Q1 2025 NexPoint Residential Trust Inc Earnings Call

Operator: Thank you for standing by.

Thank you for standing by my name is Kathleen and I will be your conference operator today.

Kathleen: My name is Kathleen and I will be your conference operator today. At this time, I would like to welcome everyone to the NexPoint Residential Trust First Quarter 2025 Earnings All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.

Speaker Change: At this time I would like to welcome everyone to the next point, Richard Dashel Trust first quarter 2025 earnings call.

All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speakers remarks, there will be a question and answer session.

Operator: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, press the star 1.

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Kristen Griffith: And now I would like to turn the call over to Kristen Griffith, Investor Relations. Please go ahead. Thank you.

Kristen Griffith: And now I would like with during the call all verdict Kristen Griffith Investor Relations. Please go ahead.

Kristen Griffith: Good day, everyone, and welcome to NexPoint Residential Trust's conference call to review the company's results for the first quarter, and it's March 31, 2025.

Speaker Change: Thank you good day, everyone and welcome to it and that's what residential Trust's conference call to review the company's results for the first quarter ended March 31st range. When he said on the call today are Paul Richards Executive Vice President and Chief Financial Officer, Matt Mcgrew, Our executive Vice President and Chief investment Officer in Bonn in Germany.

Paul Richards: On the call today are Paul Richards, Executive Vice President and Chief Financial Officer, Matt McGraner, Executive Vice President and Chief Investment Officer, and Bonner McDermott, Vice President, Asset and Investment Management.

Kristen Griffith: This president asset and investment management.

Kristen Griffith: As a reminder, this call is being webcast through the company's website at nxrt.nexpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meanings of the Private Security Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. LISER should not place a new reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risk and other factors that could affect any forward-looking statements.

Kristen Griffith: This call is being webcast through the company's website at an extra teed up next white dot com before we begin I would like to remind everyone that this conference call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995 that are based on management's current expectations assumptions and beliefs.

Kristen Griffith: Well is there should not place undue reliance on any forward looking statements and are encouraged to review the company's most recent annual report on Form 10-K, and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward looking statements.

Kristen Griffith: The statements made during this conference call speak only as of today's date, and except as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statement. This conference call also includes an analysis of non-GAAP financial measures.

Kristen Griffith: With made during this conference call speak only as of today's date and except as required by law and expert he does not undertake any obligation to publicly update or revise any forward looking statements.

Kristen Griffith: This conference call also include an analysis of non-GAAP financial measures framework complete discussion of these non-GAAP financial measures see the companies earnings release that was filed earlier today I would now like to turn the call over to Paul Richard. Please go ahead, Paul Thank you Christian and welcome everyone. Joining us. This morning, we appreciate your time on Paul Richard and I am.

Kristen Griffith: For a more complete discussion of these non-GAAP financial measures, see the company's earnings release that was filed earlier today.

Paul Richards: I would now like to turn the call over to Paul Richards.

Paul Richards: Please go ahead, Paul. Thank you, Kristen. And welcome, everyone, joining us this morning. We appreciate your time.

Paul Richards: I'm Paul Richards, and I'm joined today by Matt McGraner and Bonner McDermott.

Kristen Griffith: Joined today by Matt and the greater inbound Mcdermott I will kick off the call and cover our Q1 results updated NAV and guidance outlook for the year and briefly touch on a few subsequent events I will then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance results for Q1 are as follows.

Paul Richards: I will kick off the call and cover our Q1 results, updated NAV, and guidance outlook for the year, and briefly touch on a few subsequent events.

Matt McGraner: I will then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and guidance.

Paul Richards: Results for Q1 are as follows. Net loss for the first quarter was $6.9 million, or a loss of $0.27 per diluted share on total revenue of $63.2 million. The $6.9 million net loss for the quarter compares to net income of $26.4 million, or $1 earnings per diluted share, for the same period in 2024 on total revenue of $67.6 million. For the first quarter of 2025, NOI was $37.8 million on 35 properties, compared to $41.1 million for the first quarter of 2024 on 37 properties. For the quarter, same-store rent and occupancy decreased 1.3% and 0.3% respectively.

Kristen Griffith: Net loss for the first quarter was $6 9 million or loss of <unk> 27 per diluted share on total revenue of $63 2 million.

Kristen Griffith: The $6 $9 million net loss for the quarter compares to net income of $26 4 million or $1 earnings per diluted share for the same period in 2024 on total revenue of $67 6 million.

Kristen Griffith: For the first quarter of 2025, NOI was $37 8 million from 35 properties compared to $41 1 million for the first quarter of 2024 on 37 properties.

Kristen Griffith: The quarter's same store rent and occupancy decreased one 3% and 3% respectively. This coupled with a decrease in same store revenues of 1% led to a decrease in same store NOI of three 8% as compared to the Q1 2020 for.

Paul Richards: This coupled with the decrease in same-store revenues of 1% led to a decrease in same-store NOI of 3.8% as compared to Q1 2024. As compared to Q4 2024, rents for Q1 2025 on the same-store portfolio were up 0.3% or $4. We reported Q1 core FFO of $19.1 million or $0.75 per diluted share, compared to $0.74 per diluted share in Q1 2024. During the first quarter, for the properties in the portfolio, we completed 210 full and partial upgrades, at least 201 upgraded units, achieving an average monthly rent premium of $62 and a 16.1% return on investment.

Kristen Griffith: As compared to Q4 2020 for rent for Q1 2025 on the same store portfolio were up.

Kristen Griffith: 3% or $4, we reported Q1 core <unk> of $19 1 million or <unk> 75 per diluted share compared with 74 cents per diluted share in Q1 2024.

Kristen Griffith: During the first quarter for the properties in the portfolio, we completed 210 full and partial upgrades at least 201 upgrading units achieving an average monthly rent premium of $62 and a 16, 1% return on investment.

Paul Richards: Since inception, NXRT has completed installation of 8,558 full and partial upgrades, 4,795 kitchen and laundry appliances, and 11,389 technology packages, resulting in $172, $50, and $43 average monthly rental increase per unit, and 20.7%, 64.5%, and 37.2% return on investment, respectively. Since inception, we've increased our dividend 147.6%. For Q1, our dividend was 1.4 times covered by Core FFO with a 68.3% payout ratio of Core FFO.

Kristen Griffith: Sachin I think 30 is completed installation of 8558 full and partial upgrades 4795 kitchen, and laundry appliances, and 11389 technology packages, resulting in $172 $50 and $43 average monthly rental increase per unit and 27%.

Kristen Griffith: <unk> 64, 5% and 37, 2% return on investment respectively.

Kristen Griffith: Thanks, Ricky paid a quarter dividend of 51 cents per share.

Kristen Griffith: Common stock on March 31, 2025.

Kristen Griffith: Since inception, we have increased our dividend 147, 6% for Q1, our dividend was one four times covered by <unk> with a 68, 3% payout ratio of course.

Paul Richards: Turning to the details of our updated NAB estimate. Based on our current estimate of cap rates in our markets in 4.0Y, we are reporting a NAB per share range as follows. $44.20 on the low end, $58.20 on the high end, and $51.20 at the midpoint. These are based on average cap rates ranging from 5.25% on the low end to 5.75% at the high end, which remains stable quarter over quarter.

Kristen Griffith: Turning to the details of our updated NAV estimate based on our current estimate of cap rates in our markets and Ford in Hawaii, We are reporting an NAV per share range as follows.

Kristen Griffith: $4 20 on the low end $58 20 on the high end and $51 20 at the midpoint. These are based on average cap rates ranging from $5 two 5% on the low end to 575% at the high end, which remained stable quarter over quarter.

Paul Richards: Turning to full year 2025 guidance, NXRT is revising 2025 guidance ranges for earnings per diluted share and core FFO per diluted share. Due to the share buyback program we have initiated in Q2, earned interest rate environment, as well as plans to continue to layer in additional swaps. These guidance ranges are as follows.

Kristen Griffith: Turning to full year 2025 guidance and expertise is revising 2020 guidance ranges for earnings per diluted share and core <unk> per diluted share.

Kristen Griffith: Due to the share buyback program, we initiated in Q2 perfect.

Kristen Griffith: Straight environment as well as plans to continue to layer in additional swaps. These guided range. These guidance ranges are as follows for earnings loss per diluted share $1 eight at the high end.

Paul Richards: For earnings loss per diluted share, $1.08 at the high end, negative $1.36 at the low end, with a midpoint of negative $1.22. In core FFO, per diluted share, $2.89 at the high end, $2.61 at the low end, with a midpoint of $2.75.

Kristen Griffith: <unk> of $1.36 at the low end with a midpoint of negative $1 <unk> and core <unk> per diluted share of $2 89 at the high end $2 61.

Kristen Griffith: The midpoint of $2 75.

Paul Richards: NXRT is reaffirming same-store rental income, same-store total revenue, same-store total expenses, same-store NOI, and acquisitions and dispositions.

Kristen Griffith: And expertise reaffirming same store rental income same store total revenue same store total expenses same store NOI and acquisitions and dispositions lastly, I would like to take time to get a few subsequent events that have occurred over the past few weeks on April 28, 2025, the company's board approved a quarterly dividend of 51 cents per share.

Paul Richards: Lastly, I would like to take time to discuss a few subsequent events that have occurred over the past few weeks. On April 28, 2025, the company's board approved a quarterly dividend of $0.51 per share, payable on June 30, 2025, to stockholders of record on June 16, 2025. Since April 1, 2025, the company has purchased 223,109 shares of its common stock, totaling approximately $7.6 million, and an average price of $34.29 per share, which is a 33% discount to our current NAVMT On April 3rd, 2025, the company entered into a new five-year, $100 million SOFR swap with JPMorgan Chase with a fixed rate of 3.489%.

Kristen Griffith: Are payable on June 32025 to stockholders of record on June 16, 2024 or 2025.

Kristen Griffith: Since April one 2025, the company has purchased 223109 shares of its common stock totaling approximately $7 6 million at an average price of $34 29 per share, which is a 33% discount to our current NAV midpoint on.

Kristen Griffith: On April 32025, the company entered into a new five year $100 million silver swap with Jpmorgan Chase with a fixed rate of three 9%.

Matt McGraner: This completes my prepared remarks, so I'll turn it over to Matt for commentary on the portfolio. Thank you, Paul. Let me start by going over our first quarter same-store operational results. Occupancy ended the quarter at 94.4%, and we saw sizable occupancy growth in Nashville and Phoenix, which finished the quarter at 95.4% and 94.6%, respectively. Charlotte, Orlando, South Florida, and Las Vegas remained strong, finishing the quarter at an average occupancy of 95.1%. We are tactically pushing rate increases and accelerating interior renovations into a fundamentally stronger peak leasing season ahead. And as of this morning, the portfolio is 95.5% leased with a healthy 60-day trend of 92%.

Kristen Griffith: This completes my prepared remarks, so I'll turn it over to Matt for a commentary on the portfolio. Thank.

Matt: Thank you Paul let me start by going over our first quarter same store operational results occupancy ended the quarter at 94, 4% and we saw sizeable occupancy growth in Nashville, and Phoenix, which finished the quarter at 95, 4% and 94, 6% respectively.

Matt: Charlotte Orlando, South, Florida, and Las Vegas remained strong, finishing the quarter and average occupancy of 95, 1%.

Matt: We're tactically pushing rate increases and accelerating interior renovations and two a fundamentally stronger peak leasing season ahead and as of this morning. The portfolio is 95, 5% leased with a healthy 60 day trend at 92%.

Matt McGraner: Q1, Same Store NOI was down 3.8%, driven by 80 basis point decline in rental revenue and a 1% decline in total revenues. Though negative, we were 2% better than our internal forecast and saw an improvement of almost 40% in bad debt year over year and believe Same Store NOI will inflect higher over the remainder of the year. Renewal conversions for eligible tenants were 54% for the quarter, achieving a 73 basis point increase in lease renewals. April blended lease growth is expected to finish flat, but there are signs that demand remains strong, leading to positive rent growth later in the quarter in the back half of 2025, consistent with our initial guidance for the year.

Matt: Q1 same store NOI was down three 8% driven by 80 basis point decline in rental revenue and a 1% decline in total revenues, though negative we were 2% better than our internal forecast and saw an improvement of almost 40% in bad debt year over year and believes same store NOI will inflect higher over the remainder of the year.

Matt: Renewal conversions for eligible tenants were 54% for the quarter, achieving a 73 basis point increase in lease renewals April blended lease growth is expected to finish flat, but there are signs that demand remains strong leading to positive rent growth later in the quarter and the back half of 2025, consistent with our inter inter initial.

Matt: Guidance for the for the year I'll return to this point in a minute.

Matt McGraner: I'll return to this point in a minute. Operating expense growth finished the quarter 3.7%, maintaining the moderate growth we have seen over the last several quarters. Repairs and maintenance expense were in line at 4.9%. Interim costs saw a 2% improvement over the prior year quarter. Market conditions in Q1 continued to remain strong. Nationally, over 138,000 units were absorbed, a record first quarter leasing and demand performance. Our markets of Atlanta, Phoenix and Dallas were top three for absorption, while strong showings from Charlotte and Tampa as well gave us five of the top ten markets for Q1 absorption.

Matt: Operating expense growth finished the quarter three 7% maintaining our moderate growth we have seen over the last several quarters repairs and maintenance expense were in line at four 9% and turn costs saw a 2% improvement over the prior year quarter.

Matt: Market conditions in Q1 continued to remain strong nationally over 138000 units were absorbed a record first quarter leasing and demand performance, our markets of Atlanta, Phoenix, and Dallas, where top top III for absorption, while strong showings from Charlotte and Tampa as well gave us five of the top 10.

Matt: The end markets for Q1 absorption.

Matt McGraner: Affordability challenges persist, positioning our assets to capture increased rental demand in an improving operating environment. We have shifted to rent growth initiatives in most of our markets while continuing to balance occupancy maximization, where new deliveries and concessions are still impacting our assets. Through Q1 2025, we have seen new supply, albeit primarily within Class A stock, continue to deliver in our markets. We're encouraged by the placement of our assets relative to the submarkets most directly hit with this new competition, and real-page forecasts for our submarkets over the next three years. project a 1.4% annual rise in available inventory, well below the recent rapid growth we've seen during this historic supply wave.

Matt: Affordability challenges persist positioning our assets to capture increased rental demand and improve and in improving the operating environment.

Matt: We have shifted to rent growth initiatives in most of our markets, while continuing to balance occupancy maximization, where new deliveries and concessions are still impacting our assets.

Matt: Through Q1, 2025, we have seen new supply, albeit primarily within class a stock continued to deliver in our markets. We're encouraged by the placement of our assets relative to the Submarkets most directly hit with this new competition and real page forecast.

Matt: For our Submarkets over the next three years.

Matt: Project, a one 4% annual rise in available inventory well below the recent rapid rapid growth we've seen during this historic supply wave.

Matt McGraner: Indeed, RealPage's April data is forecasting a 22% decline in deliveries year-over-year within NXRT submarkets, from 17,636 units to 13,750 units. In the years to follow, the supply picture improves even more dramatically with the lack of new starts in recent years, with an additional 38% decline in new supply in 2026, just 8,494 units, and a staggering 82% drop in 2027 to just 1,513 units in our submarkets. Amidst this improving outlook, we have seen a marked acceleration in new lease pricing power in each successive month of 2025 to date. We're pleased to share that effective rents ended the quarter at $1,495, up 30 basis points from the fourth quarter of 2024.

Matt: Indeed real pages April data is forecasting a 22% decline in deliveries deliveries year over year within <unk> Submarkets from 17636 units to 13750 units in the years to follow the supply picture improves even more dramatically with the lack of new starts in recent years with an additional 38%.

Matt: Decline in new supply in 2026, just 8494 units.

Matt: A staggering 82% drop in 2027% to just 1513 units in our sub markets.

Matt: Amidst this improving outlook, we have seen a marketing acceleration in new lease pricing power in each successive month of 2025 today.

Matt: We're pleased to share that effective rents ended the quarter at $1495 up 30 basis points from the fourth quarter of 2024.

Matt McGraner: Six of our 10 markets showed flat to positive rent growth, with Tampa and Las Vegas showing the strongest growth, with 1.9% and 1.6% rent growth, respectively. South Florida, DFW, Charlotte, and Atlanta witnessed growth between 0% and 1% during the seasonally slower first quarter. Moreover, using March as our last full month of data, we saw 17 of 35 properties and 4 of our 10 markets—South Florida, Charlotte, DFW, and Las Vegas—all shift into positive new lease growth, and that's up from just 2 properties in Q4. April month-to-date has seen further improvement to 20 properties out of our 35 properties, with particular strength in Las Vegas at 7 percent, in Tampa at 4.8 percent, DFW at 3.5 percent, and South Florida at 2 percent.

Matt: Six of our 10 markets showed flat to positive rent growth with Tampa and Las Vegas, showing the strongest growth with one 9% in the one 6% rent growth respectively.

Matt: South, Florida, DFW, Charlotte and Atlanta witnessed growth between zero percent and 1% during.

Matt: During the seasonally slower first quarter.

Matt: Moreover, using March as our last four months of data. We saw 17 of 35 properties and four of our 10 markets South, Florida, Charlotte DSW in Las Vegas, all shift into positive new lease growth and Thats up from just two properties in Q4 April month to date has seen further improvement to 20 properties out of our <unk>.

35 properties.

Matt: With particular strength in Las Vegas, 7% Tampa at four 8% DFW, a three 5% in south Florida at 2%.

Matt McGraner: Renewal growth in Q1 was muted as we aimed to reduce exposure to still stagnant new leases while minimizing turn costs, but our defensive occupancy has allowed us to take larger swings at rental increases in the historically stronger Q2 and Q3 seasons.

Matt: Renewal growth in Q1 was muted as we aim to reduce exposure to still stagnant new leases, while minimizing churn and turn costs, but our defensive occupancy has allowed us to take larger swings that rental increases in the historically stronger Q2 and Q3 seasons.

Matt McGraner: We expect this strategy to be a source of rent growth, allowing us to obtain higher organic rents and or churn units for varying degrees of renovation opportunities.

Matt: We expect this strategy strategy to be a source of rent growth, allowing us to obtain higher organic grants <unk> churn units for varying degrees of renovation opportunities.

Matt McGraner: I want to spend a quick minute on the impacts we are seeing related to tariffs. We in BH Construction are actively monitoring this very fluid situation, but so far, the impact on NXRT is pretty muted. Most vendors we interact with have notified customers of potential increases in supply disruptions related to tariffs. Such vendors germane to NXRT are flooring suppliers like a Shaw or appliance suppliers like a GE or paint like Sherwin-Williams. So far, these suppliers are generally holding prices flat to signaling a 10 to 20 percent increase over the term if uncertainty persists. Across the rest of our platforms and multifamily development partners, we aren't hearing anything causing material concern.

Matt: I wanted to spend a quick minute on the impacts we are seeing related to tariffs. We MBA. It's construction are actively monitoring this very fluid situation, but so far the impact on SRT is pretty muted.

Matt: Most vendors, we interact with have notified customers of potential increases in supply disruptions related to tariffs such vendors or maintain XR tier flooring suppliers like a shaw our appliance suppliers like GE.

Matt: Pain like Sean Williams so.

Matt: So far these suppliers are generally holding prices flat to signaling a 10% to 20% increase over the term if uncertainty persists.

Matt: Across the rest of our platforms in multifamily development partners, we aren't hearing anything causing material concern most lumber and concrete providers. For example are local to the U S and supply chain is already and have supply chain is already in place.

Matt McGraner: Most lumber and concrete providers, for example, are local to the U.S. and have supply chains already in place.

Matt McGraner: Developers are also pointing to the dearth of new construction starts as a larger offset to normalize demand for construction materials and labor. So, obviously, a situation we're monitoring, but as we sit here today, NXRT is not seeing a material impact.

Matt: Developers are also pointing to the dearth of new construction starts as a larger offset to normalized demand for construction materials and labor.

Matt: So obviously the situation, we're monitoring but as we sit here today and extra Chi is not seeing a material impact.

Matt McGraner: We continue on the transaction front. We continue to actively monitor the sales market for opportunities and stay close to any movements on cap rates in our market. After a pretty noticeable increase in marketed offerings to start the year, most institutional investors are in wait-and-see mode for clarity around the interest rate environment and, more recently, tariffs. That said, pricing expectations for quality assets in our markets remain strong, and most processes and sellers are expecting to transact at five caps.

Matt: We continue on the transaction front, we continue to actively monitor the sales market for opportunities and stay close to any movements on cap rates in our markets. After a pretty notable noticeable increase in marketed offerings to start the year. Most institutional investors are in wait and see mode for clarity around the interest rate environment and more recently tariffs.

Matt: That said pricing expectations for quality assets in our markets remained strong in most processes and sellers are expecting to transact at five caps. Indeed, there are several portfolio processes currently underway that should provide real time transparency transparency to our guide was at similar vintages and geographical overlap with <unk>.

Matt McGraner: Indeed, there are several portfolio processes currently underway that should provide real-time transparency to our NAV Guide, add similar vintages and geographical overlay to NXRT's portfolio. These guides are 5 to 5.25 cap rate ranges in approximately $200,000 to $220,000 per unit values.

Matt: Portfolio.

Matt: These guys are five five and a quarter cap rate ranges and approximately 200 to 220.

Matt: Per unit values.

Matt McGraner: In closing, we're pleased with the start of 2025 through late April and focused on driving internal growth and recycling capital as supply continues to be absorbed later in the year.

Matt: In closing we're pleased with the start of 2025 through late April and focused on driving internal growth and recycling capital as supply continues to be absorbed later in the year.

Matt McGraner: In particular, we believe the inflection of new lease growth to be a really positive sign for our assets after many quarters of softness.

Matt: And particularly we in particular, we believe the inflection of new lease growth to be a really positive sign for our assets after many quarters of softness.

Matt McGraner: That's all I have for prepared remarks.

Matt: That's all I have for prepared remarks I appreciate our teams here at <unk> for continuing to execute and now we'd be happy to take any questions.

Matt McGraner: I appreciate our teams here at NexPoint and BH for continuing to execute, and now we'd be happy to take any questions. Thank you.

Operator: We will now begin the question and answer. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the call. And if you would like to withdraw your question, simply press the star 1 again. If you are called upon to ask your question and listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, please press star 1 to join the queue.

Matt: Thank you we will now begin the question and answer session.

Matt: If you have diode Ian would like to ask a question. Please press star one on your telephone keypad, Dewey's Johan and joined the queue.

Matt: And if you would like to withdraw your question simply press the star one again.

Matt: If you are called upon to ask your questions and listening via loud speaker in your device. Please pick up your handset and ensuring that your phone is not on mute when asking your question.

Matt: Again, Please press star one to join the queue.

Kyle Katorincek: And your first question comes from the line of Kyle Katorincek of Chattie. Your line is now open. Hey, good morning, guys.

Speaker Change: And your first question comes from the line of <unk> <unk> of Janney.

Speaker Change: Line is now open.

Speaker Change: Hey, good morning, guys, which of your markets are you starting off transactional value value where values at the upper end of your cap rate range versus the lower provided in your NAV slide.

Matt McGraner: Which of your markets do you see enough transactional value where values at the upper end of your cap rate range versus the lower provided in your NAV slot? Sorry, did you say what other geographies where cap rates are softer, basically? Yeah, you're right. Yeah, I'd say that for again, for the transactions that we've seen take place, and the processes going on, I'd say out of our market, probably Atlanta, I would say, is on the weaker side of RNAV guidance and then some DFW, which makes sense given the supply is heavily still delivering in those two markets.

Speaker Change: I'm sorry did you say what other are there.

Dr fees, where cap rates are softer basically.

Speaker Change: Yes exactly.

Speaker Change: Yeah, I'd say that for again for the transactions that we've seen take place.

Speaker Change: And the processes going on I'd, I'd say out of our markets.

Speaker Change: Okay.

Speaker Change: Probably Atlanta I would say is is on the weaker side of our guidance.

Speaker Change: And then some some DFW, which makes sense given the supply is heavily.

Speaker Change: Still delivering in those those two markets on a bond or do you have anything to add yes, I think it's also a qualitative discussion right.

Bonner McDermott: I don't know, Bonner, do you have anything to add to that? Yeah, I think it's also a qualitative discussion, right? The bid is really aggressive for well-located suburban B plus assets, similar to ours. I think more of the product that's out there is either a broken capital structure or outside the promote, right? The decision to sell into this softness is typically not making a whole lot of money for the general partnership. So it just depends, right? For quality assets, those are getting bid up. We were in a process on the deal we liked in there.

Speaker Change: <unk> is really aggressive for well as its bourbon.

Speaker Change: Assets similar to ours I think yes.

Speaker Change: More of the product that's out there as either broken capital structure or outside of the growth rate.

Speaker Change: The decision to sell into the softness.

Speaker Change: It's typically.

Speaker Change: Not not making a whole lot of money for the general partnership so.

Speaker Change: Just depends right for quality assets those are getting bid up.

Speaker Change: We're in the process on the deal we like to Las Vegas, as Matt talked about the great room <unk> fundamentals there yeah. We put what we thought was a very compelling offer out there and got out there. So that was a five sub five in place, but you look at some other assets in the syndicators that have been out there the tides.

Bonner McDermott: We put what we thought was a very compelling offer out there and got outbid. So that was a five to sub five in place. But you look at some other assets and the syndicators that have been out there, the Tides, the other groups like that, some of those assets are a little bit weaker and a little bit lesser demanded.

Speaker Change: The other groups like that.

Speaker Change: Some of that some of those assets are a little bit weaker and a little bit lesser demanded.

Matt McGraner: Okay, thank you. And then given the midpoint of your NAV range and where the stock's currently trading, can we see you guys hitting the higher end of your disposition range, selling more assets or repurchase stock and close that valuation gap over the next few quarters? Yeah, I think so. I think what we'd like to do is maintain a steady buyback program with, you know, the free cash flow that we generate, which is a lot, that at the same time be opportunistic to also not externally grow, but, you know, recycle capital. There's some deals that we want to sell, and perhaps we use a portion of the proceeds to recycle into newer assets or new, you know, value-add assets where we have an internal growth story, as well as keeping the buyback in place.

Speaker Change: Okay. Thank you and then given the midpoint of your range and where the stocks currently trading could we see you guys hitting the higher end of your disposition range selling more assets to repurchase stock and close that valuation gap over the next few quarters.

Speaker Change: Yes, I think so I think what we'd like to do is maintain a steady buyback program with.

Speaker Change: The free cash flow that we generate which is a lot.

Speaker Change: But at the same time be opportunistic to also not externally grow but yes.

Speaker Change: Recycle capital, there's some deals that we want to sell and perhaps we use a portion of the proceeds to recycle into newer assets.

Speaker Change: Our new.

Speaker Change: Value add assets, where we have an internal growth story as.

Speaker Change: As well as keeping the buyback in place obviously that share price dependent.

Kyle Katorincek: Obviously, that's share price dependent. If we run a little bit, then, you know, we might pause and wait. Awesome. Thanks, guys. Appreciate it. Thanks, Kyle.

Speaker Change: If we run a little bit then.

We might pause and wait.

Speaker Change: Awesome. Thanks, guys appreciate it.

Scott: Thanks Scott.

Omotayo Okusanya: Your next question comes from the line of Omotayo Okusanya of Deutsche. Yes, good morning, everyone. I just wanted to confirm the increase in core FFO per share guidance, that is all being driven by You're expecting more sheer buybacks, and as well as, as you're taking care of swaps throughout the course of the year, you're locking in fixed rates that are a little bit better than you were anticipating. Is that fair?

Speaker Change: Your next question comes from July of Tayo, Okusanya with Deutsche Bank.

Speaker Change: Please go ahead.

Speaker Change: Hi, Yes, good morning, everyone I just wanted to confirm the increase in core <unk> per share guidance.

Speaker Change: It's all being driven.

Speaker Change: Bye you were threatening more buybacks and as well as as you've taken care of swaps throughout the course of the year you are locking in fixed rates that are a little bit better than you anticipated is that fair.

Paul Richards: Hey, Kyle. Yeah, this is Paul, but that's correct. So we've seen in the marketplace on the swap side, you know, rates come down precipitously. So we were again able to lock in a hundred million dollar notional at sub 3.5, and we're actually seeing, I just checked today, a little bit better, a few basis points better than that too, if we were to lock in another 5,200 on a five year swap basis. And we're also seeing the curve, you know, really retraced down to five to six cuts. And so that really does help the forward guidance.

Speaker Change: Hey, Tayo, yes. This is Paul Thats correct. So we've seen in the marketplace on the swap side the rates come down precipitously. So we were again able to lock in a $100 million notional at sub three five and we're actually seeing I just checked today.

Speaker Change: A little bit better two basis points better than that to if we were to lock in another 50 to 100 on a five year swap basis, and we're also seeing the curves.

Speaker Change: Early reach rates down to 5% to six cuts and so that really does help the forward guidance.

Omotayo Okusanya: So that's, I would say, the majority of the reason how we've taken up, you know, our guidance range up those few pennies this past quarter. Gotcha. Any reason why you haven't been a little bit more aggressive on the swaps since you're kind of seeing this happening? Yeah, over the past week was pretty choppy. And so we were, like I said, about three weeks ago, we did lock in that $100 million. And then it got pretty volatile and credit charges really did spike. And now you're seeing less of that. And you are seeing rates settle. So we would be able to lock in, you know, a better transaction today than we would have the past two weeks.

Speaker Change: With that I.

Speaker Change: I would say the majority of the reason, how we had taken up our guidance range up a few pennies to set this past quarter.

Speaker Change: Gotcha.

Speaker Change: Yeah, well I mean, a little bit more aggressive on those swaps and then since we're kind of seeing this happening.

Speaker Change: Over the past week was pretty choppy and so we're like I said about three weeks ago, we did lock in that $100 million.

Speaker Change: And then I got pretty volatile and credit charges really did spike and now you're seeing less of that and you are seeing rates that also we would be able to lock in.

Speaker Change: A better transaction today than we would have over the past two weeks. So we have a keen eye on that right now I agree with you.

Paul Richards: So we have a keen eye on that right now.

Omotayo Okusanya: I agree with you. Okay, that's helpful.

Speaker Change: Okay. That's helpful.

Matt McGraner: And then, Matt, your comments earlier in regards to just kind of new rent growth and also kind of renewal growth, Again, what the fastware and OneCue kind of... The Value Add Program. Yeah, most of what I'm referring to in terms of new lease growth inflection is organic. It's not driven by any rehab results, which again is kind of like the all, I don't want to say all clear sign for the industry, but the folks both on the buy side and then on an operating performance perspective, like that's what we've been waiting for, right? The inflection of these sub-markets to start seeing new lease growth again, so I'm pretty positive.

Matt: And then Matt.

Speaker Change: Matt.

Speaker Change: Your comments earlier in regards to suggest.

Speaker Change: I'm kind of new rent growth and also kind of renewal growth.

Speaker Change: And again, what the last we're in and in one Q2.

Speaker Change: Kind of X.

Speaker Change: The value add program.

Yes.

Speaker Change: <unk>.

Speaker Change: Yeah most of it in all the what I'm, referring to in terms of the new lease growth inflection as organic.

Speaker Change: It's not driven by any any rehab results, which again is is kind of like the all.

Speaker Change: The all clear sign for the industry, but.

Speaker Change: The folks both on the buy side and then on an operating performance perspective like that's what we've been waiting for the inflection of these submarkets.

Speaker Change: Submarkets to start seeing new lease new lease growth again, so pretty positive.

Omotayo Okusanya: That's helpful.

Matt McGraner: And then for the value-add program, again, accelerated in one queue, how should we kind of think about for the rest of the year how much of that stuff we could potentially get? Yeah, I mean, I'd say that we're maybe hitting a jog, you know, as the second half of the year. As I mentioned in my prepared comments, we're holding probably a little bit more units open for rehab opportunities and willing to take some occupancy retracement to push rent in the back South Florida, you know, Las Vegas, as Bonner mentioned, there's a lot of rehab opportunities that we're still continuing to execute because we can get those bumps and be healthy and have them healthily absorbed by the tenants.

Speaker Change: That's helpful and then for the value add program again accelerated in one Q.

Speaker Change: How should we kind of think about for the rest of the year, how much of that stuff, we looked at potentially yet.

Speaker Change: Yeah I mean.

Speaker Change: I'd say that were.

Speaker Change: Yes, we are.

Maybe hitting a jog.

Speaker Change: You know as the as the second half of <unk>.

Speaker Change: The year as I mentioned my prepared comments.

Speaker Change: Holding probably a little bit more units open for rehab opportunities and willing to take some occupancy retracement to push to push rents in the back half of the year and marketed psyche.

Speaker Change: South Florida.

Bonner: Las Vegas is Bonner mentioned, there's a lot of rehab opportunities that were still continuing to execute because we can get we can get those bumps and be healthy and have them hopefully absorbed by the tenants. So yes.

Matt McGraner: So, you know, it's a goal for ours to get, you know, back to 400 units a quarter in output. I don't think we're going to get there in the next few quarters, but, you know, hopefully by second half of the year, we're doing a couple hundred a quarter. That's helpful.

Speaker Change: Yes.

Speaker Change: It's a goal for ours to get back to.

Speaker Change: It's a 400 units a quarter and out but I don't think we're going to get there in the next few quarters, but.

Speaker Change: Hopefully by.

Speaker Change: Second half of the year, we're doing a couple of hundred a quarter.

Omotayo Okusanya: And one more for me, if you don't mind. How do we think about stock buybacks for the rest of the year? With the stock at 36 to 38 versus the earlier buybacks of like 32 to 36? Yeah, I mean, I still wear like a 6667 implied cap rate. So we still like it here. It really, you know, we'll take advantage on weekdays and volatile days. So I, you know, I think I like it, you know, up to probably 10% of the, you know, 10% off the low end of NAV range or in that, you know, six and a quarter percent cap rate range.

Speaker Change: That's helpful and one more for me if you don't mind, how do we think about stock buybacks for the rest of the year with the stock up.

Speaker Change: Take that 38 versus their earlier buybacks I'd like 32 to 33.

Speaker Change: Yeah, I mean, I still we're at like a 6667 implied cap rate. So we still like it here.

Speaker Change: It really will take advantage on weekdays and volatile days.

Speaker Change: So.

Speaker Change: I think I like it up to probably 10% of the.

Speaker Change: 10% off the low end of range or in that 6.25% cap rate range I think I think thats kind of our guiding light.

Omotayo Okusanya: I think, I think that's kind of our, our guiding light. That's helpful.

Speaker Change: Okay. That's helpful. Thank you very much.

Omotayo Okusanya: Thank you very much.

Speaker Change: Thanks.

Buckhorn: Your next question comes from the line of Buckhorn of Chick Raymond Jeans. Please go ahead. Thanks. Good morning, guys, and congrats. I wonder if you could maybe dive in a little bit further on the comments about Las Vegas, given the strength you're seeing there. It seems a little maybe counterintuitive, so I kind of want to unpack it a little bit, just given the signs that, you know, tourism-related travel is declining into Vegas, and there seems to be some signs of some layoffs, you know, with some of the resorts in that market. So is your portfolio in Vegas, do you view that as kind of countercyclical in times of uncertainty, or what do you, how do you attribute the strength you're seeing in Vegas?

Speaker Change: Your next question comes from the line of Corinna Chip Raymond James. Please go ahead.

Corinna Chip: Hey, Thanks, good morning, guys and congrats.

Corinna Chip: Wonder if you could maybe dive in a little bit further on the comments about Las Vegas, given the strength, you're seeing there seems a little maybe.

Corinna Chip: Maybe counterintuitive don't kind of unpack it a little bit just given the signs that tourism related travel declining into Vegas, and this seems to be some signs of some lay off some of the resorts in that market. So is your portfolio in Vegas, you view that as kind of counter cyclical in times of uncertainty or what do you. How do you attribute the strength youre seeing in.

Corinna Chip: <unk>.

Matt McGraner: Yeah, I think for our assets, they're just in an affordable gap, right? Like there's not, I mean, our average unit per effective unit rent is probably $1,200 in that market. And then a recurring resident burden is probably somewhere in the $25,000 to $3,000 per month on a P&I basis. And the fact of the matter is, as you well know, Buck, like even though you've seen some recent supply in 2021 and 2022, or excuse me, that starts in 2022, that hit in the last 18 months, that's a historically undersupplied housing market. And so with the net migration inflows, which is still occurring today in our affordable kind of price point and in the markets that, in the submarkets that we have, there's just not a lot of options.

Corinna Chip: Yeah.

Corinna Chip: I think the I think for our assets Theyre just in an affordable gap right, but theres not I mean, our average our average unit.

Corinna Chip: Maybe a perfect unit rents probably $200 in that market.

Corinna Chip: Our recurring resident burden is probably somewhere in the 25 to.

Corinna Chip: To $3000.

Corinna Chip: Per month on a P&I basis in fact of the matter is as you well know book like the even though you've seen some some recent supply in 'twenty, one and 'twenty two or excuse me that starts in 2022.

Corinna Chip: Hit.

Last year 18 months, that's a historically under supply of housing market and so.

Corinna Chip: With the net migration inflows, which is still occurring today.

Corinna Chip: In our affordable price point and an art.

Corinna Chip: And in the markets.

Corinna Chip: In Submarkets that we have there is just not all options. So.

Matt McGraner: So it's been a particular sign of strength for really the last, I'd say three or four quarters. And it's a market that we want to continue to look at for acquisitions, given this backdrop. I think we're still very bullish on it. Yeah, no. It's a very encouraging sign. And if you think about just kind of the overall trajectory of new lease growth, I mean, I know you're trying not to project out too far, but if these trends continue through kind of peak leasing season, you know, where do you think your new lease, you know, rate growth would kind of peak out this year, maybe by the third quarter?

Corinna Chip: It's been it's been a particular.

Corinna Chip: The strains for really the last I'd say, three or four quarters in and it's a market that we want to continue to look at it for acquisitions.

Corinna Chip: Given given this backdrop.

Corinna Chip: I think we're I think we're still very bullish on it.

Corinna Chip: Yes no.

So a very encouraging sign.

And if you think about just kind of the overall trajectory of new lease growth I mean, I know you try not to project out too far but if.

Corinna Chip: These trends to continue through peak leasing season, where do you think your new lease.

Corinna Chip: Rate growth would kind of peak out this year, maybe by the third quarter.

Corinna Chip: Okay.

Matt McGraner: Yeah, it's a good question. I think, and I looked at this last night. I think that if we can get Well, let me just give you a little sense of where our guide is. So, we did $1,482 of net effective rents for the first quarter. To get to the top end of our revenue guidance, we only have to get to $1,520 a unit. That's like $35, $40. So, you know, on a percentage increase, that's, you know, a couple percent and not a whole lot of, you know, headroom there. I think that our, you know, our ability to hit, you know, $35, $40, or $50 per unit, given our assets, given the lack of affordability, you know, just given the quality of the locations, you know, I think that we have some potential to hit that upside and achieve that, you know, 2%-ish growth for the rest of the year, which would be great.

Corinna Chip: Yes, it's a good question I think.

Corinna Chip: And I looked at this last night.

Corinna Chip: I think that if we can get.

Speaker Change: Well, let me just give you a little sense of where our guide is so yeah. We did 14.

Corinna Chip: <unk> hundred $82 net effective rents for the first quarter.

Corinna Chip: Yeah to get to the top end of our revenue guidance, we only have to get to 520 $520.

Corinna Chip: And it looks like $35 40 Bucks so.

Corinna Chip: On a percentage increase that's a couple of percent and not a whole lot of.

Corinna Chip: Headroom there I think are.

Our ability to hit.

Corinna Chip: $35 40, or $50 per unit, given our assets given the lack of affordability.

Corinna Chip: Just given the quality of the locations.

Corinna Chip: I think that we have we.

Corinna Chip: We have some potential to hit that upside.

And achieve that 2% ish growth for the rest of the year, which would be great.

Corinna Chip: Yes.

Corinna Chip: That's great color I appreciate the feedback there.

Buckhorn: One real quick last one is CAPEX guidance.

Corinna Chip: One real last quick a quick last one is the Capex guidance just wondering if you could maybe help think.

Paul Richards: Just wondering if you could maybe help us think through both recurring and non-recurring CAPEX needs as you're seeing the year progress. Yeah, Buck, happy to help you with that. You know, you look at page 17 of the supplement, we've got , you know, all the $6 million bucks of kind of recurring, non-recurring CapEx in the first quarter. It's actually down a little bit, you know, year over year. I think, you know, part of that's just the reduction in the portfolio. But that seems that seems like a pretty stable, stable run rate. You know, we've got a little bit of exterior CapEx going on at some of the properties in the second, third quarter, but nothing overly material.

Corinna Chip: To help us think through.

Corinna Chip: Both recurring and nonrecurring capex needs as Youre seeing the year progress.

Corinna Chip: Yes, but happy to have that view that.

Corinna Chip: You look at.

Corinna Chip: Page 17 of the supplement.

Corinna Chip: Call it.

Corinna Chip: 6 million Bucks of kind of recurring nonrecurring capex in the first quarter.

Corinna Chip: It's actually down a little bit year over year, I think part of that.

Corinna Chip: The reduction in the portfolio, but that seems that seems like a pretty stable.

Corinna Chip: They will run rate.

Corinna Chip: We've got a little bit of a next year capex going on at some of the properties in the second and third quarter, but nothing overly material.

Paul Richards: It's a pretty, pretty steady standard year. You know, to Matt's point, I think, you know, we're targeting, you know, maybe 300 interior upgrades, you know, Q2, Q3 range. So, you may see a little bit of pickup in interiors, but that's, you know, all demand driven. So, nothing overly material in terms of change quarter over quarter for, you know, CapEx spent.

Corinna Chip: It's a pretty pretty steady standard year.

Matt: To Matt's point I think.

Matt: We're targeting maybe 300 interior upgrades.

Matt: Q2, Q3 range. So you may see a little bit of pickup in interiors.

Matt: Thats all demand driven so nothing nothing overly material in terms of change quarter over quarter for Capex spend.

Speaker Change: Got it alright, thanks, guys congrats.

Buckhorn: All right. Thanks, guys. Congrats. Thanks, Bob.

Bob: Thanks, Bob.

Omotayo Okusanya: And your next question comes from the line of Omotayo Okusanya of Deutsche Bank. Your link is down below. Yes, thanks for taking the follow-up. When we kind of looked at your actual results versus maybe some of our estimates, it felt like OPEX and as well as property taxes and insurance, came in a little bit late. Even like OpEx for the quarter, like 12 point something million a quarter, I don't think has been that low in a while.

Bob: And your next question comes from the line of Tayo Okusanya with Deutsche Bank. Your line is now open.

Speaker Change: Yeah, Thanks for taking the follow up.

We kind of looked at your actual results versa.

Bob: Some of our estimates.

Bob: Like the Opex and as well as property taxes and insurance came in a little bit light.

Bob: Opex for the quarter looked like 12 point something million dollars a quarter I don't think it will not lowering a while so just curious if there was anything unique going on if there was a onetime item in there or how would you kind of think about those number that's the sense of a run rate for the rest of the year.

Paul Richards: So just curious if there's anything unique going on, if there's a one-time item in there, or how would you kind of think about those numbers as potential run rates for the rest of the year? In terms of, you know, our guide for the year, I think Matt mentioned, you know, we were a little bit ahead of our kind of internal forecasting, but, you know, we've done well. We've worked a lot on centralization for payroll spend. We're ramping more of the potting for maintenance, so we're pushing that aggressively. I don't know that you fully realize the opportunity there.

Bob: In terms of.

Bob: Our guide for the year I think manage than we.

Bob: We were a little bit ahead of our internal forecasting but.

Bob: We've done while we've worked a lot on centralization for payroll spend.

Bob: We're ramping more of the party for maintenance, so we're pushing that.

Bob: Approximately I don't know that you fully realize the opportunity there I think we'll get more maintenance payroll spend down.

Paul Richards: I know, hopefully by, you know, the first half of 26, we get to kind of a normalized new run right there, but it's something we're working pretty hard on. You know, taxes, we're just in the devaluation cycle there, so there's going to be some fluctuation. We'll, you know, fight a lot of those, you know, particularly Texas counties. We've got a couple revalued years there, but nothing material. We didn't discuss, but we recently renewed our insurance, got a pretty favorable result there, so there's going to be a little bit of savings. It has not materialized in the Q1 numbers.

Bob: Hopefully by the first half of 2006, we get to the kind of a normalized new run rate there.

Bob: But it's something we're working pretty hard on.

Bob: Taxes.

Bob: We're just in the evaluation cycle. There. So there is going to be some fluctuation.

Bob: A lot of those particularly Texas counties.

Bob: Got a couple of really values there but.

Bob: Nothing material.

Bob: We didnt discuss but we recently renewed our insurance got a pretty favorable result, there so theres going to be a little bit of savings.

Bob: <unk> has not materialized in the Q1 numbers, that's an April one renewal.

Paul Richards: That's an April 1st renewal, but everything, you know, on the expense front looks pretty good. Going back to Matt's comments on tariffs, you know, we feel good about OPEX for the year. Helpful. Thank you so much.

Bob: But every everything on the expense front, it looks pretty good going back to matts comments on tariffs.

Bob: Still good about opex for the year.

Bob: Helpful. Thank you so much.

Bob: Yes.

Operator: And that concludes our Q&A session.

Speaker Change: And that concludes our Q&A session I will now turn the conference back over to the management team critical musical remarks.

Paul Richards: I will now turn the conference back over to the management team for the closing. Yeah, thanks very much for everyone's participation and interest today, and look forward to seeing you guys at NARI. Thanks.

Bob: Okay.

Bob: Yes, thanks very much for everyone's.

Bob: Yes participation and interest today and look forward to seeing you guys at NAREIT. Thanks.

Bob: Right.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Bob: Okay.

Bob: [music].