UDR Inc (NYSE: UDR) Q1 2020 Earnings Call Transcript

UDR Inc (UDR) Q1 2020 earnings call dated May 7, 2020

Corporate Participants:

Trent Trujillo — Director of Investor Relations

Thomas W. Toomey — Chairman and Chief Executive Officer

Jerry A. Davis — President and Chief Operating Officer

Michael D. Lacy — Senior Vice President, Property Operations

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Harry G. Alcock — Senior Vice President and Chief Investment Officer

Analysts:

Nicholas Joseph — Citigroup — Analyst

Austin Wurschmidt — KeyBanc Capital Markets Inc. — Analyst

Richard Hightower — Evercore ISI — Analyst

Jeffrey Spector — Bank of America Merrill Lynch — Analyst

Sumit Malhotra — Scotiabank Global Banking and Markets — Analyst

John Pawlowski — Green Street Advisors, LLC — Analyst

Richard Hill — Morgan Stanley — Analyst

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

Neil Malkin — Capital One Securities, Inc. — Analyst

John Kim — BMO Capital Markets — Analyst

Robert Stevenson — Janney Montgomery Scott LLC — Analyst

Alexander Goldfarb — Piper Sandler & Co. — Analyst

Hardik Goel — Zelman & Associates LLC — Analyst

Haendel St. Juste — Mizuho Securities USA LLC — Analyst

Presenatation:

Operator

Greetings, and welcome to the UDR’s First Quarter 2020 Earnings Conference. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Director of Investor Relations, Trent Trujillo. Thank you, sir. You may now begin.

Trent Trujillo — Director of Investor Relations

Welcome to UDR’s quarterly financial results conference call. Our press release and supplemental disclosure package were distributed yesterday afternoon and posted to the Investor Relations section of our website, ir.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 requirements.

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 that you be respectful of everyone’s time and limit your questions to one plus a follow-up. Management will be available after the call for your questions that did not get answered during the Q&A session today.

I will now turn the call over to UDR’s Chairman and CEO, Tom Toomey.

Thomas W. Toomey — Chairman and Chief Executive Officer

Thank you, Trent, and welcome to UDR’s first quarter 2020 conference call. On the call with me today are Jerry Davis, President and Chief Operating Officer; Mike Lacy, Senior Vice President of Operations; and Joe Fisher, Chief Financial Officer, who will discuss our results. Senior executives, Harry Alcock and Matt Cozad will also be available during the Q&A portion of the call.

While we are pleased with the strong combined same-store NOI and FFOA per share growth we produced in the first quarter, the executive team and I are more gratified by how our business and dedicated team of associates have successfully adapted to the ongoing challenges that have come with the COVID-19 pandemic. We appreciate the position that many of our associates are in and thank them for continuing to show compassion to and accommodations extended to our residents that have been negatively impacted by the coronavirus.

From a high level, our business continues to perform well. This is a testament to the outstanding work of our teams and culture, the investments we have made in technology over the past decade, our diversified portfolio across geographies and price points, the strength of our balance sheet and the defensive nature of apartments. I’m encouraged by the fact that traffic and leasing trends have steadily improved in the recent weeks, and our next-generation operating platform has enabled us to continue to deliver a high level of service to our residents and prospects, while providing the tools necessary for our associates to execute our business in the face of a fluid and the changing regulatory requirements.

I’m confident that our next-generation operating platform is not only a foundation that enables our teams to meet today’s demands, but it’s also one that allows us to pivot when customers or the environment changes. And it will continue to be a differentiator for UDR as we make our way through the pandemic and adapt to the new ways we are all going to do business in the future.

Moving on to a brief update of our business. April’s cash collections were strong at 95.5%, with 98% of our residents paying all or part of their April rent. Resident retention has moved higher and turnover has declined throughout the portfolio. Traffic is lighter than we would typically see this time of year, but it has been trending up in recent weeks, and we are encouraged by the prospects of a number of cities starting to open up again. And our dividend is secure, and our balance sheet remains strong with substantial liquidity at our disposal. Jerry, Mike and Joe will provide additional details on each of these areas later in the call.

Last, a pandemic and an economic uncertainty it has created, we’re not in our original plans. Therefore, we decided to withdraw our full-year 2020 guidance outlook. COVID-19, like other disruptions, we faced over the decades will eventually pass. And I remain confident that we are on the right team, the right strategy and the right portfolio in place to manage through this time of volatility like we’re currently experiencing. Companies like UDR that remain focused on driving operations and innovation, ensuring positive outcomes for the residents and associates, maintaining a strong balance sheet and deploying capital in a disciplined manner will come out of this much stronger.

With that, I will turn the call over to Jerry.

Jerry A. Davis — President and Chief Operating Officer

Thanks, Tom, and good afternoon, everyone. With combined same-store revenue, expense and NOI growth rates of 3%, 1.7% and 3.5%, respectively, we continue to produce solid operating results during the first quarter. Our controllable margin expanded by 60 basis points compared to the first quarter of 2019, and we reduced controllable expenses by 1.1% versus a year ago.

Over the past year, we have encouraged those listening to view personnel and R&M expense growth in tandem with one another as our next-generation operating platform initiatives pushed their respective growth rates in opposite directions, but also reduced their combined growth rate over time. This was again true in the first quarter with a combined growth rate of negative 2.3% year-over-year. But as Tom alluded to in his prepared remarks, first quarter results take a back seat to what has transpired over the past two months. We and the nation continue to face a challenging situation. COVID-19 has altered the way we live our lives, interact with people and has changed the way UDR and the apartment industry approaches day-to-day operations.

With all the negative headlines in the news, I am proud we collected April rents from 98% of our residents with 95% of residents paying full, and I’m inspired to hear the positive uplifting actions our associates continue to take to provide quality service to and engagement with our residents. This would not be possible without our next-gen operating platform. When we originally laid out our vision for the platform three years ago, we understood that a majority of businesses were rapidly transitioning to an online self-service model and that we could capture first mover advantages in the apartment industry by doing the same. Since early 2019, we have reported on a variety of stats and have highlighted how the next-gen operating platform is driving efficiency gains and contributing more dollars to our bottom line through controllable margin expansion and self-service. While we did not envision a pandemic when embarking on the transformation of our operating platform, we are thankful for the great people at UDR, as well as the investments we have made to help ensure the ongoing well-being of our workforce and the resident base in a world with mandated social distancing.

Some of the traditional aspects of our business that have changed during the pandemic include: first, 100% of in-person property tours have ceased and have been replaced with virtual and self-guided tours. One of our original goals for 2020 was to rollout virtual and self-guided tours across all of our communities, and we are in a great position to accomplish this already, having implemented this initiative in over 100 of our communities pre-COVID. Leasing offices have largely gone virtual. 100% of resident documents are executed electronically. Our corporate insight sales and renewals teams have been working overtime to reverse notices to vacate and capitalize on the traffic we are receiving. And nearly all service requests are made online by phone through our app via other electronic means such as text. This is in comparison to approximately 80% of service requests being submitted electronically or by phone pre-COVID. To ensure the safety of associates and residents alike and to comply with social distancing requirements, we continue to fulfill emergency requests only at this time.

Our next-gen operating platform is clearly demonstrating its value by allowing us to quickly adapt to the current environment and fully run our business, which keeps us in a position of strength during this crisis. Tools such as Zoom-based leasing and a real-time update on collections are two such examples.

In terms of operating details and relative market performance, Mike will provide more information later in his prepared remarks. But from a high level, I am pleased with how well we have adjusted to the situation and the steps we have and continue to take to drive solid operating results. In particular, the $1.9 billion of community acquisitions we have made since the start of 2019 continue to perform relatively well given the identified upside opportunities relative to private market operators.

Last, I would like to express sincere gratitude to our associates in the field and the corporate for continuing to embrace the challenges brought on by the pandemic and for accelerating the adoption of next-gen operating platform. I am proud to work alongside each of you as we create new and innovative strategies that will ensure continued high levels of service for our residents.

With that, I’ll turn it over to Mike.

Michael D. Lacy — Senior Vice President, Property Operations

Thanks, Jerry, and good afternoon. As everyone listening to this call is aware, the pandemic has led to unprecedented levels of unemployment range over a short amount of time, which in turn has led to widespread concerns about residents ability to pay rent. As Jerry mentioned, through the dedicated efforts of our associates and the physical response by the federal government, April cash collections totaled 95.5% and 98% of our residents made some level of April rent payments, with 95% paying full. For comparison purposes, April 2020 collections were just 4% below April 2019. What may not be as well-known to those on this call is the web of regulations, federal, state, county and local governments have enacted or are likely to enact. These are wide-ranging, and include eviction moratoriums, stay-at-home orders, restrictions on fees that can be charged, freezes on rent increases, lease break legislation and restrictions on debt collections to name a handful. While each of these has impacted our business in one way or another, our market and asset level operating strategies in response that have remained surgical, as opposed to a one-size-fits-all approach. And by surgical I mean that we are working with and accommodating any resident that has faced financial hardship due to COVID-19 on a case-by-case basis, while ensuring our compliance with any regulatory action. I want to thank all of our associates for staying on top of these constantly changing regulation and adapting our strategies as needed.

On the operations front, occupancy remains strong at 96.6% in April, which is approximately 20 basis points below the same period last year. Blended lease rate growth for the month of April was 2%, driven by solid renewal rate growth of approximately 5%. Retention is higher as annualized turnover in April was 720 basis points lower than last year’s comparable period. As reported in our release last night, we experienced a 19% decline in traffic and a 15% reduction in applications on a year-over-year basis in April due to stay-at-home orders. However, we also saw our lease closing ratio improve to 54%, compared to 31% a year ago.

I’m encouraged with the positive momentum in traffic, applications and signed leases over the past two weeks. To build on this momentum, we have implemented opportunistic [Phonetic] approach here at each community, while our next-generation operating platform have allowed us to continue to drive traffic, execute leases virtually and take a more surgical approach to maintaining rent and preserving our rent growth. While it is still too early to understand the long-term impact, if any, the regulatory actions may have on our business.

Some reset high-level operating trends we have identified over the past 45 days are as follows: occupancy in our B quality portfolio averaged 97% in April and hasn’t declined much; A quality occupancy averaged 96% in April, but has and will likely continue to be pressured by corporate lease exposure and lower traffic due to shelter-in-place orders in key markets. Traffic and turnover have been slightly better at our B communities due to the more suburban nature of our B quality portfolio. Blended rental rate growth has been comparable between A and Bs. And we have seen slightly lower collections across our B quality communities.

Highlighting some specific markets. Greater Seattle is one of the first markets afflicted by the coronavirus, yet our results through April are a pleasant surprise. However, due to recently enacted regulations in the state of Washington that mandate flat renewal growth for the foreseeable future, we are likely to see some forward rate growth headwinds. In certain urban coastal markets such as New York and San Francisco, we are experiencing a vacancy impact due to lower demand for short-term and corporate leases. Because of lower levels of traffic in these markets, we are facing reduced pricing power and are generally competitively priced on rents to increase leasing velocity.

Orlando, Tampa and Orange County are our largest markets were tied to hospitality and retail-oriented deployment [Phonetic], and collectively represent approximately 20% of NOI. These three markets have seen some softness in both rents and occupancy as a result of relatively high exposure to service sector employment combined with a large amount of our portfolio in these markets being suburban and B quality.

Finally, having previously worked in the field for a number of years, I understand how a period of extreme change can impact our regional and community leaders. Our associates have all worked well together to adapt to a new operating environment, develop targeted market approach and engage with our current and prospective residents. I’m proud of each and every one of you, have continued to exemplify the UDR values during this health and economic crisis. Thank you for all that you do.

And now, I’d like to turn the call over to Joe.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Thank you, Mike. The topics I will cover today include our first quarter results and the withdrawal of our full-year 2020 guidance and a balance sheet and liquidity update, inclusive of recent transactions and capital markets activity. Our first quarter earnings results came in at the midpoint of previously provided guidance ranges. FFO as adjusted per share was $0.54, approximately 9% higher year-over-year and driven by strong combined same-store and lease-up performance, accretive capital deployment and lower interest rates.

Regarding guidance, we have elected to withdraw our full-year 2020 guidance outlook given uncertainty around the impact the coronavirus pandemic will have on the economy and our business. As disclosed in our press release and as Mike discussed, we have presented an operational update through April to provide stakeholders with additional insights into trends.

Moving on, our balance sheet and next three-year liquidity profile remains strong due to the efforts that we have taken over the last several years. As such, we are well positioned to weather the effects of COVID-19 and the downturn that has accompanied it. Some highlights include: first, our capital capacity and debt maturity profile put us in an advantageous three-year liquidity position. As of April 30, our liquidity as measured by cash and credit facility capacity, net of our commercial paper balance, was $775 million. Through 2022, only $106 million or approximately 2% of our consolidated debt outstanding is scheduled to mature, excluding principal amortization and amounts on our working capital credit facility. Please see Attachment 4B of our supplement for further details on our debt maturity profile.

Second, we entered into $105 million of forward ATM contracts, sold one community in the Greater Seattle area on May 1 for approximately $90 million and are under contract with a non-refundable deposit to sell another community. Combined, these equate to approximately $250 million of capital sources. While the forward ATM proceeds were originally raised in anticipation of a single asset external growth opportunity, COVID-19 has changed these plans, and we have elected to focus on capital preservation in the near-term.

Third, to maintain flexibility on previously planned development starts and to preserve capital, we do not anticipate starting any new development projects until there is more clarity on the macroeconomic, regulatory, fundamental and cost environments. Our current development and redevelopment pipeline totals only $304 million at cost or less than 2% of enterprise value and is nearly 40% funded with approximately $191 million of remaining capital to spend over the next two years.

Fourth, our dividend remains secure and well covered by cash flow from operations. Based on first quarter 2020 AFFO per share of $0.51, our dividend payout ratio was 71%. This implies that our earnings would need to decrease by approximately 30% before reaching cash flow parity, substantially higher than the losses we or the multifamily industry experienced during any of the past several recessions. Taken together, our liquidity position is strong, and forward sources and uses are very manageable. Moving forward, we will be highly selective with where and how we choose to invest your capital as we believe it is prudent to preserve the capital in the current environment, while retaining value creation optionality for the future.

In terms of credit metrics, as shown on Attachment 4C of our supplement, we have substantial capacity before we have not been incompliant with any of our line of credit or unsecured bond covenants. As of quarter end, our consolidated financial leverage was 35% on undepreciated book value and 31.5% on enterprise value, inclusive of joint ventures. Consolidated net debt-to-EBITDAre was 6.0 times and inclusive of joint ventures was 6.1 times, which looks slightly elevated due to the timing of acquisitions completed during the quarter versus the closing of announced dispositions and a pending settlement for ATM proceeds. Please see Attachment 15 of our supplement for further details on sources and uses of capital.

With that, I will open it up for Q&A. Operator?

Questions and Answers:

Operator

Thank you. The floor is now open for questions. [Operator Instructions] Our first question is coming from Nicholas Joseph of Citi. Please go ahead.

Nicholas Joseph — Citigroup — Analyst

Thanks. I hope you guys are doing well. I appreciate the operating environment has obviously changed over the last two months. You have been and continue to be in the process of rolling out your next-generation operating platform. So, I’m wondering if there’s any lessons learned thus far in terms of either an acceleration or any delays or any changes to that next-generation operating platform as you see it over the next few years?

Jerry A. Davis — President and Chief Operating Officer

Hey, Nick. This is Jerry. Yeah. We did start working on the next-gen operating platform about three years ago, started reporting the efficiencies and the contributions to our controllable margin last year. And I would tell you, I think, we were well suited when the pandemic did hit to adapt quickly towards 100% virtual, as well as self-guided tours. We were doing quite a bit of that before, but transitioning to 100% was fairly easy. We were also able to shut down our offices to physical traffic and accommodate our customers electronically or over the phone, that went extremely well. And, I would say, it probably accelerated us six to 12 months of where we would have expected to have been as far as customer self-service.

In addition, we’ve been working on the big data side of it, and we continue to learn new things every day. I have been working remotely for the last two months and have become proficient at Zoom, even though I never had really used Zoom before. And when you look at the adoption of the US population to that way of doing virtual meetings, we’re starting to utilize that on virtual tour. So, rather than just doing FaceTimes, where you can just walk around, the ability to share a screen such as udr.com and walk somebody through the entire website, I think, is going to enhance our ability to sell virtually, especially as people continue to not want to travel as much, at least, over the near term.

In addition to that, Matt Cozad and our team have developed a mechanism to track collections really on a minute-by-minute, probably second-by-second basis. So you kind of see collections as they come through in real time and it allows us to direct our resources to do a better job on managing these collections. So, I would say, in addition to everything we talked to you about previously accelerating, we’ve also found new opportunities as our customer has adopted technologies, and we’re going to start using that in our business.

Nicholas Joseph — Citigroup — Analyst

Thanks. And then just maybe on the May collection trend thus far, and I recognize it’s very early in the month, but what have you seen relative to April and historical averages?

Jerry A. Davis — President and Chief Operating Officer

Yeah. This is still Jerry. I’m going to turn it over to Mike Lacey in a minute. A lot of you know, Mike, he’s been running ops really for us for a couple of years, and we thought since he is more into the details, especially as we work our way through this a couple of months, it would be a good opportunity for him to give those updates. But I can tell you, I’m pleased with the way our teams have reacted in both April, as well as May. But Mike, why don’t you give us some stats on how we’re doing?

Michael D. Lacy — Senior Vice President, Property Operations

Sure. Thanks, Jerry. Hey, Nick. Based on what we can see right now, our May collections are actually 87% of May billings, which is flat to our April collections at this point in the month. And we can see April today is 96% compared to the 95.5% we had in the press release. As Jerry said, we’re able to see this real time. So I just pulled that number a minute ago. Currently, today, is 96% occupied. I expect we end up between 95.5% to 96% this month after we take back some more corporate units.

Our main traffic today is trending about where it had been in the last few weeks, which is around 10% to 15% down compared to last year, but significantly better than where we were in March this time last month, which was down about 35%. We expect our blended lease rate growth will remain positive in May. And we’re keeping a close eye on regulatory changes. But just to remind everybody, our April numbers came in at plus 2% for blend. And annualized turnover is expected to be flat to down for the month of May. And again, credit to our next-gen operating platform team, having this visibility real-time to look at collections has been huge for us. We can focus our NG where we need to do it. And credit to our teams out in the field because they’re able to take this and work with those that need it most.

Nicholas Joseph — Citigroup — Analyst

Thank you.

Operator

Thank you. Our next question is coming from Austin Wurschmidt of KeyBanc. Please go ahead.

Austin Wurschmidt — KeyBanc Capital Markets Inc. — Analyst

Hi. Good afternoon, everyone. Just curious, you referenced some markets that are more exposed to hospitality. And I know it’s still very early, but certainly, the impact has been swift in some of these markets as far as layoffs. I’m just curious if you feel like you’ve seen sort of the worst of the impact play out in some of those markets. And you now have kind of a better sense of where some of the more challenged submarkets are across the portfolio?

Jerry A. Davis — President and Chief Operating Officer

Yeah. This is Jerry again. I’m going to throw it to Mike in a second. It’s hard to tell, we’ve seen the worst of it. I think it’s going to depend on when back to state home orders or mandates are released. And we see a lot of that starting to happen in Florida, so the Orlando market should pick up. It’s going to be interesting to see how quickly the tourism base returns to — want to enjoy the vacations there. Orange County has started to stabilize a little bit. Traffic patterns there are probably pretty stable today. We did have some — again, some delinquency issues there during the month of April. But Mike, anything you would add to, again, SoCal, as well as Orange — as well as South Florida, [Indecipherable] Florida.

Michael D. Lacy — Senior Vice President, Property Operations

Just in general, what we’re seeing right now across the portfolio, New York, San Francisco and Boston, definitely a little bit higher turnover there given corporate exposure and lower traffic due to stay-at-home orders. But on a positive note, we’ve seen Texas, Nashville, Seattle, LA, and Salinas with stronger retention, traffics increasing and honestly, decent rent growth.

Austin Wurschmidt — KeyBanc Capital Markets Inc. — Analyst

That’s helpful. Appreciate the detail there. And then one other question that I’ve been putting out there. I’m just curious, as you think about future development and how things have evolved. If you were negotiating contract today on a construction project, where do you think hard cost would be versus pre-COVID-19? And then, how does that sort of overlay with your strategy for restarting the development pipeline ultimately versus pursuing additional DCP-type investments?

Harry G. Alcock — Senior Vice President and Chief Investment Officer

Austin, this is Harry. We had two projects with planned starts during the second quarter. We had paused on these two while we, as you mentioned, look at pricing and overall economics. We recognize NOI is likely to decline in the near term, but we also know the multifamily fundamentals tend to be strong coming out of downturns. And we believe that we will be able to pull some cost out of the projects, which is a permanent benefit for the NOI trends, which are inherently temporary or cyclical.

I think in terms of hard costs, we’re in the market looking to take some cost out of our existing pipeline in addition to the forward pipeline. I mean, it really depends a little bit in terms of the type of construction and the market you’re in. I think there’s a general view that it’s somewhere in the neighborhood of 5% of hard costs is probably a safe number. There’s some optimistic views that it could be a little bit greater than that, perhaps as high as 10%.

Austin Wurschmidt — KeyBanc Capital Markets Inc. — Analyst

And then how are you thinking about that versus kind of when you’re looking at potential investment opportunities in a DCP-type deal or future development? Any additional thoughts there? And then that’s all for me.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, Austin, it’s Joe. Just in terms of how it relates to future investment opportunities, as well as external growth. I think first off, we start with the balance sheet in terms of where do we sit today and we spent some time in the prepared remarks and in the press release talking about all of what we’ve done in terms of building up capacity, pushing down maturities and really doing a lot of work there in the last couple of years. When it gets to the external growth, it’s coming similar to what we’ve done over the last couple of years, which is pivot to where the returns take us. So, we’ve reduced development significantly. When we don’t see returns, we ramped up DCP. We really hit the go button on equity and external growth on acquisitions last year when we saw the opportunity there. So I think DCP developments, buybacks, acquisitions, etc., they’re all going to end up competing with each other. But right now, we view capacity and liquidity is kind of at a premium and a desire to be patient in our approach. So, we’ll probably start to whittle away here at some point, but right now, I’m just trying to be patient with the capital that we have.

Austin Wurschmidt — KeyBanc Capital Markets Inc. — Analyst

Understood. Thank you.

Operator

Thank you. Your next question is coming from Rich Hightower of Evercore. Please go ahead.

Richard Hightower — Evercore ISI — Analyst

Sorry, I hit the mute button. Good afternoon, guys. Thanks for taking the question. And I hope everybody is doing well. Joe or anybody, really, just a follow-up on the external growth question. Talking to others, including your peers, it sounds like there’s not yet a lot of distress out there, right? The Fed is cooperating and business is still holding up. But do you envision that scenario changing over the next few months as developer balance sheets or anybody else in the ecosystem as they get stretched? And do you think that’s where the opportunity might come up a little more favorably for well-capitalized owners and investors like UDR?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

No. Hey, Rich, it’s Joe. I think for real estate broadly and then multifamily specifically, it’s probably going to be tough to get into a fully distressed situation. If you go back to the last downturn, we had a fundamental downturn, a capital markets downturn and real estate was at the epicenter of both of those. You look at where we’re at today, I think, the Fed, the treasury and the US government have done an exceptional job in terms of trying to keep businesses in a good liquidity situation, making sure consumer survives, making sure that credit markets continue to act pretty well, when you look at unsecured and secured space. So I don’t think we have anything ahead of us on the capital market side that would be concerning in terms of distress. So then it just comes down to how do you underwrite the near-term NOI growth profile. And so, I think we’re all still waiting through that, trying to figure that out. But it’s hard to see us going into a situation where we have a lot of distress out there in the transaction market.

Richard Hightower — Evercore ISI — Analyst

Okay. Those are help — go ahead, sorry.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

No you’re good, Rich.

Richard Hightower — Evercore ISI — Analyst

Okay. Okay. Yeah. Those are helpful comments. Yeah. And then just on the fundamental environment, factoring in construction delays in different places versus other places. And as we think about the lease-up environment over the next few months, where across your broad portfolio do you see supply — new supply having the greatest impact on market rents over this kind of peak leasing curve that we’re into right now?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, Rich, I’ll kind of kick it off, and some of the others may jump in here. But when we came into the year, we saw supply overall in 2020 was going to be in that flat to up 10% range. When you look at individual markets, Boston, LA, San Francisco, those were some of the markets that we thought there would be a little bit more pressure on in terms of supply being up. When you look at the stay-at-home orders and some of the shutdowns in terms of construction activity, clearly, it’s been a little bit more impacted on the East Coast. So Boston, specifically, where we thought there’d be some more pressure probably slows down a bit. New York definitely slows down. A little bit less of that taking place on the West Coast. But overall, you will see some degree of slippage throughout the country, a little bit more so in certain markets. So that flat to up 10% number probably looks more flat to down 10% and just drips into ’21.

And then if you look kind of a more forward picture, if you look at starts activity, clearly, it’s come off materially. We’ll see where April is next week when we get the numbers again. But I’d expect starts, permits activity to keep coming off both due to credit markets, which on the construction financing side, it’s kind of one area of the credit markets that have really shut down a little bit in terms of cost and proceeds. And then governmental losses clearly have slowed their activity and/or shutdown. So, probably a positive impact when you get out there later ’21 and into ’22.

Jerry A. Davis — President and Chief Operating Officer

Yeah. And I would just add, when you look at our portfolio, where we’ve probably felt the most impact from new supply would be downtown San Diego, SoMa District in San Francisco and Downtown LA.

Richard Hightower — Evercore ISI — Analyst

Great. Thank you, guys.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Thanks, Rich.

Operator

Thank you. Our next question is coming from Jeff Spector of Bank of America. Please go ahead.

Jeffrey Spector — Bank of America Merrill Lynch — Analyst

Good afternoon.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, Jeff.

Jeffrey Spector — Bank of America Merrill Lynch — Analyst

Just — I know you guys have been through different cycles and the great geographic — discuss or think about longer term, some of the different regions and future trends you expect at this point?

Thomas W. Toomey — Chairman and Chief Executive Officer

Yeah. Jeff, this is Toomey. Let me take a shot at that. With respect to — we’re right in the middle of, if you will, the crisis of this pandemic. And often, I find it wise not to adjust our strategy in the middle of a storm. What you do adjust is your tactics. And you can see we laid a good foundation with the operating platform to address those tactical opportunities. And Mike and the team are working very diligently in executing that.

As we’ve talked about what lies ahead on the backside of this, it’s interesting when we start looking at the decision trees, as well as the opportunity sets. And the first cube we come up with on a decision is, well, do we come up with a virus vaccine? Do we come up with adequate testing? And do we go back to — if we have those two things in hand in the next year, do we go back to February of 2020? Or is there something else that’s going to evolve in that slow progression out of this? And so, I think it’s just early for us to adjust our strategy. We’ll keep revisiting that question, looking at the opportunity sets that come up. And what we do have, and I believe, is a very strong foundation to build off of, whether that’s the team, the platform, the capital availability. So, no adjustment to strategy at this time. We’ll play it through. But I think we could be sitting here six months from now with a completely different landscape. And what we’ll be proud of is the tactical execution that we’ve done and probably reach that decision when that time comes best.

Jeffrey Spector — Bank of America Merrill Lynch — Analyst

Thank you. Appreciate those comments. And does that also go for how the amenities or what you can offer, I guess?

Thomas W. Toomey — Chairman and Chief Executive Officer

Yeah. I think Jerry and Mike can handle what we’re doing on the individual community levels about opening those up.

Jerry A. Davis — President and Chief Operating Officer

Yeah. One of our amenities have closed. We will open them up as soon as the cities allow. There will be a lot of protocols put in place to comply with social distancing, cleaning standards, things like that. But I think when you look at amenities going forward, over the last two to three years, what we’ve seen and a lot of our revenue-enhancing spend has been placed in converting things like theater rooms and spaces like that into smaller conference rooms and other types of work areas. So, I think that’s going to be continuing. I think when Harry is building product in the future, we’ll see how this plays out. If there’s other things, we’ll look to do. I think having high-speed Wi-Fi in buildings is also going to become much more of a selling point, as probably there will be more remote workers. But Harry, anything you want to add to buildings plans that you think about in the future?

Harry G. Alcock — Senior Vice President and Chief Investment Officer

No. I think, again, it’s early. As Jerry mentioned. As we look to particular to build new buildings, we’ll definitely look at things such as the quality of airflow and filtration systems. We’ll likely further expand package rooms to handle increased delivery volume. We’ll ensure that we’re using antimicrobial surfaces such as quartz or Caesarstone, those types of things.

Jeffrey Spector — Bank of America Merrill Lynch — Analyst

Thank you.

Operator

Our next question is coming from Nick Yulico of Scotiabank. Please go ahead.

Sumit Malhotra — Scotiabank Global Banking and Markets — Analyst

Hi. This is Sumit in for Nick. Thank you for taking my call — the question. Two broad questions, actually. One, I think you mentioned earlier on that collections were a little lighter on the Class B side of your portfolio. So just wanted to get a sense of renewal or blended lease pricing trends, as the differential being Class B and, let’s say, the Class A kind of property?

And then second question is more around DCP. Are there any active projects in your pipeline that could potentially suffer yield loss because of delays? And are you — how are you guys structured around controlling disbursement or funding on those kind of situations?

Thomas W. Toomey — Chairman and Chief Executive Officer

Want to take the DCP, Harry?

Harry G. Alcock — Senior Vice President and Chief Investment Officer

Sure. So with respect to DCP, we’re open to some more DCP. We expect new development starts to slow in the near-term, which likely impacts demand. But over time, we expect to be able to continue to deploying capital in DCP. And it is an investment class that we like and we continue to look to deploy capital in that area.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

And then maybe just to add on to that, in terms of the protection that we have in place for some of those transactions, as you think about the underlying collateral or real estate, we’ve underwritten majority of those to about 5.5% to 6% type of yield on developers’ numbers. So, if we do see a drawdown in terms of NOI expectations, think we have plenty of cushion to get down to our level of basis. If you look at our basis in general where our capital sits, we’re kind of in that 55% to 85% of the stack.

And you had asked about our ability to sign off on draws, we do have that ability. But when you look at our remaining funding within the developer capital program, we’ve only got about $14 million left at this point in time. Primarily related to the Thousand Oaks transaction, which we recently announced. So, all of the equity hasn’t been invested behind us, most of our DCP capital, and now it’s under the construction lender to finish out the funding.

Michael D. Lacy — Senior Vice President, Property Operations

Yeah. This is Mike. Just to touch on the rents, are very comparable between As and Bs or even in suburban. And I believe you asked about delinquency, too. Again, we’re averaging around 4% across our portfolio. New York is bouncing the highest due to corporate exposure. We’re working with them right now on rent assistance, LA, which makes up about 4% of our NOI, is the next highest given regulatory environment there. Then you have Seattle, Austin and Nashville. They’re all the lowest between 1% and 2%.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

I’ll just make an additional comment there on those delinquencies that Mike referenced at 4%. We do have payment plans or financial arrangements in place with, call it, about 1.5% of that delinquency, which over time, we think then reduces you to 97.5%. In addition to the fact that we continue to get payments coming in from individuals we do not have payment plans with. So we’d see those each and every day coming in. And so, we think that number will continue to go up in terms of cash collected for April.

Sumit Malhotra — Scotiabank Global Banking and Markets — Analyst

Thank you.

Operator

Thank you. Our next question is coming from John Pawlowski of Green Street Advisors. Please go ahead.

John Pawlowski — Green Street Advisors, LLC — Analyst

Thank you. Mike or Jerry, as you guys ramped concessions in April, are there any markets that just did not respond to the increased concession, whether it be six or eight weeks break?

Michael D. Lacy — Senior Vice President, Property Operations

Hey, John, it’s Mike. New York City has been the one, probably where it’s a little bit more challenging right now because of the stay-at-home orders. So, while we did increase concessions to try to increase demand there, we quickly pivoted and we’re finding that we’re doing more of the virtual tours there, getting those Zoom tour that Jerry spoke to, and that’s helping us out right now. And then as far as other markets, in some cases, we did a few loss leaders, where we’re trying to drive demand. And you could see that in San Francisco. That did help us out to some degree, a little bit more than say New York City.

John Pawlowski — Green Street Advisors, LLC — Analyst

Okay. Sticking with San Francisco, revenue growth in the quarter, even pre-COVID-19 lagged pretty meaningfully. Could you share April occupancy and new lease growth for San Francisco portfolio?

Michael D. Lacy — Senior Vice President, Property Operations

Sure. So San Francisco today looks like we’re around 94%. In April, we were 95.2%. And then our blended growth there today is right around 1% to 2%.

John Pawlowski — Green Street Advisors, LLC — Analyst

Thank you.

Operator

Thank you. Our next question is coming from Rich Hill of Morgan Stanley. Please go ahead.

Richard Hill — Morgan Stanley — Analyst

Hey. Good afternoon, guys. Two things I want to address. The 11 JV properties that you put into your combined pool. Could you just maybe talk through the revenue benefits and the expense benefits? I noted on some of your disclosure that your controllable expenses turn negative. So, I’d love to just understand a little bit more what the benefit of those new additions to the pool are?

Jerry A. Davis — President and Chief Operating Officer

Sure, Rich. This is Jerry. Just to get everybody up to speed, that’s about 3,600 units, mostly it was deals we traded for in the MetLife transaction last year. Makes up about 8.6% of combined same-store NOI this year. So when you look at those assets, they had revenue growth of 3.9%, that compares to the 3% blended level. So, it benefited total UDR revenue growth for same-stores by 10 basis points because the legacy assets would have come in at 2.9%. A lot of that was actually in fee and other income, which is really attributable to our platform. As you know, one thing we’ve told everybody in the past about why we don’t combine the MetLife joint ventures is, we will have full control over those. The — we have to run those in conjunction with an asset management function that doesn’t always adopt our entire platform. So, we’ve got those deals 100% back in the fourth quarter of last year, put the UDR platform on them. And like I said, you saw revenue growth come in at 3.9% for the first quarter.

When you look at expense growth, expense growth in total was negative 6% almost at those net deals. That compares to 1.7% on a combined basis. So the legacy assets were at 2.7%. So we got about a 100 basis point benefit on the expense side. And when you look at the controllables, which is the question you asked, and that’s where most of the benefit comes from the next-gen operating platform. We’ve been telling you about all of the benefits for the last year or two to UDR’s same-stores. And this was a good opportunity to see how quickly as we get the efficiencies from outsourcing, centralization, sharing staff between multiple properties that are close by how you could benefit. But the controllable expenses at those 3,600 homes was down 9.7%. That compares to our legacy assets being held at flat, which is still a very strong number. The end result on a combined basis is they were down 110 basis points.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Yeah. Hey, Rich, this is Joe. Just one thing for reference for everybody on the call. Within our supplemental on Attachment 5, we did provide a substantial amount of detail in terms of trying to make sure that we remain transparent. So you can see on Attachment 5, we do give detail on combined same-store that acquire JV same-store portfolio, as well as what you could call the legacy UDR same-store portfolio. So you can see rev, expense, NOI kind of back into some of the comps that Jerry is talking about on a rev, expense and NOI number. So, you can work the numbers yourself on that end, if you like.

Richard Hill — Morgan Stanley — Analyst

Got it. And then I’m sorry if you’ve already asked this question or answered this question. But for April, do you have any updates on the actual leases signed in April and what the rents look like? What I’m getting at is, some of the disclosure we’ve heard from some of your peers has been a little bit mixed. But if you have any updates on actual leases signed in April, that would be really helpful.

Michael D. Lacy — Senior Vice President, Property Operations

Hey, Rich, it’s Mike. We signed between blend on the new and the renewal is around 2% growth.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

But then for leases that go into effect in May, so leases that we may have signed in April, including news and renewals, well, we’re not ready to give detail on that at this time. We do think they’ll remain positive when we get to May. And so, when we get up to June NAREIT, we’ll provide an update within our disclosure at that point in time. So you can kind of track these numbers forward in terms of collections, blends, traffic, etc.

Richard Hill — Morgan Stanley — Analyst

Okay. Sounds good, guys. Thanks very much for the disclosure.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Yes.

Operator

Thank you. Our next question is coming from Rich Anderson of SMBC. Please go ahead.

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

Good afternoon. So, if I could maybe ask a little bit of a clinical question because it’s more fun, I guess. So all of your peers are kind of in that 95%, 96%, 97% range of April collections, which is great. And really awesome for all of you. You guys included. But I’m curious how the realities of those conversations went. Were people just willing to pay the rent? Or were there like some negotiations that went on along the way or in some of those conversations, assuming that you have several levers from which to pull, to get people to pay their rent? Or was it just as simple as — yeah, here’s my rent payment. I feel like that there might have been more realities to those — to many of those conversations to get you to that 96% level?

Michael D. Lacy — Senior Vice President, Property Operations

Yeah. This is Mike. I’ll tell you, it really goes down to the property level, and that’s why we’ve taken that surgical approach from the beginning, and it’s a case by case. So some markets, we’ve seen a little bit more where there’s people coming in and they’re negotiating versus others where it’s been more of a business as usual. But for the most part, we only have about 700 payment plans today. So, I think there’s a lot of pride out there and a lot of people that did come in and pay the rent.

Jerry A. Davis — President and Chief Operating Officer

I think most people have their jobs, have not been financially impacted too hard in our portfolio. And Mike, what did you say May collections were today?

Michael D. Lacy — Senior Vice President, Property Operations

87%.

Jerry A. Davis — President and Chief Operating Officer

87%. So that’s people that just are normally going to pay on time. So, if you think that that was roughly the same as last month, we had to go work to really get the next 9%, I guess, I would say. And a lot of those people were the ones that were under financial distress, and we entered in these payment plans. Mike’s talking about in some locations where late fees are not legal anymore. People didn’t have the incentive to pay quickly and some of those would lag. But I think, by and large, our portfolio is of such a quality that the majority of people are going to pay on their own without a lot of negotiation or being forced to do it.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Toomey, one I didn’t think, I was overly cynical. But what I found is…

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

I got a second question. Anyway go ahead.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Please go ahead.

Thomas W. Toomey — Chairman and Chief Executive Officer

Currently, on the collections negotiating status, what’s intriguing is the ops platform, we’ve talked about a number of times. We’ve got history on every resident for their length of stay, their pattern of pay, their level of service, any issues they’ve had. And so, Mike and his team are armed with, listen, you’ve been a great resident, you’ve been with us 27 months, we understand you have a challenge right now. We want to work with you. We offer them our payment plan. A lot of them surprisingly, they look at it, and they just come back and say, well, I can pay this much, and we’ll put them on terms.

Others, I don’t have it right now, what can I do? And so, he’s got a team that’s armed and while we say automation, it still does require people that have skills and data to sit down with people and try to work out a plan. And I think that’s what you’re seeing with respect to the April. You’re here in May 7. We’re still collecting money from those April rents, whether they’re unemployment checks, government aid checks or they’re out looking for work. But we want to be accommodating towards our residents to try to help them get through this and believe that on the back side of this, that goodwill, but also our brand and our image are maintained. And it’s just going to be an individual-by-individual situation. Hard to throw a blanket over it. We shouldn’t throw a blanket over it. We should be compassionate and accommodating.

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

Okay. Okay. Second question, when you think about the type of unemployment that’s happened, maybe it’s, I don’t know, 20% of the US workforce or something. I don’t know if I have that number exactly right. But how much of that has hit you directly in terms of people who have lost their jobs within your portfolios? Assuming a lot of this is service-oriented sector, I don’t know how big that is in your portfolio, but I’m just curious about the direct hit for UDR?

Jerry A. Davis — President and Chief Operating Officer

Yeah, Rich. It’s hard to tell. If somebody got laid off and didn’t come in and ask us for rental assistance, we’re not aware of it. As Mike stated a little bit earlier, in April, we entered into 700 deferral plans with individual residents, which is a little bit under 2% of our portfolio. So, I would tell you, as of April, it wasn’t very high. We’re offering the same type of deferral plans for people that are under distress, and in the month of May, we do ask them to provide some sort of proof of their being financially impacted by the COVID virus. But right now, it’s not that much.

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

But you don’t have a read about what their jobs are, like when they come in the door, you don’t have an understanding of their [Speech Overlap].

Jerry A. Davis — President and Chief Operating Officer

We do. We just haven’t gone back and looked at exactly where they work or if they got laid off. As we said, some of the markets we’ve felt more of it is in the — in those hospitality markets in Orange County, as well as Orlando. But as far as I can tell today, they either still have their jobs or they’re able to make their rent payments.

Michael D. Lacy — Senior Vice President, Property Operations

I mean, Rich, to realize, when we’re in the application process, you do get a degree of comfort about what their position is. But our average resident is staying with us 28 months. They’ve moved on to and promoted, changed jobs, we really do not have mechanism to collect that. And it’s often the deficiency of when people try to report income, well, how much of it’s passive income, how much of it of W-2 or 1099, it’s data but it’s not useful. Their actions is what’s useful. Their interaction is what’s useful.

Richard Anderson — SMBC Nikko Securities America, Inc. — Analyst

Yeah. Okay. Fair enough. Thanks very much.

Operator

Thank you. Our next question is coming from Neil Malkin of Capital One. Please go ahead.

Neil Malkin — Capital One Securities, Inc. — Analyst

Hey, guys. Thanks. Just one on the operations side, Jerry or Mike. I’m wondering if the COVID pandemic has maybe shined a light or help expedite move to more technology or the next-gen platform or the capabilities in such a way that maybe that changes your operating cost model on a property level? In other words, you might not need as many people doing tours or back office or maintenance, etc. Is that something that you’re kind of seeing come through? Thanks.

Jerry A. Davis — President and Chief Operating Officer

Yeah, Neil. I said a little earlier, we’ve been working on our new platform for about three years. A lot of it was really for that efficiency and to allow our residents to adopt self-service. I think what we’ve seen with the last two months is our customers were ready for it. They adopted it. And it’s going to allow us to continue moving forward with this. And I also said that we’re finding new things through technology to even enhance that self-service ability where they don’t feel it as necessary to show up toward the site. So yeah, I think you’re going to see efficiency. I think — we’ve been talking for the last year, year and a half about contraction to our controllable margin. This quarter, our controllable margin grew by 60 basis points as a result of, again, controllable expenses being down 1.1%. So that shows some of that efficiency you’re talking about. I would expect it to continue, but some of it has been accelerated.

Neil Malkin — Capital One Securities, Inc. — Analyst

Okay. Thanks. Other one for me is, could you just maybe sort of juxtapose the coastal versus Sun Belt market, the major things you’re seeing in terms of payback periods, moratorium, fees being suspended, evictions, anything along those lines that would give some help to understanding really what the economic and political or legislative environment looks like between those two parts of the country?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, Neil, it’s Joe. You’re right. There has been a little bit of juxtaposition between different regions and states, and — while at the federal level, but we’ve been very, very thankful for all the efforts. It’s fair to say that some of the local and state regulations have made operations more difficult in nature. When you just start with the shelter-at-home orders, as you look at the sequencing of when those come off over time, about 10% of our markets are actually open at this point in time. Those being here in Denver, Nashville, the Florida markets, Texas starting to open back up. So you are seeing more of a Sun Belt opening, and that’s where we’re really trying to figure out how to work through the operational reopening of the assets.

When you get into some of these other restrictions, such as eviction moratoriums and other things, the eviction moratoriums generally are lasting longer. When you get into the coastal markets, again, California, Seattle, Massachusetts, Oregon, all those are longer. New York just recently changed theirs, I think last night or this morning to August 20. So, you do see longer eviction moratoriums on the coast, similarly with the payback periods. We’ve seen most of the payback period restrictions taking place in California markets, San Fran, LA, San Diego, Costa Mesa. And then out on the East Coast, DC Proper has more restrictions on payback period as well. So, it is a little bit more coastal in nature at this point in time. I don’t doubt that that’s part of the reason when you hear the commentary from Mike and Jerry on delinquencies and what we’re seeing there. There probably are a few bad actors that are taking advantage of eviction moratoriums. But if and when they open up, we’ll continue to work with them and try to get payments and be compassionate towards them, but also utilize the law on our side as well and try to get those collections that are contractually owed to us.

Neil Malkin — Capital One Securities, Inc. — Analyst

That’s super helpful. Thanks. Just, I guess, on that question, are you willing to — if someone just says, I believe, kind of just letting them go, maybe taking a loss to get control of the unit back, how do you kind of weigh that decision?

Jerry A. Davis — President and Chief Operating Officer

I think a lot of it depends on how much demand we have at that particular property. If there’s significant demand, we would probably consider it. If there’s limited traffic coming in and low demand and high exposure, we’re probably going to hold them to the lease.

Neil Malkin — Capital One Securities, Inc. — Analyst

Okay. Thank you, guys.

Operator

Thank you. Our next question is coming from John Kim of BMO Capital Markets. Please go ahead.

John Kim — BMO Capital Markets — Analyst

Thanks. Good afternoon. I guess, a similar question on geography differences on renewal rates. And are you just keeping them flat where it’s mandated like California and New York? And so — if so, what percentage of your markets are you at free market terms versus government-mandated renewals being flat?

Michael D. Lacy — Senior Vice President, Property Operations

Hey, John, it’s Mike. So, yeah, we are taking this again property-by-property, market-by-market and pricing at market. So, when we’re looking at renewals today, we’ve already priced out through July, and we’re anywhere from 4% to 4.5%. That being said, we are working with those that are facing a hardship, and we do have regulatory pressures in a few counties and states. So, we’ll see where they come in, but that’s what we’ve been standing out as of now.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, John, and this is Joe. If you look at where we’re at in terms of regulatory restrictions, I mentioned in terms of the rent-stabilized assets that are subject to Costa-Hawkins in California. We do see that in LA, San Fran, San Jose, where they’ve required 0% renewal increases for certain durations of time, depending on emergency periods or otherwise. DC Proper, it’s through the emergency period plus another 30 days after that. And then the state of Washington as well have renewals of 0% here for another month or so. But obviously, caveat that that could change at any point in time. So, when you kind of look through the portfolio overall, we’re probably just around 10% of our rents right now that are subject to flat renewal increases with the rest being very market and asset-specific, as Mike talked about.

John Kim — BMO Capital Markets — Analyst

Okay. And then looking at your April update, it looks like you signed more new leases this April than last year, just looking at the application multiplied by closing ratio. Is that just because your portfolio is bigger or incentives that are being offered? Or can you provide some color on that?

Jerry A. Davis — President and Chief Operating Officer

Yeah. When you really look at our closing ratio, Mike, why don’t you go through the math on closing ratio because it’s — our supplement doesn’t quite reconcile?

Michael D. Lacy — Senior Vice President, Property Operations

Sure. Yeah. So we look at qualified traffic as somebody who’s either calling us or hitting our website. And then we really look at visits and applications, and that’s how we get to our closing ratio based on visits. So, what we’ve been seeing over the past few weeks is less people obviously coming to our properties where we have more of the stay-at-home orders in place. But those that are coming to our properties are more likely to rent. And so, we’ve seen that go over 50% to 60% as of late.

John Kim — BMO Capital Markets — Analyst

So that ratio is multiplied by visits, not applications or traffic?

Jerry A. Davis — President and Chief Operating Officer

Right.

John Kim — BMO Capital Markets — Analyst

Okay. Thank you very much.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Thanks, John.

Operator

Thank you. Our next question is coming from Robert Stevenson of Janney. Please go ahead.

Robert Stevenson — Janney Montgomery Scott LLC — Analyst

Hi. Good afternoon, guys. Joe, what are you going to be accruing for bad debt now in 2020? And what’s been your bad debt cost running you in a typical year like ’19?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Hey, Rob. So I’ll give you a historical first. Typically, when you exit a month, you’ve got about 1.5%, 2% of rents outstanding that you build. And so, over that subsequent period of time, leading all the way up into eviction process, you typically continue to collect. So that’s why when you look in our press release, Q1 2020, we had 99.6% of rents collected. So, you can see we had about 40 bps that were still outstanding, waiting to be collected.

As we go forward, we’re going to be able to assess each individual tenant in each bucket and try to determine collectability at that time. So, I can’t speak to how we are going to recognize revenue and therefore, what the collectability and bad debt is going to be as we move throughout the year because it’s really going to depend on each individual circumstance. So, do they have a payment plan in place? Do they have a good payment history? Have they come to us and spoken about their ability to pay or that they’re waiting for a governmental check that we will then receive? Or have they simply skipped and they’re gone out at this point in time? And all of those have different collectible probabilities. So, we’re going to assess that as we move through 2Q and continue to get more information. So hopefully, we’ll better update in July when we get there for you.

Jerry A. Davis — President and Chief Operating Officer

Yeah. I would tell you, historically, when you look at our portfolio, we look at net bad debt. So that’s whatever you write-off this month, offset by whatever you’ve collected from previous write-offs. So, when Joe talks about the delinquency, sometimes it carries over. Sometimes people move out, but they come back to pay us. But when you really look at that net bad debt as a percentage of gross potential rents, it typically runs in the 0.1% to 0.3% range. So it’s a fairly small number.

Robert Stevenson — Janney Montgomery Scott LLC — Analyst

Okay. And then what are you guys thinking is the — is going to wind up being the sort of lost revenue chain from the lack of renting the spaces for corporate events, for parking, all the other sort of fees, probably less application fees, etc? What has that sort of all gone up to when you guys think about that today as to what you’ve sort of lost thus far?

Michael D. Lacy — Senior Vice President, Property Operations

Sure. I can give you a little bit more color on what we saw for the month of April. And just to go to your first question on the common areas, that was an initiative that was starting to ramp up for us. It’s about 1% potential of our total other income or roughly $1 million over the course of the year. Right now, we have had to shut that down. But as amenity spaces start to open up, we expect that we can start to gain some momentum there again. But to late fees, admin fees, ad fees, things like that, they were about 55% to 60% of our total miss in April. And I’d tell you, in total, fees were off by close to $1 million.

Robert Stevenson — Janney Montgomery Scott LLC — Analyst

Okay. And as we think about operating expenses, are there additional operating expenses that we need to be thinking about of any material nature to deal with COVID and the challenges with the eviction bans and all this other sort of stuff that you’re going to have to be dealing with throughout the remainder of 2020, just quantify [Speech Overlap].

Jerry A. Davis — President and Chief Operating Officer

Rob, this is Jerry. There are some COVID expenses. We had to buy some PP&E, some cleaning materials, we actually — we did — are providing a bonus to our site associates for all of the policy changes they’ve had to endure over the last couple of months, as well as the next few coming forward. You’re going to have utilities expense go up as more people are staying in their homes. You’re going to possibly, hopefully not have higher insurance claims as people stay in their homes more. You should have a — you’re going to have a higher level of cleaning cost for common areas as time goes on. Ideally, a lot of those costs are going to be offset by lower turnover. So, when we kind of bundle all of our expenses up together today, we don’t think it’s a material difference from what we originally had guided to.

Robert Stevenson — Janney Montgomery Scott LLC — Analyst

Okay. Thanks, guys. Stay safe.

Thomas W. Toomey — Chairman and Chief Executive Officer

Thanks, Rob.

Operator

Thank you. Our next question is coming from Alexander Goldfarb of Piper Sandler. Please go ahead.

Alexander Goldfarb — Piper Sandler & Co. — Analyst

Hey. Good afternoon. And I appreciate you guys staying after the close. Just two questions really quick. First, up in Boston, what percent of your portfolio is traditionally occupied by overseas students?

Jerry A. Davis — President and Chief Operating Officer

Up in Bos, I don’t think it’s very high. We’ve got some in our 345 Harrison deal. I don’t have that number on top of me — at my fingertips, but we can get that back to you after the call, Alex.

Alexander Goldfarb — Piper Sandler & Co. — Analyst

Basically, Jerry, if you don’t know it off hand, it sounds like it’s a pretty small number.

Jerry A. Davis — President and Chief Operating Officer

It’s not material.

Alexander Goldfarb — Piper Sandler & Co. — Analyst

Okay. Great. The second question is on New York. Have your property manager has been getting a sense of what people thoughts are for this summer, whether they’re going to renew or move out? Just — I mean, certainly, we know what the rumbling is here, but obviously, our sample set is going to be different than your resident sample set.

Michael D. Lacy — Senior Vice President, Property Operations

Hey, Alex, this is Mike. We’re still seeing really low turnover in New York right now. And as we’ve set out renewals, we haven’t seen much of an increase in notices yet. We are seeing it a little bit more on the corporate side where we’ve had some exposure there. But as far as our traditional residents, they’re still sticking in place for the most part.

Alexander Goldfarb — Piper Sandler & Co. — Analyst

Okay. Thanks, Mike.

Operator

Thank you. Our next question is coming from Hardik Goel of Zelman & Associates. Please go ahead.

Hardik Goel — Zelman & Associates LLC — Analyst

Hey, guys. Thanks for taking my questions. I realize it’s late, so I’ll keep it quick. Joe, I know you talked about this a little bit on the call, but if you could just rank what you see or what you perceive are going to be the best uses of UDR’s capital in the coming year? You mentioned Developer Capital Program is still being very attractive. If you can highlight how you guys are thinking through that, that would be really helpful?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Yeah, of course. So, I think at this point in time, we talked about being patient. We’re still trying to look for opportunities because we do believe we have capacity, given the strength of the balance sheet. But it’s tough to really rank them, given the dearth of opportunities that are out there. You’ve seen the transaction market really shut down at this point in time. Development, obviously, in terms of starts is coming off, which impacts land opportunities, impacts DCP opportunities. So, the only opportunity we have to really look at day in and day out is our stock price. And so, trying to compare near-term returns, cash accretion and long IRRs, it’s pretty difficult in this environment. So, it’s tough to commit to any one class of assets other than to say that we’ll continue to pivot where we can to get the best risk-adjusted return.

Hardik Goel — Zelman & Associates LLC — Analyst

And just as a quick follow-up. Any deals you did that don’t look as good right now? I’m not saying that you’re going to lose money on them, but the returns are lower than you would have thought?

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

I mean, obviously, we were incredibly active on the acquisition front using equity last year. And while it’s possible the near-term return might be lower, given the rental rate environment that we’re in today. The reality is that we used a source of capital that was priced attractively. We locked in that cost of capital, put it to work in new assets to add typically 5% to 10% upside due to the operational initiatives combined with the platform. So, I think that opportunity still exists. The current environment does not take away from those opportunities that we saw to expand margin, to expand NOI yields by 5% to 10%. The near-term market run growth, yeah, that may have come off, but it came off for our entire portfolio. So, the fact that we utilized cost of capital match locked in the accretion, I don’t think we have any sense of regret other than probably wish we would have done a little bit more.

Hardik Goel — Zelman & Associates LLC — Analyst

Thanks. That’s great. Best of luck moving forward.

Joseph D. Fisher — Senior Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. We wish our next question is the last question. Our last question is coming from Haendel St. Juste of Mizuho. Please go ahead.

Haendel St. Juste — Mizuho Securities USA LLC — Analyst

Hey. Good afternoon, out there. So, I guess, my first question is a bit of a twist or follow-up to an earlier question. You guys are in a unique position relative to your peers that have reported thus far, to give a broader perspective by market, price point, product type. So that gives you, I guess, a unique perspective to give color on the debate over higher-priced urban coastal apartments with greater COVID movement restrictions, but offset by a greater proportion of white-collar workers with greater work-from-home flexibility versus the Sun Belt, which has less COVID cases, fewer restrictions, but lower incomes and less flexibility to work from home. So, I guess, I’m curious on what your early read is here, urban coastal high-rise versus Sun Belt garden, lower price point, which is the two — what have you seen recently that informs you? But more importantly, what are you thinking of over the next several quarters, which of these two groups can potentially outperform and why?

Jerry A. Davis — President and Chief Operating Officer

Yeah, this is Jerry, Haendel. I probably throw it to Mike and potentially Timmy on more of a long-term. I would tell you, it’s too early, as Tom said earlier, to make a real call on urban versus suburban. I can tell you right now, when we look at it, and Mike referred to this earlier, as we look at the delta between A and B and pricing power in April, whether it was on the renewal side or the new lease side, they’re almost flat. It’s really not much of a differential. I think you pegged it right, our Sun Belt in some of our B properties had residents that were probably at a higher risk of being in the service sector and could have lost their jobs. I think those — and — but I would say this traffic is probably picking up in those locations more rapidly because the cities are opening up.

The urban core markets, traffic is slower as stay-at-home is still widely in effect. I would tell you, we also had some corporate exposure in a few of those markets that we felt some impact, but it wasn’t material, but that’s where the impact was. It was in those San Francisco, Boston, New York City locations. But I would tell you right now, when I look at how it all works out, whether you’re talking; a, urban; b, suburban; they’ve all been impacted in some way, but it’s in different ways. Traffic is perking up more rapidly in suburbia. But right now, we’re just playing them property-by-property. They all have a little bit of a different story. I think Mike and his team are dealing with it well.

Tom, I don’t know if you would add anything to what you said earlier about the long-term aspects of these. And again, like I said, it’s just too early to tell what this means for future quarters. It depends on when do cities lift stay-at-home mandates, when do employers expect people both to come back to work, but also when do they start rehiring for some of those jobs that have been laid off. And then when do consumers want to get back out there and start buying things. So, I think it’s depending on a lot. It’s just too early to make a call. Anything you want to add, Tom?

Thomas W. Toomey — Chairman and Chief Executive Officer

No. I think you got it right. I mean, you’re just right in the middle of the storm. And as the cities open up, people start getting out, their patterns are going to start gravitating back to where they were before with the constraints. The constraints can go away with immediacy testing, different transportation, a vaccine, if those are six months or a year off, are people going to make a decision and live with six months of discomfort until a long-term cure is on the horizon. Will they make a decision in that window of time that impacts them for years to come, or will they hunker down and deal with the inconveniences and then when they’re lifted, come back to normal. So it’s just too early to overlay that rewinding of the economy onto a portfolio strategy and draw conclusion.

Haendel St. Juste — Mizuho Securities USA LLC — Analyst

Okay. Fair enough. Fair enough. Thank you for your comments though. And maybe you guys could talk a little bit about the virtual tours. You mentioned earlier in the call, being a handy tool here, obviously, in a post-COVID world for your leasing efforts. Can you share perhaps what percentage of your tours conducted maybe in the month of April or during some time frame have been conducted virtually versus conventional? And then maybe some comment on the differential in conversion rates between these virtual and the more traditional in-person leases? Thanks. And on top of that, are you finding that you need to offer any incremental incentives as part of these virtual leases as well? Thanks.

Michael D. Lacy — Senior Vice President, Property Operations

Sure. Hey, Haendel, this is Mike. This goes back to the whole property market, specifically, again, where we have places where we just can’t give a guided tour and in some cases, can’t even offer self-guided tours. Virtual tours are 100% of our traffic right now coming through the property. And in other cases, where we are starting to open up more, we’re still doing the self-guided tours, and we have guided tours where we can. But I would say over the last week or two, as we looked at this technology, and we’re utilizing the Zoom tour, that’s starting to pick up more, and we’re utilizing that as a very good tool to help us close.

Jerry A. Davis — President and Chief Operating Officer

And I would add, I don’t believe, Mike can correct me if we’ve added, we’ve offered any additional incentive for virtual tours.

Michael D. Lacy — Senior Vice President, Property Operations

No. That’s correct.

Haendel St. Juste — Mizuho Securities USA LLC — Analyst

Okay. That’s all for me. Thank you, guys.

Operator

Thank you. There are no further questions in queue. I’d like to hand the call back over to Chairman and CEO, Mr. Toomey for closing comments.

Thomas W. Toomey — Chairman and Chief Executive Officer

Thank you, operator. And first, let me start with, thanks to all of you for your time and interest in UDR. And certainly, we here hope that you are and your families are safe and healthy. Again, thanks to the team in the field, in Denver, very proud of what you’ve accomplished so far, and I can’t say that enough. Very, very proud of you.

On the business front, I’m reminded that America is extremely resilient, that you see the power of solutions come through in a variety of different ways. Grateful for that, but I do believe America is an extremely resilient society, and we will get through this. We have a business that is, frankly, a necessity. And we take that responsibility very seriously and at the same time, recognize it is a core of our business, and people will continue to rent, and we’re grateful for that. Also, very grateful to our experienced leadership team. We’ve been through different crises, different challenges, and they’ve risen to the challenge. On our teams in the field, I know you’re focused, you’ve got the tools, the resources. We’ve discussed already that we have an abbreviated leasing season. But I am confident that they will perform well during this short leasing season that’s going to be in front of us.

Lastly, grateful that we have a diversified portfolio, a strategy that gives us optionality and a platform to build on. And we look forward to showing you more of this in the future and demonstrating again the right strategic decisions we’ve made and how they’re going to build for our future. And with many of you, we’ll see you at NAREIT. Look forward to that and certainly, hope that you are safe and well in the interim, and please take care.

Operator

[Operator Closing Remarks]