Silver Bay Realty Trust's (SBY) CEO Thomas Brock on Q2 2016 Results - Earnings Call Transcript

| About: Silver Bay (SBY)

Silver Bay Realty Trust Corp (NYSE:SBY)

Q2 2016 Earnings Conference Call

August 4, 2016, 10:00 ET

Executives

Christine Battist - Chief Financial Officer

Thomas Brock - Chief Executive Officer

Larry Shapiro - Chief Operating Officer

Analysts

Dennis McGill - Zelman & Associates

Vivek Agrawal - Wells Fargo Securities, LLC

Janet Leon - Compass Point

Emil Shalmiyev - JPMorgan

Operator

Good morning. My name is Patrick Wright and I will be your conference facilitator. At this time, I would like to welcome everybody to Silver Bay Second Quarter 2016 Financial Results Conference Call. All participants will be in a listen-only mode. After the speakers' remarks there will be a question-and-answer period.

I would now like to turn the call over to Christine Battist, Chief Financial Officer of Silver Bay. Please go ahead.

Christine Battist

Thank you, Patrick, and good morning. I'd like to begin by welcoming everyone to Silver Bay's second quarter 2016 conference call. Joining me on the call today are Thomas Brock, Chief Executive Officer and Larry Shapiro, Chief Operating Officer.

For your reference, the press release and financial tables associated with today's conference call were filed yesterday with the SEC. If you do not have copies of the materials, you may find them on our website. These materials contain the reconciliations of the non-GAAP financial measures referenced on this call. This call is also being broadcast live over the Internet and may be accessed on our website at silverbayrealtytrustcorp.com in the Investor Relations section under the Events Calendar page. In addition, we'll be filing our 10-Q later today.

Before we begin, please note that today's discussion may include forward-looking statements. Forward-looking statements reflect our views regarding future events and are typically associated with the use of words such as anticipate, target, expect, estimate, believe, assume, project, and should or similar words. We caution all those listening, including investors, not to rely unduly on forward-looking statements.

They imply risks and uncertainties and actual results may differ materially from expectations. We urge you to carefully consider the risks described in our filings with the SEC, which may be obtained on the SEC's website at sec.gov. We do not undertake any obligation to update or correct any forward-looking statements if later events prove them to be inaccurate.

I would now like to turn the call over to Tom.

Thomas Brock

Thank you, Christine, and good morning, everyone. The second quarter had many positives for Silver Bay highlighted by our highest quarterly revenue, portfolio occupancy rates and cash flow generation. In my prepared remarks, I'll provide some highlights of our second quarter results and an update on our strategic priorities including capital allocation.

I will then turn the call over to Larry Shapiro, who will provide an overview and Christine Battist will follow and speak to our financial results. After our prepared remarks we will open the call to your questions. The fundamentals for single-family rental demand remain extremely strong across our markets and this translated into both high occupancy and rental increases for the quarter.

Occupancy improved 290 basis points year-over-year and 70 basis points quarter-over-quarter to 97 basis points. We also delivered solid rental growth during the quarter with double-digit release increases in certain markets and we continue to see strong demand during our peak leasing season.

For the second quarter we reported our highest quarterly revenue of $31.5 million notwithstanding a decrease of 350 properties to our portfolio compared to the year ago quarter. We generated net operating income of $18.1 million and core FFO of $7.8 million or $0.21 per share, core NOI margin on the aggregate folio of 57.8%, 160 basis point improvement from the year ago quarter. We believe there room for additional [operational] improvements to cash flow generation in coming quarters as we refine our processes and reallocate capital.

Our second quarter results reflect the progress made on cost control this year but there are still areas that need to improve; A, instrument and bad debt expense have come down nicely but our work order and turn costs have not and need continued focus. Lowering the cost work orders and costs is our highest priority.

With respect to capital allocation, our strategy is to balance return of capital to shareholders through dividends and share repurchases with allocations to new portfolio investments in core markets. This past quarter we returned cash to our shareholders with a dividend of $0.13 per share, which was fully supported by the cash flow generated by our portfolio.

This represents [indiscernible] dividend yield based on the quarter end. We purchased 231,000 shares during the quarter at an average purchase price of $14.78 per share. Cumulatively through the second quarter we have repurchased over 4 million shares or over 11% of our market capitalization. Portfolio optimization continues to be an important priority for Silver Bay. During the quarter we sold 62 homes, the majority in Southern California, for gross proceeds of $10.1 million at an aggregate net gain of $2.5 million.

As we complete our exit from the Southern California market, our best execution continues to be through traditional MLS channels. Demand remains robust and we continue to see extremely favorable pricing at levels at or above our fair value estimates. Over 75% of our Southern California portfolio has been sold or is currently under contract with the remainder of our homes scheduled for sale as leases roll-off.

We evaluate our portfolio and markets on a continual basis and I am pleased to share some news on further optimization of our portfolio. Recently we made the decision to sell our holdings in Southeast Florida. As we have done previously in Houston and Southern California, we plan to maximize the value of the sale of this portfolio of 380 properties via a combination of owner occupant and investor sales over the coming quarters.

Similar to our previous dispositions, we expect to receive full market value for our properties. These asset sales will generate capital that we can strategically redeploy. In the past we have found it compelling to use sale proceeds to repurchase our common stock and we will always consider share repurchase as a viable use of capital. However, at the current time we have identified a number of portfolios in our core markets that would be very attractive investment opportunities.

Purchasing homes at generous cap rates across our core markets strikes us as a compelling opportunity. Our strategy is to sell lower yielding assets and acquire assets in our higher yielding core markets that will improve the overall yield on that capital by 1% to 2%. We believe our approach will allow us to drive significant cash flow increases for our shareholders as well as achieve improved operating efficiencies due to increased scale.

During this reallocation process you may see some variability in our outstanding debt as we rely on the flexibility afforded to us by our credit facility to bridge the mismatch in the timing of our purchases and sales. In closing, I'd like to say that I am delighted to have been appointed the permanent CEO of Silver Bay and have been impressed by the cohesive team that is out there now executing well against our strategic goals and priorities.

I'll now turn the call over to Larry for his insights on the operational performance this quarter.

Larry Shapiro

Thanks, Tom. I'll highlight some of the key achievements during the second quarter and comment on our focus for the remainder of 2016. My remarks will refer to aggregate portfolio metrics unless otherwise specified. In general our results were similar across our aggregate and Same-Home portfolio.

Our occupancy rates have trended up the last few quarters and continue to do so this quarter with occupancy of 97.6% despite this being a quarter with high lease expirations. We had rental growth on releases of 8.1% for the quarter. Northern California had exceptional rental growth at 18.1% along with Orlando at 10.7%. Atlanta, our largest market, also showed strong rental growth with release increases of 9% on 340 new leases and Phoenix, Tampa, Charlotte and Dallas were all north of 7%.

Renewal rental increases for the quarter averaged 3.4% on the aggregate portfolio. Atlanta, Charlotte and Northern California all had renewal increases over 4%. These rental increases reflect the broader pricing environment for single-family rentals, which have been strong for the last few years.

This has been driven by a combination of rising house prices, constrained new building by home builders and strong employment gains. We've seen no signs of that changing over the balance of 2016, which is key as we finish up our peak leasing season in the third quarter. We remain optimistic that we can grow blended rent at 3% to 3.5% during the rest of 2016.

During the quarter we continued to maintain high retention at 79.8% of our residents on homes available for turn. At the same time, total turnover for the quarter, which includes move outs, evictions and lease breaks, increased to 7.6% of our portfolio compared to 7% a year ago.

Our trailing four quarter turnover rate was 29.6%, slightly above our year ago trailing 12-month rate. Reducing turn time has been an area of operational focus for the past few quarters. Our execution in this area was one of the main drivers of our higher occupancy this quarter along with success in our pre-leasing efforts.

Turning the homes faster also helps revenue growth and cash flow generation. I would like to thank everyone in the Company who contributed to decreasing the time for move out to move in this quarter to 41 days, a significant improvement from 56 days a year ago and 54 days a quarter ago. This metric continued to improve over the quarter to 38 days in June. There can be variation from quarter-to-quarter in this metric but we showed significant improvement and it continues to be an area of focus.

Our revenue growth this quarter, along with some expense control, led to NOI growth on our Same-Home portfolio of 12%. Despite this growth, we still have more to do to improve our operational performance. We estimate that the total annual spend to maintain a home consisting of turnover, repairs and maintenance and CapEx to be in the range of $2,500 to $3,000. We are above this range for the second quarter. However, I believe we are on the right path to close the gap and reach our goals.

One of our key operational focus areas is to drive down spend, which will in turn generate more cash flow. We made many operational improvement, process improvements, over the past year including using service techs, enhancing our vendor management and better leveraging technology to increase efficiencies.

We have more to do to fully realize the benefits of these initiatives, but believe over the long-term these changes will reduce our property level spend on R&M and turns. I am proud of the progress we have made and we will maintain our focus on operational execution for the balance of the year. We are committed to do everything we can to retain residents and maximize cash flow.

Now, I'd like to turn the call to Christine for her comments.

Christine Battist

Thank you, Larry. I'll start with some commentary on our consolidated results and our Same-Home portfolio and wrap up with our liquidity position. This was our 14th consecutive quarter of revenue growth to $31.5 million, up 4% year-over-year on high occupancy and robust rental increases. We generated net operating income of $18.1 million or an 8% increase over the year ago quarter. We reported core funds from operations of $7.8 million or $0.21 per share, a 17% increase compared to the year ago quarter of $0.18 per share.

On a GAAP basis, net loss for the quarter was $222,000 or a loss of $0.01 per share compared to a loss of $0.10 per share for the year ago quarter. We reported property operating and maintenance expense of $5.7 million or 18.2% of revenue for the second quarter, a 30 basis point improvement as a percentage of revenue from the year ago quarter and a 70 basis point improvement from the first quarter of 2016, primarily due to robust rental growth.

Property management expense was $2.7 million or 8.7% of revenue for the second quarter, a 110 basis point improvement as a percentage of revenue compared to the year ago quarter. This improvement was primarily driven by a higher revenue base and some cost control. Our discipline on this line item has not been at the expense of our residents as demonstrated by our high retention rate.

We introduced core NOI margin this quarter to align with the single-family industry standards. Core NOI margin does not change NOI, but eliminates bad debt from revenue when calculating the margin. For the second quarter we reported NOI of $18.1 million and core NOI margin of 57.8% compared to $16.8 million and 56.2% in the year ago quarter. The year-over-year increase in NOI was primarily due to a larger revenue base along with some expense management, primarily in property management.

As Larry mentioned, we had strong results in our Same-Home performance this quarter as well. We included five quarters of Same-Home debt in our press release that we believe you will find meaningful to assess this cohort of property performance over a trailing period.

The Same-Home portfolio of 5,942 properties represents approximately 67% of our aggregate portfolio as of June 30th, 2016. Same-Home NOI grew $1.3 million or 12% over the year ago quarter to $12.6 million. The key factors that contributed to this included Same-Home revenue growth of 5.8% along with some expense reductions in HOA and property management partially offset by an increase real estate taxes.

Looking ahead, our third quarter is typically the most challenging operationally as a result of seasonality. We generally experience higher lease expirations and turnovers along with elevated property spend due to the excessive heat, which increases the number of HVAC calls and at times storm related expenses. This could cause some variation in our operating results. G&A was $3.7 million this quarter, which is slightly lower than recent quarters and a year ago due to some cost control as well as timing of certain items.

I wanted to comment regarding our philosophy on interest expense, which was up from a year ago, primarily due to higher rates. We monitor our interest rate exposure on a continual basis. We have and we will use derivative instruments to opportunistically hedge our interest rate exposure on our $625 million and variable rate debt to help manage our overall interest expense and consequently its impact on our cash flow. Because rates are low, we plan to put an interest rate swap in place on our securitized debt to lock in our interest rate exposure through its remaining term.

Finally, turning to the balance sheet and our liquidity, as of June 30, 2016 we had a cash balance of $32 million in addition to $21 million in escrow deposits and $72 million available on our $400 million credit facility.

In closing, we reported a solid quarter achieving our highest quarterly revenue and portfolio occupancy. We continue to execute on our 2016 initiatives of driving operational improvements, which we believe in turn will generate increased cash flow for our stockholders.

Now, I'd like to turn the call to the operator for Q&A.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] And our first question today comes from the line of Jade Rahmani of KBW. Please go ahead.

Unidentified Analyst

Joe on for Jade. Thanks for taking my questions. At a high level from a strategic say whether M&A was achieved a Company as it going?

Thomas Brock

Sorry?

Unidentified Analyst

Correct.

Thomas Brock

I mean, Jade, at this point we're not really in a position. Our stock price is still relatively low to our NAV and we're probably a leverage level that we're comfortable at so, as we mentioned in the call, we're still will be at re-optimizing our portfolio but our ability to raise additional equity capital is somewhat limited. On the other hand, if the right opportunity for a combination came along and it was a good strategic fit, we would certainly look at that just like we would look at all other possibilities.

Unidentified Analyst

Okay great and then my second question relates to rent growth on the different between growth on the releases versus the renewals, which is pretty sizable. Can you day how much room there is to push on the renewal side and your thoughts on tradeoff between rent growth and lease turnover?

Thomas Brock

Sure, Larry is going to take that.

Larry Shapiro

Sure, so we're always trying to balance rent growth and turnover and obviously we have markets where there's extreme rent growth or very large rent growth on re-leases and we're trying to push renewals. Renewal increase is a little higher in those markets, but so there's a fine line where we're trying to balance, so we really don't want turnover. We don't want to be the cause of turnover.

People are going to move. We do have a – we're always going to have some turnover and it's roughly 30%. But between the cost to turn and the loss of revenue in vacancy, there's very few times where it makes sense for us to push renewals to the point where we would jeopardize current residents at which would lead to turnover. So at the end of the day, there is a discrepancy there. I think we're going to try and push our renewals a little higher but we're trying to balance so that we don't increase our turnover.

Thomas Brock

Yes I mean, Jade, as you are probably aware, I mean the economics of turnover are – I mean it's very expensive so trying to balance that mid 3% increase on the renewal side versus the robust high, much higher numbers on re-leases is what it's all about, but it would be hard to justify pushing those numbers too hard.

Unidentified Analyst

Got it. And then on my last question, can you provide any color on the stabilized CapEx as reflected in the cash flow statement, specifically the breakout of initial renovation CapEx and renovation CapEx on previously renovated homes and perhaps over what time frame you would expect that additional spend to abate?

Christine Battist

Sure. It's Christine here. So for the quarter on the cash flow statement you can see $8.3 million. That's for a six-month metric. In the quarter the initial reno spend was $2.4 million and the stabilized CapEx for the quarter was $1.8 million for a total of 4.2 million. It was similar numbers in the first quarter, but if you'd like those as well I can show those. And what was your second half of the question?

Unidentified Analyst

Specifically how long do you expect to continuously incur renovation CapEx, particularly if that $2.4 million relates to other homes aside from the ones that were initially acquired during the quarter?

Christine Battist

The initial reno CapEx also will include the large portfolio of properties, TAH that we purchased in April of 2015. When those go through their initial turn we evaluate them and if we need to get them up to Silver Bay standards, the cost of doing that initial turn gets captured in that initial reno bucket. And so that's just going to take some time when those leases roll off for us to do that evaluation.

Thomas Brock

So you can do the math. I mean we've had TAH for a little over a year and you know our turnover rates around 30% so you can do the math as to how long it will go on. It will be just – it will be that renewal turn that where we would make those expenditures.

Unidentified Analyst

Great. Thanks for taking my questions.

Operator

And our next question comes from the line of Dennis McGill of Zelman & Associates. Please go ahead.

Dennis McGill

Hi. Good morning, guys. First question just relates to the decision for Southeast Florida to be the portfolio that you're disposing over the market that you're exiting. With that not being the smallest, can you just maybe walk through some of the rationale and why you chose that market versus another?

Thomas Brock

I think it's interesting. Discussions of scale aren't necessarily about the exact number of homes, but in the case of Southeast Florida we just felt that we thought that that market was at relatively low cap rates relative to what we thought were our opportunities away and that we thought that there was probably a good opportunity to be able to sell into that that market is quite robust at this time and we thought we could get a pretty good execution.

So again, we're trying to consolidate our core markets and that seemed to be a great opportunity to be able to increase the cash flow of the Company by selling at relatively – again, that's one of the examples if selling at what we view to be relatively low cap rates and reinvesting at higher cap rates.

Dennis McGill

You'd think of it more as selling a winner rather than a loser.

Thomas Brock

Yes well, I mean…

Dennis McGill

Relatively.

Thomas Brock

It's not an easy market. I mean there's a lot of – it's a difficult market from a maintenance standpoint. It's a difficult market from a weather standpoint. There's more exposure in that market so all these types of things are considerations, but the main consideration was that we were able to drive a lot more cash flow.

Dennis McGill

Okay second question, when you compare the Same-Home margin to the overall margin, Same-Home being slightly lower, it's a little counter intuitive just realizing that. That's your more stabilized pool and it's been through the turns and you've maybe been more successful on the operational side or more consistent on the operational side so is there anything in nuanced in the non same store pool that I guess implies a higher margin?

Larry Shapiro

This is Larry, Dennis. It's a 60 point, 60 basis point difference between the two and, as Christine said before, none of our homes that we purchased from the American Home are included in Same-Home, so part of that difference really is that initial turn where we're capitalizing those costs. And then it's just kind of the rest of it really just kind of comes down to mix depending on where the houses are and which houses they are. We're going to have some differences but the overall difference really isn't very large.

Dennis McGill

Okay and then last question, when you look at the new lease growth in the quarter, the 8% and it sounds like some markets are very robust, but healthy almost everywhere. How much of that would you attributable to the market strength and how much of that would you attribute to sort of normalizing your catch up if you will, realizing that the focus historically was more on occupancy versus rents?

Thomas Brock

I think there's a little bit of both, Dennis. I think that in all of these businesses it's a new business and you're eager to get their occupancy levels up early so you can only lease properties at what the market will bear but we think it's a - there's very robust demand right now, particularly in the West, and this is just a really good leasing environment and that in conjunction with the fact that we think we offer a tremendous value proposition in terms of what we offer on a per square foot basis and versus a multi-family or everything else. What we're offering is a very attractive product which gives us some room, we believe, to raise rents over time.

Dennis McGill

And that pricing power, would you characterize it as accelerating further into July or relatively consistent with what you saw I the second quarter?

Thomas Brock

Yes it's still - it's pretty solid across the board. We're not seeing any let up at all. In fact, you can see that our numbers have gotten progressively better quarter-by-quarter and so far we don't see any real let up in that.

Dennis McGill

Perfect. Okay thanks.

Thomas Brock

Other than normal seasonality, right.

Dennis McGill

Great, okay. Good luck. Thank you.

Thomas Brock

Thanks, Dennis.

Operator

Our next question comes from the line of Vivek Agrawal of Wells Fargo Securities. Please go ahead.

Vivek Agrawal

Thanks. Good morning and thanks for taking my questions. On your R&M and turns, what additional process efficiencies do you want to implement that you haven't done so yet? And do you think that sort of could lead to potential improvements of the 38 days and of your June turnovers? Well, I mean that was very good but I was just curious if there's more room for that as well.

Larry Shapiro

So this is Larry. I think a lot of the process improvements that we've done around reducing our turn time we're going to continue to work on. Those have really been aimed at getting our houses turned quickly, getting them - getting the houses marketed earlier and getting, and just getting people in earlier. We think that there may be some room for improvement there at some point just kind of due to our industry. We're going to run out of some room to make big improvements there.

On the R&M and turn side we're going through a whole process review right now of everything that we do really aimed at reducing costs in both R&M and turns. We have a team of our best people kind of looking at all aspects of our business and where we can drive costs out, what we can do to reduce that cost and we think that this is a little bit longer term to really get everything done but we would expect that there's definitely some room for us to improve.

Vivek Agrawal

Okay and then I know you're able to get fairly strong rent growth. Can you help us try to understand a little bit better about some of the makeup of your bars in various markets, maybe household income, things like that?

Larry Shapiro

So our typical resident, there is no - they're not all the same. We obviously we run the gamut from single people to married people to non-traditional families to really older people but the majority of our residents are families, with children. Those typically are the type of people that rent our houses. We're in our average income is probably somewhere $55,000 to $60,000 and again, it varies by market depending on what rents are. We have markets that our rents are lower, markets where our rents are higher but as an average you can kind of use that.

We appeal to a pretty wide demographic. Our feeling is that our houses kind of at the price range they're at there is - it's a very deep, very wide, wide pool of people and that these people we believe are less likely to overall to purchase homes in the future and that they - we're hoping that they're going to just be a little stickier and stay with us longer.

Thomas Brock

And just to add to that, this is Tom, we also think we're pretty well positioned if you looked at the demographic tables and you see the large amount of millennials that are sort of moving to an age where they're starting to have families, we think we're pretty well positioned as those - as that group starts to move out of apartment buildings and is seeking three bedroom plus type accommodation and we're very well positioned for that cohort so - and which is also one of the reasons why we've had I think lower than our peers a fewer number of, a fewer percentage of residents leaving to buy a home.

Vivek Agrawal

Okay thanks and then lastly, for your Southeast Florida exit, what time line are you sort of targeting for that process?

Thomas Brock

It's hard to know. Again, it's slower if we do it by MLS listings and it's faster if we do it through bulk sales so we're seeing inquiry on both sides and great opportunities on both sides so we'll fill you in on that as we get further into the process but we're just at very early stages of that disposition. But I think both types of exits offer promising opportunity for us so we'll keep you up as we go along. I mean you could judge what it would cost time wise if you looked at our exit from southern California because were doing that as leases roll off and so that takes longer.

Vivek Agrawal

Fair, thanks for answering my questions.

Thomas Brock

Sure. Thanks.

Operator

Our next question comes from the line of Fred Small of Compass Point. Please go ahead.

Janet Leon

Good morning. This is actually Janet Leon for Fred. I just have a couple of questions. The first one is on the rental growth. So I think that 8.1% growth is really one of the best growth rates that I've seen so was a big portion of that increase in rents from the releases of the portfolios that you acquired from the American Home back in 2015?

Could you sort of provide the percentage of the growth that's coming from that portfolio since my assumption is that you guys can re-lease that portfolio at higher market prices today versus the average month's rents I guess it was around $900-ish so could you sort of give us a [indiscernible] on that?

Larry Shapiro

Yes this is Larry. I think I got most of that. You broke up a little bit at the end there but certainly some of the rental growth is coming from the American home purchases but when you look at we bought no homes in Northern California from American Home and while we had 18, over 18% re-lease growth there, it's not on a lot of houses.

Though also on markets that are over 7%, Phoenix and Tampa and Dallas, very few - we bought a few houses in Tampa but really Phoenix and Dallas we bought none. Those are all over 7% so it's really balanced. Atlanta and Charlotte were kind of the big purchases from the American Home and we did get - we got good rental increases, both on the American Home houses and on our legacy houses. So it's a combination of everything but not driven by those, the purchases from the American Home.

Janet Leon

Got it, thank you. Just one follow-up question on the reserves that you set aside for the renovation, could you sort of give us ballpark estimate on the reserves for the renovation this quarter?

Christine Battist

Just a clarification why you're asking the reserves for the CapEx, reserves to actual CapEx or something else?

Janet Leon

Reserve - I'm trying to just estimate the NAV for Silver Bay since you guys stopped disclosing the NAV starting 4Q I think so just look at the reserves that you guys set aside for renovation for the second quarter.

Christine Battist

Right okay I think I understand your question, so this would primarily relate to any activity related to the TAH homes and you could expect our typical renovation of a home was over $28,000 and it's a fraction of that, of that cost, less than half roughly for costs that would need typically to get a TAH home up to Silver Bay standards if it needed something.

Janet Leon

Got it. Is it fair to say that about low to mid single-digit number is a good run rate for the back half of the 2016 or is that a good run rate?

Thomas Brock

I'm sorry; we're just having a little trouble understanding the question, percentage of what number?

Janet Leon

Not as a percentage but like the dollar amount in terms of the renovation reserves or is that sort of depends? Is it harder forecast? Hello?

Christine Battist

This quarter we spent in total $2.4 million on initial reno and that would be primarily related all to TAH.

Janet Leon

Got it. All right thank you. Thanks for taking my questions.

Thomas Brock

Thanks.

Operator

[Operator Instructions] And our next question comes from the line of Emil Shalmiyev of JPMorgan. Please go ahead.

Emil Shalmiyev

Hi, good morning. Did you guys disclose what the move out of the home ownership rate was?

Thomas Brock

We have not. I can tell you it's roughly been in the mid teens, kind of plus or minus over the last few quarters.

Emil Shalmiyev

Okay.

Thomas Brock

Emil, I had referred to it earlier but I think if you took our last, I think our last quarter we were running at around 16%. I think if you looked at the - I was referring to the competitor set. I think they're more in the mid 20s but at this point we have definitely had a lower percentage although that could change.

Emil Shalmiyev

Yes then back on the rent growth like if you think about your runway over the next few years like if you have a decent mark-to-market built in where you're kind of holding back in the renewals, is it reasonable to assume that you could push blended rent growth of like 3%, 3.5% for the next couple years or so?

Thomas Brock

Yes well, next couple of years you never know what the future environment is going to be.

Emil Shalmiyev

Right.

Thomas Brock

That's if you're looking - if we're thinking in terms of that 3% to 3.5% right number is good number.

Emil Shalmiyev

Okay cool, thank you.

Thomas Brock

Thank you.

End of Q&A

Operator

There are no more questions in the queue. This concludes the question-and-answer session. I will now turn the call back to Mr. Brock for any closing remarks.

Thomas Brock

Okay thank you very much for joining our call. We are very pleased with the results that we had this quarter and we think we can continue to do better so please stay tuned. Thanks very much.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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