your perspective and how you'll balance that with your leverage targets?

Sure, Dave. We don't provide a heat map, but we do the same calcs. So here's how I think about that.

When we look at the three different sources, first look at just cost of equity. If we're issuing equity, we do it against an AFFO yield just for the first year. So I don't mean a true cost of equity including growth, but the first-year cost against AFFO. Call it somewhere between 4% and 4.5% cost in that particular year.

If we look at sales proceeds, we just look at the cap rate on a cash flow cap rate basis, and again ignoring growth, that could be -- it depends on what assets we're selling, that could be a sub 4%, it could be a 6%, 6.5%, maybe a 7%. But that's the type of range, depending on what it is we're selling, out of which market, which assets, et cetera.

When we think about debt, we could be issuing debt at call it a 3.35% today on a 10-year basis. When we look at what it could be in 2015, maybe we'd say a 4%. Maybe we'd say less. So let's say anywhere from a 3.3% to a 4% in the current year for newly issued debt.

So when we think about the most attractive source of capital, we have to take into account are we trading at a premium to NAV. What do sales proceeds look like? Do we have assets that we would really like to liquidate? And from a debt metric perspective, how are we thinking about our leverage, our net debt to EBITDA fixed charge coverage et cetera?

And as you know over the last couple three years, we have leaned toward issuance of less debt, or at least keep it neutral so that we can improve our metrics, we have not been a big issuer of equity because for a good portion of that period, we were trading at a discount.

But as we look at it today, frankly we have three very attractive sources of capital and we will definitely keeping track -- take into account our debt metrics. But we will look at each of those every time we consider which funds, which source of funds we want to utilize.

Okay, thank you for that. And last question is back to Jerry.

Of course you noted your reduced exposure to Texas, but could you talk about your broader thoughts on the impact of lower oil on Dallas and on Denver?

Sure. I would say, Dave, from what we're seeing and what we project to see, these are diversified economies and we don't see much of an impact to us. I would remind you in Denver, we only have one 50/50 owned asset. So it will have minimal effect us on.

And then Dallas to date, we see nothing. I would tell you even that January has been a little bit stronger than I would have expected three months ago. So I think when you look at everything that Texas has going for it outside of Houston, the other two markets, they will have some effect from oil prices, but not nearly as much.

Okay. Thank you.

We'll go next to Ian Weissman with Credit Suisse.

My questions have been asked and answered. Thank you.

We'll take our next question from Michael Salinsky with RBC Capital Markets.

To follow up to Dave's question, as we think about dispositions there, how much can you sell in 2015 without pushing up a need for a special dividend?

Oh, we've got a decent gain capacity, but Mike, it depends on the blend of assets that we sell. You can look at what we sold in 2014, they weren't all in non-core markets. We had certain assets that we chose to sell in Seattle. We had assets in Florida, had assets in Norfolk, had an asset in California.

So it's a variety. So it depends on where we -- which assets we choose to liquidate and what the gain on that is. But you've also got the claw-back rules on a variety of different things. So we're not bumping up against any issues around that right now.

Okay.

If we chose to issue -- if we chose to fund our entire development pipeline in 2015 through sales proceeds (inaudible -- background noise).

That's helpful. Second question, I think you mentioned three to four starts with MetLife, one on balance sheet. Could you give a dollar amount as we think? And then as you're looking ahead to 2016 there, as we're thinking about the capital sources and uses, how much should we expect to start there, building out the pipeline there?

Can you repeat that second part, Mike, I missed it?

As you gave a number of starts, but thinking in terms of dollar amounts, how much should we -- what's the dollar amount there, given that you're going to use MetLife for probably three to four of the starts?

Yes, hold on a second, I've got that number here. The starts in 2015 will be somewhere around $400 million in total, so that's the start number.

Yes, Mike, that's UDR shares, so we expect to start our Pack City project in Huntington Beach in 2015. We also expect to start a 50/50 JV, 155 units with Met in Mountain View, the early part of 2015. And then we have two or three others that could start in 2015. UDR share would be $400 million to $500 million.

Okay, that's helpful. And finally, the leverage metrics you gave in the strategic outlook don't include your share of the JVs given the asset sales into the JV, as well as the planned commencements with MetLife. Could you give us an update where you think those metrics play out relative to your wholly owned portfolio over the next two years?

Yes and let me just start with 2015. So we've got net debt to EBITDA -- and in fact, let me just actually go to the range numbers rather than what I have in my model. So net debt to EBITDA, we're showing a 5.8 to 6.2.

The same number -- hold on a second. The same number with JVs would be somewhere around a 6.8. And in 2016, hold on a second, I'm triangulating a couple of schedules here. Net debt to EBITDA drops to somewhere -- I'm not going to range this one, call it a midpoint of about a 5.4 and it would drop inclusive of JVs to somewhere around a 6.4.

Very helpful. Thank you.

Well go next to Derek Bower with Evercore ISI.

A couple quick ones. Tom, can you comment on the reasons for delaying the financing of the January maturity and maybe what the revolver balance stands today?

Yes, the revolver balance, hold on just one second. It's about -- it's just over $400 million. We've got some proceeds that will be coming in and we're looking at a couple potential different sources of capital, though it's sometime in the first half that we expect.

We've already got a piece of that debt hedged. So that plays into our thinking as well. So a variety of different things we're thinking about as we think about the timing of the debt.

Okay, got it, thanks. And then given the West Coast concentration of the pipeline, are there any East Coast markets that you're actively looking for land sites today?

Derek, this is Harry. As you know, we just acquired a land site in Boston for a large project that we'll start next year. We are actively looking for additional sites in Washington, DC, possibly in New York, in addition to the West Coast assets.

Okay, thanks. And then Jerry, sorry if I missed this, but where's occupancy today or at the end of January?

Both cases into January and today, it's 96.5%.

Okay, great. Thank you.

We'll take our next question from Dan Oppenheim with Zelman & Associates.

Wanted to thank you, first, for the color on the markets and the overall trends there. Very helpful.

Was wondering if you can talk Tom about the outlook and potential risks to it. How much of the lower turnover that you're seeing and has occurred for the past few years do you think is due to the shift in the markets where you are and the better customer service and satisfaction, how much do you think is cyclical that could present a risk in terms of expenses and also then to needing to fill units that way?

Sure. I would tell you that I think a lot of it is our markets. I think when you look at it with our mix of As and Bs, the Bs really haven't been moving out as much because they are not being tempted by the new development. So that has helped somewhat.

I would tell you, too, that we've done a better job of lengthening lease terms. If you -- a couple years ago our average lease was probably around 11 months and it's gotten closer to 12 months. And while that doesn't sound like much, it'll reduce the number of expirations you're going to have in any given year by several percent, it'll help drive it down, too.

I think our turnover is going to continue at a low level. Our expectation right now is it'll probably be pretty stable with where it was last year. We continue to see move outs to home purchase slightly below long-term averages and we don't see that picking back up. And as far as exposure to new development properties, we felt a lot of that last year, we don't see it getting much worse.

Got it, thanks.

And then in terms of the January trends we were talking about that in terms of the new leases and such, how much of that is influenced by the regional mix of lease expirations in terms -- and January clearly would want to have fewer of those in some of the colder, snowier markets. Is there any mix that you saw in terms of just how those, the lease expirations are in January for some of the Northeast versus West Coast markets?

We work to keep it down pretty much on a national basis, because there's very few markets honestly where you're going to do better in January. California, I will tell you, you want heavier concentrations in the middle two quarters, so it's going to hurt you almost as much as it does in a place like Boston.

So I don't think there's a significant differentiation across the portfolio. I would tell you, though, that first and fourth quarter, we like to keep our expirations down to about 21% for home count in each of those quarters. And then it gets up into third quarter as high as the low to mid-30s.

Great. Thank you.

We'll go next to Ryan Peterson with Sandler O'Neill.

Back to your outlook on dispositions, given the pricing on Gables recently, are you encouraged to sell more of your Sunbelt assets?

This is Toomey. I think we'll keep with the discipline that's worked for us for so many years. We're exposed a lot to the market. We'll see where pricing comes in, the certainty around the buyer and execute accordingly.

So I think it always gives us a broader perspective of the cost of selling assets and we'll continue to do that. I don't think there's any particular focus on a market or an asset. I think we have them ranked. We list them all. We'll see where they come.

Okay. And then one other quick question. Can you discuss at all the hurdles that you have on the Wilshire development to recoup the impairment that you took there?

No, like we said, if we meet certain return thresholds on that, we will earn back the $2.2 million. But we have a partner involved here, so we're not going to disclose those details.

Okay. That's it for me. Thank you.

We'll take our next question from William Kuo with Cowen and Company.

On view 34, I was wondering if you could talk about that. It looked like the completion date was pushed back two quarters.

William, this is Harry Alcock. It really was a function of the final element in the building is a -- in completing the rooftop. We had a few delays in the permitting last summer and just decided intentionally to push the completion of that piece of the project into 2015, which would allow us to complete the balance of the project and give the tenants a rest. This thing's been under construction for two-plus years. So we expect to start that here sometime in the next 30 to 45 days and complete it in the second quarter.

Okay, thanks. And then a follow-up on Texas, on page 14 of the outlook, looks like sub-3.5% revenue growth for 2015, which is a bit of a deceleration from 4Q. Is that a bit of conservatism built in there, or that's what you are seeing on the ground in terms of renewals and new leases that you're getting?

This is Jerry. I'll tell you this, it's -- I don't think it's conservatism.

I tell you we are feeling the effects of new supply that has hit Austin especially hard over the last year, 1.5 years. We were able to avoid it for the most part last year, but we -- I would remind you, we have a small portfolio there. It's only four same-store assets.

One of them is surrounded by new supply and it's definitely feeling it. A couple of them are B assets that even though there's new supply, they fared well last year, but they're starting to feel it. And then one is a B-plus product. It's a close to the South Lamar projects that have been coming up just south of downtown Austin and it's feeling it.

So I probably feel a little better today about Dallas honestly for my portfolio than I do Austin. We've had a good start to the year in Dallas, but Austin's a bit concerning. So, no I would tell you they've been good, strong markets for the last couple of years, but even absent anything from oil, new supply is affecting our portfolio there.

Okay, thank you. And then finally, in light of the cost saving initiatives you have been doing, I was wondering if you could comment on the differential between the expense growth in the same-store portfolio and in the JV portfolio. Is it -- is there something different there, or you just aren't able to roll those initiatives into the JV?

When you look at it, our JV's full year, the expense growth has been about 5.7%. That's for the MetLife and that compares to our 2.5%.

The biggest component honestly that typically does appear is tax refund -- I mean real estate taxes. They comprise over 30%, 33% in both pools. And you're just seeing more pressure in some of the markets where the JVs are. In addition, it could be that last year, and I don't have the details off the top of my head, sometimes it's as affected by tax refunds as it is tax rates and valuations. But it's predominantly taxes.

Okay, great. That's all I had. Thank you.

We'll take our last question from Haendel St. Juste with Morgan Stanley.

Couple quick ones here for you. So curious, looking at your portfolio map, we've talked a bit in the past about your warehouse markets and just going through the list here of some of those markets. Looks like you have maybe about a billion or so depending on what cap rate assumption people use of what I'd deem non long-term warehouse type of assets. Curious, in terms of your near-term contemplated asset sales, I'm assuming the majority of the sales are in those warehouse markets.

And then as a follow on, why not accelerate the asset sales in those markets a bit, given the rising supply, hearing from the home builders that they're picking up their starts, and given the strong asset pricing in those markets?

Well in general, I'll start and if Tom wants to add something, let's talk about capital warehouse for a minute. So we've got certain non-core assets and capital market warehouse assets. In the capital warehouse markets, I think for the past year or so we've made it pretty clear, or maybe even longer than that, that these are markets that right now are, most of them are doing pretty well. We're not in a rush to liquidate those assets and some of them are actually producing some pretty strong returns and we don't think we've exhausted their value creation potential.

So when we look at -- and I think I'm repeating a little bit what I said earlier and what Tom said earlier, but when you look at the 2014 sales, it was a diverse mix. Some out of Norfolk, non-core. Some out of Florida, that's a capital warehouse. We had a couple of assets that we pruned out of Seattle and one out of San Diego just as an example.

So we will choose the assets that we feel that have exhausted their value creation potential and from time to time, those will also be non-core capital warehouse. So that's where we're at with that Haendel. Tom, anything you would add to that?

I think a couple points to add, Haendel, and thanks for the question. First, I think every company has a certain pool of assets that are below average and probably over the long-term will liquidate. We've elected to identify what those markets are to help our shareholders understand where we are going to be strategically.

We've never put a time line on it. We think it's an economic decision and in that context, as long as we're executing our strategies and making good economic decisions, we'll arrive at that date sometime in the future and be happy with the result.

So if it comes along and the world changes economically, our asset values materially change one way or another, then I think we could think about acceleration. But right now we're happy with the pace, the redeployment of capital and then driving long-term cash flow growth.

Appreciate that, Tom Toomey.

And while I have you, curious on the decision to pare back the three-year outlook to two years. Certainly it was well received when you implemented it a few years back. Clients sell side certainly appreciated the view on your look on how you'd be running your business or expectations over the next couple of years. I know there's probably not a lot of certainty or maybe even value in the third year, but it did provide a bit of comfort to some folks. Curious how you balance those considerations when you were contemplating cutting back the three years to a two-year plan?

Yes, Haendel, it's Herzog here again. During the last year, I and others on the team here had opportunity to speak to numerous investors. And one of the things that we heard from investors is there was a lot less value to that third year than there was certainly the second year. And because the numbers just get fuzzier the further out you go.

And there was also -- there were also comments made that by providing the second year, it gave more clarity to what those numbers are rather than blending them with the third year. So we asked a variety of different investors how they felt about it, and the majority said, you know what, we would prefer a two-year plan.

And so that -- we moved to a two-year plan accordingly. And we don't think we lose a whole lot. It provides you more clarity as to how we're thinking about 2016. And so we see some benefit in that and certainly our investors let us know that they felt the same way.

Appreciate that. And last, I don't know if you mentioned or would you be able to mention, curious on the net benefit -- net impact to your same-store pool of the new entrants to the pool this year, the new assets. The new entrants into your same-store pool, curious as to what benefit they might have on your same store revenue for full year 2015?

Yes, Haendel, it's probably fairly muted. It's really just two properties that are coming in, residences at Bella Terra in Huntington Beach and then Capital View in Washington, DC. So the volume of additions is very small and when you look at those two markets, they probably blend down to about where the midpoint of our guidance is.

Appreciate it. Thank you.

That have concludes today's Q&A session. I will now turn the call back over to our moderator, Tom Toomey.

Thank you for your time today and certainly your questions. In closing, we're happy with 2014 and certainly the progress we made against our long-term plans. As we look at 2015, it's off to a great start. And I repeat, a great start.

We see a long runway for growth in the Company and for the business and so we're very excited about the prospects, not just 2015, but beyond that. And we know we're going to see many of you in the conference season as it unfolds. Certainly don't hesitate to reach out and talk to the team about what our progress is. With that, thank you again for your time today.

And that concludes today's conference call. Thank you for your participation.