UDR Inc (UDR) 2015 Q1 法說會逐字稿

Good day and welcome to UDR's first quarter 2015 conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shelby Noble. Please go ahead.

Welcome to UDR's first quarter 2015 financial results conference call. Our first quarter press release and supplemental disclosure package were distributed yesterday afternoon and posted to the investor relations section of our website, www.udr.com. In the supplement we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measures in accordance with Reg G requirements.

I would like to note that 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 to assurance that our expectations will be met. A discussion of risk and risk factors are detailed in yesterday's press release and included in our filings with the SEC. We do not undertake the duty to update any forward-looking statements.

When we get to the question and answer portion, we ask that you will be respectful of everyone's time and limit your questions and followup. Management will be available after the call for your questions that did not get answered. I will now turn the call over to our President and CEO, Tom Toomey.

Thank you, Shelby, and good afternoon, everyone, and welcome to UDR's first 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.

The first quarter of 2015 was another great quarter for UDR and our business is firing on all cylinders. As a result of great execution from operations, exceptional lease-up velocity, and a new strategic investment, we increased our full-year same-store and earnings guidance ranges. In short, we continue to execute on our previously communicated two-year strategic plan with transparent strength of fundamentals and our diligent capital allocation. We feel great about the plan and our ability to deliver on it. The following four topics highlight our first quarter.

First, our operations outperformed during our initial expectations and historical norms due to exceptional new lease rent growth, strong renewal rent growth, and a continued focus on containing costs. These trends continued as we moved into our prime leasing season in the second quarter.

Second, our development lease-up continued to perform very well. We are exceeding our budgeted lease-up absorption and realizing rents in excess of our initial projections at Beach and Ocean and Huntington Beach and our 100 Pier 4 in Boston sea port area. We expect to complete $326 million of accretive development in 2015 which will continue to drive our cash flow and NAV growth.

Third, subsequent to quarter end we entered into a joint venture agreement with Wolff Company in a portfolio of five communities that are currently under construction. The venture will provide UDR with a pipeline of over 1500 new homes with an accelerated delivery schedule and anticipated completion beginning in 2015 and ending in 2017. All the communities are located in core coastal markets including metro Seattle, Los Angeles, and Orange County. Tom will address the economics and the benefit to UDR in his prepared remarks.

Fourth, we are increasing our full-year same-store and earnings guidance ranges to reflect the strength evident in our operations and the accretive nature of the venture that I just mentioned. Better operations and the venture contributed a penny each versus previously announced guidance.

Lastly, our prospects look fantastic as we enter the second quarter. Our mix of A and B quality communities in urban and suburban locations should continue to generate strong operating results. As I indicated earlier, April trends were well above our initial forecast and May looks like it will continue to accelerate. There remains a long runway for growth at UDR and we have the right plan and team in place to capitalize on the opportunities.

With that, I'd like to express my sincere thanks to all my fellow UDR associates for their extraordinary work in producing another strong quarter of results. I'd also like to welcome Shelby Noble to the UDR team as our new Head of Investor Relations and express my gratitude to Chris Van Ens for all his hard work in the role over the past three years. I know he'll be very successful working with Jerry on the operating team. We look forward to continued success in 2015.

I'll now turn the call over to Tom.

Thanks, Tom. The topics I will cover today include our first quarter results, a balance sheet and capital markets update, a development update, recent transactions, and our revised full-year 2015 guidance. Our first quarter earnings results were at the upper end of our previously provided guidance ranges. FFO, FFO as adjusted, and AFFO per share were $0.43, $0.40, and $0.37 respectively. This was driven by better than expected first quarter same-store revenue, expense and NOI growth which was strong at 5.1%, 2.5%, and 6.2% respectively. Jerry will provide additional color in his prepared remarks.

Next, the balance sheet. At quarter end our financial leverage on an unappreciated cost basis was 37.5%. On a fair value basis it was around 28%. Our net debt to EBITDA was 6.4 times. Inclusive of pro-rata JVs, it was 7.3 times. All metrics continued to improve as planned. At quarter end our liquidity, as measured by cash and credit facility capacity, was $517 million.

On to capital markets. As previously disclosed, we issued $109 million of equity, net of fees, through our ATM program during the quarter. The shares are issued at a premium to consensus NAV.

Turning to development. We commenced construction on our 155 home, $99 million Domain Mountain View development in Mountain View, California, in a 50/50 joint venture with MetLife. At quarter end the pro-rata share of our under way development pipeline totaled $838 million and was 73% funded with an estimated spread between stabilized yields and market cap rates near the upper end of our targeted 150 to 200 basis points range. As to future development, we continue to underwrite opportunities with a bicoastal focus and we anticipate the size of our pipeline to be in the targeted range of $900 million to $1.4 billion by mid year.

On to recent transactions. As previously announced, we completed the disposition of our 20% interest in our Texas JV. We realized net proceeds of approximately $43 million on the sale, inclusive of a promote and disposition fee of approximately $9.6 million. These were recognized in the first quarter 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%.

As Tom mentioned, subsequent to quarter end we entered into a joint venture agreement with the Wolff Company to invest $136 million for a 48% interest in a portfolio of five communities that are currently under construction. Our investment is based on an initial all-in price of $559 million. We're discussing a sixth asset with our partner that we may add before closing which would represent an approximate 20% increase to both our initial all-in price and investment.

This transaction is beneficial in a variety of ways. First, we received a 6.5% preferred return on our $136 million investment. So the transaction will be immediately accretive to FFO and avoid the earnings drag associated with typical development projects. Second, assuming all five of the communities are acquired, we estimate NAV creation of approximately $80 million at current market cap rates. Third, this transaction increases our exposure to high-quality communities located in our core coastal markets where multifamily supply/demand fundamentals appear favorable for the foreseeable future.

Fourth, the JV is less risky than a typical development as construction is already under way on all five of the communities. Our partner has provided certain guarantees. The $136 million to be paid represents our entire required investment in the venture and there is no promoted structure to our partner. Fifth, four of the five communities are located within a mile of an existing UDR community, thereby enhancing familiarity with anticipated operations and valuations. And, finally, with lease-up starting on average in seven months, we're able to take advantage of current fundamental market strength.

Additionally, given our accelerated ability to exercise our purchase options ranging from 22 to 36 months from today, we view this transaction as having elements of a financing arrangement with an option to purchase rather than simply a traditional joint venture. We are excited about the accretive nature of this transaction. Additional details are available on our first quarter press release and the West Coast Development Joint Venture presentation posted on our website.

On to the second quarter and full year 2015 updated guidance. We increased our full year FFO, FFO as adjusted, and AFFO guidance ranges by $0.02 at the mid points due to stronger than expected operations and accretion from the development joint venture.

Full-year 2015 FFO, FFO as adjusted, and AFFO per share are now forecast at $1.63 to $1.67, $1.61 to $1.65, and $1.44 to $1.48 respectively. For same-store we have increased our full-year 2015 revenue growth guidance by 50 basis at the mid point to 4.25% to 4.75%. Expense growth is unchanged at 2.5% to 3% and increased our NOI growth forecast by 75 basis points at the mid point to 4.75% to 5.75%. The increase was driven by strong new and renewal rate growth, stable occupancy, and lower turnover. Second quarter 2015 FFO, FFO as adjusted, and AFFO per share guidance is $0.39 to $0.41, $0.39 to $0.41, and $0.34 to $0.36 respectively.

From a sources and uses perspective, we've updated our sales proceeds and debt and equity issuance guidance at the mid points from $775 million to $825 million. This net $50 million increase is the result of an increase in our acquisition guidance to account for the development joint venture transaction mentioned earlier and the removal of $75 million of assumed land acquisitions. As to funding our capital needs for the year, to date we received $43 million from our Texas JV disposition, issued $109 million of equity on our ATM, and have $65 million of assets under contract for sale. Assuming a $300 million bond offering late in the second quarter, we have only $250 million to $300 million of remaining capital funding needs for the year. As we outlined in our call last quarter, we will continue to utilize the most advantageous source of capital to fund these needs, typically either through asset sales or equity issuance at or above NAV. Other primary full-year guidance assumptions can be found on attachment 15 or page 25 of our supplement.

Finally, we declared a quarterly common dividend of $0.2775 per share in the first quarter or $1.11 per share when annualized, 7% above 2014's level and represented 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 first quarter portfolio metrics, leasing trends, and the rental rate growth we realized this quarter and early results for the second quarter. Second, how our primary markets performed during the quarter. And last, a brief update on our development lease-ups.

We are pleased to announce another strong quarter of operating results. In first quarter same-store net operating income grew 6.2% driven by a 5.1% year-over-year increase in revenue that was above our expectations and a 2.5% increase in expenses. Our same-store revenue per occupied home increased by 4.6% year over year to $1,659 per month while same-store occupancy of 96.7% was 60 basis points higher versus the prior-year period.

Total portfolio revenue per occupied home was $1,836 per month, including pro rata JVs. Our first quarter revenue growth was well above our original forecast and was driven by widespread strength across our markets. Stable job growth, limited impact from new multifamily supply, a single family housing market that is still finding its footing, significant demand from new millennial households, and incremental demand from empty nesters are all helping.

Turning to new and renewal lease rate growth which is detailed on attachment 8E of our supplement. Our ability to push new lease rate growth continued to outpace historical precedent during the first quarter by a wide margin. We grew new lease rates by 4.2% in 1Q, a full 320 basis points ahead of the first quarter of 2014. Renewal growth also remained robust at 5.7% in the first quarter or 60 basis points ahead of last year. In April, these trends continued with new lease and renewal rate growth of 6.3% and 6.8% respectively.

Our leasing success in conjunction with the stable sequential occupancy and lower year-over-year turnover gives us plenty of confidence that demand is more than sufficient to continue pushing rate higher throughout the upcoming prime leasing season. These factors also served as the primarily drivers of our sizable 50 basis point increase in same-store revenue guidance at the mid point.

Next, rent as a percentage of our residents' income decreased slightly to 17.2%. Move outs to home purchase were flat year over year at 14%, in line with our long-term average. Even with renewal increases at a healthy 5.7% in the first quarter, only 6.8% of our move outs gave rent increase as the reason for leaving.

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 in Los Angeles combined to represent 17% of our total NOI. Orange County posted year-over-year revenue growth of 5.8% and is outperforming versus our budget expectations thus far in 2015. Our Los Angeles portfolio's concentrated in Marina del Rey and Playa Vista sub market and continues to be impacted by new supply in the sub market. As a result, our first quarter year-over-year revenue growth of 3.8% lagged versus the overall LA market. However, we still expect full year same-store revenue growth of just under 5% for Los Angeles.

New York City represents 13% of our total NOI. Our downtown assets posted combined rent growth of 6.5% in the first quarter while maintaining occupancy at just under 98%. Lower Manhattan remains attractive as the result of limited new supply, strong job growth in the technology, finance, media, and advertising fields, and low housing affordability which limits move outs to home purchase.

Metro DC, which represents 12.5% of our total NOI, posted year-over-year same-store revenue growth of 1.9% compared to negative 50 basis points in 4Q of 2014. We are forecasting 1.5% to 2% revenue growth in 2015 as we continue to benefit from our diverse 50/50 mix of A and B assets located both inside and outside the Beltway. San Francisco, which represents nearly 12% of our total NOI, shows no sign of slowing down as new and renewal lease rate growth in the first quarter and April point to another strong year for the Bay area. Same-store revenue growth in the first quarter reached 9%. Sub market wise, results were more mixed with our downtown properties posting 5% top-line growth due to the impact of new supply and compared against 11% growth at our properties on the peninsula and in the Silicon Valley.

Seattle, which represents 6.5% of our total NOI, continued to benefit from the strong growth inherent in our suburban B assets which are located in sub markets which are less exposed to new supply. Long-term, we continue to like the downtown Seattle sub market and believe that the ongoing creation of new jobs by companies such as Amazon, Facebook, and Expedia will continue to drive demand in Seattle's urban core.

Boston, which represents 5% of our total NOI, continues to see new supply pressure downtown. Our suburban assets north of the city and to a lesser degree, those on the south shore, should fare relatively better in 2015. Last, Dallas which represents just over 4.5% of our NOI, posted 4.4% year-over-year same-store revenue growth in the first quarter. We expect new supply to pressure our uptown and Plano communities in 2015. For the full year we expect revenue growth to modestly decelerate from our first quarter results and come in around 4%.

I'll turn now to our recently completed and end lease-up developments which you can find on Attachment 9 or Page 19 of our supplement. These three properties represent $400 million or roughly 48% of our pipeline.

Beach & Ocean. Our 173-home, $52 million lease-up in Huntington Beach was 91% leased and 85% occupied at quarter end. We are ahead of budget and exceeding our lease-up expectations. Asking rents today are just over $3 per square foot or $0.30 ahead of budget. I'd like to remind you this property is located thee miles from our Bella Terra project that was stabilized a year ago and it's just a mile from our oceanfront development site, Pacific City, which we plan to start at the end of the second quarter.

Del Rey 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 about two months in this over supplied sub market in order to hold rate and maintain leasing velocity to reach our budgeted occupancy. Long-term, we believe in the Del Rey sub market where we built an exceptional property.

Lastly, we are extremely pleased with the first three months of leasing at our 369 home, $218 million, 100 Pier 4 development in Boston's sea port district. We've taken over 120 applications in the months of March and April, well above our expectations. At quarter end, the property was 31% leased and as of today it's 50% leased, 17% occupied. Asking rents of $4.70 per square foot are ahead of original underwriting. Pier 4's waterfront location is surrounded by new office building construction and is only a 5-minute walk to the downtown financial district and Boston's south station train hub.

Several major employees are relocating to the sea port district including Goodwin Procter which is relocating its Boston headquarters in 2016 and taking 380,000 square feet; State Street Bank which is relocating from the back Bay, taking 485,000 square feet; and PWC which is slated to take 334,000 square feet as well. We've experienced exceptional leasing demand ahead of these transformational events and are excited as the area continues to attract new potential residents.

April results came in well ahead of plan. As we look ahead to the next few months, we see continued and improving pricing power and stable occupancy. All in, we had a great first quarter. We remain very positive on the outlook for multifamily fundamentals and our ability to execute during the peak leasing season and throughout the remainder of 2015.

With that, I'll open up the call to Q&A. Operator.

Thank you.

(Operator Instructions).

And the first question will could from Nick Joseph with Citi.

Great. Thanks. Can you talk about how the development JV was sourced and what the benefit is to your partner for executing the transaction at this time?

Nick, is Harry. Wolff was in the market looking for capital partners and given our sort of recent experience with Steel Creek, we started talking to them about a similar type structure which is how this thing evolved from our partner's perspective. I assume there are a number of benefits that they could communicate, but I know specifically they get a couple benefits. One, they get to return money to an open-ended fund and redeploy it. Secondly, they were specifically over-allocated on the development front to certain of these markets.

Thanks. That's helpful. And then is the stabilized estimated yield of 5% on current rents or on trended rents?

That's on trended rents. We've grown rents about 3% on average over the next couple of years through stabilization.

Perfect. Thanks for that.

Next will be Jana Galan with Bank of America.

Jerry, appreciate you running through the core markets. It sounded like DC and Dallas revenue growth are expected to decelerate as we make our way through the year, but every other market looks to be gaining.

That is true. Actually, DC will be close to flat. We expect DC for the full year to come in between 1.5% and 2%. We're starting to see the downtown area, as I said in my remarks, get closer to the same types of growth as we saw in the suburbs over the last year or so. They're roughly even in that 1.5% range today. Big part of that is most of those assets last year were combating against new lease-ups and therefore have an offer a month and a half free of concessions and those have gone away, but the rest of the portfolio as you noted, we are seeing a continuing growth in revenue.

When we first gave our guidance back in early February, we felt our numbers were realistic given our economic data at the time even though at that time we were seeing a lot of operating trends on the ground that were showing strength, but it was a little early in the year. As we've gotten further into the year, we've seen rate growth continue to accelerate sequentially and just as an example, I would tell you that in the month of February our blended rate growth between new and renewals was 4.9%. In March, that grew to 5.6%. In April, it's jumped up to 6.6%. So, it's been going up 50 to 100 basis points a month. Even though we don't expect that pace to continue, we do anticipate that the growth will continue to go higher, just not the same level of increases each month.

But I can also say in the month of May I would expect it to be higher than it was in April at 6.6%. I'd also like to point out that we sent out renewals for the month of June and renewals in June are averaging over 7% portfolio-wide, but there's a fairly wide disparity between the strongest markets, which are the West Coast where renewals are pushing very high single digits. The sunbelt and the mid Atlantic are at the bottom. Those earned about 5% renewal increases. Right in the middle and close to the mid point of what we're sending out is the northeastern markets of New York as well as Boston, so big disparity and I would remind you that typically we realize very close to what we send out, so the 7 should be a pretty strong number.

Today also just to get this out of the way our physical occupancy is 97% and what's really impressive to me, and this really speaks to the broad success or strength of the rental markets that we're in, we don't have a single market that has physical occupancy today less than 95.8%, and when I look at our new lease rate growth in April, our blended rate growth in April compared to the month of March, 90% of my markets are higher in April than they were in March. So going back to what you said, we see continued strength and it's virtually across the board.

Great. Thank you, Jerry. And then just following up. Tom mentioned that you may be adding one project to the West Coast development joint venture and Harry had said that Wolff and Company was over-allocated to Southern California. I was just curious if there's opportunity to add more to the JV?

Yes, Jana, you're talking about the land development JV? Wolff? Yes, we have five assets that are included in the JV currently. There's a sixth asset that is currently being considered by both parties and we may add that prior to closing. So, yes, that would be a West Coast asset as well.

And any other opportunity to work more with them?

Do have a pipeline of additional development opportunities. That's something that we would discuss with them as we move forward.

Thank you.

Next will be Steve Sakwa with Evercore ISI.

Thanks. Good morning. Just a couple of quick questions. On the Wolff, just to be clear with the five and this potential six, was that kind of the entire current existing pipeline or did they have a portfolio of 15 and you went in and in effect picked out these five or six assets?

Steven, this is Warren. They originally had a portfolio of 10 that they presented to us and when we looked at the 10, the six that we have been talking about are the ones that we thought had the most promise for us.

Okay. And then I guess for Tom Herzog use kind of think about NAV and consensus NAV, we're hearing more companies using consistent consensus NAV as maybe the justification for issuing equity. The companies don't always provide kind of their own views on NAV, but just how do you -- I guess to the extent that there was a large disparity between your own internal and consensus, how do you sort of rationalize that? Is there a spread at which you probably would not issue equity?

Yes, Steve. Certainly we look at consensus NAV. It's an easy number for us to speak to because it's produced by our [sell side] analysts, but we absolutely do our own NAV internally every quarter and we bump that up against consensus before we consider issuing equity, so that definitely comes into our calculus. Did I answer your question on that?

Yes. We could sort of chat off line about it. I guess to the extent that your NAV was 35 and consensus was 32, and the stock was at 33, you'd be above consensus, below your own number. It may justify it to say we issued above consensus, but you're issuing below your own estimated value. So just trying to sort of get your arms around that or how we should be thinking about that.

Well, you I would put it this way. We do look at our internal NAV and we run it for a purpose to determine whether we believe internally a transaction will be accretive or dilutive and most certainly if we had concluded that it would be dilutive to us, we would not do the transaction. So, we need to look at our own NAV when we consider issuing an equity as well.

Okay. I guess just one last question for Jerry. DC looks like it's turned the corner. Don't want to put the cart before the horse here, but how are you just dealing about DC. It seems like the supply is being absorbed per than people thought. Is there a chance that DC surprises further to the upside here?

Steve, as I look at my original plan, DC is one of my most positive upside surprises along with Baltimore, so the entire Mid-Atlantic area. Last quarter we stated that we felt we had bottomed in fourth quarter of 2014 in DC and that it was either going to plateau or start to reaccelerate. The acceleration was a little bit sooner than we expected, although we did expect it to go positive. I think it potentially could outperform even more. We'll have to see if the jobs continue to come, but right now the new supply inside the Beltway is providing less resistance than it was last year.

In fact, I think on this call last year I had given some data points of where my best performing and worst performing individual assets were in DC and I know my worst performing was at about a negative 4% growth and it was my view 14 property down on U Street. And as I look at my first quarter results this year, that same property has positive revenue growth of 3.5%. So, that U Street corridor in particular we bet pretty heavily with really about four properties within a mile of there are really performing well.

And I guess is there any market at this point you're worried about just down side? Surprise or is the job picture and the household formations just running so strong that there are very few markets where you kind of worry about down side surprise?

It is universal. The one that it will show occasional signs of some weakness is in Dallas, although the job growth continues to be strong. We have felt the effects of new supply up in Plano where we have roughly one-half of our same-store portfolio, but other than that the strength is across the board. I think downtown San Francisco is impacted by supply, as I stated in my prepared remarks. That downtown area is the under performer in the Bay area at about 5.5% to 6%, if you call that underperforming.

But, Steve, today we keep looking for what is going to hit us that's negative and it's been hard to find. Earlier in the year we were a little concerned with Boston, but then what came into reality, similar to last year, is it was a seasonal weather issue because as soon as March came around we saw a dramatic pick up in our rent growth, our occupancy which has stayed strong, got a little bit stronger, and as evidenced by the success of our sea port lease-up, Pier 4, we're very enthused by the strength of Boston even though there is significant development pressure downtown.

Okay. Thanks. That's it from me.

And next will be [John Kim] with BMO Capital Markets.

Thank you. I had a question on the consolidation in the sector recently. Do you expect this trend to continue given the leveraged buyers in the market? And does this change the way you run your business at all? For example, do you want to get larger? Do you increase your economies of scale?

This is Tom Toomey. Thank you for the question. It's a very open-ended speculative question and in all frankness I'd rather focus on what our strategic plan is, the execution of it and the delivery of the results. And so while we sit around and observe what's going on, we think our best plan is the one we've outlined and the execution of it.

Okay. So do you think that if you get bigger the economies of scale would improve for your Company?

Well, I think it's a double-edged sword. I at one time with a few other guys in this room ran a Company that was 400,000 apartment homes and to tell you the truth, after about 200,000 doors, you start having inefficiencies because you become a company that's run by spreadsheets and not the local knowledge of the particular real estate. And we like our size today and are more focused on what we can derive out of the assets than what our G&A is relative to the size. We don't see it as a problem today. We look at the results and the cash flow growth of the enterprise more than we do the G&A aspect of the enterprise.

Thank you. I had a couple questions on the mechanics of the joint venture. So, just understanding the immediate accretion, the preferred return that you're getting is essentially a coupon that you're getting from your partner?

Well, we get a 6.5% preferred return on our $136 million investment. So, I think you could describe it as a coupon, yes.

Okay. And then when you -- when this asset stabilized or it's almost stabilized the yield goes to 5%, 5.4%. So, is that actually a little bit dilutive once the developments are complete?

Well, it's not dilutive relative to our cost of capital, but if the question is the 6.5% coupon that you realize sort of reverts to a 5.4%, the answer is yes. So, the returns do come down slightly as we -- as the properties come online.

Okay. And your preference today is to exercise the --

if I could just jump in. It's Herzog. Just to be clear, the 6.5% prep on the investment balance until such time as the asset's considered stabilized, which would be at 80% occupancy and until that date, the Wolff partner will incur all operating losses minus interest or get any operating income during that period of time. Once we have been deemed stabilized on an asset to that definition, then we move into our sharing ratio of 48% - 52% from that point forward. So, whatever the asset is yielding at that point will be what falls to the bottom line and the stabilized numbers that Harry's speaking to at the 5.4's is what he's referencing. So, that is the mechanics as to how that will play through the P&L over the life.

And so the accretion really picks up once you exercise the options. And is your preference right now to exercise all the options on the properties or what's your view on the project today?

Well, I think the benefit of having fixing option prices is that when we get to that point and the property's stabilized, we can make a separate investment decision as to whether that option price is a favorable price and make the decision at that time.

Great. Thank you.

And next will be Dan Oppenheim with Zelman & Associates.

Thanks very much. Was wondering about the increases on the renewals you're talking about for May and June. Were you talking about the greatest increases in the west? It looks as though there was a slight increase in turnover in some of the Western markets where renewals were pushed a bit. Do you end up softening renewals based on turnover in any of the markets? How are you thinking about that in terms of how much you want to push the rents?

No, we would not. We really look at occupancy and generating the highest NOI based on rent increases, turnover, things like that. What we've seen is as we pushed rate in places like Seattle, for example you pointed out, we had renewals at 7.4% in the first quarter. They went up to 8% in the month of April and turnover at 43% is not dramatically up from the 38%. When I can reload it at 6.1% on new lease rate growth, I'm okay with that tradeoff. Our job is to increase the value of the real estate. We believe we have to do it by driving rate growth by really whatever means is necessary.

And if you get to a point where you're having to dramatically cut new lease rate growth because you pushed too many people out the back door, that would tell me I'm pushing too hard, but I'm still able to get the 6.1% in Seattle. I've got occupancy today in Seattle that's north of 97%. Place like Portland where it increased to 46%. We had a 9% renewal growth and 8.1% new lease rate growth and my renewal growth in the month of April was 10% and my new lease rate growth was 12%. That tells me there's opportunity to do it. Sometimes people are moving because it's a transient workforce and when you look at places in the west a lot of people have relocated from other markets, especially millennials that are going to the west for the job opportunities, and they're just going to jump around a little bit more. So we're not overly concerned with that today.

Okay. Thanks. Then, secondly, wondering about the Wolff joint venture and just thinking about development overall here at this point in the cycle. Given sort of what has happened in terms of the upward move in rents over the past couple years, will you look for more opportunities to participate in development this way where it's potentially putting a shorter time between putting the capital in and sort of having building and lease-up than it would be if you were buying land given the land appreciation, the risk at this time?

This is Herzog again. I'll start and then let Harry pick up behind me. We still feel that as we pencil development deals in general we're still targeting 150 to 200 basis point spread over market rates and we still see plenty of deals that meet those standards. It's true that not as many deals pencil today as might have penciled a year or two ago, but when we look at the Wolff deal one of the things we really like is it's a much shorter period to stabilization because these projects are already well half under way, so we reach the goal a lot sooner. As we think about this relative to our pipeline of $900 million to $1.4 billion with anticipated deliveries of call it $350 million a year with $350 million a year of spend, this ties in very much to the strategic plan that we've previously communicated. So, this definitely falls in line with the game plan that we've had around development. Harry, anything you'd add to that?

No, I think you touched on it. One of the things we looked at and liked about the Wolff transaction is the initial deliveries, whereas in a typical development deal you're three to four years out from the time you start the planning process. In the Wolff transaction, initial deliveries are 11 or 12 months from now and stabilization follows about a year later. So, Wolff does get us there much more quickly.

Great. Thank you.

And next will be Rich Anderson with Mizuho Securities.

Hey, good morning out there. So, I just want to make sure I understand. With $900 million to $1.4 billion in target range of your development, that's just what you got now plus Wolff, is that right?

It's what we have now plus Pacific City plus Wolff.

Okay. Okay. And regarding Wolff, you said the all-in stabilized yield is estimated at 5 if you pull the trigger on acquiring the assets. Does that mean you're buying a low 4 on the actual incremental deal because you're getting the 6.5 to start with?

I think the math is it's -- 6.5 doesn't come into play in terms of calculating the stabilized yield. You take the 5.4% that we're going to achieve for the first 48%, you'd be in mid 4's for the incremental 52%, so assuming we acquired all five properties, we'd be somewhere in that 5% or low 5% range. That includes property tax reassessment in the California properties. That serves to dilute the return somewhat, but that's fully incorporated into the underwriting.

And the reality is if we sell a property or two or don't exercise on all of them and monetize those gains and apply it against the retained piece, that we would be at somewhere in the mid-5s. And when we're talking about underwriting, we've underwrote these things in a fairly conservative manner. We've assumed revenue growth of roughly 3% per year for the next couple years through stabilization.

So, but the total price is 597, right? And that includes the 136 that you're getting the 6.5% return on. So I can't imagine how the number for the incremental amount above the 136 isn't something below 5 to get to an average, an all-in average of 5.

Rich, the 136 -- let me just -- I'll say the same thing Harry said a little different though. The $136 million based on that going in price comes in at a 5.4. When we --

Okay. I got you. Alright. I got it.

Want to be real clear and probably answer your question, but just want to otherwise clarify. When we acquire the remaining portion that we don't own for those assets that we choose to exercise the option, you got to look at that as if we're acquiring at that point a new stabilized asset for that additional purchase price.

Okay.

So when Harry speaks to the mid-4s, that is on a stabilized asset.

Got you. Perfect. Thanks. Jerry, I can hear you're comp chomping at the bit to say that DC is recovered. Is there any talk about adding to your investment thesis in DC at this point before we really recover? Whether it be development or looking for assets or just nothing there right now that pencils for you at this point?

I'll throw it to Harry in a second. One thing I will tell you, Rich, is we've been going in and looking at opportunities to do renovation properties and we're in the midst of one out in Fairfax County right now underwriting it with a hopeful start later this year where we think we can do some value add. We also have some more modest renovation opportunities inside the Beltway. But I know Harry's been looking at product inside the Beltway and I'll let him give an update on that.

Richard, if you think about sort of a development strategy that we've talked about historically, ideally we're going to have sort of one property under construction in each market at any given time. So as we for example finish our Pier 4 deal in downtown Boston, we just recently acquired a land site in the south end with the expectation that we're going to start next year. As it applies to DC, we have our Del Rey property that is where we completed construction and are in the midst of lease-up. Our hope and expectation would be that at some point in the near future that we have a new DC development asset that we could start construction and we're actively sourcing those opportunities now.

Okay. Great. Thank you.

And next will be Nick Yulico with UBS.

Thanks. Tom, I was hoping to get a couple questions on the guidance. What is the reason for interest expense now going down versus your prior guidance? And could you just remind us the capitalized interest you expect this year?

Yes. Hey, Nick. We took it from 125 to 130, down to 120 to 125 and just a couple of items on that. Most of it's due to the delay in the bond issuance just based on timing that we previously had in the plan, and we're comfortable at this point pushing that back to the -- toward the latter half of the second quarter, and then a little bit of timing on capped interest on one or two of the development assets. So that's what makes up that difference.

And as to cap interest, I could add it up out of the sup. I want to say it's like $5 million a quarter. That's just from memory. I think that's right, but I canned add it up and you can call me after the call, if you like, and I can verify that, but I think it's in that range.

Okay. Okay. Got it. Thanks. And then just going back to the Wolff joint venture. San you just talk about why it sort of made sense to -- if you guys have been citing 150 to 200 basis points as the spread on development and this deal at the end of the day it's going to be 50 to 125 basis points, why you thought it made sense to sort of take that lower spread and then just I guess separate from that on the future MetLife JV developments, is that also sort of a lower spread than where you guys are doing stuff on balance sheet? Thanks.

This is Harry. To take the Wolff question, we view this really as a hybrid between an acquisition and a pure development. So, if you think about it you along kind of the risk return spectrum where you have a fully occupied or nearly fully occupied property and operating results that are well known at kind of a forward cap rate for these types of assets, and then you take it all the way to a pier development where the results will not be known for three or four years from the time they start sort of the design process and go through the construction and lease-up and have full risk on construction and as well as lease-up.

Wolff can get somewhere in the 6% plus return on that one. Wolff falls right in the middle where we'll be in the 5s. We'll start initial occupancy in a year. Our partner has all construction and cost risk, and so it really is a hybrid. In addition, rather than having the drag associated with the pure development deal, we get a 6.5% coupon on our invested capital through the construction and lease-up period.

I'm sorry. The second part of the question was MetLife. So the Domain Mountain View property that we just started, we haven't talked about returns but that property we would expect to be at the very high end of our 150 to 200 basis point spread, probably above that. We have a couple other properties that could start in the MetLife portfolio later this year, two in LA and possibly a new phase at the Vitruvian, and we're still working through the design and the economics on those assets and we'll talk about them at the time that we get there. The 3033 Wilshire deal that we started last year, again, we would expect to be at the high end of our 150 to 200 basis point spread on market cap rates, but we'll talk about that more as we get closer to completion.

And the next question will come from Alex Goldfarb with Sandler O'Neill.

Good morning out there. Hey, I guess we'll continue the Wolff. So, maybe this is for Warren. On the deal, the Wolff Company has the right to get a 6.5% preferred equity if you guys don't buy at least two of the five deals. What would be -- I mean, the economics would seem punitive to you guys if you didn't, so apart from providing them comfort that you guys will take at least two of the deals, what are other reasons why you would not exercise that, apart from obviously the market falling out of bed or something like that?

Well, Alex, as Harry said, one of the things we really like about this is we have the option, the ability to look. Once we get to the stabilization, once we get to our window, we can look at the properties, make a new investment decision, decide which one we like. Wolff wanted the 205 to just to give them some comfort that we're going to perform on it, but as we said to one of the earlier questions, we initially started with 10 properties, went through the investment analysis, and the joint venture hopefully will be six, we're in the process of negotiating for one final property. So, I think from a real estate perspective, I think Jerry and Harry felt very comfortable with the six that we have in the JV. Like I said, we'll be able to make that decision at the option time.

Okay. And then Tom Herzog, on the ATM in the press release and your comments you mentioned the stock trading above NAV. Yes, above -- consensus NAV. Looking on SNL, the NAV right now is around $33, at year end was $31.50. You guys issued at like $32.30 gross or $31.60 net. So one, it sounds dilutive to where or below where consensus NAV is. But, second, is a lot of companies talk about matching the issuance of the ATM with the use and I didn't hear you guys talk about it but maybe that's the way you look at it. So should we expect that every time your stock trades above 32 you guys are issuing ATM or is it truly a case of where you have investment opportunity that's above your implied cap rate, than you're issuing?

Okay. Multiple questions there. Let me see if I get them all. The first question was we issued at a net price on $109 million at $31.64. That's correct. You got to remember, we were issuing most of that the very beginning of 2015. So, the weeks of January 6, January 12, that's when the majority of it occurred. So, when we take an average of what the consensus NAV was at that time and you guys will recall that early in the year that NAV started to move fairly quickly, we had an average consensus NAV during the issuance period, during the same time they were issuing these shares of $31.07. So on a net basis we came in at $31.64 and the consensus NAV was $31.07.

I think the second question was you note that we utilized the ATM. I would -- and if our price exceeds that, which allows us to issue at or above will we continue to do so what I would reference back is the remarks that I made in the first quarter call when we spoke to our different uses of funds which are set forth in that two-year strategic document, where we had development costs, we had certain acquisition spend, and so we showed a bucket of funding needs for the year and we spoke to three sources that we would fund them with and that was issuance of stock, sales of assets, and debt, and we have executed to that as we had indicated we would and we said that we would identify what we thought the most favorable sources of funds to fund our needs and we have done that and we'll continue to do that.

As we look at where we stand today after picking up the various fundings that we've already completed, I guess it's probably important for me to remind you that a good portion has already been funded. We tweaked our guidance a little bit on Attachment 15, but the changes are not major. You'll see that when you compare the old Attachment 15 to the new, which provides our guidance. And we have already funded 109 -- we started with a need of $825 million or as adjusted for the latest adjustments. We funded 109 on the ATM. The Texas JV brought in 43. We've got sales under contract at 65 and we've got more out there that will go under contract. We've got $300 million of debt that I've already alluded to that will likely come in at the end of the second quarter. And what that really means is we've got about $250 million to $300 million remaining for the entire year which is a relatively small number for us as you know. And we continue to state that we will use the most advantageous funding source for that purpose.

Okay. Thank you. Thank you.

You bet.

Next will be Ian Weissman with Credit Suisse.

This is Chris for Ian. Monterey and Portland are a couple of non-core markets that continue to generate very strong rent growth and have occupancy over 97, I think in Portland's case for 98%. Obviously when rent growth is increasing in the high single digit it lowers the urgency to sell but just curious about your thoughts about market timing or whether your more like performance agnostic when it comes to exiting out of those markets?

This is Jerry. I guess I would start with you're correct, these two non-core markets are performing extremely well. I would remind people when you do look at our non-core markets it's not always because they're underperformers. They just don't meet our strategic initiatives and plan, and I think at times it's best to actually exit a market when it's at the top. So, in a second Harry will give you an update on some of the transactions that he's looking at in those markets.

Today, the operating teams are doing an extremely good job in markets that have good fundamentals. But, again, they don't fit our core strategic focus of he these gateway markets that are bicoastal even though they're in the coast. Our preference would still be for Seattle over Portland. And while the Monterey peninsula market has done extremely well, the average rents in that market are fairly low. It caters more to an agricultural economy and longer term we'd rather see our assets in some of the other markets in the West Coast or East Coast, but when you think about San Francisco, Seattle, Orange County, LA, we're more comfortable long-term.

This is Harry. I think I'd just add that we will continue to chip away at these properties to meet our sales objectives. Just give you kind of an overview of the properties that we're working on now. We have two properties in central Florida that are under contract, one in Tampa, one in Orlando. And to your point on Portland, we have one of our three assets in Portland that's currently in the market. We're getting terrific investor interest and would expect to close that sometime in the third quarter.

Okay. Great. So it sounds like you have a mix of assets at the market regardless of how those markets are performing, but you said you're kind of more -- you would tend more to sell assets that are performing well than those that are kind of laggards, is that kind of what I'm hearing?

I don't think that's what I -- if I said it, I didn't mean it in that context. What I was saying is just because a market is performing well, we're not going to hold onto it and ride out strong NOI growth and wait until it starts to go on the down cycle. Harry can get optimal pricing when there's still some upside opportunity. So, we don't wait until the market's about to turn south to market it for sale. That's what I meant to say.

Got you. Apologize if I missed this but revenue growth came in at 5.1% for the first quarter. It sounds like things are accelerating over the last month. And then guidance is at 4.25 to 4.75. Just wondering where the drop is going to come from.

It's really occupancy. You look at the two components that really drive revenue growth, one is changed occupancy, the other is change in rent per occupied home. In the first quarter it was 60 basis points of occupancy growth year-over-year and 4.6% growth in rents. We will most likely not are have the opportunity in the last he three threes quarters of the year to see that same occupancy growth since we pushed occupancy last year up starting in 2Q to the high 96 levels. So, it's predominantly going to come from rent growth. That being said, if I had to look at it today based on the trends, we're probably moving more to the middle to high side of our guidance number than we are to the low.

Great. Thanks a lot guys.

And next will be Jordan Sadler with KeyBanc Capital Markets.

Thank you. Good afternoon. So just curious, come back to Wolff one more time. Can you offer price versus development cost to Wolff? I'm curious about how the 559 compares versus their basis and ultimately sort of the premium to replacement cost here.

Well, I'll start with that, Jordan. I think I don't know that we have -- I know that we don't have the exact -- their exact cost numbers. Suffice to say this is a premium to their existing cost, but I think I'd point you that the 559 is $357,000 per apartment home in the 597 (technical difficulty) exercise the options on all were on the remaining 52% on all five properties is $380,000 per apartment home. So, neither of those are numbers that are alarming or would feel particularly robust from a new construction standpoint.

Okay. And I guess there was a previous question surrounding this I think regarding the motivation of the seller at this point because you guys are pointing to he potentially $80 million of value creation. It seems like a pretty short window to get there. I think we're talking about lease-up commencing in as little at seven months for some of these. Can you maybe sort of talk about what the trigger might have been or why there's this opportunity for that amount of value creation relative to $136 million of principal in this short of window of time in this environment?

Jordan, the way that I think I think about it is rather than pointing to $80 million on $136 million, you'd have to point to $80 million on $597 million which is the total aggregate purchase price assuming we acquire all five assets. What Wolff gets, again I think I mentioned at the beginning of the call, they get -- first they get return capital to their open-ended fund which is favorable for them I assume on many levels, including the fact that they get to redeploy these assets. And, secondly, Wolff has a robust pipeline of additional opportunities. In their minds they were over-allocated on the development side to both Southern California and to Seattle and, therefore, they were having to sort of forego other opportunities. So, from their perspective they get a couple of -- there's a couple of significant benefits to them.

Okay. That makes sense. This is (inaudible). I had just one quick one as well. Jerry, you may have touched on it a bit at the end of the last question but given sort of where you guys finished in the first quarter both top-line growth and same store NOI and the accelerating trends you've seen really into May and June, what's kind of held you back on raising the same-store growth even higher?

I guess just caution as we go further into the leasing season. Again, we have visibility into June. During the months of the third quarter you've got another 30% of the properties, I mean the leases that will re-price. Today, again, I'm more optimistic that we're going to push towards the high end than I am to the low end, but we have another couple quarters later this year to take a look at it. But today I can't tell you anything that I see that's excessively negative.

Great. Thank you.

And next will be Rob Stevenson with (inaudible) Inc.

Thanks. No Wolff questions, I promise. Just two quick ones here. Jerry, how many projects or dollar value do you think you're going to put into the redevelopment pipeline this year?

We anticipate -- these will all be later in the year. We anticipate three to seven would be my estimate. There will probably be a handful of those that are in the $15 million to $20 million range and then some that will be under $10 million. So, you're not going to see any -- I believe we had guidance, Tom, for re-developments that we had given. What was that number?

The spend is somewhere in the vicinity as adjusted here about $350 million for the year.

That's development and redevelopment?

Yes, development and redevelopment.

Yes, but we don't see any of the redevelopments we're anticipating right now, Rob, being of the size of some of the ones we've done over the last couple of years.

Okay. So it's going to be less than $100 million of incremental assets going in there if I'm just using six projects at $15 million gives me 90 or something in that neighborhood would be the sort of upper end do you think?

I think it's less than that. I'm saying it's probably more in the 50 range at the high end.

Okay.

And most of that -- that would be starts this year. A lot of the spend would actually be next year.

Tom Herzog, just a quick one. With a $0.03 gap between FFO and FFO as adjusted in the first quarter, and I look at the full-year estimates, does that mean you're basically at this point you're not including anything else that would be a gap between FFO and FFO as adjusted for the last three quarters?

Correct.

As we stand today.

Nothing of any significance. You can see the couple of odds and ends in the Attachment 15, but all the big stuff will be past us which was really the Texas JV promote and dispo fee.

Okay. Perfect, guys. Thanks.

Next will be Haendel St. Juste with Morgan Stanley.

Hey, there. Thanks for taking my questions. So I guess first one for you, Mr. Herzog, quick one on capital allocation. Help me understand the decision to raise the dividend by 7% during the quarter while you were selling let's see about 109 million stock through your ATM. Is there a tax issue that I'm not fully appreciating there?

No, no. We just looked at our coverage. We looked at the growth of our AFFO and as we've lined out the last couple three years, we wanted our dividend growth to largely reflect our AFFO growth. So nothing has changed on that front. It wasn't a tax issue. As we think forward the next couple of years, as you look at our plan, too, you'll see that our dividend growth coincides with our AFFO growth.

Okay. And now that you fully liquidated the Texas JV with Fannie Mae can you share what the IRR was? We got cap rate of about 6% on a recent sale of assets, but curious what the return of the likely investment was.

The all-in IRR on it was 14%.

That's levered?

Yes.

Okay. And you guys mentioned four assets you chose not to pursue with Wolff, I'm not sure if I missed it or not, but did you mention why you weren't pursuing those? Perhaps they were markets you didn't want exposure to, was it a size issue? Maybe you didn't want to take too big of a portfolio? Can you give me some sense as to why you opted not to pursue the other four?

Haendel, this is Harry. It was purely based on the quality of the assets and their specific sub markets.

Okay. Last one, Jerry, on Seattle. Let's see. Recently, the supply to hit downtown Seattle was absorbed without much of an impact, but now the funds shift over to Bellvue, which is a much smaller sub market and some forecasts suggest that Bellevue might be facing a 20% expansion of supply over the next couple years, and given that Bellevue is where you and a couple of your peers are concentrated, curious on I guess you guys still have pricing power there today, but curious on your expectations for the market over the course of this year to next, thoughts on perhaps operating strategy? And would you guys consider culling some of your portfolio, especially given not only the supply outlook, but you guys acquired looks like two assets via the Wolff link up there.

We like Bellevue very much. There is job growth that's continuing there. Even though Expedia is moving their headquarters over to Seattle from Bellevue, we think it will get replenished within downtown Bellevue which is a growing and vibrant city to be honest with you. We continue to see revenue growth so far this year north of 6%. We have a very high end A portfolio there, although as you stated, there is significant new supply that is coming to that market. We think Bellevue caters a lot of the east side job centers, whether it's Microsoft or downtown Bellevue or Google employers on the east side.

I don't think we would be looking to down size in Bellevue. Two of our deals are MetLife JVs and they're very high end. We have the elements deals which do extremely well with the workforce in Bellevue and we have one property down in the downtown area of Bellevue, it's only about 80 units, that typically does very well, although this year as you've noted it's surrounded by new supply and it's probably suffering the most with revenue growth that's roughly flat compared to the 6% or 7% for the rest of that sub market.

The two deals that we did get the Wolff transaction related to this are ones in South Lake Union, which we're excited to have more downtown presence. Currently we really only have one 50/50 JV deal with Met down there, that's probably the best property in all of downtown Seattle. This property provides us with -- I think of it as a dormitory for Amazon workers. It's surrounded right in the middle of the Amazon campus. So, I think that one's going to do extremely well.

Then the other deal is in Columbia City which is probably five, six miles south of the downtown area. The thing we like most about that property is it's right on the light rail. It's directly across the street and it's in an emerging neighborhood that we think has a ton of upside growth. What we really like about that because a lot of our portfolio in Seattle is A product, this is a price point is about 65% to 70% of what downtown rents are. So, it's a great alternative to those people that want to have more of an urban feel but can't afford downtown Seattle. So, I know that's a long question about Seattle, but we are very bullish on Seattle. You're right, that city ate a lot of new supply but the rob job growth was more than sufficient and we continue to be excited about really growing our exposure in that market.

Okay. Thank you.

And next will be Michael Salinsky with RBC Capital Markets.

Good afternoon, guys. Just to go back to Wolff real fast. The assets you guys are acquiring, are those in the same fund in them? As you look at Wolff, obviously MetLife being a long-term joint venture, I think you characterized the joint venture as intermediate term, how would you characterize the Wolff joint venture?

Michael, it's Warren. The Wolff assets are all in one fund and then as you know on this one it has a finite life. It's less than six years and our option period starts in the second year. So, this is a lot different than what we have in terms of long-term joint venture.

That's helpful. Then just as my followup question. G&A guidance went up for the quarter and you bought in your corporate headquarters. I would have thought buying that in would have actually reduced G&A. What was the reason for the G&A increase?

We had increased performance in FFO which impacted the LTI plan and so that's what the net increase resulted from.

Okay. Thank you.

And next will be [Drew Bebin] with Robert W. Baird and Company.

Hi, guys. Question for you, Jerry, on the Marina del Rey concentration in Los Angeles. I was hoping you could talk about growth in that area and what ultimately kind of gets that market out of the flattish environment that's been persisting and furthermore maybe talk about other operational improvements you're making elsewhere on the West Coast to improve growth just beyond what the market's providing to win more of those markets?

Sure. Start on Marina del Rey. As you pointed out, it has struggled. Our revenue growth this quarter, my expectation will be the lowest in the sector at 3.8%. About 80%, 90% of our same-store portfolio is in the marina, and when you look at the marina it has been hit with new supply down at Playa Vista which is an adjacent sub market. The Irvine Company and several other operators have been building there over the last couple of years. And while it struggled last year and this year, our expectation is as you get into 2016 and 2017 when the Silicon Beach really starts cranking out the jobs, which are projected to be probably about 10,000, whether it's Google, Yahoo, Jib Jab, several other tech employers are coming to that sub market. We think our proximity to the jobs is going to more than offset what's been hurting us with our proximity to the new supply. So just a situation where the supply beat the jobs and we would expect in 2016 and 2017 to see that get quite a bit better.

As far as initiatives in the West Coast, we really run the same initiatives whether it's east coast or west coast. One thing we have been doing down in our Orange County portfolio is investing some revenue-enhancing dollars which Herzog requires and we comply with getting a 200 basis point over WACC IRR which typically is about a 20% return on your money, but we're looking for opportunities to upgrade those 40 plus-year-old properties that we've maintained well but we haven't improved the functionality since we bought a lot of those assets back in the mid-2000s. So, they were due. We've been putting some of that $30 million or so that we gave guidance revenue-enhancing dollars at the beginning of the year, heavily going into the west coast.

As you look up into the San Francisco area where we had 9% revenue growth, our situation there honestly is we don't have anything in the East Bay. The downtown area, the jobs are coming, again kind of like what I said about the Marina del Rey area. The financial district's going to have significant job growth over the next couple of years but that's also where the new supply is coming. We are fairly heavy in that Soma area.

Up in Seattle I think about 80% of our portfolio up there is A product and even though new supply hasn't hurt it too much, it has had an impact on us. So, no real new initiatives although we are looking for opportunities like I said in So-Cal to reinvest even more in our real estate to give our residents some of the things they're looking for.

Okay. And one follow-up shifting to the east coast. As you look at markets like Boston and New York, obviously condos in the city are very pricey. People are, if they want to be in the city, running the most attractive option. Given the public transportation systems that goes with those markets, there's always options if somebody really wants to get out if they're willing to stomach a commute to save money. Are you seeing anything in those markets whether it be move out to buy ratios or sort of where people are interested in renting that would indicate that there's some potential rent fatigue there?

No. We think our renting demographic wants to be in that urban core and they have various things they have to spend money on. When you live in an urban core you get to cut down on your transportation costs which can run upwards of $1,000. They just make tradeoffs, but that younger demographic that we're typically focused on in those urban markets have a high preference to be in the downtown locations near entertainment, their jobs and you'll always get a few people that will move out to the next ring, whether it's in San Francisco going to Oakland, Manhattan going to Brooklyn or Jersey. Only one of those markets you brought up I continue to see a fairly high move-out to home purchase is the Boston market which historically since we've been up there the last three to four years has been one of our highest move-out to home purchase markets at over 20%.

Okay. That's helpful. Thank you.

And next will be [Connor Wagner] with Green Street Advisors.

Jerry, on DC last quarter you provided some good commentary on the split between the B's outside of the Beltway, how they were performing, the A's inside the Beltway. Wondering if you could update that for first quarter and what you're seeing in April?

Hold on one sec. B's outside, inside. As I stated I think earlier on the call, they're starting to compress to where there's a B or it's an A or it's inside or outside, they're all getting more to the point where they're averaging between 1% and 2%. So, the differentiation is tightening. My A's actually were at about 1.9% revenue growth during the quarter and my B's were about 1.2%, so the A's actually did pick up. And, again, I think that was because they had more supply pressure last year where concessions were keeping the price down.

And honestly, what's been interesting for the same reason is my urban product which is more the inside the Beltway had revenue growth of high 2's and my suburban was just slightly negative. So, kind of have slipped a little bit where the urban A is starting to pick up steam. Then, when you look at how does April look, in DC my new lease rate growth was 0.8% in April. That's probably when I look back the first time that number's been positive in the last year and-a-half, so it did go positive at 0.8. And my renewal growth in the month of April in DC, and these are effective numbers, is 5.6%. So, DC is starting to look a lot more like the rest of the portfolio. It's getting there.

Thank you. And then last one, Jerry. On Austin we've seen job growth accelerate obviously off a high number over the last year. Have you seen any slowdown in your portfolio or between the properties that you have that are more within city limits versus the suburban ones?

Well, haven't really noticed the job growth slow. As far as the performance of my properties, we have seen our downtown product, which competes with new supply as a rough patch at times. We have another property up north at the domain shopping center where new supply has also affected us even though it's kind of in a tech corridor so we like it long term. Austin is definitely a market that has seen a slowdown from last year to this year, just as absorption of that supply is occurring, although Austin goes through these waves of where you'll have new supply grow 10%, 12% over a three year period and it will be a difficult three years, but then as soon as they eat that up, it takes off again.

So -- but Austin right now, I just told you the good news about DC accelerating. When I look at Austin, my new lease rate growth in the month of April is negative 0.3%. That compares to about 2%, 2.5% in the first quarter. So we are definitely feeling some pressure in Austin today.

Thank you.

Sure.

And our next question will come from Nick Joseph with Citi.

Hey, it's (inaudible). I just had a couple of quick questions going back to the Wolff transaction. You talk about certain guarantees. What are those guarantees?

Harry, you want to take that one or --?

I can. This is Warren. The completion guarantees under the construction loans and certain other nonrecourse (inaudible) guarantees.

What are the total construction loans and what are the terms in terms of the amount, the maturity date, and the rate?

The average price of the construction loans is L plus 210 and the total amount of construction loans is $275 million, and UDR's share would be about $140 million. So of that, 2017 maturities, would be approximately $173 million, 2018 maturities would be $39 million. Of those, UDR's share would be $84 million in 2017 and approximately $19 million in 2018. All the construction loans have two-year extension feature.

Okay. And then the all-in construction costs are they guaranteed I take it is $400 million? Is that what you said to Jordan before?

No, we didn't talk about the all-in construction cost. Michael, this is Harry.

So what is the all-in? I guess $275 million of debt, 70% LTV is $400 million, is that a fair --?

Yes, the number's probably higher than that. We don't have that handy and we didn't speak to the all-in construction cost. Our buy-in price is $559 million. So what we did say is that construction cost is below our buy-in price.

And you are right, the partner's responsible for all the cost overruns and the guarantees on the construction loans.

Do you guys have any involvement in the lease-up? Do you have any shared responsibilities at all or is it all in their --?

We actually are going to be the property manager for each of the properties and Jerry's team will be doing the lease-up on the properties.

And what's the guarantee in terms of they're not going to cut cost to get a higher margin and higher profit in terms of rather than being effectively a merchant builder in this case, what's going to be the recourse that you have to make sure what is deemed to be spent is spent?

Michael, it's Harry. They're required pursuant to the documents to build the property in accordance with the approved plans and specs. These properties are all under construction. We've reviewed the plans and specs. We're going to hire a third-party construction manager to participate in the weekly [OAC] meetings, construction meetings, and get weekly reports or monthly reports from Wolff. So we're going to have sort of an active oversight role in that process.

One other thing I'd mention. As part of the due diligence process [Harry's team] has actually been out and looked at existing Wolff products. So, we're familiar with their construction, we're familiar with their product. We have teams now that have been meeting with the Wolff people and going through finishes, going through the layouts, and so I think we're pretty comfortable we're going to have a very active role and a very active voice in this whole process.

And then your 16.5 preferred return, that's a -- is it a pick payment or actually a cash payment from Wolff on your equity?

6.5 is going to get paid, Michael, at the end, at the time of -- at the time that we take the asset out.

And is that an accrued equity or is that actually a preferred payment? Is it actual return or is does it go toward your equity to buy out the next piece?

It's actually return on our investment and it's compounded as we go.

So it's a real return.

It's a real return. Correct. And then just one other guarantee that Warren might have spoken to, I think we spoke earlier, but keep in mind that any operating losses during that development period are incurred by Wolff up until the point of stabilization. So that's another form of guarantee from our perspective.

And then outside of refinancing the debt, your payment to them when you stabilize to own 100% is just the $38 million additional of equity and then arguably anything else you would have to fund with any refinancing?

Yes, that's correct. We've got debt that comes due. There's some delay on that. And take two to three years out as these options become exercisable and that debt comes due, we can choose to fund that whatever the most advantageous way is. And keep in mind, too, that if we choose not to acquire one or two of the assets that that can also act toward the funding, but as we start, we would be looking at all five assets as having appeal from a purchase perspective. We'll see what plays out on that.

Your total, if you're in at 136 you have to fund the difference between the 136 and the 597 outside any debt borrowings?

That's correct. After the debt is due.

Okay. Thanks.

For whichever ones we acquire.

Correct.

Thank you. And that does conclude the question-and-answer session. I'll now turn the conference back over to the President and CEO, Mr. Tom Toomey.

Well, first let me say thank you for your time today. It was very productive and we appreciate your interest in UDR. As we started the call business is great, bordering on fantastic. You can obviously hear from the call our level of enthusiasm or where operating trends are headed and the opportunities that lie ahead and we'll continue to execute on our two-year plan and believe that is a great path for UDR and for our shareholders. So, with that, take care and we'll talk to you next quarter.

Well, thank you. And that does conclude today's conference. We do thank you for your participation today.