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Executives

Jerry A. Brewer – Executive Vice President - Finance

Thomas H. Lowder – Chairman and Chief Executive Officer

C. Reynolds Thompson III – President and Chief Financial Officer

Paul F. Earle – Chief Operating Officer

Analysts

Jana Galan – Bank of America/Merrill Lynch

Eric Wolfe – Citigroup

Rich Anderson – BMO Capital Markets

Michael Salinsky – RBC Capital Markets Equity Research

Andrew McCulloch – Green Street Advisors, Inc.

Jeffrey J. Donnelly – Wells Fargo Advisors LLC

Derek Bower – UBS

Taylor Schimkat – KBW

Richard Anderson – BMO Capital Markets

Colonial Properties Trust (CLP) Q1 2012 Earnings Call April 26, 2012 2:00 PM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Colonial Properties Trust First Quarter 2012 Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded Thursday, April 26, 2012.

I would now like to turn the conference over to Jerry Brewer, Executive Vice President of Finance at Colonial Properties Trust. Please go ahead, sir.

Jerry A. Brewer

Thank you, Alan, and welcome to everyone joining us today. We released our earnings this morning via Business Wire. A copy of this earnings release may be found on our website.

Let me remind you that much of the information we discuss on this call, including answers we give in response to your questions, may include forward-looking statements regarding our beliefs and current expectations with respect to various matters. These estimates are based on a number of assumptions, any of which, unrealized, could adversely affect your accuracy. Please see our latest SEC filings for the detail and explanation of risk. Any non-GAAP financial measures we discuss are reconciled to the closest GAAP measures and filings that can be found on our website.

Tom Lowder, our Chairman and Chief Executive Officer and Reynolds Thompson, President and Chief Financial Officer will lead today’s call. On the call, they will discuss our business developments, financial results for the first quarter and our guidance for 2012. After their comments, we’ll open up the call to take your questions. Paul Earle, our Chief Operating Officer is also here to field questions.

I’ll now turn the call over to Tom.

Thomas H. Lowder

Thanks, Jerry, and welcome to everyone joining us. The operating momentum we discussed in our last call has continued in the first quarter. We’re off to a great start in 2012 and making progress on achieving our objectives for 2012 which are to grow the company, achieve investment grade rating and improve the portfolio.

The 8.3% same-property NOI growth during the quarter, the 11% year-over-year increase in FFO and the increase in our development pipeline to almost $200 million are clear indicators of our growth. Operating fundamentals in our portfolio are strong. We continue to push both new and renewal lease rates, resulted in a 6% increase in our same-property revenue over last year. Our occupancy remains high at 96%, turnover remains consistent at 60%, and our same-property operating margin was 132 basis points higher than a year ago.

Our home prices have fallen, the tougher mortgage underwriting standards that kept our move-outs to home purchases limited. We’re beginning to see new apartment supply in certain of our markets such as Austin and Raleigh, however, we do not anticipate the new supply to be a significant factor this year and into 2013. Our asset recycling and simplification of the business, which Reynolds will discuss in a moment, is clearly having a positive impact on overall results.

During the quarter, S&P recognized the work we’ve accomplished on our balance sheet as well as the strengthening multifamily fundamentals start upgrading our senior unsecured notes rating to BBB minus. This upgrade has already paid off in terms of lower pricing on our new unsecured credit facility in the $250 million term loan we completed last year. We’ve had good discussions with both Moody’s and Fitch and planning to have more substantial conversations following the second quarter.

Now, Reynolds will provide more details on our operating performance and activity during the quarter, I’ll conclude the call with our updated guidance for this year. Reynolds?

C. Reynolds Thompson III

Thank you, Tom. FFO for the first quarter was $0.30 per share. Building on our strong performance in 2001, our first quarter same-property net operating income increased 8.3% and revenue increased 6% versus the prior year, both stats represented company record for the first quarter.

Multifamily same-property physical occupancy was 96% at the end of the quarter. New lease rates were slightly positive and renewal rates were up 6.4% for the quarter. April new lease rates were up 3.4%, which is 250 basis points ahead of where new lease rates were in April of 2011. Renewal letters are going out at 7% and the renewal trends for April are up.

Average revenue per occupied unit reached $911 during the first quarter, up 0.7% sequentially and up 5.4% from the first quarter of 2011. Revenue per occupied unit is now 3.9% above the prior peak. Rents as a percent of income were 15.6% for the quarter, 440 basis points below our prior peak of approximately 20% in 2008. That’s one indication that we should not have near-term resistance to rental rate increases.

Resident turnover was 60%, 30 basis points above the prior year and flat to last quarter. Move-outs as a result of rental rate increases were 14%, up 80 basis points over prior year. Move-outs due to home purchases were 14.2% for the quarter, up 110 basis points over last year. The turnover due to home purchases is still below our historical average.

Austin, Birmingham, Charleston, Charlotte, Phoenix, and Raleigh all had revenue growth between 6% and 12% and NOI growth between 9% and 18%. We’re beginning to see limited deliveries in several of our markets; however, job growth in these markets has been sufficient to absorb the additional units.

We were once again fairly active on simplifying the business and improving the mix of multifamily to commercial during the quarter. We acquired the 350-unit Colonial Grand at Brier Falls in Raleigh for $45 million. The property is only three years old and located in the Brier Creek submarket.

On the disposition front, we sold our 25% interest in Colonial Promenade Madison, 111,000 square foot retail center in Huntsville, Alabama to our joint venture partner for cash proceeds of $3 million.

We commenced development on two new apartment communities. The first is Colonial Reserve at South End, a 353-unit project in Charlotte with a total projected investment of $59.3 million. This will be a mid-rise development on the rail line in the South End submarket.

The second development is Colonial Grand at Lake Mary Phase II, a $13.9 million development with 108 units in Orlando. The delivery date for Phase II is scheduled for the fourth quarter of 2012 and stabilization is projected in the first quarter of 2014. These projects bring our current development pipeline to 1,475 units and a total investment of approximately $194 million. We have one-time charges of $735,000 for warranty items at two previously-owned development projects.

On the financing front, we have renegotiated a new $500 million syndicated unsecured revolving credit facility. The facility matures in March 2016; it has a one-year extension option. And our current rating facility bears interest at LIBOR plus 140 basis points, with a 30 basis point facility fee. Additionally, the company renegotiated its $35 million cash management line with the same terms.

As Tom mentioned, we received an upgrade on our unsecured senior notes rating from S&P during the quarter to BBB minus. As a result of this upgrade, the pricing of our new line was 20 basis points lower than it would have been in the pricing on our $250 million unsecured term loan that we put in place last summer improved by 45 basis points. Debt plus preferred to gross assets was 46% at the end of the first quarter and the fixed charge ratio was 2.2 times for the quarter. We have only $80 million of consolidated debt maturing in 2012.

Now, I’ll turn the call back to Tom.

Thomas H. Lowder

Thanks, Reynolds. Our full-year 2012 FFO guidance remains unchanged at $1.23 to $1.29 per share, along with all other assumptions, expect for same-property revenue and NOI guidance. We’ve increased our estimates for the full year multifamily same-property net operating income from 5.5% to 7.5% to 6% and 8% and same-property revenues from 4.25% to 5.75% to 4.75% to 5.75%.

Our same-property expense range remains unchanged at an increase of 2.5% to 3.5%. The increase in our NOI guidance reflects the strong momentum we’re having and an increase in rental rates, steady turnover and high occupancy combined with an attractive market fundamentals, all of which have us well positioned heading into our spring leasing season, which of course is typically the strongest season of the year.

We anticipate apartment fundamentals to remain strong throughout this year, allowing us to generate results similar to 2011. Although disposition guidance remains unchanged, our core business strength will give us an opportunity to market commercial in older multifamily assets sooner than we had originally budgeted. We have better clarity on the volume of these dispositions and the timing of these dispositions over the next couple of months.

As you can tell from our new development starts during the quarter, we remain focused on unlocking the value of the multifamily line that we’ve had on our books as compared to additional acquisition opportunities. The projected new supply in many of our markets is not expected to be competitive until 2014 or later, so we believe we’ve got a unique opportunity to unlock much of the value of the land held on our balance sheet and continue our simplification of the business.

Now, at this time, operator, would you open up the call for questions, please?

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question will come from the line of Jana Galan with Bank of America/Merrill Lynch. Please proceed with your question.

Jana Galan – Bank of America/Merrill Lynch

Hi, thank you very much. I just wanted to clarify why the increasing store NOI guidance doesn’t translate into higher FFO, is it mostly because of the dispositions coming sooner or was anything else changed in your guidance assumptions?

C. Reynolds Thompson III

As Tom mentioned, our operating business is off to a great start and I think the wildcard for us is going to be the disposition timing and the disposition volume. We continue to see an opportunity to sell some commercial assets primarily retail, in some of our older multifamily assets in what we think are going to good prices and as we get a little bit more clarity on size and timing we’d be able to give some more galaxy around that, but at this point I’d say we have a bias toward – heading towards the higher end of our disposition guidance and that’s something that will play out over the next couple of months as we get some feedback on some of the different things we have underway.

Jana Galan – Bank of America/Merrill Lynch

Great, thanks. And then just following up on your payroll, on-site payroll costs were up in the quarter and I was just curious if that was more of a one-time training staff or will they kind of continue to trend at that rate?

Thomas H. Lowder

It might trend at about that same level. Our staffing is more full employment this year versus last year. Our bonus plan is paying out a little more aggressively this year than last year, and we’ve also implemented over the last couple of years an incentive program for our maintenance personnel to become certified in the different disciplines and if they achieve a different level of scale, then they are qualified for additional compensation and so it’s a combination of all those three things.

Jana Galan – Bank of America/Merrill Lynch

Thank you.

C. Reynolds Thompson III

Thank you.

Operator

Our next question will come from the line of Eric Wolfe with Citi. Please proceed with your question.

Eric Wolfe – Citigroup

Thank you. You mentioned that your new lease rates were up 3.4% in April and I think that’s what you said at least and then that was pretty substantially higher than your new lease rates in the first quarter. So my question is would you expect new lease rates to keep trending up through the peak leasing season or do you think we’re going to start to – start seeing them flat now?

Thomas H. Lowder

Why don’t give Eric just on that deal of what we’re seeing month-to-month because I think that’s pretty good trend.

C. Reynolds Thompson III

Yeah, I mean I’ll let Paul answer the forward-looking, but as we kind of look through the first quarter, our numbers were slightly down back in January to flattened out in February and were up about little over 1.5% in March and then as we mentioned were up almost 3.5% here in April. So the trend is definitely heading in the right direction and we feel very good about the way the leasing season is shaping up in general. Paul?

Paul F. Earle

Yeah, 2012 is going to play out a lot like 2011, we’ll see our new lease rates strengthen through July, August and then flatten out until September, October and then follow the same pattern as last year. So it’s just – it’s a good indication that we’re going to all experience a really robust spring and summer leasing season.

Eric Wolfe – Citigroup

And then just if you could remind me, where did that peak out last year in terms of new lease rates, thinking that in the – like x to the actual level like 5% or down there?

C. Reynolds Thompson III

6.2%

Thomas H. Lowder

And that was in August of last year.

Eric Wolfe – Citigroup

Okay. And then a question on your development pipeline, if I just look at the six properties you have listed as future apartment developments, that $40 million basis you have I think it’s on page 19, how much would that represent in total development cost and if you were starting today and how should we think about what yields those would underwrite here today?

Thomas H. Lowder

Yield question, we’re building these somewhere between 6.5% and 7% yields. Some of our projects that we have underway had drifted north of 7%, up into the 7% to 7.5% range and generally the product we’re building is around $120,000 a year.

C. Reynolds Thompson III

I think the pick up there is – that was because the land is building around (inaudible) again giving us an exceptional...

Thomas H. Lowder

Yeah, substantially higher.

Eric Wolfe – Citigroup

And then just for those six developments, I guess, how quickly do you think we could see them, you are putting the shovel in the ground for them, I assume there is some of them you’re maybe trying to sell as well, so I’m looking at the ones on page 19, so the six there.

C. Reynolds Thompson III

Yeah. I think we’re going to see all of these sites activated over the next 24 months, we’ll be very active in Orlando and Nashville and then work our way west and activate Phoenix and Las Vegas last in the cycle, but I think we’ll see everything become active over the next 24 months.

Eric Wolfe – Citigroup

Okay, all right. Thanks

C. Reynolds Thompson III

Also just as a note, we’re also in active discussions with some municipalities where we’ll take some office land out of our inventory after we’ve gone through our rezoning effort into the multifamily sector and activate those sites as well.

Eric Wolfe – Citigroup

Great, that’s helpful. Thank you.

Thomas H. Lowder

Thank you.

Operator

Our next question will come from the line of Rich Anderson with BMO Capital Markets. Please proceed with your question.

Rich Anderson – BMO Capital Markets

Thanks, good afternoon.

Thomas H. Lowder

Hi, Rich.

Rich Anderson – BMO Capital Markets

First question is on your S&P upgrade, why is it taking a quarter and a half longer more to entertain Moody’s and Fitch?

Thomas H. Lowder

Well, to be honest with you, S&P kind of gave us a surprise that they jumped out ahead and gave us the upgrade, we were expecting on our calendar to visit with everyone end of August, 1 of September, which is sort of been our cycle the last several years.

C. Reynolds Thompson III

That’s right. When we visited with all of the agencies in the third quarter of last year and got the positive outlooks from each one, all of them had indicated it would probably be around 12 months or so before they would look at in making another change with our rating. So I think the way to think about it is, S&P is ahead of schedule and the other two are on schedule, and it’s still our plan to be in front of those guys with our second quarter numbers and making our case for the upgrade based on the operations and what we’ve done the business through the first half of this year.

Rich Anderson – BMO Capital Markets

I guess, assuming the S&P is listing right now, I guess you could say that, now that it’s happened, but that’s great, that’s a great outcome. Tom, can you – in the past conference calls you’ve talked about your listed priorities and you didn’t really do that this time, just I must have missed it. You have an order of priority what needs to be done still, you’ve made a lot of great accomplishments; what do you think are the priorities for 2012 if you were to list them?

Thomas H. Lowder

Well, this thing – as you know, this thing has continued to be – we have made progress and we’ve simplified the business. The three things were to grow the company and we’re doing that with our core portfolio. This is the best I’ve seen our core business operate, and the visibility over the next 12 to 18, 24 months was extremely good in our core business. But it’s also given us opportunity to grow externally, primarily to get some of this land that you know has been dragging us down on our books to get back into production with some active multifamily development. And so the first directive in – I’ve talked about our directives in the past, but the first directive is to grow the company. And this is the latter part of what I’ve talked about three years ago; reduction, restructure, renewal. Renewal being the code word for growth.

So, we are in the growth phase and we’re going to take advantage of that, but our second directive is to achieve that investment grade rating. We are very happy with being recognized, and thank S&P, for recognizing us with the work we’ve done there. But we intend to convince the other rating agencies that we deserve investment grade rating and that will mean we’ll keep working on the balance sheet.

The third is improving the portfolio and when we say that, yeah that gets back to two things. And that gets back to that 90, 10, goal we’ve was always talked about, that 90%, the multifamily 10%, other commercial properties and with things that Reynolds has mentioned in the call here that we are putting in the pipeline for sale this year and further simplification, yeah it’s possible that we can reach that goal by the end of this year.

Rich C. Anderson – BMO Capital Markets

So maybe a tweak into that, to that list, is growth by growth maybe more through development, is that a fair way to look at it for 2012...?

Thomas H. Lowder

Yeah, well, our real growth is coming from the portfolio.

Rich C. Anderson – BMO Capital Markets

Right.

Thomas H. Lowder

The development is going to show up in 2013. So that’s when you’re going to see it start adding to FFO, but we’re also going to take an opportunity at these cap rates to improve our multifamily portfolio by selling some of the older assets. And so those are the three directives and I’m sorry that I haven’t been as clear, but it’s more of the same of simplifying this business and we have come a long way in the last three years and there is still some things to be done and hopefully we will tie up the loose ends by the end this year.

Rich C. Anderson – BMO Capital Markets

Okay. Why does the core business strength of multifamily making easier for you to sell commercial? I don’t understand that.

Thomas H. Lowder

We are very cognizant on keeping our FFO as high as possible.

Rich C. Anderson – BMO Capital Markets

Okay.

Thomas H. Lowder

Improve, we want to improve the dividend, we want to improve the balance sheet. And so we just we’re in the general business and cash flow is coming in it gives us an opportunity to be more aggressive in selling these income producing properties that we have out there. And then…

C. Reynolds Thompson III

And then just, the market has helped us as well, seeing the kind of cap rates and the financing that’s available out there, it will give us an opportunity to move somebody’s power centers that are very leased, but the financing available for our buyers has given them investment opportunity to move this product.

Rich C. Anderson – BMO Capital Markets

Okay. Last question I have is on Avalon call. Everyone talks about reason for move out. Do you guys track as diligently, reasons for move out with the reason for move in?

Thomas H. Lowder

We have a customer survey that we generate electronically. I don’t have it with me, and I have to call you back offline and give you those stats, but we do have an opportunity for all of our residents to communicate with us upon move-in via e-mail. We have about 30% response rates and I could give that to you offline. This is not with me today.

Rich C. Anderson – BMO Capital Markets

I just think it’s as important as the reason for move-out, but that’s just making [ph] your mind, all right...

Thomas H. Lowder

It is just as important. It’s never been asked before on this call. So, I just don’t have it with me, but it is just as important, yes.

Rich C. Anderson – BMO Capital Markets

Okay. Thanks, guys.

Thomas H. Lowder

Thank you.

Operator: Our next question will come from the line of Andrew Schaefer with Sandler O’Neill & Partners. Please proceed with your question.

Andrew Schaefer – Sandler O’Neill & Partners

Thank you. Firstly I want to ask, I wondering if you’ve seen the community banks coming back into the lending market?

C. Reynolds Thompson III

This is Reynolds. Not specifically, no, we’ve – yes some of the larger regional comp people but I don’t have any specific knowledge of the communicate banks.

Andrew Schaefer – Sandler O’Neill & Partners

And so I guess, then who has been kind of the lead lender behind the new developments and all that going around within your markets.

C. Reynolds Thompson III

Within our markets it appears to be the national and large regional banks.

Andrew Schaefer – Sandler O’Neill & Partners

Okay. That’s good. Now secondly, I was wondering if you would kind of prefer to have all three rating agencies, have you – investment grades before looking about, thinking or looking about going to the public debt markets?

C. Reynolds Thompson III

Short answer to that is, yes. Yeah, we don’t have any immediate plans to go to the bond market because of our disposition possibilities. And so we’ve got a great looking balance sheet, liquidity position, right now and I think the dispositions will enhance that even as we ramp up the development pipeline but the overall plan is to continue to improve the balance sheet even with the growing development pipeline for selling commercial and over multifamily assets.

Andrew Schaefer – Sandler O’Neill & Partners

Okay, thank you. And finally, does your guidance include transaction expenses?

C. Reynolds Thompson III

Yes.

Andrew Schaefer – Sandler O’Neill & Partners

Perfect, all right. Thank you. That’s it from me.

Operator

(Operator Instructions) Our next question will come from the line of Michael Salinsky with RBC Capital Markets. Please proceed with your question.

Michael Salinsky – RBC Capital Markets Equity Research

Good afternoon.

Thomas H. Lowder

Hello, Mike.

Michael Salinsky – RBC Capital Markets Equity Research

First question, do you guy, I believe you gave May and June renewal increases. What those were sent out at?

Thomas H. Lowder

They’re going out at 7%.

Michael Salinsky – RBC Capital Markets Equity Research

Okay, so they are consistent with April’s level and they are not going up?

Thomas H. Lowder

Yes.

Michael Salinsky – RBC Capital Markets Equity Research

Okay, that’s helpful. You’ve talked a lot about the multi-family performance, curious in the first quarter if you could talk a little bit actually about the commercial performance of your commercial assets?

Thomas H. Lowder

The commercial portfolio is actually very stable, our occupancies in our 100% owned properties like the Power Centers that Tom just mentioned or ravenia in Atlanta which is another big commercial asset, all of those occupancies are stable. We are seeing some – we have some occupancy improvement opportunities in our DRA/CLP joint venture – office joint venture. And that’s something that our leasing team is working on and we have started to see a little bit more activity on our office leasing front. We have been somewhat pleased with some of the recent LOI activity that we have seen and hopeful that that will continue into the summer.

Michael Salinsky – RBC Capital Markets Equity Research

Can you bring that up, I want to go back to a little bit actually. You talked about marketing potentially some of your, it’s more of the commercial assets. Curious as to what you’re marketing right now. And just given the state of the credit markets and the demand we have seen for commercial assets so far, I think the debt matures in ‘13 on the DRA/CLP joint venture and also given your 90,10 state of goal, why not look to sell some more of those assets right now. And what’s stopping you from taking that joint venture to market trying to sell the assets today?

Thomas H. Lowder

Well, debt matures in ‘14 just to be clear. And we are not the decision maker in that portfolio. So, the ones we’re focused on are the 100% on the assets that we have control lever. So, as a 15% minority partner, we don’t have the ability to take that portfolio to market, but we did have the ability to take some of these Power Centers that are well leased and well-positioned, they are unencumbered, so people can take advantage of the financing that’s available out there and that’s where our disposition activity is going to be focused.

Michael Salinsky – RBC Capital Markets Equity Research

Is there an ability to sell your minority joint venture interest?

Thomas H. Lowder

Probably not today, no.

Michael Salinsky – RBC Capital Markets Equity Research

Okay and then last year you had announced the transaction maybe was to sell up to 19 properties, is that still in place and as you think about maybe accelerating the sale of some of your other assets, is that what you’re referring to?

C. Reynolds Thompson III

We do have that global contracts still in place till the end of this year, December 2012 and it does include a lot of the older multi-family that make a lot of sense to cycle out of this year. So, you may see that unfold as we go forward.

Michael Salinsky – RBC Capital Markets Equity Research

And are you seeing enough acquisition opportunities in the market currently that would help you guys, I’d say some of that?

C. Reynolds Thompson III

There is a lot of capital chasing quality multifamily in everyone of our markets and so we’re out there, we’re active, but there is some cap rate compression going on, there is a – it’s a fairly competitive environment, so we will see what the spring and summer brands, but there is a lot of capital chasing, quality multi-family currently.

Michael Salinsky – RBC Capital Markets Equity Research

Thanks, guys.

Operator

Our next question will come from the line of Andrew McCulloch with Green Street Advisors. Please proceed with your question.

Andrew McCulloch – Green Street Advisors, Inc.

Hey, good afternoon. Most of my questions have been answered. Just one quick follow up on move out, I’m sorry if I missed it. Have seen any changes on move-outs to home rental?

C. Reynolds Thompson III

No, our move-outs to the home rental is at 3.5%. That is up some years ago, but it’s been very consistent now quarter-after-quarter. It used to be such a small number, we didn’t track it. But it equals about 3.5% of our move-outs. And there doesn’t appear to be any upward pressure on that number at all.

Andrew McCulloch – Green Street Advisors, Inc.

Great. That’s all I have. Thank you.

C. Reynolds Thompson III

Thank you.

Operator

Our next question will come from the line of Jeffrey Donnelly with Wells Fargo. Please proceed with your question.

Jeffrey J. Donnelly – Wells Fargo Advisors LLC

Good afternoon, guys. Actually in the similar way I got in a few minutes late. Could you guys give any market-by-market color on the move out to home purchase trends that you saw over the quarter compared to last year?

C. Reynolds Thompson III

We didn’t give any market specific color. The overall number was 14.2 and which is up a little bit the last year. But we can give you some biggest specific market color.

Thomas H. Lowder

Yeah, overall number is consistent with our long-term historic trend of about 15%, growing up really three markets where we have a significant number of move-outs relating to home purchases. Surprisingly, Birmingham and Alabama is one of those markets. Sarasota is the second market, we only have one property in Sarasota, but we experience about 35% of our move outs in Sarasota because of home buyers. And then the third outlier is Huntsville, Alabama, we only have two properties there. But 22% of our move-outs are relating to home homebuyers, Phoenix is a city that everybody asks about, but that’s within our run rate, it’s only 14.3%, Charlotte is only 14%, Orlando is only 15%. So all of our core markets and all the markets that are followed by all the investors and analysts are in line with our long-term historic run rate. So just a few outlier markets where we have a very small concentration of properties or just one property like in the case of Sarasota.

Jeffrey J. Donnelly – Wells Fargo Advisors LLC

And what was the percentage in Birmingham, out of curiosity?

Thomas H. Lowder

It’s 35.5%, and this is roundabout – our outlier this year has been very interesting to see the move outs relating to home buyers, but Birmingham used to always be 15% or less. So it’s just kind of an odd outlier this year.

Andrew McCulloch – Green Street Advisors

And then, I expect I might know the answer to this question, but you guys are certainly seeing that the GSEs are liquidating some large pools of single family homes, and many of those are – you may be touched on your core markets. Is that in some regards peak your interest or do you think, maybe it’s a separation question, do you think that, that it maybe a potential threat to incremental demand once those homes get into, I guess, the hand of an institutional buyer who might be looking at those as a rental opportunity rather than just flipping homes?

Thomas H. Lowder

It has never presented a problem where the investors that are buying these homes and putting them into rental pools are going after a segment of the multifamily business, that’s very small. It attracts typically a renter that wants to live in a three bed room apartment. That component of our business is very small, some 8% of our units. And if you look at the global picture, only about 8% to 10% of the units that are out there held by public companies is in the three bed-room category, and that’s typically what’s being attracted into somebody’s rental homes. And so it has never put pressure, and I’ve been in the business since1978, and I’ve never found rental homes to be a point of concern. And that’s playing out again in this cycle.

When those homes go back into the wholesale pool, who knows there’s – hopefully we’ve got a portfolio that’s well located, and we really focus on the average home price when buy a property or build the property, we really focus on the submarket with a high average home price or some attractive place for renter, well this actually plays out, but certainly not on the rental side.

Andrew McCulloch – Green Street Advisors

Do you think it’s sort of a – maybe a threat to the, I guess, I’ll call the trade up tenant, it’s the tenant who might have been in the two bed room unit and eventually moved on to buy a home, because they needed three bed rooms, but now this presents a better option for preventing effectively, and I can give them more of a – from an interim step if you will before buying a home?

Thomas H. Lowder

We just haven’t seen that trend, it’s discussed a lot and we follow it very closely, but over the decades, it has just never been a consideration as to put a lot of pressure on performance of multifamily.

C. Reynolds Thompson III

It’s additional, I mean, the suppliers there, and the suppliers been out there, it’s an additional product that we don’t see it moving the needle that much.

Thomas H. Lowder

Yeah.

Andrew McCulloch – Green Street Advisors

And it’s my last question, I guess maybe, I’ll point it to Reynolds, because I know you are always focusing on the commercial segment. I think last year you guys were talking about selling Three Ravinia, but pulled back may be because of near term tenants, expiration risk, will you able to resolve that and would you bring that building back at the market or that kind of still hang out there. And I guess more broadly are there any sort of pending expirations or sort of chunky move outs if you really aware of that, that might show up in coming quarters?

C. Reynolds Thompson III

We had not resolved that issue. There’s nothing we can do. We’ve been proactive and trying to resolve that, but the tenant has got a long-term lease. It just happens to have some provisions, and if they give them the option to terminate. And the safe thing for them to do is, keep all their options open and stay there. It’s a well occupied building, we’ll get a nice return on it. But in order for us to sell it at a reasonable number, we need to have some clarity about what the companies can do with these options, and we have not solved that yet. So we’ve turned our attention to some of these retail centers where we don’t have those issues, and feel like there is a really good market for moving some of that stuff. So Ravinia is still out there for us.

Andrew McCulloch – Green Street Advisors

Okay, great. Thank you.

C. Reynolds Thompson III

Thank you.

Operator

Our next question will come from the line of Derek Bower with UBS. Please proceed with your question.

Derek Bower – UBS

Hey, good afternoon guys. Just touching back on the rent growth, you ended the year last year pretty weak on the new rents because you’ve mentioned competitors were reluctant to push rents, so I guess when do they become more aggressive, and are you worried of all of the risks that they may be less aggressive later into the spring leasing cycle?

Thomas H. Lowder

Well, there’s no indications at all that it’s going to look any different than last year. Things will move up throughout spring leasing season into the summer leasing season, then I think, we’ll experience fourth quarter this year, a lot like last year, and then it’s just very, very – the pattern is equal to prior year’s and there’s nothing on the horizon that we see that will disrupt that. Of course our business needs job growth, job growth is important for all of us, but and we’re seeing some nice job growth numbers in our markets in Sundale. But there’s nothing out there that indicates we’re going to see a softening or where we’re taking our rents this year, and it will be a lot like last year.

Derek Bower – UBS

And you think your competitors are being aggressive enough buying on your rents?

Thomas H. Lowder

There’s only two groups out there now that the public companies have moved primarily into professional pricing model. And the REITs are doing good job moving rents, and the private companies are at a close second, but the private companies that are not on a professional pricing model are not as aggressive. But they’re following the public companies, but they are slower to react.

Derek Bower – UBS

Okay, got it. And then just lastly, were there any markets where you push the minimum renewal target during the quarter or going forward?

Thomas H. Lowder

No.

Derek Bower – UBS

Okay. All right, but that makes sense.

Thomas H. Lowder

Thank you.

Operator

Our last question will come from the line of Taylor Schimkat with KBW. Please proceed with your question.

Taylor Schimkat – KBW

Thanks. Good afternoon, guys.

Thomas H. Lowder

Hello.

Taylor Schimkat – KBW

Just one question or couple of questions on development. How many years of multifamily projects do you have today, and then what are your thoughts around timing of – meaning to replenish that pipeline?

Thomas H. Lowder

Well, as Paul mentioned, we’ve probably got a – it’s going to be a 18-month to 24-month timeframe to get all of the projects we have on the balance sheet out there and running. So we’ve got a good two years worth of our product left, but we’re also sensitive to the number of new projects that are coming in behind us, we feel like we’re on the front-end of the curve, and we’re watching what’s going on behind us. And we’re real cognizant of not having a bunch of land on our balance sheet when or if this thing starts to slowdown again.

We think there is a time, and we have a good opportunity to unload the land that’s been sitting on our balance sheet and get that into a productive position, but we don’t want to put ourselves right back in that. And so, we’ve been very selective about the new land that we bought. We bought some land that’s been adjacent to a couple of our projects. And so those are some new dollars we’re doing, but our first priority is to get the things on our balance sheet into production.

C. Reynolds Thompson III

And we’ve listed those in the supplemental, but Paul, mentioned that there are two or three more sites that we are in the process of rezoning that have had mixed used or office zoning, and the communities are working with us on those particular sites. So, we’re going to continue to work the dirt that’s on the balance sheet right now.

Taylor Schimkat – KBW

Okay. And I guess that leads into my second question, and on commercial side, can you comment on updated thoughts around commercial development as part of the company’s longer term strategy? And then any current plans for your own commercial land parcels, I guess you said rezoning for some of them, but bigger picture on the commercial land?

Thomas H. Lowder

Well, we do, they have no those sites, so some of those sites up for sale, some of the legacy assets we are in development, but they are also listed. We have development with Wal-Mart up in the Huntsville, that’s under construction. There was an obligation we had with Wal-Mart to build that center, it’s underway. We have an asset north of New Orleans, Nord du Lac that’s a multi-phase shopping center. We continue to phase that project to build it out. So there are couple of legacy assets where we are completing commercial development.

Taylor Schimkat – KBW

I think in...

Thomas H. Lowder

That’s not our business, that’s not a growing business, that business has got a tail on it. But we’re working towards completing all of that, we had land mix to the [Brooklyn] center here that we sold last year to Target. Target is under construction should open next spring. We’ll probably do a couple of big boxes next to Target there. But these are all build and out dirt that’s on the balance sheet.

Taylor Schimkat – KBW

Okay. I guess my – maybe it was a year, or maybe it was little more than that ago, I thought I recall that, thought that longer term there would be some opportunity to develop on the commercial side, and then sell. But it sounds to me now that, that might have changed as part of your strategy that commercial development is probably not going to be part of the longer term strategy portfolio?

Thomas H. Lowder

No, it’s not part of the long-term strategy. Just to continue building out what we got, and then put that opportunity in a position to be sold once we’re finished with the development.

Taylor Schimkat – KBW

Okay, great. Thanks guys, that’s all from me.

Operator

Our last question will come from the line of Rich Anderson with BMO Capital Markets. Please proceed with your question.

Richard Anderson – BMO Capital Markets

Sorry to keep you guys on, bust just one quick one. You’ve talked about rezoning, is that whole true also for the fore sale residential rent that you have as investment land, can you rezone that to multifamily?

Paul F. Earle

I guess that’s possible in our few select cases…

Richard Anderson – BMO Capital Markets

I know a zoner if you want one, kidding.

Paul F. Earle

Pardon?

Richard Anderson – BMO Capital Markets

I said, I know a zoner...

Paul F. Earle

Yeah, it’s really going to have a lot more success on some retail and office sites, the residential, there may be one out there that might play a role in a rezoning effort, but by and large, no.

Richard Anderson – BMO Capital Markets

So that $70 million in change or whatever is probably there for a long, long while?

Paul F. Earle

I’m going to delegate that to Tom Lowder, and we assume he has found the residential land.

Thomas H. Lowder

Well, thank you, Paul. But that land will be tied up and disclosed up when we see some strength in the house market. We continue to keep in touch with the homebuilders both local and national that are interested in the market, and we can’t create a market, but when the market does come about we are sellers.

Richard Anderson – BMO Capital Markets

Okay.

Paul F. Earle

We did sell one single family residential lot.

Thomas H. Lowder

That’s exciting.

Paul F. Earle

We made progress.

Richard Anderson – BMO Capital Markets

All right, thanks. Thanks, guys.

Thomas H. Lowder

Yes. Thank you.

Operator

At the present time, there are no further questions on the phone lines. Please continue with your presentation or closing remarks.

Jerry A. Brewer

Thank you all for joining us today, and we look forward to seeing you at NAREIT. Have a great day.

Operator

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation, and ask that you please disconnect your lines. Have a great day, everyone.

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