May 8, 2015
Executives
Stephanie Heim - Vice President, Counsel David Singelyn - Chief Executive Officer Diana Laing - Chief Financial Officer Jack Corrigan - Chief Operating Officer
Analysts
Haendel St. Juste - Morgan Stanley Jade Rahmani - Keefe, Bruyette & Woods Dan Oppenheim - Zelman and Associates Jeff Donnelly - Wells Fargo Securities Patrick Keeley - FBR Capital Markets Dave Bragg - Green Street Advisors Buck Horne - Raymond James
Operator
Hello and welcome to American Homes 4 Rent 2015 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode.
After the Company's presentation, there will be an opportunity to ask question. [Operator Instructions] As a reminder this conference is being recorded.
I'd like to turn the call over to Stephanie Heim, Counsel at American Homan 4 Rent. Ms.
Heim, please go ahead.
Stephanie Heim
Good morning. Thank you for joining us for our first quarter 2015 earnings conference call.
I'm here today with Dave Singelyn, Chief Executive Officer; Jack Corrigan, Chief Operating Officer; and Diana Laing, Chief Financial Officer of American Homes 4 Rent. At the outset, I need to advise you that this call may include forward-looking statements.
All statements other than statements of historical fact included in this conference call are forward-looking statements that are subject to a number of risks and uncertainties that could cause actual results to differ materially from those projected in these statements. These risks and other factors that could adversely affect our business and future results are described in our press releases and in our filings with the SEC.
All forward-looking statements speak only as of today May 8, 2015. We assume no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Reconciliation to GAAP of the non-GAAP financial measures we are providing on this call is included in our earnings press release. You can find our press release, SEC reports, and the audio webcast replay of this conference call on our website at www.americanhomes4rent.com.
With that, I will turn the call over to our CEO, David Singelyn.
David Singelyn
Thank you, Stephanie, and welcome to our first quarter 2015 earnings call. On today's earnings call, I will provide an overview of our company and a brief summary of our recent results and initiatives for the balance of 2015.
I will then turn the call over to Diana Laing to review operating and financial results for the first quarter and update you on our balance and liquidity. And then finally, Jack Corrigan will discuss the current operative environment and expand upon my comments regarding 2015 initiatives.
The first quarter represented a solid start to 2015 for American Home 4 Rent. But before I go into the details for the first quarter, I’d like to take a step back and summarize where we are as a company.
In 2015, our mandate in unchanged that is to build the premier owner and operator of high quality single family rental homes across a national platform and to provide branding and operating scale efficiencies to drive superior returns overtime for our shareholders. Our tactical focus continues to evolve from 2013 when our focus was to grow swiftly to obtain scale to provide operating and financial efficiencies.
To 2014 where are focus was to continue building our internal platform to achieve enhance performance, margins, consistency and brand awareness and now 2015 where we are focused on stabilizing our portfolio and driving superior operating performance this year and beyond. Looking at the first quarter portfolio and operating results, we reported core funds from operations of $41.9 million or $0.16 per share on revenue - $0.16 on revenues of $131.7.
On a GAAP basis, we reported a net loss of $8.3 million. With respect to property counts in statistical data, we have defined these terms in our this quarter’s supplemental financial information.
And the statistical data there I about to provide is also provided on page six of the supplemental report. Our portfolio increased by 1,989 homes resulting in a total portfolio of 36,588 homes at March 31st.
Our stabilized homes which we defined as home that have been renovated and initially leased whether or not currently leased are available for rent for at least 90 days increased by 3,026 homes brining total stabilized homes to 32,987 at March 31st. Our occupied homes, which we define as those homes were the lease has commenced increased by 2,657 homes during the quarter, resulting in a total of 30,185 occupied home at March 31st, 2015.
Our stabilized occupancy percentage remained consistent at 90.4% compared to year-end, but our total portfolio occupancy percentage increased from 79.6% at December 31st to 82.5% at March 31, 2015. Our leased homes which we define as occupied homes plus those homes for which we have an executed lease with a start paid in the future for this portfolio primarily in early April increased by 2,933 homes, bringing our total leased homes to 31,183 at March 31st.
Our leased percentage for stabilized homes was 93.4% at March 31 compared to 92.8% at December 31st. And our total portfolio leased percentage increased from 81.6% at December 31, 2014 to 85.2% at March 31, 2015.
Now with respect to lease renewal and retention rates, we have defined lease renewal rate as the percentage of tenants who have leased that went full term that renew their tenancy either on a term or month-to-month basis. Our renewal rate in the first quarter was 79%.
We have defined retention rate as the number of renewed leased divided by the sum of expiring leases in early terminations during the period. And our retention rate in the first quarter was 68%.
A couple of additional items to highlight for the first quarter, in March of 2015 we closed upon our fourth securitization transaction, it was $553 million loan with a 30 term and an interest rate of 4.14%. The interest rate is fixed for the first ten years at which time we would anticipate repayment.
We are extremely pleased with this execution as we continue to take advantage of attractively price capital to facilitate our growth. And please note that we have enhanced our supplemental reporting information to include same home portfolio performance.
We believe this will provide you a greater detail on how our portfolio will perform overtime. We also provided definitions for many of our terms such as occupied home, leased home, retention rate and renewal rates.
We will continue to look at ways we can provide expanded disclosures to help you understand our business and operating performance. And Diana will review many of these items in the supplemental report shortly.
Also Jack will provide color on our first quarter operations later in the call, but I wanted to first make a couple of observations. First, during the first quarter, we renovated approximately 3,000 homes and reduced the number of homes in the acquisition and renovation process by more than 1,000 homes.
At March 31, there was 1,863 properties in the acquisition and renovation process compared to 2,886 at December 31, 2014. As we began charging the carrying cost of properties to operations as soon as their renovations are completed, we experience more earnings and FFO drag from vacant homes in the first quarter compared to the fourth quarter last year.
The other side of this coin is that we are well positioned going into the second quarter mid to strong spring leasing season to make a meaningful impact on our portfolio occupancy percentage. Second, as we mentioned on prior calls, we are actively focused on initiatives to control cost, while we have much more to accomplish, we are beginning to see improvements in our cost control of utilities, landscaping and maintenance costs.
And third, on October 1st of last year, we transitioned to a new property management system to facilitate future growth of our portfolio and platform. Every system conversion comes with some level of distraction to operations as personal focus on the conversion and need to learn the mechanics of the new system.
Our conversion was no different. In cost of share distractions in the fourth quarter last year, while there are still some areas that we need or desire to approve upon, most of those distractions are behind us today as we move into 2015.
And talking about the balance of the year 2015, we have slowed the acquisition pace of vacant homes from 2014 and first quarter 2015 levels. This is assist in stabilizing our operations as the number of nonrevenue producing homes in the acquisition and renovation functions continues to decline.
With respect to occupancy, we made significant progress to a fully leased portfolio in the first quarter as the number of occupied homes increased by more than 2,600 homes. With our construction team completing more than 3,000 renovations in the quarter, we are well positioned to continue this trend into the spring leasing season.
In addition we have commenced an initiative within our property management team to obtain a lease percentage on stabilized homes of 95% by June 30. Although occupancy is the primary driver of maximizing revenues, we began late in the first quarter to push rates more aggressively on re-leasing opportunities.
While there is a small lag between the time rates are increased for marketing of homes to the time they are realized, I believe we will begin seeing the full benefit of the earnings and FFO benefits of faster rates increases late in the second quarter and more fully in the third quarter. As we enter the second quarter, we had a large number of homes recently renovated that will continue to provide the vacant home earnings and FFO drag that we experienced in the first quarter.
In a couple of minutes, Jack will expand upon these initiatives, but at this time I’d like to turn the call over to Diana to provide more details on our financial and operating results for the first quarter. Diana?
Diana Laing
Thanks Dave. In my comments today, I will review our first quarter 2015 financial results and comment on our balance sheet and recent financing transaction.
As a note, our first quarter results are fully detailed in yesterday’s press release and our supplemental information package both of which have been posted on our website under the For Investors tab. These documents in addition to our SEC filings provide information on our financial results and relevant definitions of non-GAAP financial measures discussed on our call today.
For the first quarter of 2015, we’ve reported core FFO of $41.9 million or $0.16 per share. On a per share basis, our FFO was unchanged from our fourth quarter 2014 results and up 33% from the $0.12 per share we’ve reported in the first quarter of 2014.
The flat quarter-over-quarter result was primarily caused by the increased expenses from initially vacant home that’s the drag that Dave mentioned. Those are the homes that have been renovated and await the commencement of their first lease.
During the first quarter of 2015, the vacant property portfolio consisted of about 1,000 more homes on average during the fourth quarter of 2014. The year-over-year increase in core FFO per share was driven by a significant increase in our portfolio, net operating income partially offset by higher interest expense, higher dividends on preferred shares and higher G&A expense.
The G&A expense for the first quarter was approximately $6.1 million which on an annualized basis represents 0.37% of total assets. This compares with G&A expense of $5.1 million for the first quarter of 2014, which on an annualized basis with 45 basis points or 0.45% of total assets.
As we’ve mentioned in the past, we have internalized our acquisition and renovation personal and we therefore incur acquisition and renovation cost directly. While this will result in a reduction of our total expenditures, these costs are now predominantly expensed for GAAP rather than partially capitalized into acquisition cost.
In the first quarter, we added back $5.9 million in expensed acquisition costs when we calculated core FFO. As Dave mentioned earlier on the call, we’ve expanded and improved the disclosures in our supplemental information package beginning this quarter.
First, we’ve clearly defined terms that we use in our disclosures notably the distinction between leased and occupied properties and the terms renewal rate and retention rate, we’ve provided comparable statistics for all periods presented in this quarter’s disclosures. We’ve also included renewal and re-leasing spreads for the portfolio which can be found on page 15 of the supplemental.
If you look at page 13 of the supplemental, we present same home operating comparisons for the first quarter 2015 compared with the first quarter 2014. Our same home property pool consists of 13,446 homes which were stabilized for both periods presented.
Occupancy at the end of the first quarter 2015 was 93.1%, a 1.4 percentage point decline from 94.5% at March 31, 2014. Despite the reduction in occupancy, revenues from same home properties increased 2.8% year-over-year driven by rental rate increases which resulted in average monthly scheduled rent per property increased of 2.5 percentage point.
Property operating expenses integrated 3.2% with a core NOI increase of 2.6% during the first quarter 2015 compared with the first quarter 2014. Capital expenditures for the same home pool were $3.3 million for the first quarter 2015 compared with $3.6 million in the first quarter last year.
We continued to maintain a strong balance sheet and we’ve advantageously accessed capital from a verity of sources. As of March, 31st, 2015 we have total debt outstanding of $2.2 billion with an average interest rate of 3.7%.
The majority of our debt is fixed rate and we have very little refinancing risk in the near term. In total, our outstanding debt represents about 31% of our total market capitalization.
At quarter end, we had a $116 million of unrestricted cash and only $45 million outstanding on our $800 million line of credit. As we move forward, we intend to continue to maintain a strong balance sheet with sufficient capacity and flexibility to support our growth objective, which should allow us to utilize multiple capital sources and ensure the most attractive cost of capital within our sector.
And now I’ll turn the call over to Jack Corrigan.
Jack Corrigan
Thank you, Diana, and good morning everyone. I would like to expand on Dave’s comments and provide a more complete review of our portfolio.
As of March 31st, 2015 we own 36,588 homes, an increase of approximately 2,000 homes from the 34,599 homes at the end of 2014. The projected investment after renovation cost of the 2,000 homes we acquired in the first quarter was approximately 340 million or a $170,000 per home and about $85 per foot.
The 2,000 homes can be broken down as follows; purchase by trusty auction approximately 800, broker purchases 1,100 and other of approximately 100. Our acquisition pace in the quarter was down from the fourth quarter of 2014 and in lined with our expectations announced on the fourth quarter earnings call.
We have slowed our acquisition pace to focus primarily on trusty auctions and bulk purchases. Therefore, we expect our acquisition pace for the second quarter to approximate 1,000 homes.
We renovated 3,000 homes in the first quarter, this exceed our acquisition activity by 1,000. We accelerated our renovation pace in December 2014 to provide inventory for our leasing teams going into the peak leasing season.
As of March 31st, we had 31,183 lease properties. This is an increase of more than 2,900 lease terms from the end of the fourth quarter.
On the rental activity side, we expected and experienced to pickup an activity from the seasonally slow fourth quarter. For comparison sake, we generated 3,200 new leases in the fourth quarter and net absorption was 1,200 leases.
In the first quarter, we have generated 5,300 new leases and net absorption was an excess of 2,900. April continued our strong renovation and we see pace with over 900 home renovated and almost 2,100 new wins in a record 2,270 new leases signed.
Our net absorption was over 1,100 homes for the month of April. We continued to see solid rental rate increases which were up approximately 3% overall including increases of an excess of 1% on new leases and nearly 4% on renewals.
Our renewals rate was 79% in the first quarter of 2015. We began pushing rates on new leases as we entered the leasing season however, some of that was diluted by leasing of product put on the market in the fourth quarter before we began pushing rates.
I expect the second re-leasing rates to be close to 4%. One negative effect of our accelerated renovation pace is the dilutive effect we had on first quarter FFO.
Ones the property is placed and serviced, its carrying cost are an expense against the FFO the REIT with an average of almost 2,100 homes placed and serviced for the first time and not generating income, there was a drag from carrying the expenses and the interest of about $0.03 per share in the first quarter of 2015, which compares to approximately $0.02 per share in the fourth quarter of 2014. But the slowed acquisition pace, we expect that the dilutive effect will moderate somewhat in the second quarter, but the real effect of declining acquisitions and renovations won’t be lean until the third quarter.
For the first quarter, our core operating margin was 63% which was at the higher end of our expectations. Finally, I would like to address our capital expenditures.
While our capital expenditures were an excess of our projections during the first quarter. It is important to note that over 80% of our repairs and maintenance and our CapEx combined in our same home portfolio is generated by less than 15% of the homes.
With our new accounting system in place, we believe we are in a better position to isolate our problem houses and deal with the root causes of these expenditures. With that we will open the call to your questions.
Operator?
Operator
Thank you. The floor is now opened for questions [Operator Instructions] Our first question is coming from Haendel St.
Juste of Morgan Stanley. Please proceed with your question.
Haendel St. Juste
Hey, good morning. Thanks for taking my question and I certainly appreciate expanded supplement, it’s a big step forward and we look forward to have more enhancements in the future.
So I guess my first question is on operating, your core margins came in as expected at the high end of the revise range you laid out last quarter which is good. But other operating results were bit blow our expectation in particularly your same store results.
So first, can you provide more color of why your occupancy stabilized and same store was down to substantially year-over-year down 170 and 220 basis point respectively?
Jack Corrigan
Well, it’s primarily in the Midwest and Indianapolis probably the biggest defender. We have one sizable institutional competitor out there that beginning around November they reduced their rates dramatically and offered a blanket one month free rent and we could have gone and competed with them and had a raise to the bottom or held our ground until they finish that.
That lasted through February. We decided to hold our ground that lasted through February and leasing has picked up dramatically in Indianapolis.
In addition in the Midwest which you have it just takes a little longer to get because of weather issues in the winter, it takes a little longer to turn properties. But that’s over within the Cincinnati, Columbus, Chicago and Indianapolis are picking up activity very quickly.
Haendel St. Juste
So why hold pricing so from during I guess with typically a seasonally slower quarter, especially in the light of those competitive factors. In what respect certainly sounds like we are seeing it perhaps providing some contentions sooner might have been the more appropriate strategy?
David Singelyn
We made a decision that because of the level that they dropped their rates that we weren’t going to compete with that and we left them lease up and then get our rates. That’s what we decided I think it will bare itself out in the second and third quarter.
Haendel St. Juste
Okay. And then what is your turn times averaged during the first quarter and how does that compared to prior quarters?
And then do you think or can you help us understand what perhaps impact that might have add on first quarter occupancy?
Jack Corrigan
Yeah, the turn times in the first quarter were impacted by homes that add from November and December, so if you look at turn times of product that we put into service or the turns in 2015, we were at approximately 55 to 56 days tenant, paying tenant to paying tenant. But if you look at the whole quarter and everything that turned, it was substantially higher than that was probably 80 days and some of that was the construction period that the marketing period also was extended because of the November through December slow down.
Haendel St. Juste
Okay. And then looking ahead, as we enter the go deeper to the spring and summer periods where they end to more traffic and interest.
I am curious on your operating strategy, can we see you get more aggressive here on the rent side and then beside the monitoring occupancy levels and keeping eye on full traffic, what are other key items you are focusing on engaging how much is to push runs around?
David Singelyn
Well, we are - we monitor what the activity was on the house last time that it was marketed. We look at the rates in the area that there is a number of things that we look at and we are definitely pushing rates if you look at what we’ve put on the market so far.
In 2015, our re-leasing increases are about 3% and if you look at what we put since February, it’s about 4%. And then you look at what we’ve put on since March, it’s about 5%.
So it’s - we’re definitely watching it and moving rates with the added activity.
Jack Corrigan
And then Haendel we also are looking and we can see the velocity of the leasing pace through our call center. And as that picks up which we - I basically outlined in the prepared remarks that’s picked up in the first quarter in April and then the other pieces the level of remaining inventory reach these markets, those all have an impact as well.
And we’re starting to see absorption in a lot of these markets and I think you’ll start to see a repeat of what happened a year, year and a half ago in the Arizona markets where there was an oversupply and ones it got absorbed, rates were increased and I think all of the operators have seen some pretty nice increases in Phoenix today.
Haendel St. Juste
Okay, I appreciate that and then Dave, why have you - one last for you in the floor. I want to go to maybe a question I asked you a couple of quarters ago about how much bigger you guys want to be.
And so I am just curious on your thoughts on that question today and do you feel that perhaps you continued cohesiveness in size that might be impacting your operational efficiency here?
David Singelyn
Yeah, I don’t think the answer is changed at all and so I think it’s still there is no predefined target. I don’t think size has an impact to our operational performance.
I think what you see is more of what is the unabsorbed acquisitions not only for us but for the whole industry and various markets having more of an impact. We are continuing to acquire.
We are slowing down a little bit of the vacant home acquisitions but we are still acquiring at auctions where we’re very, very good yield. But we have a framework, a platform, a new operating system that I am confident that we can put more properties in without much stress to the operating platform.
Haendel St. Juste
I appreciate it guys. Thank you.
Operator
Thank you. Our next question is coming from Jana Galan of Bank of America.
Please proceed with your question. Jana your line is live.
Do you have a question today? We’ll move on.
Our next question is coming from Jade Rahmani of KBW. Please proceed with your question.
Jade Rahmani
Yes. Hi.
Thanks for taking the questions. The supplemental showed annualized CapEx per property on I guess same store owned homes of 983, can you discuss your approach to long term CapEx, what do you expect on a normalize basis per property?
And also if you could give anymore color on the 15% of properties, you said accounted for 80% of R&M and CapEx?
Jack Corrigan
Yes. There is multiple answers to that question, but I’ll give you the bottom line first.
We expect our projection is about $450 per home per year that we would reserve for CapEx whether it’s spent or not. The issue on the 50% varies, I mean you can look at - maybe that it’s about house, maybe in some cases in Salt Lake City, we went it and it’s really a capital improvement when we went it.
And on the turn, we built out the basement because we found that Salt Lake City has a very high demand for built out basements. And maybe in Florida, we’ve made a decision for safety purposes to put fences around backyards that slop to a water retention plant.
So there is certain things that are just capital improvements and there is other things that are CapEx, we’re in the process of isolating, if it’s about house, we’ll see it, if it’s - we’re just isolating the problems and trying to figure it out and fix it.
David Singelyn
You know Jade, one think I’d add is what you are seeing here is one of the benefits of the fourth quarter when we went through and put in a new accounting system. We do now have more data and we have abilities to isolate a little bit more of just for operational purposes and allow them to focus on some of these items.
You saw some of the benefits in our expenses. If you look at the same stores in repair and maintenance, it’s already come down a little bit in the first quarter and we expect to be able to continue identifying, isolating and remediating some of the higher cost items in the future.
Jade Rahmani
And just in terms of the overall approach and way of thinking, I mean it seems that right now, yourselves and some of the other larger participants are approaching CapEx or recurring CapEx on sort of an ad hoc basis as needed either through turnovers or as part of the repair and maintenance process, but do you expect eventually the move towards a return on investment framework where you approach CapEx spending much like some of the larger scale REITs and evaluate on a return on investment standard?
David Singelyn
Well, we always try to look at everything we spend on a return on investment standard. So what I try to do operationally, we believe that the houses that we put fences on return, the amount that we invest gives us a return to quicker and better - quicker leasing and better rates.
And when we put in a basement, we had to look at it for what can we get in rent for the amount of dollars that we are going to put into it. So I think every dollar I spend, I am not saying that that always get shutdown to the property level but every dollar I approve has a return on investment.
Jade Rahmani
Just switching to the M&A environment, are you seeing opportunities increasing and can you just talk about what you view as the main benefits of combination, if it’s operating leverage for better G&A coverage and more efficient property management or if there are other strategic benefits you see?
David Singelyn
No, I think Jade, you probably hit the - some of the primary items. One is by putting properties in our platform I think overtime you are going to see operational efficiency.
Again overtime the ability to maximize some of the rent. But on the short term, it is going to be in the expense consolidation side, our expense elimination side.
The platform, the environment right now for consolidation, I don’t think has changed significantly from where we were. A few weeks ago when we had the year-end call, it’s probably about three, four, five weeks ago, so we still see a lot of discussion occurring around potential transaction.
We still see pricing and some social issues being some of the obstacle. But we can see the gaps are tightening and I would expect that throughout the year and be - you have to be a little bit patient, this is going to be a lumpy process, it’s not going to be every quarter.
There is going to be consolidation, but there will be transactions this year and next year as there have been already. But they are going to be a little bit more lumpy on larger scale.
Small, small transactions of few properties we’ll do, we won’t even announce, those will be only announcing the larger ones that have an impact.
Jade Rahmani
Okay. And just finally on the pace of acquisitions, do you think the 2Q, 1,000 homes is kind of a run rate that we should thing toward?
David Singelyn
I would say that the numbers that Jack commented on is a good run rate with one caveat to that and that caveat is that’s really the day-in and day-out acquisitions and any portfolio consolidation transactions that may surface will be on top of that. And again those are very hard to predict when they are going to be.
So I think that’s a good steady run rate of acquiring properties at the trusty auctions vacant type properties that need to be absorbed. Portfolios will generally be more occupied homes being acquired.
Jade Rahmani
Thanks for taking my questions.
David Singelyn
Thank you, Jade.
Operator
Thank you. Our next question is coming from Dan Oppenheim of Zelman and Associates.
Please proceed with your question.
Dan Oppenheim
Thanks very much. I was wondering if you can talk about some of these starts in the same store and arise more in terms of the tenants, the retention there.
Where it looks though those tenants that were going month-to-month where tenant in terms of the renewals. Just wondering how of that - nearly 4,000 renewals were - tenants that were going to lease to month-to-month?
David Singelyn
I don’t have that number in front of me, but we generally have about 1,000 to 1,200 month-to-months tenants in our tenant base.
Jack Corrigan
At any given time, that’s not the number that go that at status every month, that’s approximately how many we have.
Dan Oppenheim
Right, but any change in terms of just what was happening in terms of the leases this quarter versus prior ones?
David Singelyn
Yeah, again we don’t have that information. If you look at page 15 of the supplement, you will see that at the end of March, we had 1,200 month-to-month.
Dan Oppenheim
Okay. And then I was wondering in terms of the - looking at the reduction in bad debt, it was really favorable for this quarter, where there an y changes in tenants screening that are helping that, I think that’s going to continue anything that sort of was a change in that drove that or is just sort of happened, you’d lost bad debt this quarter?
David Singelyn
No, I think, it’s - I wouldn’t say there is any change in this quarter, but as we have been mentioning over a number of our calls, we have been seeing that number come down. And so we did change tenant screening in 2014 that definitely has a benefit to that number.
But also we have better data on it from the conversion that we did in the fourth quarter. And as a result, we are able to basically deal with the issues at a little bit earlier timeframe than we did before.
So we’re addressing a much earlier in the delinquencies measured in just a few days as opposed to a month or so.
Jack Corrigan
Dan I have - I think I can answer your question, if you look - the previous question. If you look at page 15 of the supplemental, we have Q1 expiration outcomes renewed 3,936 and renewals in that table just below at where we don’t count the month-to-months on that and it’s 3,155, so the difference would be the month-to-month.
Dan Oppenheim
Okay. Thank you.
Operator
Thank you. Our next question is coming from Jeff Donnelly of Wells Fargo Securities.
Please proceed with your question.
Jeff Donnelly
Good morning, guys. Dave, I just wanted to follow-up on your comments on portfolio acquisitions.
I am curious how you think about underwriting in no circumstances, is that sort of traditional home by home analysis, being pricing base more on underlying asset value or do you guys kind of look at it more in terms of enterprise value if you will thinking about the expense savings. I am just curious of how you might narrow it down?
David Singelyn
Are you talking about the portfolio acquisitions?
Jeff Donnelly
Yeah. Portfolio, do you think you look at portfolios having 300 homes, 500 homes whatever they are?
David Singelyn
Yeah, I - you know let Jack typed in as well. I think at the end of the day what you end up with is a little bit of where the cost savings is, but that’s not the mechanics that we use.
The mechanics that we use is what would the underwriting of those properties be in our platform and what would they yield in our platform regardless of what they were yielding in the other platform. So the additional G&A and those items, we basically will fallout because we will burden it with our cost structure.
And at the end of the day, the benefits rebuilding from excess G&A et cetera will fall out of the bottom.
Jack Corrigan
And in general in all our acquisitions what we look at is whether it’s portfolio or otherwise we look at minimum yield and then are we buying below market and are we buying below replacement cost and we kind of evaluate at the lower of those three metric to come up pricing of any deal. Of course we always try to get our best price but.
Jeff Donnelly
Okay, that’s understood. Actually thinking about you Jack, I am just curious on I guess some kind of oil heavy market such as Houston, any sense that weakness in oil related industry that’s translating to leasing velocity or pricing even as you look beyond end of Q1?
Jack Corrigan
Well, Houston is interesting because Houston within in all of our oil market or oil related market Bakersfield, Houston, Oklahoma City; you saw some loss of jobs and some fallout in occupancy, but Houston in particular has and Texas has such a migration that those houses are getting picked up and that higher rate. So it’s kind of muted the issue in Houston and so a little worse I mean in Bakersfield but we don’t have that many homes there and Oklahoma City is little slow.
Jeff Donnelly
It’s helpful. Thank you.
And just a final question just about the same store numbers on page 13, just might be an apples and oranges question. But if overall I think same store occupancy - average occupancy is down a little over 2% and your same store revenues were up 1.5 I guess presently your revenue per unit would be up almost 4% in the period but your rent per unit at the end of the period is showing us an increase of just 2.5%.
I know it’s sort of a measurement issue there, but I guess I am just trying to reconcile the difference between those results, maybe it’s because your presenting rents at the end of the period rather than revenue over the period?
Diana Laing
Yes. Jeff that is primarily the reason, the revenue numbers or the rental rate numbers are the end of the period and the occupancy numbers are really the average during the period.
So that - we’re hopeful that this data that helps folks in their modeling for future but it will never be perfect.
Jeff Donnelly
Okay. I understood.
I just wanted to make sure I was clear on that. Thanks.
Operator
Thank you. Our next question is coming from Patrick Keeley of FBR.
Please proceed with your question.
Patrick Keeley
Good morning, guys. My first question, you talked about focusing more on broker acquisitions in 2Q, just kind of curious how the proportions you expect and to look versus 1Q and why are you favoring this channel going forward?
Jack Corrigan
I think maybe misheard or maybe I misspoke, but I am pretty sure that it wasn’t really - we are right now we’ve suspended broker purchases, so we’re focusing on trusty auctions and bulk deals. So and the reason we are doing that and the slowdown is because we believe that those give us our best returns, so.
Patrick Keeley
Sorry for the mix up there. And then I guess second question, I mean looking at your releasing trends, Tampa and Jacksonville kind of standout with the declines year-over-year kind of - what was different there and should we expect this to kind of shift back to portfolio average overtime?
David Singelyn
I believe it will shift back to portfolio average overtime.
Patrick Keeley
Thank you.
Operator
Thank you. Our next question is coming from Dave Bragg of Green Street Advisors.
Please proceed with your question.
Dave Bragg
Hi. Good morning.
Just looking for some more clarification on the CapEx disclosure on page 13, the average quarterly CapEx per property is 246, that ties to the 13,446 same store homes, correct?
David Singelyn
Correct.
Dave Bragg
So that would imply as you annualize a $1,000 in CapEx per property, can you reconcile that to your reserve of 450?
David Singelyn
Yes. As I mentioned, some of that 983 is actual capital improvements versus what I call recurring CapEx.
And secondly I think that and probably most importantly is that 80% of our expenditures were in 15% of our houses and that usually has a root cause to that effect. And so we’re investigating the root cause, we think that we will improve upon that whether it’s changing vendors or changing what something else that we’re doing or if there is a particular house it has or particular homes that have just had a bad welder and you are going to have issues with them and then we’ll call it from the heard.
So that’s kind of the plan, I think it will be successful and some of the capital improvements that we are doing overtime, we won’t need to do anymore.
Dave Bragg
Okay. So you’re suggesting that that’s does not an appropriate run rate of the 983 for those reasons?
David Singelyn
Yes.
Dave Bragg
Okay. Next question just has to do with leverage.
Can you please update us on your leverage targets and incremental plans for more debt?
David Singelyn
Yeah. So as Diana mentioned, we’re in the very low 30% today.
We do have capacity on our revolving credit facility of about another 750 million or so and we do have a little bit of cash on our books. As we also discussed, our acquisition pace is a little bit lower, it’s maybe a lot more than in prior quarters.
And so the velocity of our securitizations that we’ve seen in the past will be slowing those down, we do not have one plan at this time in the pipeline and the acquisitions can be financed for probably if not the balance of the year, majority of the year through both the line of credit and retain cash flow. That could change if we have any significant portfolios to acquire and the opportunity to acquire and if we do then it’s an analysis of matching the benefits of the acquisition and the cost of the capital.
And that’s an analysis that you really have to do at the time of the acquisition and there is a lot of variable that go into that and as to pricing of the acquisition versus the cost of the capital. So at this point, we do not have another securitization on the horizon.
Dave Bragg
Okay. Thank you.
Operator
Thank you. Our next question is coming from Buck Horne of Raymond James.
Please proceed with your question.
Buck Horne
Hey, thanks. Good morning.
And just additional kudos for the same home date, I think it’s much needed and I think helps investors maybe answer a lot of questions we’ve been trying to get to for a long time. So congrats on that but of course downsize is, it’s going to be up, even more questions from us.
I wanted to dive into the expenses a little bit that were reflected here, things like the property taxes, looks like you caught a really big jump in property at least in the same home portfolio, did that - was that just in the same home portfolio, did you have an issue with taxes across the broader portfolio? And also on the property management expense line, it looks like that’s still running at a fairly high level as a percentage of revenue, should that normalize to a lower level and what would that be?
Diana Laing
Buck, this is Diana. And one of the challenges less drawbacks at the same home disclosure is going to be explaining we have to do about some of these, by maybe aberrations and changes in expense line items.
And property taxes is kind of perfect example of that. Last year we had credits coming through the first quarter that we didn’t have this year, so.
David Singelyn
And it’s being refunds.
Diana Laing
So we had recorded expenses previously that ended up getting credited on certain assets. It was throughout the portfolio this is I think a portfolio that’s indicative that the whole on that measurement.
So I wouldn’t expect to continue to see property tax increases of 10%. And in fact over the year, it will probably balance out to a much lower number in 2% to 3% range.
Property management costs, yes, we’re up a bit. And this is a little bit of a function of how we allocate costs between leased and vacant properties, it’s also just - also an indication of total costs.
But overtime those property management costs will go down as we get the portfolio stabilized in larger.
David Singelyn
And Buck, also on the property management, we’re really stabbed up because we were missing calls last year at the beginning of the leasing season, so we really stabbed up our call center and our lease writing teams which will also add to the expense this year versus last year, but it’s been extremely productive. And let me - and this is a little bit of enhancement of Jack’s comments on property management.
The cause of property management, the significant effort in property management is when properties are vacant and they are becoming going through the leasing process or coming out of the leasing process. And when you look at a stabilized portfolio where you’ve got 20% to 30% turning, that number of properties is significantly less than what we are dealing with today because we basically are doubling up on our efforts in property management because we are putting - this quarter we put 3,000 new homes into property management out of a renovation group and so that’s not a long term property management thing when you become stabilize.
So there is additional cost and additional effort to handle the acquisition side, it gets reflected in expense and property management. We’re also coming in to the leasing quarter, so this it - you’ll see those numbers come down as we continue to stabilize our operations.
Buck Horne
Alright, that’s very helpful. Follow-up, just on the competitive landscape that’s out there and just thinking about the vacancies that you are seeing just either among institutional competitors or just in the industry large, are there any big pastels on the road that need to done with kind of like I am thinking along with the comments you made about what happened in Indianapolis were competitor had a lot of houses that came on the market at least up, is there any other areas or markets where you are seeing something that may be an issue to be doubt with this quarter and next?
David Singelyn
We’ve had a couple of markets and it’s been relatively rare that it occurs. We definitely had it in Phoenix, we had it for a little while in Houston about a year ago and Tampa was one market where we had it and then Indianapolis was the fourth one.
I think there probably be other but there where it happens but I think it will be less and less because most of the institutional buying has slowed up. I like your term Buck, portals [ph] because they are really temporary absorption issues now at long term permanent occupancy issues.
And s we go into and then come out of them, so.
Buck Horne
Okay. Alright, thanks guys.
Good job.
David Singelyn
Thank you, Buck.
Operator
Thank you. At this time, I would like to turn the floor back over to management for any additional or closing comments.
David Singelyn
Well, thank you, Diana and thank you everyone for joining us today. We look forward to speaking with you later and on our next quarterly conference call.
Have a great day. Bye-bye.
Operator
Ladies and gentlemen, thank you for your participation. This concludes today’s teleconference.
You may disconnect your lines at this time and have a wonderful day.