Oct 29, 2016
Operator
Good morning, ladies and gentlemen. Thank you for participating in the MAA Third Quarter 2016 Earnings Conference Call.
At this time, we would like to turn the conference over to Tim Argo, Senior Vice President of Finance. Mr.
Argo, you may begin.
Tim Argo
Thank you, David. Good morning.
This is Tim Argo, SVP of Finance for MAA. With me are Eric Bolton, our CEO; Al Campbell, our CFO; and Tom Grimes, our COO.
Before we begin with our prepared comments this morning, I want to point out that as part of the discussion, Company management will be making forward-looking statements. Actual results may differ materially from our projections.
We encourage you to refer to the safe-harbor language included in yesterday’s press release and our 34-Act filings with the SEC which describe risk factors that may impact future results. These reports, along with a copy of today’s prepared comments, and an audio copy of this morning’s call will be available on our website.
During this call, we will also discuss certain non-GAAP financial measures. Reconciliations to comparable GAAP measures can be found in our earnings release and supplemental financial data.
I’ll now turn the call over to Eric.
Eric Bolton
Thanks Tim and good morning. Third quarter results were at the top end of our guidance as solid same store results, which were captured against a record occupancy performance of last year, coupled with favorable trends in G&A and interest expense, drove Core FFO per share of $1.49, representing an 8% jump as compared to Q3 of last year.
As outlined in our earnings release, we have raised full year guidance for Core FFO to a range of $5.86 to $5.96 per share. We continue to capture solid leasing trends across the portfolio.
Average daily occupancy within the same store portfolio in the third quarter was a very strong 96.4% compared to the likewise very strong 96.5% occupancy in Q3 of last year. Effective rent per unit increased 4.2% with higher performances coming from Orlando, Tampa, Atlanta, Charlotte and Fort Worth.
As noted in our release, we were successful in closing two acquisitions during Q3, one in Houston and one in Greenville, South Carolina. Both transactions are newly constructed properties and represent compelling long-term investment opportunities for those two markets.
We were also successful in completing the disposition of seven older properties in the third quarter as part of our efforts to steadily recycle capital to protect and enhance MAA’s long-term earnings profile. Additionally, we currently have five other properties under contract for disposition and expect to close on these transactions in the fourth quarter.
Our merger with Post Properties is making good progress. Both companies have shareholder meetings scheduled for November 10th and we anticipate a closing of the merger effective December 1st.
Processes associated with integration of the two companies are well underway with the go-forward organization structure and team members now in place. As outlined in our announcement of the merger, we anticipate that upon completion of integration activities by the end of 2017, we expect to capture overhead synergies of $20 million.
Specific line items and decisions associated with capturing this opportunity have been identified and we remain very confident in achieving this performance benchmark. As we continue to engage in the more detailed tasks surrounding the integration of the two companies, we remain very enthused and confident about capturing the improved operating margins and NOI lift from the legacy Post portfolio that is important to the overall value proposition of the merger.
Our work to date associated with inventorying and comparing the more detailed operating practices of the two platforms, further assessing opportunities surrounding our larger scale and enhanced market efficiencies and evaluating the redevelopment opportunities, all combine to have us also feeling very confident about this aspect of the value proposition. We will begin to lay out more details upon closing the merger and as part of providing our initial guidance for calendar year 2017.
Before turning the call over to Tom I want to express my appreciation and thanks to the associates working at both MAA and Post for their hard work and great support during the past few weeks as we have worked through the difficult task of merging the organizational structures and preparing for consolidated operations, while also taking care of our residents and existing operations. Our newly combined company will have a number of strong attributes that position us well for the future.
The professionalism and dedication that our combined team of associates demonstrates each day are key among these qualities. I’ll now turn it over to Tom.
Tom Grimes
Thank you, Eric. And good morning, everyone.
Our second quarter NOI performance of 3.7% was driven by revenue growth of 3.6% over the prior year. Revenues were up 1.5% sequentially, which is 30 bps higher than the sequential change last quarter.
We have good momentum in rents as all in place effective rents increased 4.2% from the prior year. In the third quarter, new rents and renewal rents executed during the quarter increased 4.3% on a blended lease over lease basis.
We achieved 96.4% average daily occupancy which is strong on an absolute basis but slightly lower than last year’s record performance. Fourth quarter trends continued the positive momentum.
October’s average daily physical occupancy of 96.1% is in line with October of last year. Our 60-day exposure, which is current vacancy plus all notices for a 60-day period is just 6.6%, below to prior year by 55 basis points.
New and renewal rents have built on the strong trends of the third quarter. On a blended lease over lease basis, October rents have increased a seasonally strong 3.3%.
On the market front, the vibrant job growth of the large markets is driving strong revenue results. They were led by Fort Worth, Orlando, and Atlanta.
The secondary markets continued to close the effective rent growth gap with the large markets. Since the third quarter of 2015, the rent growth gap between large and secondary markets has narrowed 80 basis points.
Revenue growth in Jacksonville, Charleston and Memphis all stood out. As mentioned, momentum is strong across our markets with occupancy, rent growth and exposure all showing positive trends.
Our only market worry bead is Houston which represents just 4% of our current portfolio. It’s worth noting that Houston will drop to less than 4% of NOI after the merger.
We continue to closely monitor and protect occupancy in this market. As we approach the end of October, Houston’s average daily occupancy is 95.9% and 60-day exposure is just 6.1%.
Our customer base remains stable. Move-outs for the portfolio were down for the quarter by 1.4% over prior year and turnover remained low at 51.3% on a rolling 12-month basis.
Move-outs to home buying remained at 20% of total move-outs. There was also little change in move-outs to home rental, which represents just over 7% of move-outs.
During the quarter, we completed over 2,400 interior unit upgrades, bringing our total units redeveloped this year to just over 5,400. Our pre-merger redevelopment pipeline of 15,000 to 20,000 units remains robust.
As a reminder, on average, we are spending about $4,500 per unit and receiving average rent increases of approximately $100 over a comparable non-renovated unit, generating a year one cash return of well over 20%. Work is underway defining the scale and scope of the redevelopment opportunity for the Post portfolio.
Indications are that it will be a significant value creation opportunity. We are excited about adding units from the Post portfolio to our redevelopment pipeline.
Our lease-up communities are performing well. Station Square at Cosner’s Corner II and Cityscape at Market Center II both stabilized on schedule during the third quarter.
Rivers Walk II will stabilize on schedule in the fourth quarter. Colonial Grand at Randal Lakes II in Orlando is 30% leased and on schedule to stabilize at the end of next year.
Our three new acquisition communities in Tempe, Greenville and Houston are all on track. We are pleased with our progress thus far on the Post merger.
The operating structure of the combined companies has been finalized and communicated. There is a high degree of overlap in both systems and markets.
We have enjoyed meeting the Post onsite teams and believe that adding these solid teams as well as excellent product and locations to our operating platform will create value for all of our stakeholders. We are in good shape for fourth quarter and set up well for 2017.
Al?
Al Campbell
Thank you, Tom. And good morning, everyone.
I’ll provide some additional commentary on the Company’s third quarter earnings performance, balance sheet position, and then finally on the revised earnings guidance for the full year. Net income available for common shareholders was $1.12 per diluted common share for the quarter.
Core FFO for the quarter was $1.49 per share, which represents 8% increase over the prior year. This performance was $0.04 per share above the mid-point of our previous guidance.
Our same store performance continued to be solid, which is in-line with our expectations. About half of the outperformance or $0.02 per share was related to the favorable impact from the timing of our planned bond deal, previously projected for the third quarter, which has been postponed until early next year due to our merger activity and will a little bit more about that in a moment.
An additional penny per share is related to the timing of our transaction activity during the quarter, and the final penny per share is related to favorable G&A expenses for the quarter. As Eric mentioned, we acquired two new communities during the third quarter.
We invested a total of $133 million for these two new communities, bringing our total acquisition volume year-to-date to $264 million. We also sold seven communities, averaging 22 years of age, during the quarter for gross proceeds of $152 million, which represented a 6.3% cap rate.
We also exited two additional secondary markets with these sales, Winston-Salem and Greensboro, North Carolina. Our plans for the year include selling an additional five communities, which are expected to close during the fourth quarter.
We completed one community during the quarter, River’s Walk phase II in Charleston, and we had three communities, all expansions of current properties, remaining under construction at the end of the quarter. We funded $13 million of construction costs during the third quarter, and have an additional $33 million to be funded on the existing pipeline.
We continue to expect average stabilized NOI yields of about 7.5% for these communities once completed and stabilized. During the third quarter, we paid off $75 million of maturing public bonds, which we expect to refinance as part of a public bond offering early next year.
Also during the third quarter, Fitch upgraded our senior unsecured rating to BBB+, a stable outlook, and S&P placed our credit ratings currently at BBB flat, on positive Credit Watch to reflect the anticipated increased strength of the balance sheet from the announced Post transaction. Given the merger announcement and related activities, we have postponed our original plans for a bond deal late this year in order to allow the merger to close, which we expect to provide support for a financing early next year.
Our balance sheet remains in great shape at quarter-end. Our leverage, defined as net debt to gross assets, was 39.7%, which 100 basis points below the prior year, while our net debt was only 5.6 times recurring EBITDA.
At quarter-end, 89% of our debt was fixed or hedged against rising interest rates at an average effective interest rate of only 3.9%, with well laddered maturities averaging four years. At quarter end, we had almost $570 million of combined cash and borrowing capacity under our unsecured credit facility, providing both strength and flexibility.
Given our current expectations for acquisitions and dispositions over the remainder of the year, along with our projection for excess cash, we do not expect any new equity needs other than the shares issues for the merger transaction this year. Also, we expect our leverage to decline upon the closing of the merger with Post, ending the year in the mid-30s as a percent of gross asset value.
Finally, as Eric mentioned, we are again increasing our earnings guidance for 2016 due to the stronger than projected performance. We’re increasing our core FFO projection by $0.06 per share at the mid-point, to reflect both the $0.04 per share third quarter outperformance and $0.02 per share for our revised expectations for the remainder of the year.
We expect interest expense for the fourth quarter to be about $0.03 per share favorable due to the delayed timing of the planned bond deal, offset by about $0.01 per share of costs relating to cleanup from Hurricane Matthew. We were very fortunate to avoid significant damage from this recent storm, but we will incur some costs during Q4 for repairs and clean-up.
Core FFO is now projected to be $5.86 to $5.96 per share, or $5.91 at the midpoint, based on average shares and units outstanding of about 79.7 million. Core AFFO is now projected to be $5.16 to $5.26 per share, or $5.21 at the midpoint.
The major components of our guidance, including same store growth, transaction and financing assumptions, remain similar to our prior guidance, with the one exception of the bond deal timing, as discussed. As mentioned in our release, given the merger transaction is not yet approved, this guidance does not reflect the anticipated impact of the transaction.
If the transaction closes as planned, we expect to end the year within this current guidance range, although near the lower end given the initial dilution expected from the merger transaction. We expect to provide guidance for 2017 and more details regarding the merger transaction with our fourth quarter press release.
As discussed during our merger announcement call, we plan to capture synergies and additional earnings opportunities from the merger with Post that will recapture the initial dilution from the transaction over the first 12 to 18 months, and what we have seen thus far continues to support these expectations. We plan to outline this further with our fourth quarter release.
That’s all we have in the way of prepared comments, today. So, now we’ll now turn it over to you for questions.
Operator
Thank you. [Operator Instructions] We’ll take our first question comes from Rob Stevenson with Janney.
Your line is open.
Rob Stevenson
Good morning, guys. Eric, help me, help frame the thought process as you go forward between the large markets and the secondary markets in terms of how do you -- it seems like most of the sales keep coming from the secondary markets.
Do you turn using the Post platform and do development in some of these secondary markets to maintain the exposure? As this cycle gets late in the tooth because that’s typically been where you’re stability has been during down cycles.
Is it just a factor of post Post, you’re going to be much more large markets? I mean how should we be thinking about that as the Mid-America platform moves forward in terms of market distribution?
Eric Bolton
Rob, I will tell you, we remain very committed to the overreaching objective of keeping a diversified and balanced attribute of earning stream. And we think in our region of the country, high job growth region of the country, one of the best ways to create that full cycle profile, if you will, is maintaining a healthy allocation between both large and secondary markets, high growth large and secondary markets.
As of today, we have about 65% weighting in large markets and 35% waiting in secondary markets. After the close of the merger, it will be more along the lines of 75-25.
Now, you are right and that a lot of the asset sales that have taken place have come out of the secondary markets. But primarily that’s a function of prioritizing disposition focused on older assets where the after CapEx margins are starting to show signs of moderating.
And we feel like we can pull money out of those specific properties and recycle into better margin, better growth opportunities. And so, given the history of our Company, it just so happens, a lot of the older assets were in some of the more secondary or tertiary markets.
So, just as a consequence of our overall recycling objective, we’ve seen the allocation between large and secondary, and of course the Post transaction is going to change it. I will tell you this going forward, you’ll probably see the 75-25 revert back to closer to call it 60-40 weighting, 65-35 weighting kind of where we are today.
We are going to continue to look for opportunistic acquisitions, as well as opportunistic development opportunities in both large and secondary markets as exemplified by this quarter, we bought one Houston, one in Greenville, so we did one in each segment. So, we remain very committed to the whole strategy that has really defined us for the last 20 years.
And we will ebb and flow a little bit just as a consequence of recycling and market opportunities. But fundamentally, we don’t plan to change who we are.
Rob Stevenson
Okay. And then Tom, you talked about the redevelopment in the portfolio.
I mean, you guys have done close to 5,500 units in the existing Mid-America portfolio. When you look forward to 2017, 2018, 2019, assuming the market’s cooperative and no recession et cetera, what’s the remaining opportunity in the core Mid-America portfolio?
And then, I know it’s early but what’s the magnitude of the number of units that you think are appropriate within the existing Post portfolio to do the rehab on?
Tom Grimes
Sure. On the MAA side, Rob, we’ve got north of 15,000 units remaining and we’d expect to see next year in the range of what we did this year.
We’re really working through, we’re in the sweet spot of the Colonial portfolio at this point. On the Post side, it is still early, but we are very excited about those locations and how the interiors of those units will line up against the market norms in those locations and what that opportunity is.
And so, I would tell you right now, it looks like it’s 10,000 units or better.
Operator
Thank you. We’ll take our next question from Drew Babin with Robert W.
Baird & Company. Your line is open.
Drew Babin
Following on Rob’s question on redevelopment opportunities within Post, would you expect that some of the assets might find themselves kind of on the development and redevelopment page in the supplemental, as kind of more impactful redevelopments or do you envision the renovations being more kind of the kitchen and bath on turnover type projects?
Eric Bolton
There would be the kitchen and bath on turn opportunities. We are pretty disciplined about that and will likely not do a full -- evict everybody or ask people politely to move out and take the whole units down.
We feel like that maximizes the opportunity. Now there are inside of that that’s what we call heavy and a light, and there’ll be some opportunities to do some granite and stainless upgrade as well as some light fixture changes as well, meaning just doing floors and fixtures and some items like that.
But we’re still mapping out those opportunities, but really excited about the conditions of property and the locations and the opportunity there.
Drew Babin
And on the disposition side, the 6.3 which I assume is an economic cap rate on what was sold in the third quarter. Would that be a good run rate kind of modeling dispositions going forward?
Obviously it’s much lower cap rates than some of the assets that have been sold over the last few quarters. Obviously, the remaining assets would be of higher quality, which we feel confident underwriting that type of disposition yield in the next year?
Tom Grimes
I would say so, yes. Yes.
The five that we’ve got on the contract, if all proceeds as we expect, there will be similar cap rate achieved on those.
Drew Babin
Okay. And finally, the 4.3% blended rent increase in 3Q, can you break that out by renewals and new leases?
Tom Grimes
Yes, sure. That was -- let’s see, it was on third quarter, it was 2.4 and 6.6.
Operator
We’ll take our next question form Jordan Sadler with KeyBanc. Please go ahead.
Austin Wurschmidt
Hi. Good morning.
It’s Austin Wurschmidt here with Jordan. Just sticking on the Post transaction, as you’ve come through that portfolio, how are you thinking about asset sales on the combined portfolio into 2017, and particularly interested in maybe some markets where you are going to have a much bigger presence for example in Atlanta?
And then, I’d also be interested in any updated thoughts on what you’re intending to do with the DC, either keep or potentially selling those assets?
Eric Bolton
Well, I would tell you that we are just really starting to dig in a lot on our plans regarding portfolio, any sort of capital recycling that we’re going to be doing and putting our plans together for next year and really for the next three years. I would tell you that probably my biggest priority exist on recycling some capital probably out of Dallas and Atlanta.
Those two markets are going to comprise a fairly healthy percentage of overall portfolio concentration and that both would be a little bit higher than I think we want to maintain over the long haul. So, there’ll probably be some recycling opportunity in those two markets would be a more for a priority for us.
DC, we were up there last week and starting to really understand more about that opportunity. As I think you know the DC market is starting to finally show some signs of recovery.
And bottom line is we are going to be patient with our analysis and thinking about what to do up there. We think that holding on to those assets at this point makes a lot of sense, particularly given where we are in the recovery cycle of that market and things that they bring, again different earnings profile element to the portfolio with our objective of really aiming to create balance on our earnings stream.
We think those assets are good for the portfolio at this point.
Austin Wurschmidt
Thanks or the detail there. And then just any other opportunities as you start to dig in?
You mentioned integration is well underway and might not have been as obvious when you completed your initial underwriting either on the operational side, revenue management related?
Eric Bolton
Well, again, we’ll get into more specifics as we get the transaction closed and we start to put out our 2017 guidance. We’re really digging in on the mechanics of the details, policies and practices on everything from how we manage and utilize LRO overall to how we manage and turn apartments to everything.
And I would just say that we feel very optimistic about what we’re seeing at this point and feel very confident in the overall value proposition.
Austin Wurschmidt
Great. And then just last question for me.
On the Houston acquisition, just curious about how you guys underwrote that and how you’re thinking about market rent growth in Houston over the next, call it 12 to 18 months?
Eric Bolton
Well, this is a very opportunistic situation which presented to us off market with the developer and capital equity partner that we know very well, we’ve done business with over the past. They were motivated to cycle out of the investment.
Houston Heights district is a very high-end area, just northwest of downtown, the 3 miles northwest of the CBD of Houston, very restrictive covenants about supply in this particular sub-market back. In fact, this is the first community delivered in that sub-market since 2008, which is saying something when you’re talking about Houston.
But we went in there very conservatively. We basically assumed no rent growth for the next two years, 1.5% rate growth in the third year.
I believe Houston will likely do better than that, but that’s what we assumed. And on that basis, it underwrote at a level that we felt pretty good about, 5, 6 stabilized NOI yield first year, based on what I consider to be kind of probably lower rents than certainly what we’ll see long-term.
So, we feel, it was a pretty opportunistic buy, at this point.
Operator
We’ll take our next question from Robert Wagner with Green Street Advisors. Your line is open.
Conor Wagner
This is Conor. Good morning, guys.
So, Bob couldn’t be with us today. Overall, Eric, if you could continue commenting on Houston.
Have you seen other deals where, I know you guys have been looking there for a while where sellers have been less willing or just overall the transaction margin. Is this deal indicative that the transaction market in Houston is opening up or sellers still trying to wait for better pricing?
Eric Bolton
I think it’s probably not indicative of where the market is right now, Conor. I think that, as you say, we have been looking at a lot of opportunity trying to chase opportunity there for last couple of years and haven’t really found.
We think a few transactions take place, but not much. And this was just the unique situation that was presented to us, and we jumped on it.
I think that everybody is fully aware that supply trends and new permitting trends pulled way back in Huston. And I think we’ve got to get through 2017.
But I think, anybody that’s got the wherewithal and ability and/or the interest in holding on to 2018 is going to do that. So, I think Huston, we’re going to continue to keep an eye on that market and like it long-term.
But I think that it’s probably too early to suggest that this transaction is indicative of anything really turning there in terms of transaction activity.
Conor Wagner
And then, you mentioned supply, the supply issue in Houston. Any markets next year where you are most concerned about supply growth versus any markets where supply growth pictures becomes more favorable?
Tom Grimes
No, Conor. I think in general we’re seeing that 2017 looks a lot like 2016 in terms of supply that developers are beginning to have trouble with financing our lining items up in that area and then it probably peaks in 2017 and backs off in 2018.
As Eric mentioned, Huston deliveries will be roughly half, will see half of the levels that they were this year and Atlanta, Dallas and Nashville will see modest increases but job growth remains very strong in that area and then really the reminder are in line with 2016.
Operator
We’ll take our next question from Tom Lesnick with Capital One. Your line is open.
Tom Lesnick
I guess first, and I am sorry if I missed this. But Tom, could you maybe provide the renewal and new lease over lease comps for both your primary and secondary as well your overall performance?
Tom Grimes
Yes. It’s 2.4 and 3.1 for the third quarter.
And give me just second, I’ll get it for large and secondary. Did you have another question while we’re just having the primary and secondary?
Tom Lesnick
Yes, actually yes. So, on the on the Colonial transaction, you guys included the debt mark-to-market add back in your definition of core FFO, and some of that’s still tapering off.
Do you guys have any estimates of what that would be based on where rates are on today on the Post portfolio?
Al Campbell
Tom, we do. We’ve talked about that a little bit.
I’ll tell you, I think a bigger point is we’re really looking at how we’re going to handle that this transaction given all the -- there is a lot f discussion in industry about non-core measures and handling of that. SEC is very focused on that and of course the REIT industry is right in the bull’s eye on that.
So, I think what you’re seeing, we’re going to take a look at that and most likely what we’re going to do going forward next year is focus more NAREIT FFO and discuss the transaction merger integration cost. So that means that the fair market value adjustment will be included in that instead of pulling it out as for core FFO.
I think our peers do include that, we’re going to go ahead and do that and line that up within NAREIT FFO. Having said that, I think the number is around 35 million, something like that in total that we talked about and we’ll get more details on that when we give guidance for 2017.
Tom Grimes
Alright and then Tom -- sorry, go ahead, Tom.
Tom Lesnick
No, I was just saying I got that. I appreciate it.
And so the comps?
Tom Grimes
Yes. For the third quarter, the large market growth was 3% on new lease and 7% on renewal and secondary is 1.5% on new lease and 6% on renewal.
Operator
We’ll take our next question from Tayo Okusanya with Jefferies. Your line is open.
Tayo Okusanya
Along the lines of the Post merger, apart from the $25 million of synergies that you guys have talked about. You’ve also kind of now talked about these redevelopment opportunities within the portfolio.
Anything else you are targeting out there that should give investors much more confidence about the amount of synergies overall they could get from the deal over a two to three-year holding period?
Eric Bolton
Well, I would tell you, Tayo. First, let me make sure it’s 20 million of overhead, not 25, but 25 was on Colonial, 20 on Post.
But as far as the areas of opportunity and sort of the opportunity to recover earnings solution. First of all, it’s important to recognize that we’re taking on the Post portfolio.
And what’s going to happen is the dilution that we see will be frankly at its highest point at the very first month or two and then it begins to taper off over the coming 12 to 18 months. And so, we think that by the time we get to the end of 2017 that the recovery associated with overhead synergy that $20 million number would be fully realize by the time we get to the end of 2017.
Beyond that, there are really three other sort of big areas of opportunity, first and foremost is the development pipeline that Post has. Again, we’re taking that development pipeline on at frankly its most dilutive point.
And, we will see as these properties come online and the earnings contributions start to grow, that will start to really show up, really towards end of next year and really into 2018 as these construction projects finish. But that’s going to be a meaningful area of opportunity.
Thirdly is what Tom was talking about a moment ago, the redevelopment. That’s a two to three year process.
We see tremendous opportunity there, these are terrific locations that we think are just absolutely right for our redevelopment program. And we think that potentially is going to be much more significant frankly than what we contemplated that going into this.
And then finally, the fourth area is we just refer to it generally as NOI lift. And it’s a combination of a bunch of things.
It ranges all the way from how we execute with LRO, yield management practices, as I was saying earlier, how we turn apartments, capturing the full benefit, surrounding the scale that we have. And frankly those benefits regarding scale and efficiencies, there is going to be some benefit accrued to the existing legacy MAA portfolio as a consequence of this combination as well.
So that particular opportunity is still being mapped out in detail, but we think that over the next 12 to 18 months that it likewise is a very significant opportunity. When you pull it all together, I mean when you look at sort of the -- there is a lot of different ways to think about sort of the value proposition here.
But certainly, when you look at the pricing pay versus the upside that we think it’s going to be realized over the next couple of years or so. Much in the same way we saw with Colonial, we think this one here with Post is going to be frankly more upside than what we saw with Colonial.
Tayo Okusanya
And then just one more for the road. Just in regards to some of your secondary markets, there was also some weak same-store NOI growth there, Savannah, San Antonio, Greenville, and Birmingham.
How should we be -- sorry, Birmingham and Little Rock, Arkansas. How should we be kind of thinking about those markets since we don’t really talk much about but some of their numbers are also pretty weak?
Tom Grimes
I would tell you, I mean it’s little bit different stories on some, on those first couple that you mentioned. They have very strong on year-over-year occupancy growth this time last year and tapered out a little bit.
But Savannah, we feel good about long term. Their job growth is north of 2%.
They’re managing through some deliveries in the pooler submarket. But frankly that has become an aviation aerospace hub, almost smaller version of Charleston.
And then Little Rock and Birmingham, I think they continue to improve but limited supply there and job growth in recovery mode, but they do not have quite the strengthened job growth that place Savannah, Charleston and Greenville do.
Operator
We’ll take our next question from Gaurav Mehta with Cantor Fitzgerald. Your line is open.
Gaurav Mehta
Following up on your comments on redevelopment opportunities within the Post portfolio, I was wondering if you could comment on your thoughts on using the Post brand. And on the merger call, you said that you’re still evaluating how you’re going to do the integration with different brands.
Is there any update on that?
Eric Bolton
We’re -- that’s something we’re going to be very careful with and very thoughtful about. We think that the Post brand has value.
We think it’s particularly important in the Atlanta market. We are going to -- you’ll see no change initially whatsoever.
All the Post property names will continue just as they are. And we have no near-term plans to modify anything along these lines.
But over the course of the coming year, we will be looking at opportunities to get a little bit alignment, some degree of alignment between sort of the Post brand and the MAA brand and see if we can come up with something that makes sense. But above all, we’re absolutely committed to doing all we can to protect the I think very high rating that the Post brand maintains in a number of markets, Dallas included but particularly Atlanta I think is very important, and as well strengthen in a lot of the markets we’re.
So more to come on that but we understand the value of the brand and we’re interested and want to be certain that we don’t lose that.
Gaurav Mehta
And I think you highlighted Atlanta and Dallas as the couple of markets where you maybe overallocated Post merger and you may plan to recycle capital, are there any markets Post merger that you feel you’re underallocated and where you plan to put that capital?
Eric Bolton
Well frankly, I mean really just about any other market that we’re in at the moment, has capacity, if you will. So, we’re going to continue to -- all existing markets that we’re in, continue to look for opportunities.
I think we will continue to as we have talked about with our recycling effort, we will continue to look at older assets, we still have a few. But not much left in that regard, but we have a couple one-off opportunities here and there that we will probably look at next year.
But I think overall, the markets that we are in and certainly we like them and we would be happy to recycle capital in any of those markets.
Operator
We’ll take our next question from Neil Malkin with RBC Capital Markets. Please go ahead, sir.
Neil Malkin
First, some anecdotal evidence relative to single-family homes and trends. It seems like the first-time homebuyers that data is at pretty high levels or is accelerating.
So, I am wondering if particularly in your secondary markets you are seeing any pressure on moveouts due to home purchase, any type of that activity going on just given the price point of your assets?
Tom Grimes
We’re not and actually in our secondary markets group, there is lower -- the home buying, moveouts to home buying lower in secondary markets than in the large markets group. So, nothing there.
Neil Malkin
And then other one, you have been sending out or receiving pretty good renewal increases relative to new leases -- new lease rate increases, I am wondering at the current time, what -- is there a gain or loss at least in your portfolio and how do you look at the balance or the marriage between the two to not get too ahead of the market?
Tom Grimes
Yes. So, the way we really look at it is that we monitor the gap between the absolute dollar value of the renewal and the absolute dollar value of the new lease and what you find is it has some seasonal attributes to it.
And so, it is -- it will be as little as $2 or $3 in the summer months when leasing is full bore. And then, as it begins to wind down and it’ll open up to about $25 at this point.
But right now, the way that it works is just in general at some point, if those become divergent and stay that way, it inhibits new lease price growth. But the dollar value between the two has remained narrow for the last couple of years and thus we’re continuing to be aggressive on renewals.
Neil Malkin
I guess another way, if you were to reset all of your leases to market, would you roll up or down?
Tom Grimes
We’d up roll up another 3.5% to 4% loss to lease in our portfolio right now….
Neil Malkin
Okay, great. Thank you.
Operator
Thank you. And we’ll take our last question from Buck Horne with Raymond James.
Your line is open.
Buck Horne
My quick first question actually was on the renewal numbers as well, that 6.6 seems pretty strong. Maybe a little color on it, just how did it trend throughout the quarter, if there was any significant change from month-to-month?
And maybe what you’re going out with on renewal offers for November and December?
Tom Grimes
I mean what we’re doing -- that has stayed pretty steady as it goes, to be honest with you Buck. Renewals have been a bright spot for us for some time.
August was 6.5, September was 5.9, October 6.2 and then you know the fourth quarter will be a hair lower than that, upper 5s just because we try not to force, we try not to force as little turnover as possible in the slower months. But frankly our lease expiration management was in very good shape, which has allowed us to continue to ask for what will work.
I mean we have great customer service on site and markets are reasonable. So, we continue to work successfully with the renewals at that time.
Buck Horne
Sounds good. And my last question is on costs, a little bit.
Maybe Al, if you could help us. Understand some of the movements, maybe start with the real estate taxes and so, explain -- a little bit of a comp issue in this quarter, and it looks like the guidance is forecasting for the fourth quarter to be a little bit easier for you on real estate tax pressure.
Maybe just also if you foresee any other items coming up over the coming year, particularly maybe personnel costs; are you seeing any pressure on personnel to retain on site teams or anything like that?
Al Campbell
Well, I guess it’s a good question and real estate taxes, I think it’s important to focus on exactly what you did at the full year, the guidance we put out is 5.5%, 6.5%, don’t expect that the change. Taxes, you get a lot of volatility sometimes in quarterly comparisons because there’s couple of things that happen and you get -- timing of getting your information during the year can change year to year and timing of getting appeals successful or not successful can change year to year.
So, I think the story for the third quarter is that last year in third quarter, we got a lot of information and some favorable appeals that were very favorable and really helped us understand. As so, we are facing a tough comp this year, third quarter, but our trajectory for the whole year is much more stable this year.
Every bit of information we’ve gotten seems to support our initial expectation. And so we feel good about the 5.6 to 6.5 and pressure coming from the same places we talked about, in Texas, in Georgia as they aggressively chase value of some of those areas and have a lot of transactions to support it.
So, that’s really what’s going on in there. Another is no, we really don’t expect at this point a lot and the pressure going to fourth quarter.
In terms of our -- what we’ve put out and what’s in our guidance continued expense in personnel, continued expense in other areas in line with what our expectations were. So, it’s nothing new.
Only unusual item we think of right now, mentioned a little bit, little bit storm cost cleanup in fourth quarter, Hurricane Matthew, certainly very fortunate that we’ll have little bit cost in the fourth quarter to clean that up but other than that, nothing unusual we found to be expected.
Operator
And we have no further questions at this time.
Eric Bolton
Okay. Well, thanks nothing else from management at this point.
And we’ll see a lot of you at NAREIT in a couple of weeks. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes today’s conference.
You may disconnect at this time.