Apr 29, 2016
Executives
Jason Reilley - Senior Director of Investor Relations Timothy J. Naughton - Chairman, President & Chief Executive Officer Sean J.
Breslin - Chief Operating Officer Matthew H. Birenbaum - Chief Investment Officer Kevin P.
O'Shea - Chief Financial Officer
Analysts
Nicholas Joseph - Citigroup Global Markets, Inc. (Broker) Jana Galan - Bank of America Merrill Lynch Gaurav Mehta - Cantor Fitzgerald Securities Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Jeffrey Pehl - Goldman Sachs & Co. Alexander D.
Goldfarb - Sandler O'Neill & Partners LP Robert Chapman Stevenson - Janney Montgomery Scott LLC Richard Charles Anderson - Mizuho Securities USA, Inc. Ivy Lynne Zelman - Zelman Partners LLC Drew T.
Babin - Robert W. Baird & Co., Inc.
(Broker) Omotayo Tejumade Okusanya - Jefferies LLC Conor Wagner - Green Street Advisors, LLC Gregory A. Van Winkle - Morgan Stanley & Co.
LLC Wes Golladay - RBC Capital Markets LLC
Operator
Good afternoon, ladies and gentlemen, and welcome to the AvalonBay Communities' First Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Following the remarks by the company, we will conduct a question-and-answer session. Your host for today's conference call is Mr.
Jason Reilley, Senior Director of Investor Relations. Mr.
Reilley, you may begin your conference.
Jason Reilley - Senior Director of Investor Relations
Well, thank you, Aaron, and welcome to AvalonBay Communities' first quarter 2016 earnings conference call. Before we begin, please note that forward-looking statements may be made during this discussion.
There are a variety of risks and uncertainties associated with forward-looking statements, and actual results may differ materially. There is a discussion of these risks and uncertainties in yesterday afternoon's press release as well as in the company's Form 10-K and Form 10-Q filed with the SEC.
As usual, this press release does include an attachment with definitions and reconciliations of non-GAAP financial measures and other terms, which may be used in today's discussion. The attachment is also available on our website at www.avalonbay.com/earnings, and we encourage you to refer to this information during the review of our operating results and financial performance.
And with that, I'll turn the call over to Tim Naughton, Chairman and CEO of AvalonBay Communities, for his remarks. Tim?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Yeah. Thanks, Jason, and welcome to our Q1 call.
With me today are Kevin O'Shea, Sean Breslin, and Matt Birenbaum. I will be providing management commentary on the slides that were posted yesterday afternoon and then all of us will be available for Q&A afterwards.
My comments will focus on providing summary of Q1 results, talk about trends in the apartment market and our portfolio and lastly, I'll share some thoughts on capital allocation and portfolio management. So, starting on slide four, it was a strong quarter, this past quarter, where we achieved core FFO growth of more than 12.5%, fueled by healthy same-store revenue growth of 5.5% and same-store NOI growth of almost 8% as well as contributions coming from our lease-up portfolio from our $2.7 billion development pipeline.
As we mentioned last quarter, external growth from investment activity has contributed roughly 45% of core FFO growth over the last two years and it continues to add meaningfully to FFO growth in 2016. We were active on the portfolio management front as well this past quarter, closing out $240 million in acquisitions and almost $0.5 billion in dispositions.
Turning now to slide five; recent market trends reflect shifting patterns across our footprint. This chart shows year-over-year changes in effective rent for each of our six regions and for the full market, as reported by Axiometrics.
A few trends worth noting include, first, effective rent growth on the West Coast continues to outpace the East Coast by about 400 basis points, running around 6% in the West and roughly 2% in the East during the quarter. Second, the New York and Northern California regions are seeing some deceleration, while our other regions remained stable or are improving.
New York has been impacted by new supply while Northern California's performance is being driven by a combination of supply, a slower job growth in last year this time and tough year-over-year comps. Southern California, Seattle continue to post strong gains while DC is beginning to show modest improvement.
The last point worth mentioning is that these charts really do demonstrate the apartment cycle can ebb and flow similar to what we experienced in the 1990s. With deliveries beginning to stabilize, rent growth is likely to balance around a bit, driven more by the demand side of the equation including demographic shifts, growth in employment wages and the pace of household formation.
Turning to slide six, looking at our portfolio, we can see that the average rent change in the market is consistent with our portfolio and the overall market trends and remains healthy in the 4% range. This rate of growth is down from last year, but is consistent with our expectations as more supply is coming online this year.
In addition, similar to the prior set of charts, our portfolio reflects markets that can be somewhat choppy across the cycle. In fact, just in this cycle, we have seen three periods when rent growth has been above the average and three when it's been below the average and during the time span of less than six years.
Turning to slide seven, after having trailed in rent growth versus urban submarkets early this cycle, suburban submarkets began to outperform over the last couple of years. This trend has been driven by expanding development pipelines and inventory that began to build in many urban submarkets across our region starting in 2013, outpacing suburban deliveries during this time.
We believe that this trend of suburban outperformance is likely to continue over the next two to three years, given that urban deliveries should be about two times that of the suburbs through 2017. As capital allocators and active developers, we've been talking about this over the last couple of years.
We began shifting our focus two to three years ago towards suburban submarkets, particularly infill areas where we saw better value and less supply. But however, just as I mentioned, how market performance can ebb and flow across the cycle by region, the same is true for submarkets.
As capital flows shift their response to these trends, we'll continue to be opportunistic in search of the most compelling risk-adjusted returns, whether they'd be in target suburban or urban submarkets. And in fact, over our 20-plus year history, we've achieved similar returns in urban and suburban submarkets across our region.
We've been able to do this by taking a fine-grained approach to capital allocation, directing new investment to the highest risk-adjusted returns at any particular point in time. Now turning to slide eight, another capital allocation topic I'd like to touch on relates to our level of development as the cycle matures.
This slide depicts realized and estimated unrealized IRRs of development completions sorted by completion dates through 2013. On our last quarter, we discussed strategies we are deploying to mitigate risk posed by our development efforts, including pipeline diversification, managing land inventory, and match-funding new commitments.
This quarter we thought it might be helpful to look at how development has performed historically based upon cycle timing and timing of delivery. As you can see and might expect, developments generate its highest returns during periods of economic expansion, particularly in the earlier years of expansion where projects may have been started during the prior downturn or in the early recovery portion of the current cycle.
What perhaps is less intuitive is our history of generating healthy returns for projects that delivered during the contraction phase of the cycle and that were most likely started during the latter portion of the prior cycle, a point in time when land and construction costs are generally peaking. Across all parts of the cycle, we have been able to comfortably clear our cost of capital and deliver NAV to shareholders through development.
My point here is not that development always makes sense, but rather that we can continue to create value through this capability during downturns, if deployed in a skillful, rigorous and disciplined way that focuses our efforts and resources on the most compelling opportunities in our markets. Turning to slide nine, it stands to reason that as we pursue development in a disciplined manner, as the cycle matures, it ought to result in a diminished opportunity set as fewer deals meet required hurdle rates.
And, in fact, this is the case. Since 2013, while our development pipeline as measured by total capital investment has more or less leveled off, when measured as a percentage of total enterprise value or even by the number of projects, it's declined by roughly 25% to 30%.
So we believe that we can continue to create shareholder value through new development at this point in the cycle, albeit at a lesser rate perhaps than earlier in the cycle. Lastly turning to slide 10, we've been active in the transaction market recently and I wanted to share a couple of thoughts with respect to our activities in this area of our business.
Over the last few months, we've purchased or cleared due diligence on three communities totaling over $300 million of total investment. Each of these communities are high quality assets with high walk scores and great submarkets, located in Alexandria and Arlington, Virginia and Hoboken, New Jersey.
With many merchant built development deals completing and some investment funds unwinding, we are seeing some excellent assets come to market, much of it unencumbered by long-term debt and expensive prepayment penalties. These acquisitions are being funded in turn through asset sale proceeds from funds and wholly-owned dispositions, some of which will trade as 1031 exchanges with acquisitions.
As a result, our level of asset sales will be dependent on acquisition volume. As we identify acquisitions that we believe can improve the risk adjusted returns of our portfolio, we'll pair them with the sale of non-core assets.
But overall, we do plan on being a net seller of assets this year. We're just taking advantage of an active market to improve the portfolio.
So in summary, before opening it up to Q&A, I'd just like to say Q1 was another strong quarter for AVB, achieving double-digit growth in core FFO for the fourth consecutive quarter. While we're seeing some moderation in fundamentals and operating trends, they remain healthy.
The sector will continue to benefit from favorable demographics and living patterns of Millennials and Gen X, while new deliveries should begin to stabilize in 2016 at levels that are at or below structural demand for apartment housing. As we move into the mature portion of the economic expansion, we'll remain disciplined capital allocators and risk managers, recognizing that we can continue to create meaningful value for shareholders through new development, employing the talent and rigor that we've demonstrated over the several cycles during the past 20 plus years.
And with that, Aaron, we'd be happy to open up the call for questions.
Operator
Certainly, sir. And we'll take our first question from Nick Joseph with Citi.
Nicholas Joseph - Citigroup Global Markets, Inc. (Broker)
Thanks. I'm wondering, in terms of operations, if you can talk about how the first quarter trended relative to where you thought it would at the beginning of the year and which markets are ahead of expectation so far and maybe which are behind?
Sean J. Breslin - Chief Operating Officer
Yeah, Nick, it's Sean. Happy to do that.
Overall, based on performance in the first quarter, and what we know about the second quarter thus far, we're basically in line with our overall expectations for revenue. New York is a little bit behind, but Southern Cal, Pacific Northwest and the Mid Atlantic are a little bit ahead, more than offsetting New York.
And then the other two major regions, Boston and the Northern California region are basically in line with our original budget. In terms of to provide a little more color maybe on where we are in terms of recent trends, in the first quarter, rent change was 3.7%, it's trended up in April to 4.2%, which is renewals in the mid 5%s and move-ins in the high 2%s, getting to that 4.2%.
And to provide some context, when we planned for the year, our expectation is that rent change throughout the year would average about 4.5%, which is down about 120 basis points from what we realized in rent change in 2015. So, based on where we are now moving into the second quarter of the stronger leasing season when rents really start to ramp up, our expectation is pretty consistent with what's happening in the portfolio.
And particularly, if you look towards the stronger season and renewal offers, I think we're in pretty good shape. May and June renewal offers are out in the high 6% range.
And that's basically a blend of, call it, 5% in the Mid-Atlantic and New York, about 6.5% in Boston, about 8% in Northern Cal and Southern Cal, and about 10% in Seattle. So, overall, we think we're in pretty good shape.
Things are unfolding sort of as we expected, and as we look forward into the rest of the second quarter, we're in pretty good position. Occupancy wise, we're 95.7% at this point which is about 20 basis points below this point last year and availability is in the low 5%, about 10 basis points below where we were last year.
So, those are numbers we're comfortable with, taking on slightly lower occupancy. Availability is about right as we start to push rents harder going into the spring season.
Nicholas Joseph - Citigroup Global Markets, Inc. (Broker)
Thanks for the color. And then in terms of supply in urban versus suburban, the presentation shows suburban supply decreasing in 2017 against urban.
But the commentary from the other apartment peers that have reported earnings so far is focused on supply moving out of the urban core more back into the suburbs. So, I'm wondering, if you expect that to occur after 2017 or if you think supply will continue to impact the urban core more so at this point in the cycle?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Nick, this is Tim. The slide that we show, I guess it's Slide 7.
To be clear, that really is focused on deliveries as we get out to 2016 and 2017. Our peers may have been, I didn't listen to their calls, they may have been focused more on starts, which obviously would impact maybe 2018, 2019.
And as I mentioned before, I mean it's not, we're relatively agnostic between urban and suburban. And in terms of just even how we're focusing our efforts, if we start to see more value in the urban submarkets, we're going to, because of some of the trends we're seeing now, we're likely to maybe double back there.
So, they may be right. You might see some fall off in 2018 or 2019 if starts in 2016 or 2017 come down in the urban areas, but certainly in terms of deliveries, we don't see that at all over the next couple of years.
Sean J. Breslin - Chief Operating Officer
Yeah. Nick, just to give you some specific numbers based on our sort of ground up view of supply, which is a blend of the development team and our operations team and our market research team working together both with their own knowledge, as well as third party information.
Those numbers in 2016 are about 2.8% of inventory in the urban submarkets. In terms of deliveries, at about 1.9% in suburban.
And the projections for 2017 based on pretty much what we know right now, shovels in the ground et cetera. So, it could move around a little bit, but given the timeline, get things entitled and built probably it's not going to move a lot.
Some stuff may be delayed from one year to the next but, in aggregate, probably not going to move a lot. For 2017, deliveries in the urban submarkets around 3% and suburban about 1.4%.
So, that's based on what we know today. The other thing that's out there we probably need to be mindful of just in terms of total supply is there are some things happening both from a hard cost perspective, as well as the construction lending environment that may constrain that a little bit just universally.
So, that's something to keep in mind.
Nicholas Joseph - Citigroup Global Markets, Inc. (Broker)
Thanks.
Operator
We'll go next to Jana Galan with Bank of America.
Jana Galan - Bank of America Merrill Lynch
Thank you. I thought the public private partnership development right added in this quarter looks very unique.
Is that something that you're going to look to do more of in the future?
Matthew H. Birenbaum - Chief Investment Officer
Hi, Jana, it's Matt. I guess I'll speak to that one.
It has been part of our business for a long time and we've had a lot of success with public private partnerships at certain points in the cycle, including in New York we had some very successful deals, in Queens, in Long Island City. Last decade it were so much similar, we've done some public private deals on the West Coast and some transit stations.
So, it does play well to our competitive advantages we think into some of our strengths and that deal is actually a good example because we were able to be selective there as a developer, even though others may have offered a higher land value because the public authority recognized and respected that given our reputation, given our scale, our balance sheet strength everything else, that we can deliver on our promises and for them it's as much about certainty of execution. There are some schools to be built there on that side as well as the project we would own and by dealing with – and selecting us, they don't have to deal with a private developer who is going to have a separate equity partner, separate lender, separate general contractor, it's an integrated solution.
So, we have – we like those deals. That particular deal, it's a pretty exciting location, 96 Street and 2 Avenue, it's a full city block, it's right on top of the new 2 Avenue subway line, which is I think the first new line in the city in many, many, many years.
And the timing on that one is such that given the approvals process that's in front of us, the regulatory process, that deal actually may well start kind of early into the next cycle, which is based on some of the slides that Tim had shown before frequently deals that have very strong returns.
Jana Galan - Bank of America Merrill Lynch
Thank you. And is there any updates for your upper west side New York development in terms of a retail component?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Jana, this is Tim. I think you are referring to the Columbus Circle site that we own.
Currently, we actually are doing some work on the site. We are doing some enabling work in terms of abatement and demolition.
I think as we mentioned before, we still anticipate starting the deal sometime mid this year, probably sometime in Q3 – late Q3. We are continuing to evaluate different strategies to lay off some risk there, including one way that you mentioned, by bringing in a retail partner.
We still have people interested despite some softness on the condo side. So, people are interested in wholesaling some of the building for residential condo as well.
The reality is, we've been spending time, really trying to nail down performance obligations for both types and it's ultimately got to work. Ultimately for there to be a deal because to the extent we bring in a retail partner, they would essentially be taking title at the time of which we can deliver a cold dark shell to them.
And we want to make sure they're going to be there and they're going to ought to make sure that we can meet certain performance obligations, and until in effect we're almost ready to start the building, the vertical building construction, we're not going to really be in a position to finalize the deal there. Another strategy, I mean impart given the East 96 street site, we are considering essentially to bring in a financial partner, to layoff some, as another way to layoff some risk.
The deal that Matt just talked about, it's a large deal, which is $500 million excluding the land lease itself. And so, as we think about New York City concentration, we may look at either joint venture in Columbus Circle, or potentially even other avenues to lay-off some of the concentration risk in a pretty short investment time period in the city.
So, just stay tuned, we're exploring a number of sort of risk management strategies with respect to this deal and our overall portfolio there. And we'll keep people informed as it makes most sense.
Jana Galan - Bank of America Merrill Lynch
Thank you.
Operator
We'll go next to Gaurav Mehta with Cantor Fitzgerald.
Gaurav Mehta - Cantor Fitzgerald Securities
Yeah, thanks. Following up on New York, you sighted supply as one of the reasons for softness in the market.
I was wondering if you could also comment on what you're seeing on the demand side?
Sean J. Breslin - Chief Operating Officer
Yeah, sure, Gaurav, this is Sean. When you think about New York, for the most part, we do think it is a supply issue.
It's about – our expectation for this year is about 2% of inventory, but in New York City proper, it's about 3.5% direct supply. And then if you toss in some shadow supplier from condos and things like that, that number might be a little bit higher.
On the demand side, demand has actually been pretty healthy. Job growth has been steady across the region in I think mid 1% range and it's been up in the mid 2%s in terms of the city itself.
So, demand has been there, but what you have to keep in mind related to the supply is, it's all coming in at the pretty high end for the most part and if you think about New York City and even parts of Northern New Jersey, what's going to be delivered this year is about 10,000 units. So, there is plenty of demand.
The demand might not look the same as what it has on last cycles in terms of percentage from the financial sector, a very, very high paying levels. So, there is probably more diversity of the job growth than what we have experienced in the past.
But there has been steady absorption and steady demand in that market.
Gaurav Mehta - Cantor Fitzgerald Securities
Great. And then following up on suburban versus urban that chart number, slide number seven that you have in your presentation, suburban outperforming urban.
But if I look at your New York suburban portfolio, by rental it's just underperforming the urban market. So I was wondering if you could provide more details as to what's going on in New York suburban?
Sean J. Breslin - Chief Operating Officer
Yeah. So, in terms of New York, one thing to keep in mind there is the suburban sub markets in the Northeast in general, including New York and then moving up into New England are more seasonal.
So, you tend to see more softness and like Q4 or Q1 in the suburban submarkets. So, that's not a surprise to us in terms of where we ended the first quarter, as well as the fourth quarter.
But as you look forward and the impact on supply, to give you a sense of where it's headed, for our portfolio if you look at renewal offers as we move in through the second quarter, they are in the low 5% range, the weakest is New York City at about 4%, the Long Island is at 6%, Northern New Jersey is at 7%, Central New Jersey at 5.5%. So, we do expect those suburban submarkets to pick up steam as we move through the second quarter and third quarter relative to New York City, purely just as a function of supply for the most part.
So, we expect it will play out that way in New York overall based on what we know today.
Gaurav Mehta - Cantor Fitzgerald Securities
Okay. Thanks for taking the questions.
Sean J. Breslin - Chief Operating Officer
Sure.
Operator
We'll go next to Jordan Sadler with KeyBanc Capital Markets.
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Hi. It's Austin Wurschmidt here with Jordan.
Just sticking with New York a little bit, could you provide a little bit of color on what you're seeing at your AVA DoBro project in terms of lease up pace relative to the expectations, as well as the rents you're achieving there?
Sean J. Breslin - Chief Operating Officer
Sure. It's Sean again.
Yeah, lease up volume has been quite good there. We averaged 39 a month through the quarter, which is quite healthy considering it tends to be one of the lower volume quarters of the year.
It typically ramps up in the second quarter and the third quarter. There is some supply being delivered in that submarket now.
There will be a little bit more as we get further into the year. The velocity and rate have both been quite healthy.
So, rate is holding a little bit above what we expected around $60 a foot and velocity has been good. So, our expectation is for that to continue.
The DoBro product is a pretty unique product. It's been accepted quite well by the target demographic, and so we are pleased with the early results.
Matthew H. Birenbaum - Chief Investment Officer
Austin, this is Matt. Just to clarify a little bit, we have marked the AVA DoBro piece of that to market and that's the number that you see updated in the earnings release, because the Avalon piece, which is the upper floors of the building, we have not yet started to lease there.
Those rents are not yet mark-to-market.
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
And what percent of the units there are the AVA DoBro?
Matthew H. Birenbaum - Chief Investment Officer
I think it is about 300 Avalon and 500 AVA.
Sean J. Breslin - Chief Operating Officer
Yeah, so 500. 60% or so is the AVA.
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Great. Thanks.
That's helpful. And then just more sticking on the New York City submarket specifically.
Despite the supply during sort of the typically slower season, occupancy was up 50 basis points during the quarter. And I was just curious what was driving that, if it was tactical and just some detail there?
Sean J. Breslin - Chief Operating Officer
Yeah. I mean as you might know from previous commentary for us, we don't necessarily target a very specific rate of occupancy for each and every market and submarket.
Our objective is to optimize revenue and so sometimes we are going to get back occupancy to get rate and/or vice versa to try and optimize revenues. So I wouldn't read too much into occupancy changes from quarter-to-quarter or even year-over-year.
The only global statement I would say is over the last couple of years given market conditions, we're more aggressive on rate, all things being equal at the expense of occupancy across our footprint and every submarket is little bit different, but I wouldn't read too much into the sequential quarter even the year-over-year numbers other than the trend of last couple of years being more aggressive on the rate side and yielding a little bit more on occupancy has been okay.
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Thanks. That's helpful.
And then just switching and last one from me to the portfolio management comments. I guess what are you guys really trying to accomplish as you see acquisitions come to market and where exactly are you seeing the best opportunities?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Yeah. Maybe I'll start and then ask Matt to follow-up in terms of where we're seeing the best opportunities.
There is just a lot of transaction volume right now, and there is a lot of really, as I mentioned in my prepared remarks, a lot of really fine assets often times built by, merchant builders, coming off construction loans, they don't have permanent loans in place that have the prepayment penalties and therefore, sometimes sort of – that doesn't make it attractive for us in terms of assuming secured debt. So, it's an opportunity to take advantage.
In fact, we have a lot of unencumbered assets, some of which are non-core that we like to trade and there is a point in time in which there is some really attractive assets that we think we can improve the overall quality of the portfolio by churning a little bit of it. So, it's a little bit of a unique moment in time we think, but in terms of – Matt in terms of where we're seeing some of the best opportunities, maybe you can just elaborate a little bit there.
Matthew H. Birenbaum - Chief Investment Officer
Sure. I guess I'd start by saying on the macro level regionally, the two regions where we would seek to redeploy capital the most would be the Mid Atlantic and Southern California for different reasons, but those were actually kind of more or less on target for our long-term portfolio, geographic allocation goals, but if we're under allocated anywhere it's probably in those two regions.
And some of that was frankly delivered. In the case of Mid Atlantic we sold quite a bit here, earlier in the cycle kind of in front of what we saw lot of supply coming relative to the Mid Atlantic's history.
So, we think it's a pretty good time to be buying in the Mid Atlantic. Values haven't increased all that much relative to all the other geographies in our portfolio which makes sense because obviously rents have been relatively flat here for quite a while.
So, we see just better value in terms of just total relative to replacement cost, relative to cost, preferred cost per unit. And Southern Cal, it's always difficult there.
Archstone really was a transformative event for us in terms of growing our Southern California portfolio, but we're still looking to grow there where we can. In terms of submarket locations, we are looking to upgrade the quality of the portfolio a little bit as Tim mentioned.
So you look at the three that we've mentioned so far, they're all infill, high-quality, high-density infill suburbs, we would look in, in the urban cores as well based on pricing, where we see the best relative value, but higher walk scores. And then we have been looking at younger assets, which is a little different for us.
We do find, sometimes, we're a very successful buyer for assets that maybe somebody else has just renovated, 12 year, 15 year old assets where the value-add players aren't going to bid those up to the same extent. So we look at those types of assets too, and arguably the Market Common fits that description a little bit.
But we're always looking for ways where if we can leverage what advantages we have into, sometimes, it's unique deal structure that may drive us to get a little bit better value on the buy side. But typically we would probably be looking for assets that are a little bit younger than what you may have seen us buying in the past.
And again...
Austin Wurschmidt - KeyBanc Capital Markets, Inc.
Great. Thanks for all the detail.
Operator
We'll go next to Jeffrey Pehl with Goldman Sachs.
Jeffrey Pehl - Goldman Sachs & Co.
Hi. Thank you.
Just looking back at the Archstone acquisition in late 2012, the largest component of the purchase was in Southern California. How do you believe those assets are performing today versus your original expectations?
Sean J. Breslin - Chief Operating Officer
Yeah, Jeff, it's Sean Breslin. In terms of overall performance, I think it's fair to say that the assets have outperformed our expectations in terms of our period of ownership here.
And then on top of that, the other thing I would add is there's probably more opportunity in the portfolio in terms of redevelopment, repositioning those assets than we probably expected going in. Archstone did a fine job maintaining the assets, but given the balance sheet they had and the position they were tied into with Lehman just didn't necessarily have the capital to invest in the assets to reposition them.
So we're trying to take advantage of that opportunity across the footprint, including significant concentration that we did acquire in Southern California. So net-net, I'd say we're pleased with our results from Archstone and values have grown considerably during the last couple of years.
Jeffrey Pehl - Goldman Sachs & Co.
Hey, thanks for the color. And just as a follow-up to that, do you believe your Southern California portfolio could potentially outperform Northern California over the next few years?
Sean J. Breslin - Chief Operating Officer
Yeah, it's Sean again, I mean, it's always a possibility given the underlying demand drivers in Southern California combined with the very low levels of supply, the lowest of any of our regions currently in terms of our expectation, sort of in the mid-1% range. It's a possibility.
It tends to be a market that, over the long run, has been an outperformer with far less volatility than some of the tech markets like Northern California and Seattle. So it could certainly be a period of time where it does outperform, that would not be beyond reason.
Jeffrey Pehl - Goldman Sachs & Co.
Great. Thanks for the color.
Sean J. Breslin - Chief Operating Officer
Sure.
Operator
We'll go next to Alexander Goldfarb with Sandler O'Neill.
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
Good afternoon. Just first, you mentioned in some prior questions ago about the bank regulation on lending.
As you guys have seen it so far in the banks be impacted by the Basel III coming down on construction lending, has your experience, what you've seen in the field, has there been a material cutback on the part of developers and their inability to get construction lending or is this really sort of an issue on the edges and most developers that you see in the market are still able to get the construction lending as they historically have been able to?
Sean J. Breslin - Chief Operating Officer
Alex, this is Sean, and maybe Tim or Matt want to jump in. I mean at this point, we're aware of what's been communicated to the banks, and some of the risk retention issues as well as the incremental oversight of multifamily loans.
For the most part, what we're hearing is somewhat anecdotal in terms of more pressure on the underwriting, banks putting out targets that are, I'd say, either even or less than volume they produced last year in terms of construction lending for multifamily specifically. So I'd say it's still early in the game as to the eventual outcome, but there are certain signs of tightening that will put more pressure on bringing either additional equity to the table to get deals done probably is the likely answer, but different pricing as well.
And Kevin, may want to comment on that as well from a bank perspective.
Kevin P. O'Shea - Chief Financial Officer
Sure, Alex, I mean as you know, we're not directly in the market, but from what we've been able to learn from being active in our dialogue with the banks who do this kind of construction financing, certainly what we have heard is that construction financing has become tougher to obtain as you point out, especially for small, less well capitalized developers. Pricing, for example, has moved beyond 300 bps over LIBOR.
And in order to get better terms, often these developers are needing to provide partial recourse and sometimes making commitments to provide permanent financing to the bank post construction, and sometimes provide higher levels of deposit. So across the board, there's just been a little bit of tightening that we've seen in the end market.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Yeah. Alex, just maybe the last point on this.
I think the way it sort of initially manifests itself, you to start to see a little more deal flow on the land side. So as private sponsors are maybe not getting the terms or hearing what they want to hear from banks or even potentially equity partners, those deals oftentimes start to get sort of softly marketed back in the market.
And we're seeing that right now on a couple of particularly attractive opportunities, where the land owner thought that they were going to develop them themselves and suddenly they're spinning a different story to the market that they've got a lot on their plate and they need to sell some of what they got. So I think it's a way you're likely to see it manifest itself at least initially here over the next three months to six months.
But I think we'll probably just all kind of have to keep a watch out and see is it really having an impact at the end of the day on total start volume.
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
But the point is that you guys are likely to see some more attractively priced land?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
I think we'll see more traffic in land initially. We'll see ultimately what it brings in terms of...
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
Okay.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
... (36:45) But...
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
On the condo side, on the Sheepshead Bay project, where you have a condo partner in there, just given all the up-talk about condo concern in New York, as far as the financial risk to AvalonBay, if the entity doesn't perform, I assume you guys just automatically take over their spot or is there some financial liability to you if they run into some financial difficulty on their own?
Matthew H. Birenbaum - Chief Investment Officer
Alex, this is Matt. I guess I can take a shot at that one and, I don't know, if Kevin wants to chime in as well.
They have equity in the deal. We are providing construction financing really to facilitate the deal because we're building the whole building.
And so if they were to default on the loan, they would walk away from their equity and we would wind up with their units. I believe there is some guarantee support as well, although I don't remember exactly how deep that goes.
And we have looked at that as a downside scenario. We could take their units back and rent them, and we don't think it would be a material change to the economics of that deal.
I will also say that it's a very different location. You talk about there's a lot of condo supply in New York, it's not in Sheepshead Bay, it's not in Brighton Beach, it's not in that part of Brooklyn at all.
So that market is its own little micro pocket there that I really think is hardly at all impacted by what's going on across the city.
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
Okay. And then just final question.
The $0.14 land gain in the second quarter, what's that relate to?
Kevin P. O'Shea - Chief Financial Officer
Sure, Alex, this is Kevin. That relates to a second phase of development that we anticipate contributing to a venture with our existing partners, and in doing so recognize a gain on that sale of the land to that venture of about $20 million.
Alexander D. Goldfarb - Sandler O'Neill & Partners LP
Okay, cool. Thank you.
Operator
We'll take our next question from Rob Stevenson with Janney.
Robert Chapman Stevenson - Janney Montgomery Scott LLC
Good afternoon, guys. Sean, can you talk a little bit about what you're seeing in your various D.C.
submarkets performance-wise, stronger versus weaker and what's likely to be the trend over the remainder of the year as leasings continue?
Sean J. Breslin - Chief Operating Officer
Yeah. Sure, Rob, happy to.
In terms of the Mid-Atlantic, based on where we are to date in terms of performance, and I'll talk mainly from a rent change perspective in terms of where we're getting traction, D.C. is actually holding up the best right at the moment, kind of mid 2% range versus a 1.5% or so for suburban Maryland and Northern Virginia.
That's up roughly about 75 basis points over last year. I mean our expectation going forward is that it's probably going to continue to be the softest in the suburban Maryland submarket based on the supply that's being delivered across Rockville, North Bethesda et cetera.
Northern Virginia probably will be sort of the second position, if you want to call it, in terms of performance. And then D.C., based on asset mix that we have, we think will probably be the leading submarket in terms of performance.
And keep in mind, what's in our same-store bucket is Northwest, some value-oriented assets, a deal tied to American University et cetera. So it's a very different kind of same-store basket relative to maybe others.
The majority of the supply is actually going to be delivered in the District. So if you looked at it from an entire market perspective, D.C.
probably will continue to be soft and potentially as soft as suburban Maryland. But in terms of our specific portfolio and the way it's positioned, the D.C.
assets are leading and probably will continue to.
Robert Chapman Stevenson - Janney Montgomery Scott LLC
Okay. And then did you guys see any weakness during the quarter in your highest price point units, the sort of super-luxury or whatever you want to call it, the $6,000, $8,000, $10,000 plus price point units and stuff like that?
Sean J. Breslin - Chief Operating Officer
Yeah. Any particular market in mind or just in general you mean?
Robert Chapman Stevenson - Janney Montgomery Scott LLC
Well, I mean, I would guess New York and San Francisco would be the two that I would most target, but I guess across the portfolio as well.
Sean J. Breslin - Chief Operating Officer
Yeah. I mean, I wouldn't say so.
I mean, if I think about it like from a New York perspective, the highest rent deal we have is in the Bowery at $80 a foot or so, and it's been performing quite well. There's very little supply there to compete against.
So I think for the most part, it really does depend on where your assets are positioned relative to new supplies. So we've got $50-a-foot, $60-a-foot assets in Midtown West, more value oriented, but there's more supply there, so they're struggling more, as an example.
But then you go to Long Island City and it's $50 a foot, $55 a foot, and it's doing 6% year-over-year. And so I wouldn't say there is a common thread to higher end units underperforming across any of the markets at this point in time.
It's really more a direct function of to supply in the submarket that you're in.
Robert Chapman Stevenson - Janney Montgomery Scott LLC
Okay. So nothing even with like bifurcation between sort of penthouse and mid-tier sort of units within the same complex or anything like that?
Sean J. Breslin - Chief Operating Officer
Not necessarily, no. I mean Exeter at the Pru gets the highest rents, but at the high end floors.
So I would say there's nothing that we see materially at this point. It'd be sort of one-off type things.
Robert Chapman Stevenson - Janney Montgomery Scott LLC
Okay. Thanks, guys.
Operator
We'll go next to Rich Anderson with Mizuho Securities.
Richard Charles Anderson - Mizuho Securities USA, Inc.
Thanks. Good afternoon.
Question on New York. Can you make any comment about how things trended over the course of the quarter?
Did you notice anything improving as the quarter went on? Was March better than January or was nothing discernible there in terms of trend line?
Sean J. Breslin - Chief Operating Officer
Yeah. I mean, Rich, this is Sean, it's certainly picking up steam a little bit.
I mean if you look at the region overall, rent change in the first quarter was about 2%, which was 1% New York City, about 4% in Long Island and 2.5% to 3.5% in the Jersey markets. It has picked up steam a little bit, where we're doing around 3% now instead of 2%, which is around low 4%s in renewals and 1%,1.5% on move-ins.
But as I mentioned earlier, when you look at renewals, I'd say it has started to pick up a little more speed, particularly in the suburban submarkets, as I mentioned New York City is still the weakest around 4%, but it moves up quite nicely when you get into the suburban submarkets, 5.5%, 6%, 7% depending on where you are. So I'd say the momentum is positive, probably most positive in the suburban submarkets as compared to the city.
Richard Charles Anderson - Mizuho Securities USA, Inc.
Okay, great. And then on your dispositions, do you have any tax protection issues that may be behind some of the motivation to also be an acquirer?
Matthew H. Birenbaum - Chief Investment Officer
Rich, this is Matt. Yeah, no, we are planning on doing some of our disposition acquisition activity as 1031 Exchanges, but I wouldn't say that we have tax protection issues beyond the fact that we can only sell so much without redeploying the proceeds into acquisitions or paying a special dividend.
So I mean we have an overall company limit on that volume, but...
Richard Charles Anderson - Mizuho Securities USA, Inc.
Okay. And
Matthew H. Birenbaum - Chief Investment Officer
...I don't know, Kevin if you...
Kevin P. O'Shea - Chief Financial Officer
Yeah, Rich. This is Kevin, to add on that, I mean we tend, as you know, to use dispositions as a means of funding development activity.
And that certainly is our plan this year, that component of our external capital that we raise to fund development will be in the form of dispositions. At some level beyond a certain point when we sell additional assets and trigger additional gains, and you can see some very robust gains here reflected in what we've sold so far, you do run into a situation where from a re-tax point of view you would need to make a special distribution and would retain that capital.
So if we want to buy assets to reposition the portfolio and fund that with dispositions beyond what we would need to sell to fund the development, then at some point it just makes sense to do that incremental portfolio repositioning through 1031 activity.
Richard Charles Anderson - Mizuho Securities USA, Inc.
Right. I was talking about that, but also individuals that may own units and exposed to a gain.
Kevin P. O'Shea - Chief Financial Officer
No. We've picked up a little tax protection, our share of that in connection with the Archstone transaction, but that's not implicated in anything we're discussing right now.
Richard Charles Anderson - Mizuho Securities USA, Inc.
Okay. Fair enough.
And what about – just what kind of spread you're seeing inbound, outbound cap rates and to what degree is that maybe contributing to some incremental dilution in the near-term? Clearly you're looking to create value long-term, but is that something you can comment on?
Matthew H. Birenbaum - Chief Investment Officer
Yes. It's been a pretty tight spread, this is Matt again.
The sales, as of last quarter, we sold (46:16) in Connecticut at a low 5%s cap and the buys were in the high 4%s. So there's maybe a little bit of dilution there, but it's relatively small.
And from a timing point of view, we're doing suddenly these reverse exchanges where we're actually buying in front of the selling. So I don't think it's material.
Richard Charles Anderson - Mizuho Securities USA, Inc.
How far in advance can you do that? What's the rule?
Matthew H. Birenbaum - Chief Investment Officer
I think six months.
Richard Charles Anderson - Mizuho Securities USA, Inc.
Okay. All right.
Thank you.
Operator
We'll take our next question form Ivy Zelman with Zelman & Associates.
Ivy Lynne Zelman - Zelman Partners LLC
Good afternoon. Great results, guys.
Thank you for taking my question. As it relates to your portfolio and your concentration is more suburban as well as Class B, and you think about the inventories, how tight they are for resale and the benefit that your tenants may not be able to find something even if they want to move out or afford it or get mortgage financing and some of the challenges, how do you think about, going forward, some of the dynamics that incrementally on the for-sale side that might loosen up or more inventory will come?
And in which markets are you arguably the most vulnerable or may see more pressure for move-out to buy within your footprint? Just first question, and then I have a couple more to follow up.
Thank you.
Sean J. Breslin - Chief Operating Officer
Yeah. Ivy, just a general commentary on that trend maybe, I means move-outs to home purchase has remained well below historical averages for essentially this entire cycle.
It is only 11% this quarter as an example, which is down about 150 basis points year-over-year. And typically where we're probably most sensitive to it in terms of either existing assets or new opportunities is in those markets where home prices are somewhat more affordable, which would typically be Seattle and the Mid-Atlantic, maybe a little bit in Central Jersey.
And based on everything that we see, production is certainly starting to increase some, but it remains well below just sort of structural demand given the level of household formations that are expected, which you know quite better than all of us. So in terms of near-term pressure, I don't think that's likely to be a real issue for us based on what we know today.
Ivy Lynne Zelman - Zelman Partners LLC
Got it. Thank you for that.
There is not a particular market that stands out as one, I mean certainly a market like Queens or New Jersey, those markets, nothing stands out incrementally within the portfolio, the 11% is pretty consistent across the board in terms of the move out to buy?
Sean J. Breslin - Chief Operating Officer
No, it does move around by market. As I mentioned, those two markets, Mid-Atlantic and Seattle and then New England tend to be at the higher end of the range, as compared to New York, Southern Cal, Northern Cal, very expensive markets, tends to be quite low.
The only market that basically was at its long-term average at one point last year was New England, which was about 20%, 21%. It's drifted down since that time.
So at this point, every market is running well below its long-term average.
Ivy Lynne Zelman - Zelman Partners LLC
Got it. And if I may ask one more follow-up as it relates to supply in the markets where you seem to be better positioned that you're not in, the New York sort of tougher areas where all the supply is being delivered.
What historically has the trickle-down effect been into Class B assets where you're seeing rents under pressure, or more concessions being offered in Class A? Can you go back historically and look at what the impact has been, if any, in the Class B suburban or within the urban Class B?
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Ivy, this is Tim. Certainly, whenever there's any supply introduced into a market, it's going to have some impact on all rental housing.
And I sort of think of it as sort of concentric circles, if you will. So, the stuff that's newer, more recently delivered is kind of right in bull's eye?
And as you kind of go down the price, the price ladder, they're obviously less impacted. And you'll – I mean, I think right now in our portfolio we're seeing – just to give you an example, I think we're seeing Class B roughly outperforming Class A by over 100 basis points, 150 basis points in terms of rent growth.
So, it's probably more significant even in the sub markets that are experiencing a lot of supply.
Ivy Lynne Zelman - Zelman Partners LLC
Got it. Well, thank you.
Good luck, guys. I appreciate you taking the question.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Thanks.
Operator
We'll take our next question from Drew Babin with Robert W. Baird & Company.
Drew T. Babin - Robert W. Baird & Co., Inc. (Broker)
Good afternoon. I was hoping to take the discussion of the Bay area, a little deeper and talk about specific towns, specific areas on whether it'd be urban versus suburban, Class A versus Class B, and can you talk about which areas are most impacted by new supply, and which are most impacted by any marginal slackening of demand?
Sean J. Breslin - Chief Operating Officer
Yeah, sure, Drew, this is Sean. First, maybe to set some context for Northern California, when we provided guidance earlier this year, and Tim alluded to it on today's prepared remarks you know for the call as well, we did have an expectation that given the increase in supply across the region, which is basically around 3% today as compared to 1.5% last year, combined with a somewhat softening in demand.
If you remember, at this point last year job growth across the Bay Area was running around 4% at a pretty blistering pace, as compared to about 2% today that we would see softening in performance throughout the year and that's pretty much on track, as I mentioned earlier. We are basically on budget in that market.
In terms of the performance of the specific submarkets where you are seeing stronger and weaker results what I would say is, in general, more value-oriented assets are outperforming the higher-end assets across the footprint, the footprint being the Bay Area region overall. In terms of specific submarkets, San Francisco, that supply is pretty much Mission Bay kind of the submarket right there that tends to be a little bit weaker right now.
Our assets, the value-oriented assets, Daly City, Pacifica, (52:43) they're all outperforming versus the higher end A assets Mission Bay and SoMa is underperforming. San Jose, the supply is North East San Jose a little bit of South San Jose and then it stretches up really into Mountain View as well in terms of supply.
And then, on East Bay, there is not a whole lot of supply really in the East Bay. You have a little bit in Dublin and Pleasanton, it's a product coming online up towards Public Market (53:10), Berkeley in that area, but it's de minimis relative to what you're seeing in San Francisco and San Jose.
So, hopefully that provides some context where the supply is coming online.
Drew T. Babin - Robert W. Baird & Co., Inc. (Broker)
That's helpful. Thank you.
Sean J. Breslin - Chief Operating Officer
Yes.
Operator
We'll go next to Tayo Okusanya with Jefferies.
Omotayo Tejumade Okusanya - Jefferies LLC
Hi, guys. Good afternoon.
I did join the call a little late. So, I apologize, but at any point have you addressed updated guidance for 2016 given first quarter results and your initial take on what 2Q could look like?
Kevin P. O'Shea - Chief Financial Officer
Sure Tayo, this is Kevin. As you may recall, we historically do not provide updated guidance for the full year on our first quarter call.
We provide some initial outlook obviously for our fourth quarter call in January, and then we provide a fulsome mid-year update after our – in connection with our second quarter call, so that's the plan. So, we don't have a further update particularly given that we've got the leasing season in front of us and we're only a few months from having done a full budget.
So, no new news on that front. This was the first quarter that we provided guidance on the second quarter.
As you can see from our release, the midpoint of our guidance for NAREIT FFO is $2.10 per share, and our core FFO is $2 per share. So, that's – and then in terms of what we did in the first quarter as you know from our release, we beat our initial expectation by $0.06, which is probably the largest beat on our expectations in the quarterly basis in recent memory.
So, quite strong performance with about probably $0.04 of that $0.06 beat likely to be permanent, and $0.02 likely to reverse at some point over the course of the year.
Omotayo Tejumade Okusanya - Jefferies LLC
Okay. That's all very helpful.
Kevin P. O'Shea - Chief Financial Officer
Is that helpful, Tayo?
Omotayo Tejumade Okusanya - Jefferies LLC
Thanks helpful color. Thank you.
Kevin P. O'Shea - Chief Financial Officer
All right.
Operator
And we'll go next to Conor Wagner with Green Street Advisors.
Conor Wagner - Green Street Advisors, LLC
Good afternoon. What is your total expected disposition volume this year to fund development beyond what you're going to use for asset purchases?
Kevin P. O'Shea - Chief Financial Officer
So, Conor, this is Kevin. I guess essentially what you are asking for is what's our net disposition activity.
We don't provide that level of guidance because essentially that would be, as you recall, when we provided our outlook for 2016, we indicated that we anticipated sourcing external capital of about $1.1 billion.
Conor Wagner - Green Street Advisors, LLC
Yes.
Kevin P. O'Shea - Chief Financial Officer
And at the time, we indicated that that would likely come through unsecured debt and asset sales with unsecured debt hopefully and likely comprising the majority of that $1.1 billion. So really, it's the $1.1 billion less whatever we do in unsecured debt that would represent the net disposition activity.
But it certainly represents a minority of that $1.1 billion. In terms of what we've done so far, as you can see, essentially, the acquisitions that we completed in the first quarter were basically funded through fund and wholly-owned asset sales and the assumed debt in Hoboken.
So, going forward for the balance of the year, we expect to source still about $1.1 billion. And again, the expectation is predominantly in the form of unsecured debt with the balance through net disposition activity.
Conor Wagner - Green Street Advisors, LLC
Thank you. And then, on East 96th, is this indicative of a more competitive land environment, having to doing a deal like this?
Matthew H. Birenbaum - Chief Investment Officer
Hey, Conor. It's Matt.
Actually, we've been working on that deal for three years already. So I would say, it's indicative in the sense that we've said for a while now that doing straight up land deals in New York is very, very difficult at today's economics.
So, if we were to source new opportunities, it would more likely be deals like this. But I wouldn't say that – we are generally in the market for these types of opportunities, they are infrequent and they are complex and they tend to take a lot of time to get done.
But there are opportunities that we sought throughout different points in the cycle over the years.
Conor Wagner - Green Street Advisors, LLC
And given the lengthy process both getting to this point and then to actually getting the project started, could you walk away from this deal in two years if after the approval process rents have moved or in the same way that you option other pieces of land and you have the ability to walk away, could you walk away from this deal?
Matthew H. Birenbaum - Chief Investment Officer
I don't want to get into too much of the specifics. There is still a lot to be resolved, but suffice it to say that there are a lot – there is a fair amount of flexibility on all sides.
Conor Wagner - Green Street Advisors, LLC
Okay. And will there be an affordable component on the units?
Matthew H. Birenbaum - Chief Investment Officer
Yeah. This is mixed income deal, it is not subject – there is no 421-a program in New York today, but because it's a public-private deal, essentially we'll be doing a private or synthetic 421-a and that's part of the negotiations and the discussions we're having with the ECS in terms of the levels, the amount, the debt, the subsidy and so on.
So, more to come.
Conor Wagner - Green Street Advisors, LLC
Okay. Then just last one.
What level of capital is at risk on this deal currently?
Matthew H. Birenbaum - Chief Investment Officer
Yeah. It's pretty de minimis at this current point in time.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
It's legal fees and a little bit of planning at this point in time, it's not much.
Conor Wagner - Green Street Advisors, LLC
Great. Thank you very much.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
You're welcome.
Operator
We'll take our next question from Greg Van Winkle with Morgan Stanley.
Gregory A. Van Winkle - Morgan Stanley & Co. LLC
Hey, guys. You just mentioned that $0.02 of a beat in 1Q 2016 is likely to reverse over the course of the year.
Can you just elaborate on what you meant by that. Is that because you've got lower expectation for New York and San Fran over the balance of the year?
Just help me understand that comment?
Kevin P. O'Shea - Chief Financial Officer
Greg, this is Kevin. To be clear, we're not providing guidance through that set of comments.
So, I was just confirming that of the $0.06 that we beat our initial expectations in the first quarter, $0.04 likely appears to be permanent and $0.02 is likely to reverse in the balance of the year. So, to give you an example of that, we received kind of a $0.01 positive variance in the first quarter from a tax rebate that we received in March that we had budgeted to receive in April.
So, that $0.01 will reverse in the current month. So, that's an example of it.
The other $0.01 was related to redevelopment OpEx, which was largely due to slight delays in start of some renovation programs that we still expect to start. So, that will probably reverse ratably over the course of the next three quarters.
Gregory A. Van Winkle - Morgan Stanley & Co. LLC
Okay. I see.
Thanks for clearing that up. And then you talked about seeing some acquisition opportunities right now and that the big driver of that is there's a lot of quantity of deals coming to market.
I'm curious also if you're seeing any change in the kind of pricing or private capital is willing to pay or how many bids that are out there?
Matthew H. Birenbaum - Chief Investment Officer
This is Matt. I guess I'll speak to that one a little bit.
I would say not yet, we are also marketing a fair number of assets, as well as in the hunt on buying assets. So, generally speaking, there is still a lot of interest, a lot of activity.
Again, on the buy-side, we see a slight wrinkle in one deal that may draw less interest than others because of some profile of the deal or structure that – we view that as a little bit of an opportunity and in some cases that has worked to our advantage. But generally speaking, there might be a little bit less interest in some deals if they are kind of tertiary submarket locations, but broadly speaking there's still a lot of demand, a lot of people looking to buy property right now.
Gregory A. Van Winkle - Morgan Stanley & Co. LLC
Okay. Great.
And then, last one here. I'm just curious on what you are seeing in terms of rent to income ratios in your portfolio relative to what those look like historically and just how much of a concern pure price fatigue is becoming or if you're seeing any kind of meaningful uptick already and move out to the rent in any of your markets?
Sean J. Breslin - Chief Operating Officer
Yeah, Greg, it's Sean. Rent to income ratios, they are still running around 22%.
It's been away for couple of years now and it's at the higher end of the range from an historical perspective, but has remained relatively constant. So one thing we have said is that, we continue to expect wage growth to help support rent growth going forward, and we've seen that so far beating last year in particular and our expectation for this year.
So overall I think we're in a pretty good shape. In terms of move outs to the rent increases, it's down about a 100 basis points last year, submarkets were down more than others, but in general, we're comfortable with where we are.
Gregory A. Van Winkle - Morgan Stanley & Co. LLC
Okay. Great.
Thank you, guys.
Sean J. Breslin - Chief Operating Officer
Yeah.
Operator
We'll go next to Wes Golladay with RBC Capital Markets.
Wes Golladay - RBC Capital Markets LLC
Hello, guys. A quick question on what you're seeing as far as traffic goes.
We had a difficult start to the year with the equity markets, a lot of volatility, a lot of recession periods. I imagine some companies might have been holding back on their hiring decisions, things look a little bit better now.
Don't know if you've seen an uptick in traffic, maybe a leading indicator of incremental hiring. What are you seeing at the ground level?
Sean J. Breslin - Chief Operating Officer
Yeah, Wes, this is Sean. First, in terms of commentary about traffic, one thing to be cautious about on traffic is we start to influence that number as well, depending on our level of availability we may be driving marketing harder or softer to generate traffic.
So, it is a bit of a manufactured number in terms of – it's based on not only organic demand, but how much of that demand we're trying to capture. In terms of overall traffic, though it was up about 3% as I recall year-over-year in the first quarter.
And if you looked at it, per available apartment home, I think it was down about a 100 basis points. So, not a significant movement one way or another and I would just be careful, about how are you thinking about using that information that's all.
Wes Golladay - RBC Capital Markets LLC
Okay. And there's no I guess big difference in seasonality between the months of January, February, or March probably, but it sounds like you don't even want to use that number.
Looking at the development pipeline, how much of that pipeline consists of the complex deals where maybe Avalon and maybe a few others can compete and take on a deal like the one you did on 96th East versus just a plain vanilla development?
Matthew H. Birenbaum - Chief Investment Officer
Listen, this is Matt. I guess, in terms of – I think a lot of them are deals that probably are more well suited to our competitive advantages than others, not necessarily because of the complexity.
A lot of those are deals in New Jersey, where we have an ability to crack entitlement that a lot of others don't for example. So, they all have a different story.
Therefore, in suburban Boston too where we have an incredibly deep franchise that has been doing that for years. So, a lot of them are those types of deals.
We do have a couple of deals, which are mixed used deals in our pipeline, including one that we expect to start here later this year in Northern California and Emeryville, which also we think plays to our strength – not just similar to the deal we did with Eden here in Northern Virginia, Mosaic or Assembly Row up in Boston which we did with Federal. So, we have a few deals like that in the pipeline, but it's really, it's pretty diverse, it's diverse by region, it's diverse by deal type.
They all have different reasons why kind of from an economic point of view we thought that we have some kind of an advantage there.
Wes Golladay - RBC Capital Markets LLC
Okay. Thanks for taking the question.
Operator
And with no further questions in queue, I'd like to turn the call back to Tim Naughton for any closing remarks.
Timothy J. Naughton - Chairman, President & Chief Executive Officer
Well, thank you, Aaron. No closing remarks on this, other than to say we look forward to seeing you all in NAREIT in June.
Have a good day.
Operator
This does conclude today's conference. We thank you for your participation.
You may now disconnect.