May 1, 2013
Executives
Marty McKenna - Spokeman David J. Neithercut - Chief Executive Officer, President, Trustee, Member of Executive Committee, and Member of Pricing Committee David S.
Santee - Chief Operating Officer Mark J. Parrell - Chief Financial Officer and Executive Vice President
Analysts
David Toti - Cantor Fitzgerald & Co., Research Division Nicholas Joseph - Citigroup Inc, Research Division Robert Stevenson - Macquarie Research Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Steve Sakwa - ISI Group Inc., Research Division Jana Galan - BofA Merrill Lynch, Research Division Ross T. Nussbaum - UBS Investment Bank, Research Division Omotayo T.
Okusanya - Jefferies & Company, Inc., Research Division Michael J. Salinsky - RBC Capital Markets, LLC, Research Division David Harris - Imperial Capital, LLC, Research Division Richard C.
Anderson - BMO Capital Markets U.S. Michael Bilerman - Citigroup Inc, Research Division
Operator
Ladies and gentlemen, thank you for standing by. Welcome to the Equity Residential First Quarter 2013 Earnings Conference Call and Webcast.
[Operator Instructions] This conference is being recorded today, Wednesday, May 1, 2013. I would now like to turn the call over to Marty McKenna.
Please go ahead.
Marty McKenna
Thank you. Good morning, and thank you for joining us to discuss Equity Residential's first quarter 2013 results.
Our featured speakers today are David Neithercut, our President and CEO; David Santee, our Chief Operating Officer; and Mark Parrell, our Chief Financial Officer. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities law.
These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events.
And now, I'll turn it over to David Neithercut.
David J. Neithercut
Thank you, Marty. Good morning, everyone.
Thanks for joining us for our call today. As reported in our earnings release last night, the first quarter of 2013 was a very busy, very exciting and certainly a historic period for Equity Residential.
On February 27, along with our partners at AvalonBay, we closed on the $16 billion acquisition of Archstone. Equity Residential's $9 billion share of this purchase included 22,000 existing apartment units, 6 assets in various stages of development or lease-up and 14 undeveloped land parcels.
Within minutes of the closing, 100% of the Archstone assets were live on our website, equityapartments.com, and Archstone's website was directing all traffic from the assets we acquired to equityapartments.com. Within hours of closing, every acquired property was fully operational on our platform, and normal activity was taking place such as rent payments, service requests, lease renewals, new leases, e-leads, et cetera.
The following morning, our LRO pricing system provided pricing for every newly-acquired unit. We've received nearly 3,000 online rental payments totaling nearly $5 million.
We've received 5,600 direct debit payments totaling $13 million and 250 service requests, and had certainly achieved our goal of immediate and seamless resident and prospect transfer. In addition, during the quarter, we restructured $2.9 billion of Archstone's secured debt.
We arranged $3.25 billion of new unsecured credit facilities with our bank group. We sold $3 billion of noncore assets and redeployed much of those proceeds in what we have been told is one of the single, largest 1031 tax-deferred exchanges in history.
And we were happy to welcome 700 new professionals to the Equity Residential family. And if that was not enough, we also delivered same-store revenue growth in the first quarter 2013 of 5.1%.
We also delivered our 24th consecutive quarter of same-store expense growth of less than 3% and NOI growth for the quarter of 6.3%, all which were very much in line with our expectations for the quarter. Now I could go on and on for quite some time of how proud we all are of what's been accomplished this past quarter, of the incredible effort and hard work of so many people across the enterprise including our new colleagues that have joined the Equity team from Archstone, of how pleased we are to have completed the total transformation of our portfolio several years ahead of plan and of how excited we are now to own a portfolio of some of the finest assets in gateway cities across the country that should deliver the highest risk-adjusted returns over the long term.
We've got a lot of ground to cover today. So before I turn the call over to David Santee, our newly-appointed Chief Operating Officer, I want to just take a minute to thank the people of Equity Residential, those of you who have been with us for a while, those that have recently joined us and those who have recently departed -- for all that you've done over the last year and the last quarter to make this all happen.
Your commitment, your dedication, your spirit and your love for what you do made all this possible. And it's an honor to be your CEO and to work with you all each and every day.
So I'm now very happy to turn the call over to David who will share with you what we're seeing on the ground across our markets today.
David S. Santee
Thank you, David. Since we last spoke, our business has performed exactly as expected on both revenue and expense during the most active quarter in our history.
For the quarter, same-store revenue for 90,350 apartments was 5.1%, driven by continued strength in apartment fundamentals and our execution around the 4 key revenue drivers, which are physical occupancy, resident turnover, base rental rates on new leases and renewal pricing. Now unlike Q1 of last year, we entered 2013 from a position of greater strength, with occupancy averaging a solid 95% versus 94.7% in Q1 of last year.
Improved sales metrics for the quarter, which are Internet leads, foot traffic and applications were all up, producing an increase in move-ins of 3% year-over-year, giving us continued confidence with our renewal program that I'll discuss in a moment. Resident turnover quarter-over-quarter on the surface increased 20 basis points.
However, looking behind the curtain on this metric, we saw a 14% increase in same-community apartment transfers as residents trade both up and down to accommodate changing life situations and continue to find ways to adapt to affordability concerns. Even though our turnover metric is up, we were able to retain more residents for the quarter as the increased same-property transfers more than accounted for the 20 basis points increase in turnover.
And just to add additional color, home buying inched up for the quarter, increasing 40 basis points from 11.7% of move-outs to 12.1% of move-outs. But in absolute terms, it was only a net increase of 51 more home buyers over 2012.
Most important was the continued decline in move-outs due to rent increase that we saw begin in early Q4 and fell from 15.1% for Q1 of 2012 to 13.3% in Q1 of this year. As we have cycled through the 2 or 3 years of double-digit rent increases in many of our core markets, our new residents now find high single-digit renewal increases more palatable.
As expected, base rent pricing for the quarter followed the traditional seasonal pattern of moderation. However, our strong occupancy and low exposure that we see today sets the stage for base rents to move slightly above 4% as demand begins to accelerate.
And last, but certainly not least, our renewals. For the quarter, we achieved a 5.7% average renewal increase, slightly above our expectations.
Looking forward, we have quoted renewal increases for May, June and July in excess of 7% and are currently achieving a 5.3% for May, 5.1% for June and 5.2% for July. Residents with smaller increases typically sign immediately, and as a result the monthly achieved numbers have historically improved as we move into the month of expiration.
All in all, we are right where we expected to be. San Francisco, Denver and Seattle continue to be our top 3 markets.
And to date, we have seen little direct impact from the new supply in Seattle or North San Jose. Washington, D.C.
continues to meet our expectations with solid occupancy and moderating rent growth in some submarkets. The overall fear of sequestration and its unknown impact on the D.C.
economy, in addition to the new supply, has caused many multifamily operators, as expected, to hunker down and buy occupancy, putting a damper on any potential near-term pricing power. It's important to note, however, that all but one of our same-store D.C.
assets are still experiencing positive revenue growth as of May. Los Angeles appears to have finally realized sustainable traction with outsized growth in the urban core and more moderate growth as you move north and east into the Inland Empire.
Orange County is on the same track of above-average growth with San Diego bringing up the rear with a 3.6% year-over-year revenue growth. New York remains solid as continued economic diversification in areas of tech and new media from financial services, coupled with little to no supply, create a very robust demand for quality apartments.
On the expense side, it's business as usual. As David mentioned, our 24th consecutive quarter of sub-3% expense growth is a testament to the transparency and power of our platform process, and more importantly, our people.
The 3 drivers of expense making up 68% of all expenses are real estate tax, payroll and utilities and all are expected to meet our full year expectations. However, recent speculative run-ups in the natural gas market have pressured both gas expense and electric costs during the past couple of months.
Only recently we have seen them fall back to expected levels, but they still meet our forecast. Real estate taxes, our largest expense, is on target at 6.5%.
More importantly, as we have exited many Southeast markets, we have also reduced future volatility in our ability to forecast full year taxes. Before the Archstone acquisition and dispositions, 80% of all real estate tax dollars were unknown until the end of Q3.
Today, that number is 40%, adding a higher degree of predictability to overall expense growth. All other account groupings are well within our expectations, and we expect to see continued expense optimization in our same-store portfolio as a result of integrating the Archstone assets.
As for the integration, everything is going extremely well. As David mentioned, many months and hours of planning paid off with a swift and seamless transition to our platform.
And equally rewarding was the feedback we received from our new residents, but more importantly, our new associates regarding the superior enterprise platform and process that our team has spent the last 7 years designing and building. Our new associates continue to assimilate and remain focused on the key drivers of our business.
Occupancy as of today for the Archstone stabilized assets is a solid 96.1%. Revenue is tracking in line with our same-store portfolio with an estimate of 5.3% revenue growth for the quarter and is slightly ahead of our original underwriting done almost a year ago.
Expenses to-date are substantially below our budget and far exceeding our expectations as we continue to embed our procurement tactic and spending philosophy in every aspect of the business. We couldn't be more pleased with both the financial results and positive outlook from our new Archstone associates and look forward to continued success and exceptional results.
David J. Neithercut
Great. Thanks very much, David.
Let me take a minute now to talk a little bit about the portfolio and what we sold during the quarter, what we expect to sell over the remainder of the year and what we think we'll look like on the 1st of January 2014. So as noted in the release last night, during the quarter, we sold more than 18,000 apartment units for nearly $3 billion at a weighted average cap rate of 6% and a price per unit of slightly more than $161,000.
These sales and volume were right on top of our original expectations when we were finalizing the Archstone deal late last year. Now as we indicated when we announced the deal in late November, the disposition of assets in exit markets, as well as nonstrategic assets in core markets were extremely integral to the overall deal.
Because not only did the acquisition of 60% of Archstone give us access to a huge supply of assets that fit hand and glove with our existing portfolio, but it also represented the opportunity to recycle capital out of the markets in assets that we had no desire to own for the longer term. As we also discussed in our last call, it was our original expectation November of last year that we would sell our properties more ratably over the current year, but thanks to the work that had been done by our team in advance of the announcement and the continued strong demand by buyers to acquire these assets, we were able to accelerate the disposition timeline and significantly reduced the execution risk of the Archstone acquisition, though that would come at the cost of more FFO dilution for the year than originally expected.
In addition to the $3 billion of dispositions in the first quarter, thus far in the second quarter, we have already closed the sale of 8 additional assets for $374 million at a weighted average cap rate of 6%. We currently expect to sell another $400 million to $500 million yet this quarter and plan on selling another $200 million in the second half of the year, bringing the total amount of disposition activity of legacy EQR assets for the full year to $4 billion.
On Page 8 of last night's press release, we show the changes in our portfolio between the end of last year and the end of the first quarter of this year. And during which time, we have increased the amount of our NOI coming from our core markets by 6 percentage points to 92% and have increased our average rental rate in those markets by 9.5% to $2,126 per unit.
You can also see that we reduced the number of units we own in Atlanta, Phoenix and Orlando by nearly 1/2 and in Jacksonville by nearly 75%. By the end of the year, we expect to have 90% of our operating net income coming from the noted core markets, to have exited Tacoma and Jacksonville completely and to have essentially completed our exit from both Phoenix and Atlanta, but for a handful of joint venture assets that will be left behind that will require a bit more time and structure.
The disclosure of our development business in last night's earnings release shows $1.4 billion of active development currently underway. That number increased during the quarter with the start of construction on our project at 170 Amsterdam on Manhattan's Upper West Side, a terrific site that we tied up in early 2011 and where we will build 237 units on a long-term ground lease.
Our development activity also increased during the last quarter with the addition of 6 Archstone assets, representing $400 million in total development costs. Of these new additions from Archstone, our current expectation is that only the Marina del Rey project is a long-term hold and we would expect to sell the others following lease-up and stabilization.
As part of the Archstone transaction, we also acquired 14 new land sites. Of these, we will hold 6 for future development -- 1 land site in Washington D.C.
and 5 in San Francisco, 4 of which are in San Francisco proper and 1 which is in the Mid-Peninsula. We will likely sell the remaining 8 land sites -- 3 in Arizona, 1 in San Diego, 2 in South Florida and 2 in Maryland about 30 miles south of Washington D.C.
With the Archstone land sites that we intend to keep, we now own a total of 17 land sites and control 2 others, all in our core markets, representing a pipeline of about 6,200 units in great locations in Washington, D.C., San Francisco, Seattle and Southern California with a development cost of $2.5 billion. In addition to the $130 million of projects already started this year, we have the potential to begin construction yet this year on as much as another $1 billion of development.
We will address all potential development starts on a case-by-case basis with a close eye on appropriate sources of funding. But at the present time, we expect to begin another $500 million to $700 million of development, bringing our total starts for the year to as much as $800 million, adding great assets to our portfolio in key locations and continuing to create value for our shareholders through our development business.
So I'll now turn the call over to Mark Parrell.
Mark J. Parrell
Thank you, David. I want to take a few minutes this morning to review our Normalized FFO guidance for the second quarter.
I would also like to give you some color on our recent capital markets activity and discuss how we expect our balance sheet, credit metrics and liquidity to look at year end after the integration of the Archstone assets and the disposition of $4 billion of assets from our portfolio. I will also summarize some changes we made this quarter to our income statement and press release supplement to improve transparency and add clarity regarding the Archstone-related transaction costs that we are incurring and the current and future configuration of our portfolio.
So let's talk about Normalized FFO a bit. This quarter we had a pretty large difference between FFO as defined by NAREIT and Normalized FFO, and we also had substantially lower NAREIT-defined FFO in the first quarter than we had expected in our February guidance.
We do show you on Page 24 of the release a chart that shows the main adjustment items. I want to quickly summarize the 3 main drivers.
First, there were $71 million of prepayment penalties incurred in the first quarter and these were incurred about one quarter earlier than expected and they were responsible for the lower NAREIT FFO in the first quarter. We also had $46 million of merger costs, which were disclosed on the loss from investments in unconsolidated entities due to merger expenses line item, a very catchy name, and I'm going to talk about that line in a moment and give you some more color.
And that's just primarily our share of the Archstone employee severance costs. We also had $19 million of merger costs, which we disclose on the new merger expenses line, which I'll also explain in a moment and these were mostly investment banking, legal and accounting fees.
Both of these types of merger costs were included in our NAREIT-defined FFO guidance number for the first quarter and both were about what we had expected. For the second quarter of 2013, we have provided a Normalized FFO guidance range of $0.67 per share to $0.71 per share.
The press release contained a description of the items that bridge the difference between our first quarter 2013 Normalized FFO of $0.64 per share and the midpoint of our second quarter 2013 range. Now on to the capital markets side of the house.
Eliminating the funding risk from the Archstone transaction as quickly and efficiently as possible has been a major priority for us. As David Neithercut just described, we are well along to selling $4 billion in non-core EQR assets, in addition to the over $500 million in Archstone assets that were sold before we closed on the Archstone acquisition.
This success also allowed us to more quickly address 2 other important balance sheet goals: reducing the large amount of secured debt that we have post-Archstone; and reducing the elevated level of 2017 maturities. I'm happy to report that we have had great progress on both these fronts.
At the close of the Archstone acquisition, we assumed about $2.9 billion in secured debt. This was down from our expectation at the time of the February earnings call because we thought we would assume a $500 million Archstone secured debt pool that matured in 2017 at acquisition and then repay it in April 2013.
Because of our accelerated dispositions, we were able to repay that pool in the first quarter at the time of the Archstone closing. In the first quarter, we also took another step to address the elevated secured debt in 2017 debt maturity levels caused by Archstone.
We decided to prepay $543 million secured debt pool that matures in 2017 and was originated by EQR several years ago. This action both improved our maturity schedule by lowering our 2017 maturity tower and reduced the elevated level of our secured debt.
As a result, we incurred prepayment penalties in the first quarter, which our February guidance anticipated would be incurred in the second quarter. Also in April, we accessed the unsecured bond market, raising $500 million in a massively-oversubscribed unsecured notes offering.
These notes mature in 2023, and have a coupon of 3% and an all-in effective rate of 4%, including the impact of certain fees and the termination of our interest rate hedges that related to that debt. We are very pleased with the strong demand for our paper.
We continue to think it is wise to match the long duration of our expected ownership period of the Archstone assets with a set of liabilities that have a similarly-long duration. We are studying whether to extend the maturity of a portion of the $1.2 billion in Archstone debt that matures in 2017 that we assumed.
By June 2013, we must decide whether to take advantage of a favorable extension option offered to us by the secured lender. However, lately, secured debt spreads have widened considerably while unsecured rates have declined.
This secured debt spread widening offsets a fair amount of the benefit of the favorable extension option. We will be thoughtful in balancing the advantages and disadvantages of exercising this option against using cash on hand to retire some of this debt without refinancing it or possibly leaving 2017 maturities alone for now.
All of these actions on the capital market side, combined with our dispositions, leave us pleased with what our balance sheet, debt maturity schedule and liquidity will look like at the end of 2013. Measured at year-end 2013, we would expect to cover our fixed charges at about 2.6x, to have a debt-to-undepreciated book value of assets ratio of about 40% and to have a net debt-to-EBITDA ratio of slightly over 7.0x.
At year end, we expect our $2.5 billion revolving line of credit to be undrawn, the $750 million term loan to be fully outstanding and have approximately $500 million of cash on the balance sheet. Our current guidance assumes development spending in 2013 of only about $500 million, which has been factored into all the metrics I just discussed.
And I do want to point out that $500 million includes the acceleration that David Neithercut referred to in our pipeline. Most of that additional spending on those starts will occur in 2014 and '15.
As David also mentioned, besides accelerating the -- we don't see this as having any real impact on our ratios or funding in future years, given the relatively small percentage of our asset base that's currently tied up in our development business, along with our ability to use free cash flow and asset sales in 2014 and thereafter to generate $500 million or more of investable capital. Now just a couple of changes on the accounting and disclosure side I want to go over.
First on Page 8 of the release, we have expanded our portfolio summary to show the portfolio at both December 31, 2012, and in March 31, 2013. We have a lot of transaction activity going on and we thought this might be helpful, to show you the progress of our portfolio transformation and help you track our dispositions.
We combined the Maryland and Northern Virginia D.C. submarkets that we previously disclosed separately, into the Washington, D.C.
market and we removed the Tacoma submarket, which we'll be exiting shortly, from our Seattle market. Second, we wanted to show as clearly as possible the transaction costs we incurred and expect to incur related to the Archstone transaction.
To that end, we added 2 lines to our income statement: merger expenses; and the loss from investments in unconsolidated entities due to merger expenses lines. The merger expenses lines are costs we incurred directly here at Equity Residential in acquiring Archstone, and those include investment banking, legal and accounting costs.
Merger expenses in the first quarter totaled $19 million and we do not expect this line item to have much activity during the remainder of 2013. The new loss from investments in unconsolidated entities due to merger expenses line also contains Archstone-related costs, but these costs were incurred by the joint ventures that we created with AvalonBay to assume employment-related expenses like severance and to pay the salaries for the remaining Archstone employees that are helping us with the wind-down process.
These JVs also hold disposition assets like Germany and they assume certain preferred stock interests that third parties hold in Archstone subsidiaries. So on this line, we will pick up our 60% proportional share of all our costs from those things.
We reported Archstone-related acquisition cost on this line of $46 million, almost all of which was severance-related in the quarter. We expect to incur about another $11 million in these costs in 2013 for a total Equity Residential 2013 cost here of $57 million.
I wish I could have combined this line with the merger expenses line, but the rules do not allow us to do so. On Page 26 of the release, we give specific guidance on both these line items.
Neither merger expenses nor losses from investments in unconsolidated entities due to merger expenses impact our Normalized FFO numbers. I'm also pleased to report that at this point, we believe that we will incur materially less in Archstone transaction costs than the $180 million that we estimated at the time of the equity raise back in November 2012.
We now expect to incur about $100 million in transaction costs, mostly because we have avoided substantially all of the transfer taxes and most of the tax protection costs that we thought we would incur. Finally, we have changed our prepayment guidance on Page 26, so it equals the prepayment penalties we have incurred so far this year.
This, along with some expected land sales, also caused us to increase the midpoint of our NAREIT-defined FFO range by $0.11 for the year. Both land sales and prepayment penalties do not impact our Normalized FFO numbers.
As I previously mentioned, we are currently reviewing our debt restructuring options for the remainder of the year and we will update these numbers as part of our second quarter earnings call in July. Now, I'm going to turn the call back over to David Neithercut.
David J. Neithercut
All right. Thank you, Mark.
So just in closing, let me note that last weekend, the lockup expired on the stock that we'd issued Lehman as currency for our share of the Archstone purchase and the 34.5 million shares held by Lehman represent about 9.2% of our total shares in units currently outstanding. I've been asked a lot of questions about Lehman's intention with respect to these shares.
And while I wish I had all the answers for the investment community on this particular matter, I'm sorry, but I just don't. These shares are the responsibility of the parties with whom we negotiated the overall transaction.
They're very smart people that are under no pressure to sell any or all of our shares within any certain timeline. And indeed, if Archstone going public was, in fact, an option for them, they were clearly prepared to hold stock for quite some time and must have had the ability to do so under the terms of emergence from bankruptcy last year.
Our understanding is that they have ample cash to meet any pending distributions to their creditors from the multiple billion dollars of cash paid as part of our closing and that realized from monetizing other assets. But they will have to monetize or position our stock at some point in the future and we're obligated to help them to do that if asked.
We recognize the Street would like Lehman out of our stock. And believe me, we would like Lehman out of our stock and Lehman will ultimately get out, but they're in no hurry to do so because they have the necessary flexibility to exit in a fashion that will maximize the return to their creditors and they intend to do just that.
So all that being said, we do know that the underlying value of our company is not dependent on who owns those shares. There's really not a whole lot more we can say about that, and so we'll be happy to open the call to questions.
Operator
[Operator Instructions] Our first question comes from the line of David Toti with Cantor Fitzgerald.
David Toti - Cantor Fitzgerald & Co., Research Division
Just a question on development and I get the sense that there's an increasing interest on your part relative to expanding the pipeline, adding to the land bank. And this seems to be occurring at the same time that we're seeing higher levels of supply and other sort of entrants into the supply market.
What are your thoughts around sort of beginning to accelerate product delivery at this point in the cycle?
David J. Neithercut
Well, I guess, David, I'd tell you that the Archstone assets that we acquired, the land sites that we acquired that we expect to build, are absolutely terrific land sites. As I said, 5 of them are in San Francisco Bay Area, 4 downtown and 1 in the Peninsula.
And we believe that these will be great long-term assets for us. And we just think, frankly, that construction costs could continue to rise from here and we believe if they have the ability to get going on these sooner than later, that's a smart thing to do.
I guess what I'll tell you that while you may see in 2013 and 2014 our development starts increase from what has sort of been our historical levels, I would not expect that to be a new run rate -- having established a new run rate, but rather working through this increased inventory that we have before we might step back into what you've seen us do on an annual basis in the past.
David Toti - Cantor Fitzgerald & Co., Research Division
Okay. And then along those lines, what kind of yields are you thinking about today relative to, let's say, Alexandria versus the New York sites?
And what's the sort of trend in the shadow pipeline relative to the yield expectations?
David J. Neithercut
Well, I guess of the assets that we have in D.C. today, including that which we just finished, we're kind of in the mid-6s on those deals.
And in New York City, thanks I guess in large part to the terrific deal we've got on the deal in Amsterdam that I mentioned, where we think our current yield on current rents would be in the high 6s, we'd be close to about 6% on the 2 deals that we're building now, that on 400 Park Avenue South and our deal on Amsterdam. So we think those are pretty good returns given where our assets trade in that marketplace today oftentimes with a 3 handle.
And certainly, when comparing to the 6% yields that we're selling on our assets in Atlanta, Phoenix, et cetera, we think that's a pretty good trade.
David Toti - Cantor Fitzgerald & Co., Research Division
Okay. And then I just have one quick follow-up and I'll yield the floor.
There's been some discussion here in Manhattan around the resurgence of office conversion to rentals and condominiums. Are you guys involved in anything like that relative to some of the deals you might be looking at?
David J. Neithercut
No, we're not.
Operator
Our next question comes from the line of Nicholas Joseph with Citibank.
Nicholas Joseph - Citigroup Inc, Research Division
David, you mentioned that move-outs to rent being too high is down year-over-year as you replace the departing tenants with new tenants used to paying higher rents. So does this give you more confidence to be able to push renewals even further than you already are?
David S. Santee
Well, I think that's a function more of a market-by-market situation. Obviously, if you go to a D.C.
where rents are moderating, you have a lot of new supply. Pricing power is diminished.
It's hard to push renewals above current market rents. I mean, our historical approach has always been to bring renewals to the current market rents, if not overshoot them a bit.
So it's more of a function of market rents than anything.
Nicholas Joseph - Citigroup Inc, Research Division
Okay. And can you talk about traffic patterns this year relative to historical averages?
David S. Santee
Yes, traffic for the quarter was up about 5% and that's with a minus 1% in January. So we're seeing very good demand.
When you say traffic, I refer to it as foot traffic and that's when people actually walk into our shop. That's great.
That resulted in a 3% increase in applications, which resulted in a 3% increase in move-ins for Q1. And then as far as our website goes, just the activity there, especially as a result of kind of leveraging the Archstone website, has really increased 50%.
I mean, that's what we saw for Q1. So there's definitely no lack of demand, that's for sure.
Nicholas Joseph - Citigroup Inc, Research Division
And does that kind of increase year-over-year was consistent in April as well -- in terms of foot traffic?
David S. Santee
Well, foot traffic, yes. April was a great month for us.
April is, for all intents and purposes, stronger than the first quarter.
Operator
Our next question comes from the line of Rob Stevenson with Macquarie.
Robert Stevenson - Macquarie Research
Can you talk a little bit about the expectations for D.C. over the remainder of the year?
You guys had, relative to some of your peers, I think a stronger first quarter in terms of both occupancy and rental rate. Do you guys expect that to continue or is there basically -- are you hitting it 1 quarter or 2 later than other people and you're just going to -- expecting to start -- in your guidance or your plan for 2013, do you expect to see D.C.
to continue to weaken over the coming quarters?
David S. Santee
Well, I think that remains to be seen how weak D.C. will be.
Certainly, when everyone is concerned and the folks that don't have yield management systems, that don't have visibility into their operations, the first thing they do is build up their occupancy and we see that. We see a lot of our competitors running at 97%, 98% occupancy.
We try to be a little more measured, use the visibility we have, make informed decisions, not run for cover. Our underwriting, I will tell you, we really assumed rents would remain flat for most of the year as far as new leases, but we're seeing -- we sent out 7% renewals for June and July in D.C.
-- granted there will be more of a gap in what we achieve. But when you take getting a 5% on renewal increases and maybe a 1% on new leases, that gives you about a 3% to 4% revenue growth.
Robert Stevenson - Macquarie Research
Are there any markets where you're seeing demonstrably different performance than the others -- in D.C.?
David S. Santee
Well, so when I look at our May billings, there is only one property and we've referenced this property before and that's 425 Mass. That's ground 0 as far as NoMa goes.
You can see 15 cranes from the rooftop, and that really is our only property that has a year-over-year negative revenue growth and current month billing negative revenue growth. Everyone else as far as May year-to-date, May billings relative to last year, is still billing positive.
I would tell you that Boston, Rosslyn, that's doing fine. Pentagon City is doing fine.
So really, I would say it's a general softness pretty much across the whole market.
Robert Stevenson - Macquarie Research
Okay. And then after being in the assets now for a bit, I mean, is there any major deferred maintenance CapEx from the Archstone assets that you guys are going to have to rectify over the rest of the year?
David S. Santee
I would tell you that I have been to most of the properties. There's a lot of CapEx that was in process.
I think they did a reasonable job of maintaining the integrity of the buildings. I think the opportunity is in the interior of the units, the rehab opportunity.
And we are certainly taking advantage of those and will be proceeding with probably 8 to 10 complete interior rehabs.
Mark J. Parrell
Yes, just to add some color. I mean, we have about 1,200 Archstone rehabs we expect to complete this year.
We have 3,600 units, Archstone units, that we've approved rehabs to do and we expect to kind of knock out 1,200 or more each in the next few years. So we have a sense that there's value that can be created there.
David J. Neithercut
And let me just add on the CapEx side, Rob. As we look at CapEx spend on our portfolio this year and the Archstone portfolio, we expect to spend a little bit more on their portfolio on a kind of dollar-per-unit basis.
But I'll tell you that, that amount of spend is well below what we would ordinarily or expect to spend on a new acquisition, on a just one-off acquisition. And so -- and I'll also tell you, it is well below that total amount of spend, sort of a placeholder for CapEx that we had on our numbers when we underwrote the transaction.
So while it may be a little bit more than what we've got at a run rate, it's well below what we normally spend on a new buy and well below the placeholder in our pro formas.
Robert Stevenson - Macquarie Research
What are you guys targeting for 2013 on a per-unit basis just on the maintenance, the sort of FFO adjustment per unit?
Mark J. Parrell
So we have guided you to $1,500 on the same-store side. So if you go to CapEx, that's Page 22 of the release, so that includes everything.
It includes the rehabs because, of course, the rehabs could be maintenance-related or they could be income-producing and incremental, and there's difference of opinion on that. So we lay that out in the same-store pool, about $1,500 a unit.
And then in addition, you'll have what we spend on the Archstone stuff and I think it'll be probably a little higher than $1,500, but not necessarily a lot as David said.
David S. Santee
Yes. And I guess I just would add on that with respect to the Archstone rehabs, we have approved a lot of rehabs.
As Mark's noted, we'll expect to do $1,200 or so. And we're expecting a solid mid-teens return on that incremental capital invested.
Operator
Our next question comes from the line of Alexander Goldfarb with Sandler O'Neill.
Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division
Just a few questions here. First, on the development especially because it looks like if you do $800 million of starts here, the CIP would get up to the $1 billion, $1.5 billion type range, which is pretty healthy for you guys.
Do you have a view on what starts will be this cycle? I mean, clearly, we have material uptick year after a prolonged period of undersupply in the market.
So is your view that we're sort of in a pig in a python right now where there's a sudden surge and then it peters out to a more normalized level? Or is your view that everyone is going to pile into this thing and we're going to go back to levels similar to the '80s?
Mark J. Parrell
Well, I guess, you've asked a question about development nationally and I'll answer your question about what we expect to see in our markets. Yes, so I guess, I would tell you that I think we're seeing development in our markets that had -- could have been built up over several years of no starts for obvious reasons.
So that there was a lot of entitled land ready to go that nothing started on because no access to construction debt, et cetera, et cetera. So I think we are seeing a little bit more than what you'd expect to see in our core markets in a normal run rate.
And again, as I said, we look at this through the product we have, we look at the yields we think we can achieve, some concern about continued rise in construction costs, we think it's a good time to go ahead and move forward with the projects that we have on our balance sheet. As you note about just -- the total amount of construction, a lot of that stuff that's on there will roll off.
And regardless of what we start this year, a lot of that capital won't be spent until next year. So believe me, we're going to keep an eye on it.
We do not expect to operate for multiple years at elevated levels of development. Again, we may have a couple of years up, but our run rate will be more of what you've seen us do in the past.
Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division
Okay. And then a second question is more New York-centric.
Post had some interesting commentary on their call, which makes some sense. I'm curious what you guys are seeing in your portfolio.
As you look at operating, you have uptown, you have sort of Chelsea downtown and Brooklyn. Are you seeing differences in your ability to push rent, tenant turnover, rent levels, et cetera?
Or is despite seemingly that everyone wants to live downtown, the turnover and ability to push rents is sort of the same whether you're uptown, downtown or in Brooklyn?
David J. Neithercut
Well, I'll let David answer that but I'll just sort of note, whatever conclusions you're drawing from Post, I think you're coming from a sample size of 2.
Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division
Correct, correct. Clearly, a smaller sample size, but...
David S. Santee
I guess I would say that we don't see a whole lot of difference no matter where you are. Jersey City, which we -- I guess, we call the suburbs is not as robust.
But Brooklyn, our Brooklyn, our asset did a -- doing a 12. So we don't really see any difference.
And frankly, with the addition of the Archstone assets and the close proximity to our assets, we're able to do a lot more effective cross-selling and we see a lot of residents moving between buildings and what have you. So we're very pleased with what we see in New York.
Mark J. Parrell
Yes. I mean, we reported, Alex, just inside our numbers for New York City and that includes Brooklyn, a 5.9% revenue number.
New Jersey, Northern New Jersey was 5.5%. And everything else, which for us is a small amount of further out suburban, but very small, of around 3%.
So I think those trends are broadly consistent with other reporters who have larger portfolios that are more suburban-focused and that's how you get to an average for us of about a 5.5% revenue number.
Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division
Okay. So from what I hear you saying, it sounds like as you look forward to investing more in the city, you're sort of agnostic whether you're uptown or downtown.
You just view the trend as good across the entire market, not better in any one submarket.
David J. Neithercut
Yes, I think that's the case. I mean, clearly, there might be more desired neighborhoods or markets than others, but they'll be priced accordingly.
Operator
Our next question comes from the line of Steve Sakwa with ISI Group.
Steve Sakwa - ISI Group Inc., Research Division
I guess 2 questions. First, David, it sounded like in your comments that the revenue from Archstone was pretty much tracking as you expected, but that the expense side was materially better on the operating side.
I'm just wondering if you could talk a little bit more about that and how much more is there to go as you kind of move into the second and third quarter?
David S. Santee
Yes. Well, I guess I would say that we did make an adjustment for the first 4 months of acquisition.
We did offer all of the Archstone on-site folks a job and we accounted for that. So -- but in between the time that we made that offer and we did budgets, we're seeing a considerable downsizing from people making decisions to leave and what have you.
And then some of it is just simply timing. But I think, when you look at our overall annualized run rates after this 4-month period, we pretty much underwrote the deal very similar, if not identical, to how we operate our communities.
Steve Sakwa - ISI Group Inc., Research Division
Okay. I guess second question for maybe David Neithercut.
As you kind of look at the arbitrage that is existing because kind of where the public shares trade of many of the multifamily companies and where you can sell high-quality assets, I guess at what level or how do you think about maybe selling more assets and either buying back stock from Lehman or buying back stock in the open market to potentially close that gap or a tax considerations -- just make that a very difficult exercise to execute.
David J. Neithercut
Look, I guess, we've worked very hard to assemble these assets. We think that they are terrific and will create value for us for a long time.
And we're not going to react to just some short-term sort of dislocation for things that aren't under our control. I think we're focused right now on running what we've got and creating as much value as we can and I think the rest of it will sort of sort itself out.
That doesn't mean that aren't times when we might not consider doing what you suggest, Steve, but I just think that there's some short-term dislocation going on that we're not going to overreact to at the moment.
Operator
Our next question comes from the line of Jana Galan with Bank of America Merrill Lynch.
Jana Galan - BofA Merrill Lynch, Research Division
Just a quick modeling question. On the dispositions for the rest of the second quarter and the second half of the year, are you still targeting about a 6% cap rate or are these assets different markets or maybe slightly older?
David J. Neithercut
No, I think -- yes, it's interesting. What we've sold in the first quarter was around 6%.
What we've sold this quarter to-date is around 6%. And what we think we'll do for the whole year is about 6%.
So you can continue to use 6 in your numbers.
Jana Galan - BofA Merrill Lynch, Research Division
And then on the acquisitions, you didn't really expect much for this year except for Archstone, but you did acquire a Seattle asset in the first quarter. Do you think you'll still see opportunistic one-offs from your acquisition team or you're just really focused on Archstone for the remainder of the year?
David J. Neithercut
Well, I mean I guess we'll always consider but we did buy one asset and it was sort of done in tandem with the one asset that we sold in Seattle. So we sold the Archstone Belltown deal to the same people from whom we acquired the Seattle deal in Redmond.
So we sold an older high-rise building in Seattle and bought a recently-constructed mid-rise property in Redmond and we thought that was a very good trade and done at a very comparable cap rate. And I think that, that's what you may see more from us going forward, is our ability to trade assets at cap rates that are far, far closer than what we've seen in the past.
But we'll look at other opportunities this year if they're out there. Mark had noted we've got $500 million of cash we have on the balance sheet and we've got the capacity, but I would not expect us to be active in the marketplace.
Operator
Our next question comes from the line of Ross Nussbaum with UBS.
Ross T. Nussbaum - UBS Investment Bank, Research Division
Just to follow up on Steve Sakwa's question. If you approached Lehman and said, we'd like to take out $1 billion of your holdings here at a price that was slightly above where your stock is today, is that something that you think they'd be receptive to or you would be willing to do?
David J. Neithercut
I guess, Ross, I understand people have got a lot of questions about all this and it's just not appropriate for me to talk about it. I sort of told you what we know and that's really about all I can say.
Ross T. Nussbaum - UBS Investment Bank, Research Division
Okay. But not even so much what Lehman would do, but with respect to what your willingness is.
I mean, do you think about as an option to clear out their position, thinking about taking them out at a price that makes sense for everybody involved?
David J. Neithercut
Oh, we'd be happy to do something that made sense for a price for everybody involved. I mean, look, I think we've got to be openminded about how to address this, but I don't think -- we're not going to act desperate in the process, so -- but we're in contact with these folks and we're also in contact frankly with other people who have suggested interest in buying perhaps some stock and I guess I'd just tell you that we'll play whatever role we may need to play to help facilitate something.
But frankly, my guess and my expectation is that we won't have to play a direct role ourselves.
Ross T. Nussbaum - UBS Investment Bank, Research Division
Okay. So let me turn to operations.
I might have missed this, but was there any commentary on what the new lease increases were during the first quarter above the tenancy lift?
David S. Santee
The new lease base rents for the quarter hovered around 3%, 2.5% to 3%. Today, when I look at the rate, it's right there almost at 4%, 3.9%.
Operator
Our next question comes from the line of Tayo Okusanya with Jefferies.
Omotayo T. Okusanya - Jefferies & Company, Inc., Research Division
Actually, my question has been answered already.
Operator
Our next question comes from the line of Michael Salinsky with RBC Capital Markets.
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
David, just to go back to that last question, the 3% you quoted. Was that lease-over-lease?
David S. Santee
No, those are LRO base rents.
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
Okay. Do you have by lease-over-lease by chance?
David S. Santee
The lease-over-lease probably on average was about 0.75 point for the quarter.
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
Okay, that's helpful. And second of all, I'm not sure if you look at this, but if you look at the blended between renewals and new leases signed in the quarter -- in the first quarter, the average -- the rents that were signed in the quarter, how does that compare kind of on a year-over-year basis?
David S. Santee
I'm not sure that I understand your question. So are you asking, Mike, whether there's more renewals than usual in the first as compared to the first quarter of 2012?
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
No. What I'm asking is the leases that were signed in the first quarter, including both renewals and new leases on a blended basis, what was the average rent increase on leases signed in the first quarter versus, on a comparable basis, the leases signed in the first quarter of '12?
David S. Santee
Okay. So renewals signed in Q1 of '13 averaged 5.7%.
I don't have Q1 of '12. I can tell you that Q4 was 6.2%.
But I'm sure Q1 of '12 was probably 7%, I'm guessing.
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
Okay. I'll follow up off-line with you on that one.
Second question, I know you only owned the Archstone portfolio for about a month. But any kind of -- and you didn't control it obviously last year, but any kind of comparable metrics you could provide?
You said it's performing better on the expenses, but any kind of numbers you can put around that?
David J. Neithercut
Better on expenses than what we had budgeted.
David S. Santee
Yes, I guess what I would tell you is, is that we have pulled in all of their revenue data, so we feel comfortable in quoting a comparable revenue number. But when you look at the expenses: a, they were not a public company.
They had different capitalization policies. All I can tell you is, is that when we looked at their actual data relative to ask our expenses, they were operating their properties about $400 per unit higher than our communities, our same-store pool.
And we underwrote that acquisition using our same-store expense numbers.
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
Okay, that's really helpful. And finally, David, having owned the portfolio now for about 2 months, as you look out over the next couple of years, where do you see is the biggest opportunity within the Archstone portfolio?
David J. Neithercut
Well, I think we've already discussed that, Mike, it's these rehabs. We've got -- I think as we've said previously, I think that the Archstone/Lehman team did an adequate job taking care of the properties, but we don't think that they took advantage of opportunities that were there with a little extra capital.
And I think it's the rehab -- our ability to execute the rehab program, which we've really got down to an art here. As I said, at least on the ones we've underwritten today, could be 15% returns on what we're talking about as another $35 million of investment in these assets.
So we think that, that will create a significant amount of upside for us.
Operator
Our next question comes from the line of David Harris with Imperial Capital.
David Harris - Imperial Capital, LLC, Research Division
Here's a couple of questions for you, Mark. I think you made reference to spreads widening on secured debt.
I wonder if you could just add a little color to that. If I missed it, I apologize.
And also, in any way is that spread widening associated with this backdrop of noise, which seems to be gathering in pace around Fannie and Freddie reform?
Mark J. Parrell
Right. What we saw over the course of the quarter, David, was an increase in the spread that Fannie Mae and Freddie Mac charge on what we'll call normal leverage, which is sort of a 70% 125 kind of coverage loan.
So we see that spread as approaching 2%. That's a considerable increase.
This is all 10-year debt numbers I'm quoting. And on the unsecured side, I see that number as 130 to 140 for EQR.
So you can see how it's become less favorable. I do think there is some impact from the regulator's requirement of the 2 GSEs that they change and take a lower market share.
I certainly think this is one way to do it. But you're still talking about an all-in rate that's about 3.6% on the secured side.
And so if you're like most folks in the multifamily business and you don't have access to the unsecured market, it's still a really good rate. And we have not seen -- and we had some good dialogue with our investment team, we have not seen or had any problems selling assets because of the spread widening just because absolute rates are just so low.
But yes, I do think there is some push and that, that is one of the reasons -- from the regulator -- one of the reasons these spreads have increased.
David Harris - Imperial Capital, LLC, Research Division
I mean, you flagged this. I mean, if I go back 2 or 3 years ago, David, you flagged this as being a reason why you were keen to push forward with sales.
This is, as I say, 2 or 3 years ago before Archstone obviously was ever on board [ph] . What kind of spread do you think becomes an issue in terms of being able to sell the assets you are looking to sell and the cost of finance, the relative spread cost of finance to the buyer.
Are we talking 300? What is it, 70 -- 60, 70, 80 basis points today?
I mean, double that? Does that become an issue then?
Mark J. Parrell
Yes, I guess -- it's Mark Parrell again giving it a shot, David. It's the all-in rate that matters, not the spread.
So if the treasuries went down again, which we always think is impossible, and then it happens. I would tell you that spread could be 3%, if the treasury is 1%, nothing would happen.
I also point out that we've now disposed of a great deal of the assets that carried that risk that we highlighted for you some years ago. So I'm not quite sure how that all works.
I mean, do all-in rates go up because there is growth in the economy, in which case our NOI is growing faster, in which case coverage of the loan is not a problem.
David Harris - Imperial Capital, LLC, Research Division
We live in hope on that one.
Mark J. Parrell
Yes, we hope, right? Or is it inflation or spread.
So I would tell you, I don't have a magic number for you except I think the all-in rate's a lot more important than spread.
David J. Neithercut
Let's not forget the CMBS market out there too, David.
David Harris - Imperial Capital, LLC, Research Division
Right, right. Well, are CMBS spreads widening like the Fannie and Freddie debt or not?
David J. Neithercut
No. There was a little widening earlier in the year and that's come back in.
I mean, the life companies and CMBS have become more active. The life companies are more on low leverage, a little bit higher quality, little younger assets, where the CMBS market is mostly right now playing in the B market segment -- the B asset market segment, where they're becoming more active and I would expect the CMBS market could replace the GSE's good component or the GSE supply that's going away with relative ease.
David Harris - Imperial Capital, LLC, Research Division
Okay. My second question relates -- and it's a point of detail.
But you referenced the German assets that are held in the joint venture, your Archstone joint venture. I mean, do these amount to very much in terms of net asset exposure to the euro?
Mark J. Parrell
We hedged a component of our exposure to the change as it related to assets, David, that are on the block and will be sold shortly. There's another part of the business that will take us a little while longer and we have not hedged that just because of the uncertainty.
But it's not -- frankly, it's not actually that material amount of money in the aggregate to us.
David Harris - Imperial Capital, LLC, Research Division
Less than 1% if I sort of pick a number?
Mark J. Parrell
I think you could pick a number of less than $100 million and say -- which is considerably less than 1% as our share of what we would expect out of Germany.
Operator
Our next question comes from the line of Rich Anderson with BMO Capital Markets.
Richard C. Anderson - BMO Capital Markets U.S.
To move on, just a question on the Page 8 and sitting at 92% of your portfolio in core. David, I think you said that number will be 90% by year end, understanding there's a lot of moving parts.
But what do you think the long term is? Is 90% the right number?
David J. Neithercut
No, let me -- I've got heads nodding, they're telling me that I said 90%; I meant to say 95%. Everybody knew that when I said it, and I appreciate you bringing it up.
At the end of this year, we'll be 95%.
Richard C. Anderson - BMO Capital Markets U.S.
Okay, okay. That screws up the rest of my question.
So then the other part of it is D.C. and New York Metro area is 35% of the total.
How comfortable are you with that in the long term?
David J. Neithercut
Well, I think that's a number that would need to be brought down over time and we'll continue to bring it down. We knew going into this that because of the weighting, the share of the Archstone assets that were in D.C., that we probably would ramp ourselves up a little more than we'd like.
But we still have got assets in D.C. that are not in the district, that are not in the Arlington area that we can sell to bring that number down.
Richard C. Anderson - BMO Capital Markets U.S.
What level of kind of normal activity would you expect in 2014 and beyond of just portfolio management, couple billion on either side every year, something like that?
David J. Neithercut
No, I think that's way high. And I guess unlike what we've been doing over the past several years in trying to sell assets and reallocate that capital, we have the ability to, I think, be a little bit more timers [ph] now.
I think that when we find opportunities to reinvest capital, we can certainly access our disposition -- some disposition assets. But we'll still have some assets in Orlando.
We'll have -- still have some assets that we'll need -- that we'll want to sell but we'll be in no hurry to sell them and I think that we'll do so only if and when we find the right reinvestment opportunities.
Richard C. Anderson - BMO Capital Markets U.S.
Okay. In terms of the same-store portfolio, will you consider folding in Archstone into that analysis this year even though you haven't owned it for the full year, or will that be something that'll happen later?
David J. Neithercut
Unfortunately, the Archstone portfolio will not be in our full year same store until 2015 because we will not own it for a full year until all of 2014. It will be brought into quarterly numbers in the second quarter of 2014, okay, because we will have owned it for the full second quarter of 2013.
Richard C. Anderson - BMO Capital Markets U.S.
Okay, understood. Got it.
In terms of the Archstone developments that you're planning on selling, will those then be housed in a TRS and hence will you be booking gains into FFO when you do sell those assets?
Mark J. Parrell
Well, first off, when we book those assets -- it's Mark Parrell answering, Rich -- the assets were brought in at market because we're required to do purchase accounting and book them at fair market. So if we sell them, there will be minimal gain or loss on those assets, I would expect.
So right now, there's a little bit of gain you see already in our regular NAREIT-defined FFO. That's from a legacy property -- we held a piece of land for a long time, not related to Archstone.
So I would not expect material gains on the Archstone development noncore stuff that we're going to sell. The land, the development assets themselves, we'll see, because we're going to stabilize those and build them out.
In terms of the TRS, we have plenty of NOLs to go against tax, so I wouldn't expect there to be any material tax hit on those assets. But if we bought an asset with the intention to sell, we would have put it in the TRS.
Richard C. Anderson - BMO Capital Markets U.S.
Okay. Last question for me is if there was anything kind of wrong about Archstone, it was their accounting not so conservative, particularly from a capital expenders perspective -- expenditures perspective.
Do you see any material adjustments from an accounting viewpoint from your -- when you're looking at the portfolio, or is all that stuff kind of behind you at this point?
Mark J. Parrell
Well, I'm not sure their accounting -- I'm not sure I'd characterize their accounting that way, first of all. And second, I don't think their expense and CapEx accounting is actually relevant to us anymore.
I mean, our expenses are going to be completely than different than theirs because we're resetting real estate taxes, we have different capitalization policies. So I'll tell you those folks we've dealt with them for a while and they've been nothing but professional and honorable to deal with.
So I don't think their accounting is actually all that relevant to us on a go-forward basis because we're really -- it's sort of a fresh start for us.
Richard C. Anderson - BMO Capital Markets U.S.
It did make me think when you saw lower expenses from the Archstone portfolio that maybe that was a capitalization issue as opposed to a real expense issue.
Mark J. Parrell
Well, we looked at it -- I mean, we don't care about the accounting, honestly. We look at just what it cost to run the asset and we saw savings in both realms.
Operator
Our next question comes from the line of Nicholas Joseph with Citibank.
Michael Bilerman - Citigroup Inc, Research Division
Yes, Michael Bilerman. David, another question on dividend policy.
A few years ago, end of 2010, you went to this new policy of 65% of sort of Normalized FFO. And I think, at the time, you expressed some views that others may follow and you really like the policy.
I'm just thinking sort of a few years hence, not many people or no one has followed that sort of methodology in all the services whether it be Bloomberg, Reuters -- SNL continue to show your dividend yield at 2.8% where in your mind it's much higher, a 3.2%, a 3.3% based on your forecast for the year. And I'm just wondering whether that's limiting the investor base at all that really don't understand, that may just be taking a quick look.
You're a big cap REIT. And so I'm just wondering whether you rethink the plan now that you've tried it.
And I admire you for trying it, but I'm just thinking about whether it would be a success going forward.
David J. Neithercut
That's a very good question, Michael. I will tell you that we continue to think that it is the best and appropriate dividend policy for the company.
That being said, we have given a great deal of thought to how we would pay that out. So at the present time, we pay out at a lower level in each of the first 3 quarters and kind of true-up in the fourth quarter dividend.
And we wondered whether or not we shouldn't think differently about how we pay it out over the year. But in no way have we ever discussed or considered actually changing the policy of being 65% of that Normalized FFO.
Had we not been in the middle of this entire Archstone process, that might have been something that had been addressed earlier. But I do know that it's something that our board will be looking at towards the end of this year and could consider for next year.
So not a change to the policy, but rather a change in terms of how that dividend will actually be distributed.
Michael Bilerman - Citigroup Inc, Research Division
Right. And perhaps even thinking maybe as a range that you don't get into a point of having to lower dividend and then get on lists of -- like that, where there's inconsistencies in dividends.
Just a question just in terms of sale activity. And I do take your point on not trying to be reactive to a short-term dislocation in the marketplace and that you spent years assembling what is an unbelievable portfolio of assets that you wouldn't want to just sell just to prove a point in terms of valuation.
But would you sell interest in assets and so that you're still maintaining the portfolio that you have, but arguably just a lower interest in a handful of assets to generate that capital to potentially buy back stock if you wanted to do that, but you're not losing control of the asset.
David J. Neithercut
Well, I guess, look, I think that if and when we feel the need to raise capital for any purpose, we'd consider all sources. We are not as enamored with joint ventures as you may see others in other sectors.
We just believe that we're working too hard for someone else's money and don't get appropriately paid for it. And we just kind of lose control of assets and people got different -- I guess, we don't see any need or desire to get budgets approved by a third party and then be accountable to that third party.
But again, I mean, that's certainly something that could be considered if and when the time comes for whatever purpose to raise capital. But I'll also suggest that we've still got, as I said, assets in Orlando and others that we know that we'll sell over time that could create significant capital, of course if we wanted to for whatever purpose.
Operator
And at this time, I'm not showing any further audio questions. Please go ahead with any closing remarks.
David J. Neithercut
All right. Thank you very much.
Appreciate everybody's time today, and we look forward to seeing many of you at NAREIT here in Chicago in June.
Operator
Thank you. Ladies and gentlemen, that does conclude our conference call for today.
Thank you for your participation. You may now disconnect.