UDR's (UDR) CEO Tom Toomey on Q4 2015 Results - Earnings Call Transcript

| About: UDR, Inc. (UDR)

UDR, Inc. (NYSE:UDR)

Q4 2015 Results Earnings Conference Call

February 3, 2016 03:00 PM ET

Executives

Shelby Noble - Senior Director, IR

Tom Toomey - President and CEO

Tom Herzog - CFO

Jerry Davis - COO

Harry Alcock - SVP, Asset Management

Analysts

Nick Joseph - Citigroup

Jana Galan - Bank of America

Ian Weissman - Credit Suisse

Austin Wurschmidt - KeyBanc

Nick Yulico - UBS

John Pawlowski - Green Street Advisors

Alex Goldfarb - Sandler O'Neill & Partners

Rob Stevenson - Janney Capital Markets

Dan Oppenheim - Zelman & Associates

Rich Anderson - Mizuho Security

John Kim - BMO Capital Market

Greg Van Winkle - Morgan Stanley

Wes Golladay - RBC Capital Market

Operator

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

Shelby Noble

Welcome to UDR's fourth quarter financial results conference call. Our fourth quarter press release, supplemental disclosure package and updated two years strategic outlook document were distributed yesterday afternoon and posted to the Investor Relations section of our website, www.udr.com. In the supplement, we have reconciled all non-GAAP financial measures to the most directly comparable GAAP measure in accordance with Reg G requirement.

Prior to reading our Safe Harbor disclosure, I would like to direct you to the webcast of this call located in the Investor Relations section of our website www.udr.com. The webcast includes a slide presentation that will accompany our two year strategic outlook commentary.

On the Safe Harbor, statements made during this call which are not historical, may constitute forward-looking statements. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be met. A discussion of risks and risk factors are detailed in our press release and included in our filings with the SEC. We do not undertake a duty to update any forward-looking statements.

When we get to the question-and-answer portion we ask you that you be respectable of everyone's time and limit your questions and follow-ups. Management will be available after the call for your questions that do not get answered on the call.

I will now turn the call over to our President and CEO, Tom Toomey.

Tom Toomey

Thank you, Shelby and good afternoon, everyone. Welcome to UDR's fourth quarter and 2016 and 2017 strategic plan update conference call. On the call with me today are Tom Herzog, Chief Financial Officer and Jerry Davis, Chief Operating Officer, who will discuss our results, as well as senior officers, Warren Troupe and Harry Alcock, who will be available during the Q&A.

During this call we will present our updated two year strategic outlook as we have done in the last three years. In 2015 we again met or exceeded all primary objectives of our strategic plan as to-date have meaningfully outperformed in each of our prior plans. Tom will address this outperformance and the next two years strategic outlook in detail later in the call.

Turning to 2015, it was another great year for UDR and we continue to see strength in all aspects of our business. A quick recap of the team's accomplishments during the year. First our operations continue to run on all cylinders and delivered strong same store results across the board. With same store NOI growth of 6.7% a full 220 basis points ahead of our initial expectation. Second we delivered over $300 million of development which leased up well and we expect to hit our targeted returns of 6.2% or better at stabilization.

Third we entered into two accretive problem solving transactions, mainly the $559 million West Coast development Joint venture and the $901 million Washington, D.C. acquisition in which we kept to our principles of self funding accretive cash flow growth and continued strengthening of our balance sheet. Last we grew AFFO per share by 12%, a strong rate, which resulted in a 7% dividend increase and meaningful consensus NAV per share growth of 15%. We continue to believe that growth in these two metrics translates to the strong total shareholder returns over time.

Looking towards the future. We feel very positive about our business and our prospects. Multifamily fundamentals remain extraordinarily strong. The positive demographic trends amongst our prime renters, the 22 to 35 year old population cohorts, is expected to grow through 2030 and is not reversible. This coupled with steady job growth, gives us confidence that our operating platform which is our primary driver of our cash flow growth should continue to generate impressive results in the future.

Our self funded development pipeline is expected to generate the incremental cash flow and value creation we originally forecasted. Expected additions to the pipeline in 2016 will maintain our targeted size at $900 million to $1.4 billion and our forecast to be highly accretive. Our ability to fund this pipeline with asset sales largely reduces our dependency on capital markets and as we stated in prior years, we'll continue to focus on improving our debt metrics.

In summary, there remains a long runway for growth of UDR and we have the right plan and team in place to capitalize on the opportunity. With that I'd like to express my sincere thanks to all my fellow UDR associates for their hard work in producing another strong year of results. We look forward to a great 2016.

And now I'll turn the call over to Tom.

Tom Herzog

Thanks, Tom. Our fourth quarter earnings results were in line with our previously provided guidance. FFO, FFO as adjusted and AFFO per share were $0.41, $0.42 and $0.37, respectively. Fourth quarter same store revenue expense and NOI growth remained strong at 6.2%, 5.2% and 6.6% respectively. For full year 2015 FFO, FFO as adjusted and AFFO per share were $1.66, $1.67 and $1.51, respectively. Full year same store revenue expense and NOI growth are 5.6%, 3.0%, and 6.7%, exhibited continued strong demand for apartments and above our initial expectations provided last February.

At year end, our liquidity as measured by cash and credit facility capacity was $987 million, our financial leverage on an undepreciated cost basis was 34.6%. Based on our current market cap, it is approximately 26% and inclusive of JVs it was approximately 30%. Our net debt-to-EBITDA was 5.7 times and inclusive of JVs was 6.7 times. All balance sheet metric improvements were ahead of plan.

On to first quarter and full year 2016 guidance; full year 2016 FFO, FFO as adjusted and AFFO per share is forecasted at $1.75 to $1.81, $1.75 to $1.81 and $1.59 to $1.65, respectively. For same-store our full year 2016 revenue growth guidance is 5.5% to 6.0%, expense 3.0% to 3.5% and NOI 6.5% to 7.0%. Average 2016 occupancy is forecasted at 96.6%. Other primary full year guidance assumptions can be found on Attachment 15, or Page 28 of our supplement.

First quarter 2016, FFO, FFO as adjusted and AFFO per share guidance is $0.42 to $0.44, $0.42 to $0.44 and $0.40 to $0.42, respectively. Finally, with our release today, we've increased our 2016 annualized dividend to $1.18 per share, a 6% increase from 2015 and represented a yield of approximately 3.25%.

With that I'll turn the call over to Jerry.

Jerry Davis

Thanks, Tom, and good afternoon, everyone. In my remarks I will cover the following topics. First, our fourth quarter portfolio metrics, leasing trends and the continued success we've realized in pushing runaway growth again this quarter and into January. Second, the performance of our primary markets during the quarter, and expectations for 2016. And last, a brief update on our lease-up developments and the Washington D.C. acquisition.

We're pleased to announce another strong quarter of operating results. Our fourth quarter same-store revenue growth of 6.2%, was driven by an increase in revenue per occupied home of 6.5% year-over-year to $1,794 per month, while same store occupancy of 96.5%, was 30 basis points lower versus the prior year period. Our fourth quarter strategy of holding rates high along with aggressive rate increases throughout 2015 benefits us in 2016, as we entered the year with almost 2.75% of our revenue growth already baked into our rent roll. Our robust full year same store revenue growth of 5.6% was driven by 5.5% increase in revenue for occupied homes and flat occupancy. We see a strong growth rate growth continuing in 2016.

Turning to new and renewal lease rate growth which is detailed on Attachment 8-G of our supplement. We continue to push rate in the fourth quarter, new lease growth totaled 3.8% or 170 basis points ahead of the fourth quarter of 2014. Renewal growth remained resilient, improving 170 basis points year-over-year to 7%. This year-over-year acceleration was accomplished with only a 40 basis point increase in fourth quarter turnover.

Next, move-outs to home purchase were up 120 basis points year-over-year at 14% in line with our long-term average. Importantly our full year 2015 turnover rate increased by just 20 basis points versus the full year 2014. Even with renewal increases at a seasonally strong 7%, only 7% of our move-outs gave rent increase as the reason for living in the fourth quarter. However, we expect turnover to increase roughly a 100 basis points in 2016 as our revenue growth is highly predicated on the rate growth and not year-over-year occupancy gains.

Moving on to quarterly performance in our primary markets, which represent 69% of same-store NOI and 75% of our total NOI. Metro DC, which represents 18% of our total NOI posted positive full year revenue growth of 1.7%. We expect improving full year revenue growth in 2016 of around 2.5%, as we continue to benefit from our diverse exposure of 50% B assets and 50% A assets located both inside and outside of LA. Orange County and Los Angeles combined represent 15.4% of our total NOI.

Orange County posted sequential revenue growth of 160 basis points and continues to outperform our budgeted expectations early in 2016. LA is materially stronger due to our heavy concentration in the Marina Del Rey submarket as new jobs have continued to migrate to this highly desirable submarket. Fourth quarter revenue growth in LA was an impressive 10.2%. Our current expectation is that both of these markets will generate revenue growth in the 7% range in 2016.

New York City, which represents 12% of our total NOI, posted full year revenue growth of 5.6%. We saw seasonal weakness in the fourth quarter and early January, but future trends are pointing to strength within our submarkets. We continue to expect new jobs in technology, finance and media, which will benefit our Lower Manhattan properties. Our 2016 forecasted revenue growth of 6% is above 2015. I would remind everyone that View 34, is on same-store approval beginning in the first quarter of 2016.

San Francisco and San Jose, which represent 11% of our total NOI, posted full year revenue growth of 9.7%. Although we saw weakness in the fourth quarter it is indicative of the first quarter and fourth quarter seasonality that we have seen in this market in the past. With that said, we believe this weakness is possibly more than just seasonal and do not expect this market to post for double digit revenue growth that it has in recent years and we have forecast a deceleration in 2016 to revenue growth of 8% or so.

Future trends are slowly improving from what we saw in the fourth quarter but we are keeping a close eye on the job growth and absorption levels within our submarkets. Keep in mind San Francisco job growth has been above 4.5% for the past few years. Axiometrics' current forecast calls for job growth to decelerate to 2.5% to 3% but still well above the national average of 1.75% to 2%.

Seattle, which represents 6% of our total NOI benefitted from strong growth from suburban B assets who are less exposed to new supply than A assets Downtown. Although new supply will challenge us somewhat in Downtown Seattle and to a lesser degree in Bellevue we expect 2016 to be slightly below our 2015 numbers or roughly 7% growth. Boston which represents 7% of our total NOI, should continue to see new supply pressure downtown but our suburban assets in the north and south shores should fare well to lead better in 2016.

Long-term we like downtown submarket and look to continue to grow through development in this submarket. Most recently GE announced the relocation of their global headquarters to the Seaport district. This will bring another 800 jobs into the submarket which should directly benefit our 369-home, 100 Pier 4 community and our future 345 Harrison development in Boston South End. Our forecast calls for revenue growth to accelerate slightly from the 5.5% growth posted in 2015.

Last Dallas, which represents 5% of our total NOI, posted 5.1% year-over-year growth in the fourth quarter. We expect new supply pressure in uptown and Plano in 2016. January results indicate that these submarkets are performing slightly better than initial budgeted expectations and 2016 revenue growth is projected to improve to roughly 5.5% from 5% in 2015. As you can see on the Attachment 7-B of our supplement, our 320-home Los Alisos community located in Orange County, our 196-home Waterscape community located in Seattle and our 740-home View 34 community located in New York City are joining the same-store pool in the first quarter of 2016.

Turning to our in lease-up developments; Katella Grand I our 399-home, $538 million lease-up in Anaheim, California in the West Coast development JV was 16% occupied at quarter end and as of today is 20% occupied and 27% leased. We are currently offering less than one month of concessions at this community and leasing has been very strong in January with 25 applications. CityLine, our 244-home, $80 million lease-up in Seattle, Washington was 9% occupied at quarter end. We are on budget and meeting our lease-up expectations.

Finally, 399 Fremont our 447-home $318 million lease-up in San Francisco began leasing during the fourth quarter. At quarter end we were just 2% leased and today we are over 10% leased with rents exceeding pro forma. We will have our first new rents in March of 2016.

Now a quick update on the Washington, D.C. acquisition. We are three months into owning these communities and everything is going as according to plan. Currently we're making CapEx improvements to two of the properties to either cure deferred maintenance or drive a higher return through revenue enhancing improvements. And we still expect these communities to perform in line with our D.C. portfolio this year with revenue growth right around 2.5%. Currently we would expect five of the six communities in this portfolio to enter our same-store pool in the first quarter of 2017.

With that I will remind those listening that there is a link to our updated two year strategic outlook document on the Investor Relations page of our website. We'll pause for a moment so that everyone can gather the two year outlook materials.

Well I'll now turn the call back over to Tom Toomey.

Tom Toomey

Thanks, Jerry, and please turn to Page 3 for some high level thoughts. Firstly we view this year's update as continuation of the last three plans. We believe this continues to be the right path for UDR, here's why. The plan's primary objective is to drive high quality cash flow growth, while incrementally improving our balance sheet and portfolio. In other words consistent sustainable growth that is funded in a safe low risk manner. We believe that successful execution of these objectives will drive strong total shareholder return.

There are four key points I'd like to highlight, why we think there's a long runway of accretive growth ahead. First, fundamentals; you've seen plenty of published data on this and clearly demographics, supply-demand characteristics are in our favor and any good business that has good growth for a number of years means solid fundamentals. The second is strategic position, where do we start. Well we're in 20 markets, 50% A and B quality mix. We like this position. We think it solves for the number one critical element of any future growth, which is the positioning of our portfolio such that our residents will continue to be able to grow to pay higher rents.

And third is the team and the skills. Operationally we continue to innovate, invest in technology and training programs all of which are designed to increase our margins, which now stand above 70% at the NOI line, extraordinary for any business. On the development side, we'll remain focused on looking at our risk adjusted returns and staying disciplined. Third is problem solving, clearly we operate in a cyclical economy and along that line there will be challenges and opportunities. We have a team that is very experienced of managing through these cycles if not anticipating these cycles and these opportunities. Certainly I feel confident that the team has the ability to capitalize on these opportunities as they become available.

And lastly and just as important is managing risk. And we see ourselves managing this through first our diversity of our market mix, our discipline around our development and certainly a continued improving balance sheet set of metrics and lastly our transparency and disclosure and communication style. We believe these main objectives can continue our cash flow growth and optimizing our total shareholder return. We remain fully focused on executing them.

With that I will turn over Tom to discuss in detail the updated outlook.

Tom Herzog

Please turn to Page 4, as Tom mentioned earlier we have met or exceeded all of our primary financial and operational objectives to-date, as set forth in our prior three year plans published in 2013, 2014 and 2015. In particular our same-store growth and development deliveries have outperformed over the past three years and have served as primary drivers of our better than expected cash flow growth and improvements in balance sheet metrics.

Turning to Page 5, perhaps the most critical driver of UDR's value creation strategy is our best-in-class operations. We're continuously implementing new revenue growth and cost efficiency initiatives throughout the organization to improve how we do business. As noted on this page, we have consistently produced better overall top line growth versus peers and the U.S. average since the initiation of our three year plan in 2013. During this time we've grown our total revenue per occupied home by 26%, increased occupancy by 100 basis points, reduced turnover by 310 basis points and improved our NOI margins by 220 basis points.

So, how are we maintaining our operational advantage and how do we intend to keep it in the future? Please turn to Page 6, many who listen to this call are familiar with the primary revenue generation and expense control initiatives that are underway. These along with potential future initiatives are presented in the table on this page. Importantly all of our growth and efficiency initiatives have one thing in common, to either provide our customer wanted service or allow our associates to do their jobs better. Current initiatives should continue to drive our bottom line and our list of potential future initiatives is extensive.

Please turn to Page 7. This page lists some of our operational projects that have been implemented over the past couple of years and their impact on our NOI. As is evident, we have made solid progress in each initiative to-date and our bottom line has benefited greatly. We will continue to capture additional NOI efficiencies from these initiatives. Operations have been and will continue to be a significant competitive advantage for us. This is not just because of our superior blocking and tackling in the field, but also because of the creativity of our operations team employs to continuously improve the business.

Turning now to capital allocation and development on Page 8. Development remains a vital component of our value creation strategy. While not as many deals penciled in today's environment, development remains accretive and will continue to be a primary means through which we continuously improve our portfolio. At year end our underway development totaled $670 million for which the equity requirement was 55% funded. Additionally, our share of the West Coast development joint venture going in value was $271 million, towards a 100% of equity has been funded. This pipeline is concentrated in our primary coastal markets.

Inclusive of the West Coast development JV, we expect to deliver $375 million and $220 million of projects in 2016 and 2017, respectively. Our annual targeted spend of $400 million to $500 million per year and our targeted trended spread versus cap rate of 150 to 200 basis points have not changed. While construction costs continue to increase so do rents. To mitigate market risk around new development projects, we employ the following disciplines. First, prior to development financing, we generally seek and title land, demand full drawings and a GMAX contract, thereby locking in costs and reducing risks.

Second, we diversify our geographic exposure. Our goal is commence a new development in a target market as the previous development is leasing up. Third, we utilize conservative top line growth assumptions to underwrite our projects. And lastly, we deploy our self-funded strategy to fund our development pipeline and reduce the payment fee on capital markets. Through our free cash flow and non-core asset sales, we can fully fund our annual development spend. In other words, we are match funding our risks as we recycle older, non-core assets to develop new core assets in our primary markets.

In 2016 and 2017, we’ll continue to mine our current land bank as well as at new land sites. We are planning two to three starts in 2016, which include one large wholly owned project 345 Harrison in Boston and one or two smaller 50-50 JVs with MetLife. As of year-end 2015, our shadow pipeline was approximately $900 million at our pro rata ownership and represented $425 million to $475 million of value creation assuming current spreads.

Please turn to Page 9. We anticipate that on full stabilization, which occurs at different periods for each project, the pipeline of underway and completed developments is expected to generate accretion of $0.07 per share with growth thereafter. On an NAV basis, we expect our pipeline to generate $1.75 per share at stabilization approximately 35% to 40% value creation over costs.

Page 10 exhibits some of our recent developments. Please turn to Page 11. As focused as we are on operations and development, maintaining a strong balance sheet along with a self funded plan is just as important. We exceeded the balance sheet metric goals provided in our 2013, 2014 and 2015 strategic plans. We expect further improvements in 2016 and 2017. This has also been acknowledged by the rating agencies. In 2014 we received a credit upgrade for Moody’s to Baa1 and 2015 received an upgrade from S&P to BBB+. On the capital markets front our 2016 or 2017 capital needs will be funded through a combination of asset sales and new equity and debt of which we’ll utilize the most advantageous source depending on our strategic objectives, market conditions and pricing at the time the capital is needed.

Please turn to Page 12. In 2015, our AFFO per share growth was a strong 11%. In 2016, AFFO per share growth is expected to average in the 6% to 9% range. This growth will continue to be driven primarily by favorable same-store growth and development earn-in and these will be partially offset by a few items, including non-core dispositions, higher expected interest rates and 421-A and 421-G property tax impacts. In 2017, AFFO per share growth is expected to be in the 5% to 8% range. This 100 basis points delta is primarily due to lower same-store assumptions. As in our prior strategic plans, we rely on land third-party data providers for our future growth expectations in the out years. And of note these estimates have proven conservative in the last several years and our team has been able to outperform. We expect the business to drive 9% to 11% NAV growth in 2016 and 8% to 10% NAV growth in 2017.

Please turn to Page 13. This page provides our 2016 guidance, initial 2017 expectations and detailed modeling assumptions. In 2017, we're expecting solid same store and cash flow growth based on still strong third-party job growth expectations against moderating new multi-family supply growth in our markets. In addition, our expected asset sales and the entrance to our same store pool in 2016 and 2017, will enhance our same store mix toward higher growth markets.

And finally Page 14. Our 2016 top line growth assumptions for our markets are presented on the map. We expect the West Coast and Southeast to grow at a rate above the portfolio average. The Mid-Atlantic will continue to perform below the portfolio average but we'll improve slightly, and is still expected to outperform relative to our peers due to our 50-50 mix of As and Bs in D.C. and less direct exposure to new supply inside the [Beltway].

With that I'll turn it open for Q&A. Operator?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Nick Joseph of Citigroup.

Nick Joseph

Thanks. I'm just wondering, what the two year plan assumes for the broader macroeconomic environment and has it baked in any sort of recession over the next 24 months?

Jerry Davis

Nick this is Jerry. We really look at the Axio and Moody's data to start with, what they are forecasting is continuation of job growth, not too far off from what it was in 2015, call it a little over 200,000 per month. Supply is going to impact this year, probably a little bit more than it did last year and then in '17, there is a drop-off. So we look at the macro data and then we start looking at specific submarkets where we operate and take into account, how directly we're going to be affected by that. In addition, when you really go through -- actually there's a few other things to consider. We'll continue to spend about $35 million to probably low $40 million in revenue enhancing improvements to our properties that will add probably between 15 and 25 basis points into 2017 and probably about that much in 2016. And as we look further out into 2017, there's probably only a couple of markets that look to us, like they would be decelerating from the growth rates that we anticipate in 2016. Those are Northern California, Seattle for the most part and then we see some that we think are going to be improving and that would be the Mid-Atlantic, we also see Boston most likely improving for us. And then the rest of our portfolio whether it SoCal or the Sunbelt, we would expect to be modestly down And when you blend all that together it takes you from our midpoint this year of about 5.75% growth down to that 5%. So, again we don't really anticipate a recession, we don't claim to be economists. We subscribe to what they say but that's how we're looking at the business.

Nick Joseph

Thanks. And then, you clearly benefited from strong operating trends and the developments delivering ahead of expectations, but I am a little surprised that you expected 2016 core FFO growth isn't higher, given the expected same-store NOI growth, the benefit of the two accretive 2015 transactions and the benefit of leverage. So could you walk through what is driving expected core FFO growth, that's actually below expected same-store NOI growth for 2016?

Tom Herzog

Yes. Sure Nick, this is Tom Herzog. To your point, the same-store comes in at a $0.12 positive number, development comes in at $0.02 which is lower than what we had in 2015 and that's purely due to timing on what got delivered. In 2015, we had [Channel], View 34, 27 Seventy Five, 2016 we're looking at Pier 4, Beach & Ocean, which has got some drags from 399 Pac City, Jamboree, 3033 and Domain Mountain View, all great projects but at this point there's some drag. So that lowered the development by a bit from what we would have seen in 2015. Some of the items there would have leaned against the FFO growth relative to the NOI. It would have been, floating interest rates are up about 40 basis points in our model as a penny. The average revolver balance is going to be down some call it $150 million or so that's a penny and a half and that was just due to the timing of that mid September debt issuance. The tax benefit goes from $3.9 million to $1.5 million and that's a penny. [Non-interest] exchanges picks up another penny. And then to your point earlier that is partially offset by the accretive West Coast JV and some accretion on the Home transaction, those are all the moving parts. This is as we'd have expected our core and basic growth going forward is just as strong, but we just had a few items that caused FFO to come in a little bit lower relative to the same-store.

Nick Joseph

Thanks. I appreciate the color.

Operator

Your next question comes from the line of Jana Galan of Bank of America.

Jana Galan

Thank you. I was wondering if you could expand upon the comments you'd made earlier on the first quarter softness in San Francisco and San Jose that what you're seeing that could mean that it could be more than just seasonal?

Jerry Davis

Yes, it's hard to tell at this point in time. We did see or have some occupancy and pricing power pressures in the fourth quarter, but as we rolled into January we started to see signs of improvement. Now new lease rate growth in the fourth quarter was 5.2%, renewal growth was 9.3%. As we look at January, our January new leases are up 4.2% in San Francisco and San Jose and that compares to 3.3% in December, so it is improving. And our January renewals are still well above 8% at 8.4%, our occupancies at 97, so it has strengthened. Now as we look at job growth which is the primary concern in those markets right now it's been running about 4.5% for the past couple of years and when we have talked Axiometrics, they are forecasting for job growth to decelerate to 2.5% to 3% and while that's about a 150 basis points to 200 basis points deceleration, it is still well above the national average of job growth of 1.75% to 2%. So we like to think it's all seasonal. We are going to know in the next 60 days if it is and over the last three to five years there has probably been two or three times in the first quarter when I grew concerned about the strength of San Francisco only to see things turnaround as we got into the month of March and April. So it's just a little bit early to tell, but on the ground we are not seeing any significant job loss from any single employers and as I've said as we've come out of the fourth quarter and entered the first quarter we have seen fundamental starts to strengthen again.

Jana Galan

Thank you, Jerry. And then on the operational initiatives, very impressive to get to your [20%] NOI margins. I guess how much room is left in terms of reducing days vacant or maintenance staff efficiencies?

Jerry Davis

I think days vacant we have gone from about 26 days to 20, we are not going to be able to get it much lower, I don’t think, call it maybe another two days but we have been chopping a day, day and half of each of the last three to four years. It's starting to slow a bit. The only thing you can do to reduce it quicker is to cut rates that's how you can really move to compartment homes and we are more focused on driving rates. So we will let that vacant day stay about where it is. On the staffing efficiency I think we can continue to drive that metric even better. There is a few things technologically, we are working with our property management software provider to help us go to the next step on. But I would tell you as we created our expense budgets for 2016, we do have our repairs and maintenance coming in at flat once again and this is probably going to be the further fourth straight year that it's been negative to positive -- negative or up 1%. So we've kept that under pretty good control while we've been able to achieve turnover that's remained flat. So we use those guys times not just to push price down but to enhance service, which helps us maintain a steady turnover.

Jana Galan

Thank you.

Operator

Your next question comes from the line of Ian Weissman of Credit Suisse.

Ian Weissman

Hi, yes. Good afternoon. How are you doing? Did you guys put out I guess guidance for the year about budgeted spend of $550 million to $700 million combination of debt equity and sale proceeds I think for the balance of this year? And maybe you could just talk about the attractiveness of the each in this environment as we sit here today.

Tom Herzog

Ian it's Herzog here again. I think about it this way. If we are looking at debt let's just start there. Typically we are going to use substitute debt to refinance debt that's maturing and that might be coming in at the call it 4.2, 4.3 range in our model, would be cheaper right now. So I think the debt in terms of that type of the cost on an unsecured basis that's on a 10 year. Let's go to equity. Equity, I am going to look at an AFFO yield on a current year basis and just based off of AFFO projected for the midpoint of today's share price that comes in at about 4.5% current. Of course we are going to add growth for that so I have to look at it on a cost of equity basis and that's probably going to be somewhere just shy of probably 8% or something like that on the cost of equity basis. And then you move to sales of assets and again on current yield they depend on what cap rate of assets that we are selling, I think our sales for 2015 came in at a 5.8% cap rate. Jerry is that correct?

Jerry Davis

Yes.

Tom Herzog

5.8%. But again it depends on the mix of what we are selling and as we think about how we fund our business, the debt maturities, which are rather modest over the next couple of years probably comes from refinancing of debt. When you think about the development spend, call the development spend $500 million including re-debt, including land, we can fully self fund as I said in my scripted remarks through a free cash flow, through our 1031 exchanges on land and on a portion of our development spend that the balance funded through sales and gain capacity out of our $125 million, $130 million. So if we choose to we can fund the entire development spend on a self funded basis and our debt maturities through re-fies. In the mean time we have a $1 billion of capacity right now on our revolver in cash. So, again that percent of our business being quite self funded. But when you look at each decision as it comes to pass during the year against these various forms of capital, those are the different decisions that we -- those are the different data points that we look at and we make a decision on how to fund the activities.

Ian Weissman

I guess the question now in terms of asset sales today if you just think about the window of opportunity, do you think that window has changed in this environment?

Tom Herzog

Jerry do you want to take that?

Jerry Davis

Sure, this is Jerry. So, for asset sales, right now there's still a tremendous amount of capital chasing assets. A assets, B assets, cap rates are very favorable, capital is readily available to acquire these assets, but we don't see that changing any time soon. Debt remains readily available, cash flows continue to grow and we're seeing investors, not just pension funds but also sovereign wealth funds, FIRPTA changes potentially have opened up additional investment in U.S. real estate to foreign entities. So, at this point, the disposition market continues to be very liquid.

Ian Weissman

And just lastly, just to clarify, your $500 million of development spend, what does that imply for starts this year, if I missed that?

Jerry Davis

Yes, we're going to have two to three starts this year, 345 Harrison in Boston and then one to two other JV starts with MetLife.

Tom Herzog

In terms of dollars that will be somewhere in the neighborhood of $350 million to $450 million, which is very consistent with our starts every year since 2011.

Operator

Your next question comes from the line of Jordan Sadler of KeyBanc.

Austin Wurschmidt

Hi, good afternoon, it's Austin Wurschmidt here. I was just curious given the continued focus on driving rate in 2016, does the 2017 outlook assume a similar level of revenue, I guess is earned-in headed into 2017 as you entered 2016?

Jerry Davis

Austin this is Jerry. I would expect it to be a little bit less. We do not anticipate as you get to the back half of this year to have quite as much ability to drive new lease rates or renewal rates. Our expectation when we did our budgets was that market conditions would be a little bit weaker across the board, well not across the board, but in aggregate call it 70 to 80 basis points. So, if I do guess right now what I think we would go into next year with, that will be in the 275, it's probably going to be somewhere closer to the 240, 250 in order to get that deceleration for midpoint-to-midpoint of about 75 basis points.

Austin Wurschmidt

And then I was just curious Jerry what -- you mentioned New York kind of strengthening as you look out a little bit, could you just give us some color on where you're standing on renewal lease rates for New York?

Jerry Davis

Absolutely. Right now they are going now between 6% and 7% January, probably in that 6% well that's what we achieved in January. As you look out over the next two months, it's probably a hair less, call it 6% to 7% but we are seeing strength, I'll say strength. We're seeing a stable environment in our New York portfolio and I would add our occupancy today in New York is at 97%. When you look at New York, we're in three submarkets, we're in Chelsea, we have two assets -- or three submarkets, we've two down in the financial district, we have one in Murray Hill and we have our last one, which is a Met JV is in the Upper West Side. The Upper West Side is definitely the weakest of the group where in fourth quarter we had revenue growth of about 1%. When you look at the other three that are in our same-store pool which is the two downtown as well as Chelsea, revenue growth was 5.5% to 6%. So, we're not seeing supply issues anywhere except the Upper West Side. You're not really seeing affordability to a great extent right now and you're not -- we are also not seeing job loss anywhere.

Austin Wurschmidt

That's helpful. I mean from a demand perspective I guess you mentioned you're not seeing any job loss, but as you look out, I mean do you think if job growth were to slow that some of the demographic trends in New York, do you think could that be enough to back fill demand given the supply that we are seeing in New York?

Jerry Davis

Yes, I do, because a lot of our portfolio is B, with the exception of probably our Chelsea property as well as our Upper West Side. Our Murray Hill and our two downtown properties really do cater to that B-renter and I think people can trade down if they wanted to do from the A's to come to us and several of our floor plans especially over View 34 are very large. So people did feel the squeeze and had to double up, I think that would be an alternative too.

Operator

Your next question comes from the line of Nick Yulico of UBS.

Nick Yulico

Just going to that Attachment 7-B where you breakout all the projects been added to the same-store this year. Looks like you fell almost 1,600 units and you had about 35,000 in your same-store, so you are adding about something like 5% units. Can we get a feel for what the revenue growth assumption is for these assets that are being added to your same-store figure, how much of a benefit to your overall same-store it is?

Jerry Davis

I will probably just cut to the chase and say what the benefit is to my same-store. It’s about 20 basis points. It’s predominantly coming from View 34 and these other two. But just to give you a little indication. Our New York, which Herzog was going through the two year outlook, we have said New York revenue is going to come in really within our midpoint 5.5 to 6, it’s much closer to 6 than 5.5. But View 34 was adding roughly 80 basis points to New York. So without that one I would have been in the low 5s. But again when you look at the components of each one of these that's going into the full year, this year call it 20 basis points. So without those I would have been I guess 5.5 to 5.6.

Nick Yulico

Okay, thanks. It's helpful. And then as far as -- maybe this one is for Tom Toomey. As far as your -- as you think about the class B piece of your portfolio and maybe some markets Orlando or other places. How are you sort of weighing keeping that as kind of a hedge against new supply and assets have done quite well versus all the talk coming out of NMHC which was redevelopment value-add? If you could sell those properties to people, you are getting sort of the most aggressive pricing the market has ever seen?

Tom Toomey

I guess I look at it this way. Through cycles these tend to hold up very well. And when you find markets that we look at income to the ability for the resident to pay, to our ability to continue to push rent increases through to them. The Bs probably have a bigger bandwidth in our mind to absorb it and then on the down side they are probably insulated more than the As. So I’ve always drawn to kind of good solid B in a great location as a good long-term cash flow driving machine. And so we’ll probably always have a good mix of Bs in the portfolio and we will solve really for our ability to grow cash flow over time.

Nick Yulico

As far as Bs go, I mean what percentage of your portfolio you think is class B at this point?

Tom Toomey

We think it’s about 50-50 right now between A and B. And then over time those As will turn into Bs and we’ll have to continue to reload at the top end. But we’re always probably be a company that will have that balance of 50-50.

Nick Yulico

Okay. Thanks guys.

Operator

Your next question comes from the line of John Pawlowski of Green Street Advisors.

John Pawlowski

Thank you. With regards to CapEx, can you let us know what percent of NOI you are expecting to spend in '16 for both recurring and non-recurring?

Tom Herzog

I’m sorry, just as far as what the CapEx numbers are? I can give you those real quick. The CapEx per door on the recurring is at $1,100 a door, for revenue enhancing it’s about $550 a door and then for A and Bs whatever the number would be, we plan to spend about $50 million in total. So you could do the quick door calc on that. I don’t know that I answered your question.

Jerry Davis

This is actually the question, I think came up from a call earlier today when one of our competitors was talking about looking at CapEx as a percentage of revenue, revenue on a per door basis. I don’t think we have that number of the top of our head, but it’s fairly easy for us to calculate and get back to you.

John Pawlowski

Second question, past few quarters you suggested the increase to G&A guidance has largely been due to higher than expected incentive program payouts from outperforming targets. Looks like G&A ended up 50% higher than initial guidance. So could you just give us a little color on what specific metrics for were hit that drove the $8 million overrun?

Tom Herzog

If you look at G&A there are a number of different -- by the way, you’re right. It was FTI and LTI that drove the higher G&A. Our metrics stand around things like same-store, development spreads, balance sheet metrics, TSR and then on top of that we had a couple of major transactions that were very good for our business including the West Coast development JV, the Home transaction, the Washington D.C. acquisition. And so we hit on all of our metrics in 2015 without exception and it did result in to the metrics that we have set for higher than average LTI payouts and FTI payouts. One of the thing I will have you note though that might get missed is that we have the transitional plan in place moving from the old LTI program to the new. So now we have a three year cliff left on the TSR portion and we didn’t use to have that. So the transitional piece is about $3.5 million of that $10 million variance. So just keep that in mind.

Tom Toomey

John, it's Toomey. I will just tell you, '15 we hit everything right on the ballpark, from ops to transactions to the financing of the company to TSR. And so I’m grateful for that performance and happy as hell to payout bonuses across up and down the entire organization and we'd like to do it again, frankly. We add all those metrics and perform at that level again, we'll be paying at that level.

John Pawlowski

Okay, thanks.

Operator

Your next question comes from the line of Alex Goldfarb of Sandler O'Neill.

Alex Goldfarb

Good afternoon. Just a few quick questions here. First on the -- what slide is it, Slide 7, Jerry where you guys talked about the benefit of reducing the downtime of days taken and then you also talked about going back and resuscitating old leads both as increasing NOI. It would seem like resuscitating old leads would sort of cut down on vacancy. So, are the two NOI impacts -- that would seem to be overlapping, are they two distinct NOI benefits or you are just citing the difference of different initiatives but in aggregate you wouldn't add those two together?

Jerry Davis

There's probably a little bit of overlap. You are right, part of what helps us fill vacant units faster is going back after lost leads. There probably is a hair bit of duplicity in there, what we're really looking for is again on the resurrection of discarded leases, trying to help out our site associates that at times you don't have enough time to do accurate follow-up. So, yes, there is probably a little bit of that that could be occurring.

Alex Goldfarb

So, what else is driving, apart from resuscitating old leads, what else drives reducing the downtime of the unit? I mean it takes a certain amount of time to clean the unit, there's regular marketing traffic which you guys are pretty good at. So what else goes into cutting down that downtime of the unit?

Jerry Davis

That's a multitude of things. One, we spread the lease expirations throughout the month instead of having them all occur at the same time. Some -- it's much easier just to say lease has expired at the end of the month but when you do that you have 30 people move out of a 600 unit property, your maintenance team can't get to the 30th apartment to turn it until day 22. By spreading that throughout the month, we're able to do a little bit better. The other things you do as you try to entice people to push up their moving date. If you know an apartment is going to be market ready on the 26th of the month and somebody comes in and says, hey, I want to move in at the end of the month or beginning of the month, you basically tell them when they will be moving in. So you push them closer to the 26th instead of automatically just putting them in as a move-in on the 30th and that's cut off three days. So, some of its strategic, some of it is putting in more demanding metrics on our maintenance team, for expectations of when apartments need to be turned, old school way of doing it. You wouldn't go turn a unit until it was leased. The way we try to do it is turn it as quickly as you can from when somebody moves out. So you have ready inventory. But those are obviously the major factors.

Alex Goldfarb

Okay, that's helpful. And then sticking with you Jerry, you made the comments earlier on San Francisco and too early to tell, was just sort of year-end softness versus, there is something that is happening in the job market there. But just curious given your other tech market exposure like in Seattle and maybe Boston as well, do you get a sense if there is a linkage, so that if there were a slowdown of tech let's say in San Francisco, your team in Seattle or Boston or other tech oriented markets would feel it or the deal is that a number of the what could be happening at a local doesn't necessarily happen at -- in the other tech related markets?

Alex Goldfarb

Yes, I don't think it happens quite as much. There's more startup activity honestly in the Bay Area. So if funding for Unicorns and the other tech startups slows, I don't think it has as much of an effect in places like Seattle, down in LA where Silicon Beach is becoming really a tech hub or out in Boston those are typically more established organizations that aren't dependent on financing.

Alex Goldfarb

Okay and the point is you're not seeing any softness in any of those other three markets you just cited?

Jerry Davis

No. We're actually seeing strength in all three of those other markets.

Alex Goldfarb

Great, thank you.

Operator

Your next question comes from the line of Rob Stevenson of Janney.

Rob Stevenson

Good afternoon, guys. Jerry, in terms of what you've been saying in the third and fourth quarter so what's your -- what's baked into your 2016 guidance, is there any real bifurcation between the various D.C. submarkets these days, operating performance wise?

Jerry Davis

Yes. I think your Bs are still continuing to outperform. They have compressed at times and then widened but our B product outside the Beltway continues to carry us versus our inside the Beltway. When I look at our As they are currently coming in probably close to -- our A urban had revenue growth in the fourth quarter of about 1% and our Bs which are predominantly in the suburbs came in about 2%. So, revenue growth basis, call it 100 basis points.

Rob Stevenson

Okay. And then -- Jerry, when I think about turnover for you guys. I mean, turnover ratcheted up modestly year-over-year to 52%. How should we be thinking about the impact of 100 or 200 basis points of turnover in terms of the bottom line? What does that represent penny wise for you guys if turnover goes up a 100 basis points in 2016 over what you are expecting?

Jerry Davis

It really depends on what you are getting for rate growth. If I'm pushing renewals at 8% and my turnover goes up a 100 basis points, it's probably positive to my bottom line and it also depends on how quickly I can reload. I don’t have the exact number off the top of my head. I will tell you my expectation this year for 2016 is my turnover is going to go for about a 100 basis points because we are going to continue to try to drive the rate. So I don’t think you are going to see it continue to come down. We are not seeing an increase in move-outs to home ownership. We are not seeing it from money problems. The one metric that is tending to migrate up a little bit is move-outs due to rent increase, but it still has not gotten to a level that I see is pushing an inordinate number of people out of the door. And if you look at that schedule that's in our supp, which shows the turnover metrics comparing this year to last year, it's attachment 8-G. There is really only one market where you see a significant increase and that's our Monterey County which went probably from 49% to almost 57%. That's also a market where we have revenue growth this past year in the low to mid teens. So we would do it all again in places like San Francisco and areas like that it's going up a 100, 150 bips and I will take that too, as long as I am getting renewal growth that's approaching double digit.

Rob Stevenson

Okay. And then on the real estate tax side. What's the impact from 421-b expirations and what's the overall assumption for real estate tax growth in 2016?

Jerry Davis

I will give you second part, then Herzog's going to talk more 421s. Overall this next year our expectation is real estate taxes are going to go up in that probably 7% range. Now that sounds like a huge number. This past year our real estate tax expense we thought was going to come in 5.5% to 6% and it actually came in right around 3%. We benefitted dramatically from our appeal wins, it's probably pushing close to a $1.8 million to $2 million that brought us down almost 200 basis points. When we factor in and budget for real estate tax growth, we do not expect or build in any refund. So again it's going to be roughly up at that 7% range is what we are showing today and a chunk of that as Herzog will say in a minute is due to the 421s. Tom?

Tom Herzog

Yes, Jerry. From a same-store perspective, Rob, the 2016 same-store expenses, as a company, we would expect that to be impacted by 45 basis points, and in 2017 about 70 basis points. I will mention that on schedule -- in the Schedule 8 series of our supp we do footnote for the total portfolio and for New York specifically the impacts on same-store expense and same-store NOI so that you can see it with and without. And from an AFFO perspective in 2016 it's about $670,000 roughly just from the burnoff of the abatements and whatnot, and in 2017 it would be about a $1.3 million. That's what built into the numbers right now.

Rob Stevenson

Okay, thanks guys.

Operator

Your next question comes from the line of Dan Oppenheim of Zelman & Associates.

Dan Oppenheim

Thanks very much. I was wondering, if you can talk a little bit in terms of the 2016 expectations, where you see the greater risk? If you think about the revenue side potentially here in the Bay Area, we've certainly seen some of the deceleration as of late, but then also on the expense side talking about R&M being flat or is it personnel costs, which probably have to come down from where they have been lately, or the tax side. How do you think about weighing the risks as you go through 2016?

Jerry Davis

I'll start with that. This is Jerry. I see little risk on the expense side. Again we have expenses budgeted at 3.25%. When you have a margin like us, what really moves the business most is the revenue. I think I told you what we have in our model currently for real estate tax is 7%, it really doesn't have refunds calculated in and I'm confident that we are going to get some of those. And the other expense categories we are looking at and that we've built in, the second largest component of our expense stack is personnel which is about a quarter of our total expenses. We expect that to grow between 4% and 4.25% higher than it has the last couple of years as we have more competitive pressures to attract and retain our associates. All the other categories, marketing we expect to go down. Our marketing team has done a great job with both at our website as well as working with the ISOs or ILSs to bring down our cost. Repairs and maintenance, I don’t see that going up dramatically. I think we have debt locked down pretty well. So on the expense side I think it's not overly risky. The revenue side there is always risk and probably the two markets that we are keeping our eyes on the most, would be San Francisco because we hear all those same information, you guys hear. New York we're watching that closely too and as I've said earlier about both of those markets, they both today, it's not apparent to us whether it's seasonal issues that created the weakness in the fourth quarter, because we're starting to strengthen or if it is something more. But as I look at it there's really three markets that today you would say are kind of risky and it'll be those two as well as Austin. But what I would also say is those constitute 25% of UDR's total NOI. When you look at all of the other markets combined which make up 75%, we see strength. We see strength in Sothern California, the entire Sunbelt with the exception of Austin is extremely strong today. D.C. are still going to be a laggard by comparison, it's improving and we think Boston is improving. So, while there may be a risk in a market or two, the benefit of having a geographically dispersed and asset class differentiation between the As and Bs I think gives us pretty good protection.

Operator

Your next question comes from the line of Rich Anderson of Mizuho Security.

Rich Anderson

Thanks. Good afternoon. I just have one question because I guess everything else is perfect. On the debt, the 5.7 debt to EBITDA today, going to maybe as low as 5, in 2017 looks so great. But then when you wrap in the joint venture impact, 100 basis points up now, it kind of muddies it a little bit, maybe significantly in the eyes of some people. I'm just curious what you think about that in terms of managing your leverage at the joint venture level so that the full leverage story looks better than what it appears at this point?

Tom Toomey

Rich it's a fair question, this is Toomey. I think your math is about right and as we think about the joint venture, but maybe The Street doesn't always look through to as the strength of our partner and MetLife and their position and strength. And so they are very comfortable running these development joint ventures and then when they're completed, they will finance them out at 40% to 50% leverage which would be a high for UDR's corporate entity. But we're comfortable with them as a partner financing around that level and we feel that they are there for a long period of time and will perform if necessary and have shown a track record of doing so through many cycles.

Rich Anderson

So it will be same 100 basis point impact two years from now, you think?

Tom Toomey

I would put it at that. I think that's fair, the way it looks organically right now, I would -- everything Tom said, I obviously agree with as well. One of the things we have to take into account is that when you look back at what's taken place in the company over the last number of years, we have dramatically reduced leverage but over the last two years it's been clearly or substantially organically. And so you've got the organic improvements that'll occur but also as we have an opportunity to do up a Home or West Coast development JV. If we were trading at a place where we could issue stock at a premium, that does give us an opportunity to further de-lever the enterprise by acquiring assets on an accretive basis at a premium and that lowers the leverage of enterprise. The other thing I've mentioned is when you look at our current leverage levels with the rating agencies and we have had studies done by three different banks, as to where we are rated at the BBB+, Baa1 and what the sweet spot has been determined is at the leverage level that we're at that's the BBB+, Baa1. So, to go through a natural means to further improve that leverage and do so on a dilutive basis is not something that's all that enticing, as we think we can continue to improve it over time in the ways that I just described.

Operator

Your next question comes from the line of John Kim of BMO Capital Market.

John Kim

Thank you. I had a question on your reduced acquisition guidance compared to last year's. I realize this is really just for modeling purposes but has your risk appetite changed? And, also, can you provide some color on the volume and characteristics of potential deal flow compared to maybe a few months ago?

Harry Alcock

John this is Harry. I think we do acquisitions primarily as opportunity based and so the significant acquisition we had last year, which was the Home acquisition, really we were able to solve the problem and then we had a currency that was required in order to get that deal done. As we look forward, again if something like that came up we certainly would take a look at it. But as we started last year we don't have any expectations that can materialize again. If it does we'll certainly take a look at it, but we don't have any reason to expect that, that will reoccur.

John Kim

And what about the risk appetite?

Harry Alcock

Well, so again, our risk appetite has remained unchanged and you also asked about deal flow. I mean there are tremendous amounts of deals in the market today. You saw last year was nearly $140 billion in transactions across the multi-family space, which was a record year. And NAREIT a couple weeks -- at NMHC a couple weeks ago the broker community is indicating that they’re actually ahead this year of where they were last year. So we expect there to be sort of continued frothy deal market. But again it’s very difficult for us right now to compete with the pension funds, the sovereign wealth funds and the assets that we want to buy again. If an opportunity materializes where we can solve the problem we think that might be just a spot where we could potentially capitalize.

Tom Toomey

John, this is Toomey. I would just characterize it as this way. It’s not an element of risk and it’s more of an element we believe fundamentals of the industry have many years ahead of strength. It's just a function of pricing and opportunities and we would rather save our currency for where we can have more predictability and that’s in our development pipeline today. On the acquisition front prices are pretty good. I think assets still have some room to run, but we think, we want to be a self-funded company that can internalize our growth if you will. And the best path for that is continue the development today. We’ll continue to look at the market on an acquisition front, but really do not feel that pricing wise, we’re going to get the same type of returns that we would be getting in our development pipeline.

John Kim

Okay. And then I think, Jerry, you mentioned that you see Southern California decelerating in 2017. Can you break that down between Orange County and LA, if there's any difference?

Jerry Davis

I thought that there would be stable to slight deceleration and that’s mainly just based on how strong we see it this year. They are both going to be coming in our current projections close to 7%. If I had to forecast between the two, I’d probably -- it’s probably about even. I think they’re both going to remain strong for a while. They ’re both late to the game. You’ve got fantastic tech job growth that Marina del Rey submarket where most of our assets are located in LA and obviously that’s slowing down. I think the jobs still haven’t fully arrived. If I look down at Southern California, I just read the other day there was more job growth there in 2015 than there has been, since I think late 1999 levels. So it’s picked up. You don’t have any one large employer. You don’t really have significant supply issues in Orange County and in LA. Most of the new supply’s come downtown, where we’re not located. So I would say at this point, I don’t see a significant differentiation between how the two are going to perform next year, this year I would expect our LA portfolio probably to be a hair higher than our Orange County.

Operator

Your next question comes from the line of Greg Van Winkle of Morgan Stanley.

Greg Van Winkle

Hi guys. You mentioned seeing some outperformance from B's versus A's right now in D.C. Are there any other markets where you're seeing a significant bifurcation? Does that hold true in a lot of the markets where there's a lot of new supply and is that gap widening at all?

Jerry Davis

Greg, it will expand and contract quarter-by-quarter today, the differentiations by about a 150 basis points nationally. You’re right, you tend to see that differential in almost every market where new supply is coming into compete against our A product. So I would say on a national basis for us, that’s probably about what the difference is, call it 150 bips. I saw it probably reached its peak a year, year and-a-half ago when it was well over 200 basis points. At some point earlier this year, I remember looking and it felt like it had contracted down to about 50, but in the fourth quarter, it was about 150.

Greg Van Winkle

Okay. Thanks. And then something that's not contemplated in your two-year plan is stock buybacks. If the market continues to provide limited opportunity for acquisitions with a favorable window for asset sales, and your stock trades at a discount to NAV, is that something that might be on the table at some point, or not something that you really think about?

Tom Toomey

Not at this point, Greg. We are trading somewhere in the vicinity of NAV. As you know, there is a lot friction costs that’s involved. We’d be nowhere near looking at stock buybacks at the current date.

Greg Van Winkle

Okay. Thanks guys.

Operator

Your final question comes from the line of Wes Golladay of RBC Capital Market.

Wes Golladay

Hello, everyone. A quick question on the Unicorns. How big of an issue do you think this is? And if you had to estimate how much your new leases come from startup employees, what would you think that is?

Jerry Davis

This is Jerry, I don’t know how big a risk it is. Currently I wouldn’t say it’s a huge risk, but that could change in the next 90 days as we see more. So I wouldn't put the risk at extremely high. As far as percentage of my leases that come from those types, I don’t track that data or at least I don’t have it on me. I don’t think it's a very high percentage.

Wes Golladay

Okay, thanks a lot.

Operator

Thank you. I'll now turn the call to President and CEO, Tom Toomey for any additional or closing remarks.

Tom Toomey

Well certainly, and again thank you for your time and interest in UDR today. Certainly wrapping up, 2015 was a great year and as we talked throughout that year, we're positioning the company for a great 2016. I think we're off to a very solid start on that front and we look forward to updating you after the first quarter.

Operator

Thank you for participating in today's conference call. You may now disconnect.

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