Q1 2025 Independence Realty Trust Inc Earnings Call
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Independence Realty Trust First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Okay.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Independence Realty Trust.
Speaker Change: First quarter 2025 earnings conference call all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number 1.
Speaker Change: I would like to ask a question during that time press star followed by the number one on your telephone keypad.
Speaker Change: If you like to withdraw your question Press Star followed by the number one.
Operator: As a reminder, today's call is being recorded.
Speaker Change: As a reminder, today's call is being recorded I would now hand todays call over to Stephanie Krewson Kelly. Please go ahead.
Stephanie Kruse: I will now hand today's call over to Stephanie Kruse and Kelly. Please go ahead. Morning, and thank you for joining us to review Independence Realty Trust first quarter 2025 financial results. On the call with me today are Scott Schaeffer, Chief Executive Officer, Jim Sebra, President and CFO, and Janice Richards, Executive Vice President of Operations.
Speaker Change: Good morning, and thank you for joining us to review Independence Realty Trust's first quarter 2025 financial results on the call with me today are Scott Schaeffer, Chief Executive Officer, Jenny Seabrook, President and CFO and Janus Richards Executive Vice President of operations today's call is being webcast in the investors section of our website.
Stephanie Kruse: Today's call is being webcast in the Investors section of our website, IRTliving.com, and a replay will be available via webcast and telephonically beginning at approximately 12 noon today, Eastern Time.
Speaker Change: IRT living dot com and a replay will be available via webcast and Telefonica <unk> beginning at approximately 12 noon today eastern time.
Stephanie Kruse: Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on this call. These forward-looking statements reflect IRT's current views with respect to future events and financial performance. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Jenny Seabrook: Before I turn the call over to Scott I'd like to remind everyone that there may be forward looking statements made on this call. These forward looking statements reflect irt's current views with respect to future events and financial performance actual results could differ substantially and materially from what IRT has projected such statements are made in good faith pursuant to the safe Harbor provisions of.
Jenny Seabrook: The private Securities Litigation Reform Act of 1995, please refer to Irt's press release supplemental information and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations participants may discuss non-GAAP financial measures during this call copy.
Stephanie Kruse: Please refer to IRT's press release, supplemental information, and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations.
Stephanie Kruse: Participants may discuss non-GAAP financial measures during this call. A copy of IRT's earnings press release and supplemental information containing financial information, other statistical information, and reconciliations of non-GAAP financial measures to the most direct comparable GAAP financial measures is attached to IRT's current report on the Form 8K available in the SEC filings section of IRT's Investors website.
Jenny Seabrook: <unk> earnings press release, and supplemental information containing financial information other statistical information and reconciliations of non-GAAP financial measures. The most directly comparable GAAP financial measures is attached to Irt's current report on the form 8-K available in the SEC filings section of Irt's invest.
Jenny Seabrook: <unk> web site.
Stephanie Kruse: IRT does not undertake to update forward-looking statements on this call or with respect to matters described herein, except as may be required by law.
Jenny Seabrook: <unk> does not undertake to update forward looking statements on this call or with respect to matters described herein, except as may be required by law with that it's my pleasure to turn the call over to Scott Schaeffer.
Scott Schaeffer: With that, it's my pleasure to turn the call over to Scott Schaeffer. Thanks, Stephanie. And thank you all for joining us this morning. I'm happy to report that 2025 is unfolding largely as we anticipated, despite the macroeconomic uncertainties that have emerged since our last call, we are on track to achieve both our full year same store NOI and core FFO per share guidance. Our communities are well located in areas with strong population and employment growth and will continue to outperform even during periods of economic uncertainty.
Scott Schaeffer: Thanks, Stephanie and thank you all for joining us this morning.
Scott Schaeffer: I'm happy to report that 2025 is unfolding largely as we anticipated. Despite the macroeconomic uncertainties that have emerged since our last call. We are on track to achieve both our full year same store NOI and core <unk> per share guidance.
Scott Schaeffer: Our communities are well located in areas with strong population and employment growth and will continue to outperform even during periods of economic uncertainty.
Scott Schaeffer: First quarter results were solid. We deliver 2.7% same store NOI growth, driven by 100 basis point increase in average occupancy year over year, as well as an increase in our average effective rent since the first quarter of last year. Value Add Renovations also contributed to our same store results. During the quarter, we completed 275 units and achieved a weighted average return on investment of 16.2%. We now have 28 communities with over 4,600 units in our ongoing value-add program and expect to complete between 2,500 and 3,000 units this year at our targeted RLI.
Scott Schaeffer: First quarter results were solid we delivered two 7% same store NOI growth driven by 100 basis point increase in average occupancy year over year as well as an increase in our average effective rents since the first quarter of last year.
Scott Schaeffer: Value add renovations also contributed to our same store results during the quarter. We completed 275 units and achieved a weighted average return on investment of 16, 2%.
Scott Schaeffer: We now have 28 communities with over 4600 units and our ongoing value add program and expect to complete between 2500 3000 units this year at our targeted rois.
Scott Schaeffer: We continue to execute on our long-term investment strategy. During the quarter, we sold our final asset in Birmingham, Alabama, for $111 million, which completed our exit from that market. And we expanded scale in Indianapolis by purchasing a 280-unit community for $59.5 million at a 5.6% economic cap. We also entered into a new joint venture investment that will develop 324 units in Charleston, South Carolina. We are under contract on two additional communities with a combined purchase price of approximately $155 million. One asset located in Rwanda was developed in 2019, is adjacent to an existing IRT owned community, and will provide many operating synergies.
Scott Schaeffer: <unk> continued to execute on our long term investment strategy during the quarter, we sold our final asset in Birmingham, Alabama for over $111 million, which completed our exit from that market and we expand and scale in Indianapolis by purchasing a 280 unit community for $59 5 million.
Scott Schaeffer: At five 6% economic cap rate.
Scott Schaeffer: We also entered into a new joint venture investment that will develop 324 units in Charleston, South Carolina.
Scott Schaeffer: We are under contract on two additional communities with a combined purchase price of approximately $155 million.
Scott Schaeffer: One asset located in Orlando was developed in 2019 is adjacent to an existing IRT owned community and will provide many operating synergies the.
Scott Schaeffer: The second property is a newly developed community in Colorado Springs that is in leasing. These investments will provide an economic cap rate in the high fives during year one.
Scott Schaeffer: The second property is a newly developed community in Colorado Springs that is in lease up these.
These investments will provide an economic cap rate in the high fives during year one.
Scott Schaeffer: Beyond these pending transactions, our acquisition pipeline remains strong. As Jim will discuss, we have ample liquidity to deploy into these and other accretive investments.
Scott Schaeffer: These pending transactions our acquisition pipeline remains strong as Jim will discuss we have ample liquidity to redeploy into these and other accretive investments.
Scott Schaeffer: Regarding our markets, apartment fundamentals will improve across the portfolio during this year, as prior deliveries are absorbed and new supply deliveries decrease sharply from recent peak levels. In 2024, approximately 79,000 new apartment units were delivered across our submarkets, representing 6.1% of existing supply. We expect 32,000 new deliveries in 2025 and only 24,000 units in 2026, representing 2% and 1.5% of existing supply respectively. These deliveries equate to annual decrease of 60% in 2025 and an additional 24% in 2026. We expect our SunBelt markets will benefit the most from expected declines in new apartment deliveries this year.
Scott Schaeffer: Regarding our markets apartment fundamentals will improve across the portfolio. During this year as prior deliveries are absorbed a new supply deliveries decreased sharply from recent peak levels.
Scott Schaeffer: In 2020 for approximately 79000, new apartment units were delivered across our submarkets, representing six 1% of existing supply.
Scott Schaeffer: We expect 32000, new deliveries in 2025, and only 24000 units in 2026, representing 2% and one 5% of existing supply respectively.
Scott Schaeffer: These deliveries equate to annual decrease of 60% in 2025 and an additional 24% in 2026, we expect our sunbelt markets will benefit the most from expected declines in new apartment deliveries this year.
Scott Schaeffer: Demand for our portfolio of high quality, largely Class B communities has proven to be resilient over the years, even during challenging economic times, as demonstrated by our stable occupancy rates and positive blended rent growth. During 2024, nationwide new deliveries of multifamily units exceeded absorption, resulting in a negative net absorption of 21%. In 2025, while the national apartment market is expected to see positive net absorption of 1.5%, our submarkets are forecasted to rebound strongly and enjoy positive net absorption of 8.5%. as increases in population outpace new supply. Longer term IRT submarkets are forecast to see population growth of seven people for every one newly delivered apartment over the next three years.
Scott Schaeffer: Demand for our portfolio of high quality largely class B communities has proven to be resilient over the years, even during challenging economic times as demonstrated by our stable occupancy rates and positive blended rent growth.
Scott Schaeffer: During 2024 nationwide new deliveries of multifamily units exceeded absorption, resulting in a negative net absorption of 21% in 2025, while the national apartment market is expected to see positive net absorption of one 5% or sub markets are forecasted to rebound strongly and enjoy positive net absorption of eight 5% as increases.
Scott Schaeffer: <unk> population outpace new supply.
Scott Schaeffer: Longer term IRT submarkets are forecast to see population growth of seven people for every one newly delivered department over the next three years.
Scott Schaeffer: Additionally, home ownership affordability factors that include elevated mortgage rates and home prices continue to favor renting. Across our top 10 markets, average home ownership costs are 94% higher than IRT's monthly rent. Importantly, IRT's average resident rent-to-income ratio is stable at approximately 21%, indicating our residents are on solid financial footing.
Scott Schaeffer: Additionally, homeownership affordability factors that include elevated mortgage rates and home prices continue to favor renting.
Scott Schaeffer: Our top 10 markets average home ownership costs are 94% higher than Irt's monthly rent importantly, irt's average resident rent to income ratio is stable at approximately 21%, indicating our residents are on solid financial footing.
Scott Schaeffer: As I mentioned earlier, we are sensitive to the macroeconomic uncertainties that have emerged since our last call. However, we believe supply and demand fundamentals in our markets will continue to be the dominant influence on our operation. Based on our outlook for continued strong demand and significant declines in new supply, our 2025 plan continues to assume ongoing rental rate gains without sacrificing occupancy. First quarter results have demonstrated this to date, and we expect this dynamic to accelerate as we advance into 2026.
Scott Schaeffer: As I mentioned earlier, we are sensitive to the macroeconomic uncertainties that have emerged since our last call. However, we believe supply and demand fundamentals in our markets will continue to be the dominant influence on our operations.
Scott Schaeffer: Based on our outlook for continued strong demand and significant declines in new supply. Our 2025 plan continues to assume ongoing rental rate gains without sacrificing occupancy.
Scott Schaeffer: First quarter results have demonstrated this to date and we expect this dynamic to accelerate as we advance into 2026.
Scott Schaeffer: Before handing the call over to Jim, I want to thank the IRT team for their continued hard work and dedication to delivering exceptional service to our residents.
Scott Schaeffer: Before handing the call over to Jim I want to thank the IRT team for their continued hard work and dedication to delivering exceptional service to our residents.
Jim Sebra: I'll now turn the call over to Thanks, Scott. And good morning, everyone. The core FFO per share of $0.27 in the first quarter of 2025 was flat as compared to the prior year period, reflecting the impact of the final stages of our portfolio optimization and deleveraging strategy that was completed last year. Same store NOI grew 2.7% in the quarter, comprised of a 2.3% increase in same store revenue and a 1.6% increase in operating expenses over the prior year. As we forecasted, same store revenue growth was driven by a 100 basis point increase in average a 90 basis point increase in average effective monthly rents and 50 basis points of lower bid debt compared to the prior year.
Scott Schaeffer: I'll now turn the call over to Jim.
Jim: Thanks, Scott and good morning, everyone core <unk> per share of <unk> 27 in the first quarter of 2025 was flat as compared to the prior year period, reflecting the impact of the final stages of our portfolio optimization and deleveraging strategy that was completed last year.
Jim: Same store NOI grew two 7% in the quarter comprised of a two 3% increase in same store revenue and a one 6% increase in operating expenses over the prior year.
Jim: As we forecasted same store revenue growth was driven by a 100 basis point increase in average occupancy a 90 basis point increase in average effective monthly rent and 50 basis points of lower bad debt compared to the prior year.
Jim Sebra: Savings or operating expense growth in the quarter reflected a 2.9% increase in controllable expenses. driven by higher contract services and These increases were partially offset by a 30 basis point decrease in non controlled Overall, lower repair maintenance costs, turn costs, and property insurance costs kept total expense growth below inflation levels during Q1 of 2025. Regarding recent leasing trends, the year is unfolding as expected, broadly speaking. For our like term leases during Q1, our blended rental rate growth was up 10 basis points, with new lease rates down 4.6% and renewal rents up 4.8%. Please keep in mind that during Q1 2025, only 12% of our leases expire.
Jim: Same store operating expense growth in the quarter reflected a two 9% increase in controllable expenses driven by higher contract services and advertising.
Jim: These increases were partially offset by a 30 basis point decrease in non controllable expenses overall, lower repair and maintenance cost turn cost and property insurance costs kept total expense growth below inflation levels during Q1 of 2025.
Jim: Regarding recent leasing trends the year is unfolding as expected broadly speaking.
Jim: For our like term leases during Q1, our blended rental rate growth was up 10 basis points with new lease rates down four 6% and renewal rents up four 8%. Please keep in mind that during Q1 2025, only 12% of our leases expires for Q1 2025, our resident retention rate was <unk>.
Jim Sebra: For Q1 2025, our resident retention rate was 59.5%. And our rate of resident renewals was 68.6%. Regarding investment activity during the first quarter, we sold a property in Birmingham, Alabama for $111 million, representing a 5.6% economic cap rate. And we recognize that $55 million tax As Scott mentioned, we acquired a community in Indianapolis for $59.5 million, which was a 5.6% economic cap rate, and the property is a candidate for our Value Add program. We also entered into a new joint venture to develop a 324-unit community in Charleston, South Carolina, which is targeted for delivery in the second quarter of 2027 at an anticipated yield on cost of $6.8 .
Jim: 59, 5% and our rate of resident renewables was 68, 6%.
Jim: Regarding investment activities during the first quarter, we sold a property in Birmingham, Alabama for $111 million, representing a five 6% economic cap rate and we recognized a $55 million tax gain.
Jim: As Scott mentioned, we acquired community in Indianapolis for $59 5 million, which was a five 6% economic cap rate and the property is a candidate for our value add program.
Jim: We also entered into a new joint venture to develop a 324 unit community in Charleston, South Carolina, which is targeted for delivery in the second quarter of 2027 at an anticipated yield on cost of six 8%.
Jim Sebra: Our balance sheet is strong with low risk. We ended the quarter with a net debt to adjusted EBITDA ratio of 6.3 times, which is higher than our fourth quarter 2024 ratio due to seasonally lower Q1 EBITDA associated with seasonally higher operating We remain on track to achieve a mid five net debt to adjusted EBITDA ratio by year end 2025. Including principal amortization, only 17% of our total debt matures between now and year end 2027, which is one of the lowest among public multifamily peers. In March, we entered into a new one year 100 million SOFR swap resulting in 100% of our debt being fixed and or Lastly, we have nearly 750 million of liquidity to fund a creative investment.
Jim: Our balance sheet is strong with low risk we ended the quarter with a net debt to adjusted EBITDA ratio of six three times, which is higher than our fourth quarter 2024 ratio due to seasonally lower Q1, EBITDA associated with seasonally higher operating expenses.
Jim: We remain on track to achieve a mid five net debt to adjusted EBITDA ratio by year end 2025.
Jim: Including principal amortization, only 17% of our total debt matures between now and year end 2027, which is one of the lowest among public multifamily tears in March we entered into a new one year 100 million so for swap, resulting in 100% of our debt being fixed annual hedge lastly, we have nearly <unk>.
Jim: $750 million of liquidity to fund accretive investments.
Jim Sebra: With respect to our financial outlook for 2025, we are certainly aware of the potential for an economic slowdown. However, in our sub markets, we see pricing power in front of us and accordingly are not making any changes to our Scott, back to you.
Jim: With respect to our financial outlook for 2025, we are certainly aware of the potential for an economic slowdown however in our Submarkets, we see pricing power in front of us and accordingly are not making any changes to our guidance Scott back to you.
Scott Schaeffer: Thanks, Jim. We are off to a solid start to the year and continue to believe that we are at the beginning of a multi-year period of improving fundamentals and growth. Because of our portfolio's market concentrations, waning supply pressures, and strong balance sheet, we expect our portfolio and platform will continue to outperform in 2025 and enter 2026 with solid earnings momentum and growth opportunities.
Scott Schaeffer: Thanks, Jim.
Scott Schaeffer: We are off to a solid start to the year and continue to believe that we are at the beginning of a multi year period of improving fundamentals and growth.
Scott Schaeffer: Cause of our portfolio as market concentrations waning supply pressures and strong balance sheet, we expect our portfolio and platform will continue to outperform in 2025 and enter 2026 with solid earnings momentum and growth opportunities. We thank you for joining us today and look forward to seeing many of you at the Wells Fargo Conference next week and the NAREIT Conference in June.
Scott Schaeffer: We thank you for joining us today and look forward to seeing many of you at the Wells Fargo Conference next week and the NAVRE Conference in June.
Operator: Operator, you can now open the call for questions. At this time, if you would like to ask a question, press star followed by the number 1 on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number 1.
Scott Schaeffer: Operator, you can now open the call for questions.
Speaker Change: At this time, if you would like to ask a question press star followed by the number one on your telephone keypad.
Scott Schaeffer: Your question has been answered and you would like to remove yourself from the queue Press star followed by the number one.
Brad Heffern: Your first question is from the line of Brad Heffern with RBC. Hey, morning, everyone. Thanks.
Scott Schaeffer: Your first question is from the line of Brad Heffern with RBC.
Brad Heffern: Hey, good morning, everyone. Thanks.
Jim Sebra: Can you walk through the leading spreads for the first quarter? Obviously below guidance? Why was that? And does it change your view at all on the original spread guidance for the full year? Sure. Thanks, Brad. You know, I'll obviously give you some commentary, you know, Janice or Scott, obviously jump in, you know, leasing spreads, new leases were down 4.6% in the first quarter, renewals are up 4.8. You know, obviously, in terms of the trajectory throughout the year, as well as the four-year guide, you know, obviously, there's a lot of facets to the question.
Can you walk through the leasing spreads for the first quarter, obviously below guidance why was that and does it change your view at all on the original spread guidance for the full year.
Scott Schaeffer: Sure. Thanks, Brad.
Speaker Change: I'll, obviously give you some commentary Janus Scott, obviously jump in leasing spreads new leases were <unk>.
Scott Schaeffer: <unk> four 6% in the first quarter renewals are up four eight.
Scott Schaeffer: Obviously in terms of the trajectory throughout the year as well as the full year guide, obviously theres a lot of facets to the question I think when you compare that trajectory from Q4 to Q1 for US you compare versus our peers and I just want to remind everybody that we have predominantly a fee class portfolio.
Jim Sebra: You know, I think when you compare that trajectory from Q4 to Q1 for us, you compare it know, I just want to remind everybody that we have predominantly a B-class portfolio. And as a result, didn't really experience the same level of decline in rental rates as some of our peers did, because they're mainly a Class A portfolio and compete more with the new supply that was delivered. You know, secondly, you know, the trend that we're seeing month to month so far this year, continue to be very positive. We continue to see, you know, January was better, February is better than January, that continues all the way through April.
Scott Schaeffer: And as a result didn't really experience the same level decline in rental rates for some of our peer set because they're mainly a class a portfolio and compete more with the new supply that was delivered.
Scott Schaeffer: The trends that we're seeing month to month. So far this year continue to be very positive. We continue to see January was better February was better than January that's that continues all the way through April so we're quite excited about that kind of.
Jim Sebra: So we're quite excited about that kind of development of the waning pressure from new supply that we kind of highlighted earlier this year, and really kind of seeing that, you know, improving rental rate growth in the back half of the year. Okay, got it.
Scott Schaeffer: Development of the waning pressure from new supply.
Scott Schaeffer: We kind of highlighted earlier this year and really kind of seen that improving rental rate growth in the back half of the year.
Scott Schaeffer: Okay got it.
Jim Sebra: And then on the tenant level, have you seen any evidence yet of stress from the tariffs, macro uncertainty, etc? Good morning. Overall, we've not felt any effects from the tariffs and or from deportations. I think it's a little early, but we are watching it extremely closely. And we have great faith in our teams that we will be able to offset and continue to outperform as we've done in the past with economic uncertainty. And just to add on to that, you know, in the first quarter of this year, our bad debt was roughly down 50 basis points versus Q1 of last year.
Scott Schaeffer: And then on the tenant level have you seen any evidence yet of stress from the tariffs macro uncertainty et cetera.
Scott Schaeffer: Good morning, overall, we have not felt any effects from the tariffs and or trumps deportations I think it's a little early but we are watching it extremely closely and we have.
Scott Schaeffer: Great. Thank you and our teams that we will be able to offset and continue to outperform as I've done in the past it economically.
Scott Schaeffer: And just to add on to that in the first quarter of this year, our bad debt was roughly down 50 basis points versus Q1 of last year.
Jim Sebra: So a lot of the initiatives we took in place to kind of deal with fraud have working and we haven't seen a related kind of uptick because of hardships or anything else. So we're, you know, we're seeing the good progression that we anticipated.
Scott Schaeffer: So a lot of the initiatives, we took in place to kind of deal with fraud at working and we haven't seen that was related to kind of uptick because of hardships for anything else, where we're seeing the progression that we anticipated.
Scott Schaeffer: Yeah.
Austin Wurschmidt: Your next question is from a line of Austin Wurschmidt. KeyBank Capital Markets. Unknown Speaker You mentioned month-to-month improvement in market rents this year.
Speaker Change: Your next question is from the line of Austin, Washington with.
Speaker Change: With Keybanc capital markets.
Speaker Change: Great. Thanks, Good morning, everybody Jim mentioned.
Speaker Change: The months improvement in market rents this year.
Jim Sebra: Is that starting to lead to acceleration in leasing spreads as we get into the second quarter? Unknown Speaker 0 Unknown Speaker 0 Yeah, the comment was more directed at the improvement in the trade-outs that we're seeing, you know, the trade-outs in February were better than January, March were better than February, and April is better than March. Obviously, we're getting away from talking about specific numbers, you know, month to month, but just, you know, kind of general trajectory is that it is improving at the pace that we anticipated.
Speaker Change: Is that starting to lead to acceleration in leasing spreads as we get into the second quarter or if you compare kind of the trade outs.
Speaker Change: For like term leases.
Speaker Change: Yes, the comment was more directed at the improvement in the trade outs that were seeing the trade outs in February were better than January March better than February and April better than March.
Speaker Change: Obviously, we're getting away from talking about specific numbers month to month, but just kind of general trajectory is that it is improving at the pace that we anticipated and we had as we mentioned earlier, we really do see the pressure from new supply waiting in the back half of the year and Thats really going to help accelerate further more more more.
Jim Sebra: And we, as we mentioned earlier, you know, we really do see the pressure from new supply waning in the back half of the year, and that's really going to help accelerate further more, more accelerated the back half of the year. That's helpful.
Speaker Change: Right at the back half of the year.
Jim Sebra: And then can you just speak to maybe how trends are playing out on the ground from a traffic and conversion perspective versus prior year? Yeah, you know, from the standpoint of the leasing traffic on the ground, you know, here in May, and so far for kind of April as well as March, you know, the demand is up roughly 20 to 25% versus the same time period last year. So the demand is increasing. And I would generally say that, you know, the conversion is still kind of relatively the same as last year. So we're beginning to see kind of upward trajectory to obviously that lease rate growth and then obviously occupancy.
Speaker Change: Okay. That's helpful. And then can you just speak to maybe how trends are playing out on the ground from a traffic and conversion expected perspective versus prior years, and just give us a sense of when you kind of think that new lease rate growth might turn positive just wondering if there's kind of any change in that expectation.
Speaker Change: Yes from the standpoint of the leasing traffic on.
Speaker Change: The ground here in May so far.
Speaker Change: Or kind of April as well as March.
Speaker Change: The demand is up roughly 20% to 25% versus the same time period last year. So the demand is increasing.
Speaker Change: I would generally say that the conversion is still kind of relatively the same as last year. So we're beginning to see kind of upward trajectory, obviously that lease rate growth in that obviously occupancy.
Janice Richards: I don't know, Janice, do you want to kind of add any additional comments? Yeah, I think seasonality is playing out as anticipated. And we're seeing some great demand in the market that we're ready to capitalize on.
Speaker Change: I don't know John if you want to kind of add any additional comments, yes, I think seasonality is playing out as it has.
Speaker Change: Got it.
Speaker Change: And we're seeing great demand in the market that were ready to capitalize on.
Speaker Change: Okay.
John Kim: Your next question is from the line of John Kim with BMO Capital Market. I wanted to clarify on what you're seeing in April and May, you discussed, Jim, that price and power is in front of you. And I just want to make sure that commentary was based on what you're seeing on new lease rates. and Renewables on what you're signing in April. Yeah, the commentary is on obviously blended rental rates. And yes, we obviously both that trajectory is developing positively for both new leases and the overall blended rates.
Speaker Change: Your next question is from the line of John Kim with BMO capital markets.
John Kim: Hi, I just wanted to flesh.
John Kim: Clarify on what Youre seeing in April and May you discuss gem that pricing powers in front of you and I just want to make sure that.
John Kim: Commentary was based on what Youre seeing on new lease rates and renewals.
John Kim: Are you finding in April and May so far.
John Kim: Yeah, the commentaries on obviously blended rental rates and yes, obviously both that trajectory.
John Kim: <unk> is developing positively for both new leases and the overall blended rates.
John Kim: Okay.
Scott Schaeffer: Do you anticipate starting or sourcing more development opportunities this year? You mentioned the one in Charleston will be developed at a 6.8 percent yield, and it seems like there could be some more opportunities at attractive yield spreads to acquisitions. But I'm wondering what you're seeing on the ground and if you anticipate putting more capital in.
Speaker Change: Do you anticipate.
Speaker Change: Starting or sourcing more development opportunities. This year, you mentioned the one in Charleston.
Speaker Change: We will be developed it is six 8% yields and.
Speaker Change: It seems like there could be some opportunities at.
Speaker Change: Attractive yield spreads to acquisitions.
But im wondering what youre seeing on the ground and if you anticipate putting more capital and developments.
Scott Schaeffer: Hey, John, this is Scott. We're seeing a lot of opportunities, you know, we're very cognizant of our cost of capital. And, you know, we have, we have over, you know, since we started that program, you know, limited our exposure to the development, just as as a management of the balance sheet risk or the risk to the balance sheet. But we are seeing opportunities. The one in Charleston was particularly attractive to us because we have some, a couple of assets in Charleston and have been been looking to grow there, but have found it difficult to buy accretively.
Scott Schaeffer: Hey, John This is Scott.
Scott Schaeffer: We're seeing a lot of opportunities, we're very cognizant of our cost of capital and.
Scott Schaeffer: We have over since we started that program limited our exposure to the development.
Scott Schaeffer: Just as a management of the balance sheet risk or the risk to the balance sheet.
Scott Schaeffer: But we are seeing opportunities the one in Charleston was particularly attractive to us because.
Scott Schaeffer: We have some a couple of assets in Charleston, and have been looking to grow there, but have found it difficult to buy accretively. So this was a way too.
Scott Schaeffer: So this was a way to, you know, invest in an asset, giving us the option to buy it when it's completed, hopefully at a good return.
Scott Schaeffer: Invested assets, giving us the option to buy it when it's completed.
Scott Schaeffer: Hopefully you had a good return.
Eric Wolfe: Your next question is from the line of Eric Wolfe with Citigroup. Hey, thanks. Can you just talk about the decision to raise capital on the ATM and sort of how you're thinking about the spread between your cost of capital and where you can acquire assets today and what that opportunity set looks like? Sure, yeah, you know, at the, you know, obviously, when we did the September equity raise last year and ATM raise in fourth quarter, then some additional ATM in the first quarter, you know, the break even call it economic cap rate for the deal for the for to be accreted from an earning standpoint is in the kind of 5.4% range.
Speaker Change: Your next question is from the line of Eric Wolfe with Citigroup.
Eric Wolfe: Hey, Thanks can you just talk about the decision to raise capital on the ATM and sort of how youre thinking about the spread between your cost of capital and where you can acquire assets today and what that opportunity set looks like.
Speaker Change: Sure Yes.
Speaker Change: Obviously, when we did the September equity raise last year and ATM raise in fourth quarter, then some additional ATM in the first quarter.
Speaker Change: The breakeven call it economic cap rate for the deal for the.
Speaker Change: For it to be accretive from an earnings standpoint is in the kind of five 4% range and as we've been able to demonstrate we're able to purchase assets with a year one economic cap rate of five six or north. So the deals were doing are accretive from an earnings standpoint, so for us to <unk>.
Jim Sebra: And as we've been able to demonstrate, you know, we're able to, you know, purchase assets with a year one, you know, economic cap rate of five, six or north. So the deals we're doing are created from an earning standpoint. So for us, you know, to continue to raise capital when the market's kind of given us the ghost signal makes a lot of sense, especially when we believe we can put it to work.
Speaker Change: To raise capital when the market's kind of given us the dosing all makes a lot of sense, especially when we believe we can put it to work the two deals and you kind of heard us talk about it.
Jim Sebra: The two deals and you kind of heard us talk about it in our prepared remarks, the two deals that are under contract, the one in Orlando and the new build in Colorado Springs, you know, that blended economic cap rates of, you know, high fives are up to 5.8% year one. helpful. And then there's a follow up on the sort of blended spreads. It looks like the sort of all in blended spreads are a bit lower than your like term spreads. And I think you mentioned before that the reason is you're trying to move away from short term leases and extend duration on those leases.
Speaker Change: Our prepared remarks, the two deals that are under contract the one in Orlando and the Newbuild in Colorado Springs that blended economic cap rate.
High fives, roughly five 8%.
Speaker Change: Tier one.
Speaker Change: That's helpful. And then maybe just follow up on the sort of blended spreads it looks like the sort of all in blended spreads are a bit lower than you like term spreads and I think you mentioned before that the reason is youre trying to move away from short term leases and extend duration on that.
Jim Sebra: Can you just talk about sort of when you began that process and why you began that process and sort of how long you think that will impact your sort of overall? Yeah, so we started that process in the mid part of last year. And as you can imagine, it takes, you know, almost a year for us to fully kind of go through the process. So we would expect that that transition from less short term leases and more long term leases to be almost done by the middle part of this year. Obviously, it's always market driven.
Speaker Change: Those leases can you just talk about sort of when you begin that process and why you begin that process and sort of how long you think that will impact your sort of overall rent growth.
Speaker Change: Yes, so we started that process in the mid part of last year and as you can imagine. It takes you know call. It almost a year for us to fully kind of go through the process will be and would expect that that transition from less short term leases and more long term leases to be almost done by the middle part of this year, obviously, it's always market driven.
Jim Sebra: You know, when a prospect comes in, they have the option to choose, you know, at whatever the rates are for a three month lease up to a 12 or 13 month lease. And that is a little bit out of our control. But we certainly kind of look at, you know, setting the premiums to go from a longer term lease to a shorter term lease to, you know, kind of influence the expiration curve so that the expirations are happening in the period of time where you have the highest leasing traffic.
Speaker Change: Prospect comes in they have the option to choose at whatever the rates are for a three months lease up to a 12 or 13 months lease.
Speaker Change: That is a little bit out of our control, but we certainly kind of look at setting the premiums to go from a longer term lease to insurers from lease to kind of.
Speaker Change: Influence the exploration curve, so that the explorations are happening in the periods of time, where you have the highest.
Speaker Change: Leasing traffic.
Speaker Change: Okay.
Amy Probat: Your next question is from the line of Amy Probat with UBS. Hi, thanks. So you're passing the easy comp, the last of the easy comps on occupancy and the occupancy comps are then normalized starting in the next quarter.
Speaker Change: Your next question is from the line of Ami <unk> with UBS.
Speaker Change: Hi, Thanks, So youre passing the easy comp philosophy easy comps on occupancy and the occupancy comps are then normalize starting in the next quarter.
Jim Sebra: So I'm just wondering how we should be thinking about the cadence of same store revenue from here. And if there are any other pieces outside of the rent spreads themselves that could be leading to some lumpiness and same store revenue through the year? Yeah, obviously, you're absolutely right. You know, occupancy was a big lift here in the first quarter relative the first quarter of last year. You know, second quarter, third quarter and fourth quarter, you know, the revenue growth is really kind of got to come from both the rental rate growth, as well as the reduction in bad debt that we forecasted throughout the year.
Speaker Change: So I'm just wondering how we should be thinking about the cadence of same store revenue from here and are there any other pieces outside of the rent spreads themselves that could be leading to some lumpiness in same store revenue through the year.
Speaker Change: Yes.
Speaker Change: You are absolutely right occupancy was a big lift here in the first quarter relative to the first quarter of last year.
Speaker Change: Second quarter third quarter and fourth quarter. The revenue growth is really a product that has come from both the rental rate growth as well as the reduction in bad debt that we forecast for throughout the year.
Jim Sebra: I would say, generally speaking, the reduction in bad debt throughout the year will continue to kind of pace I think our original forecast kind of had us getting a call 1.4, 1.5, 1.4 to 1.5% of revenue this year. And we ended we're right about 1.8% today, and it'll kind of move down to call 1.2 to 1.3, the average out to that 1.4. And then obviously, the rent growth trajectory is really going to benefit us in the second half of the year. Got it.
Speaker Change: I would say generally speaking the reduction in bad debt throughout the year, we will continue to kind of pace I think our original forecast kind of had us getting a call at 141514 to one 5% of revenue. This year and we ended up we're right about one 8% today and they're all kind of moved down to call. It one two to one three to average out to that one.
Speaker Change: Sure.
Speaker Change: And then obviously the rent growth trajectory, it's really going to benefit us in the second half of the year.
Jim Sebra: And then as we move past supply, how are you thinking about the relative performance between the B's and the A's or the renovated B's? In terms of relative performance of just rent growth or occupancy? Yeah, rent growth, mainly rent growth, but if you could touch on some of the demand trends that you might see as well. Yeah, you know, we continue to see we're predominantly class B, you know, property or portfolio, we continue to see really good demands for obviously the class B product, you know, the value adds units or the units when they do go into the renovation program, are pretty much always pre leased, we really don't have, you know, kind of excess inventory on the value add communities.
Speaker Change: Got it and then as we move past supply how are you thinking about the relative performance between the BS and the as are the renovated these.
Speaker Change: In terms of relative performance of just rent growth or occupancy rank growth.
Speaker Change: Yes, mainly mainly rank growth, but if you could touch on some of the demand trends that you might see as well.
Speaker Change: We continue to see we're predominantly a class b property or.
Speaker Change: Portfolio, we continue to see really good demands for obviously the class b product the value add units or the units when they do go into the renovation program.
Speaker Change: Or pretty much always pre lease we really don't have kind of excess inventory on the value add communities.
Jim Sebra: You know, the class A deals that we do have, they did compete a little more with some of the new supply that was delivered. But we still see, you know, demand trends picking up there. But they continue to be continues to see just nice, stable demand.
Speaker Change: The class eight deals that we do have they did compete a little more with some of the new supply that was delivered but we still see demand trends picking up there, but it continues to be continues to see just nice stable demand.
Jamie Philb: Your next question is from a line of Jamie Philb . Great, thanks and good morning. Can you talk about costs in your redevelopment program and the potential impacts from tariffs? How early do you lock in costs ahead of projects? And how sustainable are your mid single digit returns on investment? If we see costs move 10% higher or more?
Jamie Feldman: Your next question is from the line of Jamie Feldman with Wells Fargo.
Jamie Feldman: Great. Thanks, and good morning can you talk about costs on your redevelopment program and the potential impacts from tariffs. How early do you locking cost ahead of the projects and how sustainable are your mid single digit returns on investment if we see costs move 10% higher or more.
Jamie Feldman: Yes, it's a great question.
Jamie Feldman: For the vast majority of our cost in the renovation program. Obviously there is a good chunk of it is labor to obviously do the actual turn.
Jamie Feldman: Some of the more product heavy costs are in the value add and the actual vinyl flooring that we'll put in or in the appliances.
Jamie Feldman: Good chunk of the appliances come from manufacturers inside of America. So we don't necessarily have a huge tariff issue there unless obviously they have tariff issues sourcing raw materials from non U S countries.
Jamie Feldman: Fast majority of the vinyl flooring will either come from Vietnam are South Korea, and we've already locked in pricing for the next for for any for 2025 for a full year.
Jamie Feldman: At this point, we're really not expecting any kind of really significant pressure on the value add but thats, where if there is issues and the tariff and trade world. That's where we are at Iot will expect to see it but as you can imagine is still very very early to tell.
Jamie Feldman: Okay.
Jim Sebra: Okay, thanks for that. And then just thinking more about the blend, it looks like your new and renewals are in line is slightly better than your March update. But more new leases took the blend down. Can you talk about, did you take back any more delinquent units that would have changed the blend in occupancy? as you did your leasing and focused on your leasing. Overall, we've seen our delinquent units maintained, we did see a decrease of 50 basis points in our bad debt from year over year. And so we're anticipating that to continue to decrease to achieve guidance of 1.2%.
Speaker Change: Okay. Thanks for that and then just thinking more about the blend it looks like your new and renewals are in line or slightly better than your March update.
Jamie Feldman: But more new leases took the blend down can.
Jamie Feldman: Can you talk about did you take back any more delinquent unit that would've changed that blended occupancy.
Jamie Feldman: As you did your leasing and focused on your.
Jamie Feldman: We are focused on your leasing.
Jamie Feldman: Overall, we've seen our delinquent units maintained we did see a decrease of 50 basis points of bad debt trends every year and so we're anticipating that to continue to decrease.
<unk> guidance is one 2%.
Jim Sebra: So we did have early terms that contributed to that mix, but it was relatively normal for the season.
Jamie Feldman: Oh, Yes, we did have early terms that contributed to that mix, but it was relatively normal for the season.
Jamie Feldman: Yes.
Linda Tsai: Your next question is from the line of Linda Tsai with Jeff. Morning, Linda. Linda, your line is open.
Speaker Change: Your next question is from the line of Linda Tsai with Jefferies.
Jamie Feldman: Yeah.
Speaker Change: Good morning, Linda.
Speaker Change: Your line is open.
Speaker Change: Yeah.
Operator: There's no response from that line. Yeah, we can move to the next item.
Speaker Change: There is no risk.
Speaker Change: If we move to the next analyst.
John Pawlowski: Your next question comes from the line of John Pawlowski with Green Street. Thanks for the time. A few questions about the thought process and the assumptions underpinning the four-year revenue guide. I know it sounds like you're assuming supply comes down pretty substantially this year.
Speaker Change: Next question comes from the line of John Pawlowski with Green Street.
Hey, thanks for the time.
Speaker Change: A few questions about the thought process there.
Speaker Change: Functions underpinning the full year.
Speaker Change: Revenue guide.
Speaker Change: It sounds like Youre, assuming supply comes down pretty substantially this year can you help frame your job growth assumptions.
Scott Schaeffer: Can you help frame your job growth assumptions for 2025, how that kind of compares to the job growth you saw across your... Yeah, I don't have, I apologize, I don't have the job growth assumptions right in front of me. I would say that, you know, some of the data points that we've talked about in the past where you have both obviously population and job growth per unit of new supply. Over the last three years, you know, that ratio of kind of population growth to supply growth in our submarkets was, I think, 3.8 people for every new supply.
Speaker Change: Assumptions for 2025, how that kind of compares to the job growth you saw across your footprint July 24.
Speaker Change: Yes, I don't have I don't know I apologize will have the job growth assumptions right in front of me I would say that some of the data points that we've talked about in the past where you have both obviously population and job growth per unit of new supply over the last three years.
Speaker Change: That ratio of kind of population growth the supply growth in our in our Submarkets was I think three eight people for every new supply in.
Scott Schaeffer: In the next three years, so 2025, 2026, 2027, that ratio is going to be roughly seven times. I do know that, you know, obviously when you look at the supply trends, you know, we delivered or in 2024, the deliveries were about 6% of existing stock in our submarkets. And in 2025, that's going to drop to about 2%. So the job growth and the population growth we think is just generally relatively steady with historical trends. It's just the supply is really dropping off. And I would add to that, you know, as we stated in the prepared remarks, that according to CoStar, there was a negative absorption in 2024 of 21%.
Speaker Change: In the next three years. So 2025, 26 27 that ratio is going to be roughly seven times.
Speaker Change: I do know that obviously when you look at the supply trends, we delivered or in 2020.
Speaker Change: For the deliveries were about 6% of existing stock in our Submarkets and in 2025, thats going to drop about 2%.
Speaker Change: So the job growth and population growth. We think is just generally relatively steady with historical trends its just a supply and destroy dropping off.
Speaker Change: I would add to that.
Speaker Change: As we stated in the prepared remarks that according to Costar there was a negative absorption in 2024 of 21% and while nationwide 2025 is expected to have a one 5% poverty positive absorption and while our submarkets, specifically will be eight 5% positive absorption so according to <unk>.
Scott Schaeffer: And while nationwide, 2025 is expected to have a 1.5% positive absorption. And while our submarkets specifically will be 8.5% positive absorption. So according to CoStar, that indicates continued job growth and far, far less new supply, which is what we're seeing as we move through 2025.
Speaker Change: Costar that indicates continued job growth and far far less new supply, which is what we're seeing as we move through 2025.
Speaker Change: Okay.
Scott Schaeffer: And on that point, it'd be helpful just to maybe hear you talk through a few of the most heavily supplied markets right now, you know, the Denver, sorry, the Raleigh's, the Atlanta's. Any statistics that you can point to to say, hey, this inflection point is happening right now. Rent spreads are about to lag higher.
Speaker Change: On that point it'd be helpful. Just to maybe hear you talk through a few of the most heavily supply markets right now the Denver, sorry, the rallies.
Speaker Change: Atlanta is and just.
Speaker Change: Any statistics that you can point to say hey, this inflection points happening right now rent spreads are about the leg higher.
Scott Schaeffer: You know, the exact numbers in any given quarter I'm less concerned about. It doesn't feel like the light is turning on in some of these heavily supplied markets.
Speaker Change: The numbers in any given quarter, having less concerned about is just it doesn't feel like the lightest.
Speaker Change: Turning on in some of these have a supplied market so any.
Scott Schaeffer: So any data points that give you confidence for this big reacceleration that seems to be underpinning the revenue guidance would be helpful to hear. Sure, we see, you know, Charlotte and Colorado are going to continue to have some supply pressures throughout 24, I'm sorry, 25. So we will be, you know, looking to outperform and maintain not only occupancy, but maximize revenue where we can. Atlanta and Raleigh, we've seen a positive new lease rent growth since January and, sorry, not positive new lease rent growth, but less negative new lease growth with a trajectory where it's becoming, you know, less and less every month.
Speaker Change: Any data points that give you confidence for this big reacceleration that seems to be underpinning.
Speaker Change: The revenue guidance would be helpful to hear.
Speaker Change: Sure, Let me see Charlotte in Colorado are going to continue to have the supply pressures throughout 'twenty four.
Speaker Change: I'm, sorry, 25, we will be.
Speaker Change: Looking to outperform and maintain not only occupancy, but last night revenue, where we can.
Speaker Change: Atlanta, and Raleigh, and we've seen a positive.
Speaker Change: New lease rate growth.
Speaker Change: Since January.
Speaker Change: Alright.
Speaker Change: Really congrats but less negative in these credits with a trajectory where it's becoming.
Speaker Change: Less and less every month and I think that is starting to be a data point that shows the trajectory of the supply.
Scott Schaeffer: And I think that is starting to be a data point that shows the trajectory of the supply, you know, with the demand and the absorption rates increasing. So I think we'll continue to see that through the rest of 25 in Atlanta and Raleigh. Charlotte and Colorado will still be, you know, having pressures throughout 25.
Speaker Change: With that demand and absorption rate increasing.
Speaker Change: So I think we will continue to see that through the rest of 'twenty five in Atlanta, and Raleigh, Charlotte, Colorado will still be.
Speaker Change: Having pressures throughout 25.
Scott Schaeffer: Josh, just as a little aside, you know, with some specific numbers, in terms of supply growth, when you look at this, pick a market like Atlanta, which is our largest market, you know, in 2024, the new delivery that occurred was about 6% of existing stock in our submarkets, not even just the overall, just in our submarkets. For 2025, CoStar estimates that to be 90 basis points, a significant falloff.
Joe: Joe just has a little aside with some specific numbers in terms of supply growth. When you look at it pick a market pick a market like Atlanta, which is our largest market.
Joe: 24, the new deliveries that occurred was about 6% of existing stock in our submarkets not even just say overall just in our Submarkets with 2025, Costar estimate that to be 90 basis points.
Joe: Significant follow ups.
Jamie Feldman: Your next question is from the line of Jamie Feldman, Wells Fargo. Great. Thanks for taking the follow-up question. I just wanted to follow up on. This is the expense side. So you have two insurance renewals coming here in May and June. Thus far, we've seen declines in insurance premiums year-to-date from some of your peers. So, curious how you're thinking about the renewal in terms of your expectations and what's in your guidance. And then any other OPEX line items we should be thinking about where you could see some benefits here?
Jamie Feldman: Your next question is from the line of Jamie Feldman with Wells Fargo.
Speaker Change: Great. Thanks for taking the follow up question.
Speaker Change: I just wanted to follow up on.
Speaker Change: The expense side to insurance renewals coming here in May and June.
Speaker Change: As far we have seen declines in insurance premiums year to date from some of your peers. So curious how youre thinking about the renewal in terms of your expectations and what's in your guidance and then any other opex line items, we should be thinking about where you could see some benefits here.
Jim Sebra: Sure. Good question. You know, we have two insurance renewals. Our property and casualty will renew on May 15th, and our liability will renew on July 1st, not June. So still a little bit early on the property and casualty, and I don't want to obviously, you know, talk about, you know, too much specifics. Our guidance at this point assumed a 10% increase for the year, but we will, we are expecting to generate a decrease in the premium once the renewal is signed. So that's a little bit early, but I don't want to give kind of too much, you know, direction in terms of the quantification of it yet until it's really, you know, firm.
Speaker Change: Sure Good question.
Speaker Change: We have to renew expense insurance renewals, our property and casualty will renew on may 15th and our liability will renew on July one not too so.
Speaker Change: So a little bit early on the property and casualty and I don't want to obviously talk about too much specifics our guidance at this point.
Speaker Change: Assume the 10% increase.
Speaker Change: For the for the year, but we will we are expecting to generate a decrease in the premium.
Speaker Change: Once the once the.
Speaker Change: Renewal aside.
Speaker Change: So that's a little bit early but I don't want to get too much direction in terms of the quantification of it yet until its really firmed.
Jim Sebra: The liability premium or a liability policy that will renew in early July, we are expecting an increase. But overall, between both policies, it is expected to be a net decrease. The liability expenses is far insurance premium expenses, far smaller than the property and casualty.
Speaker Change: Liability premium or a liability policy that will renew in early July we are expecting an increase but overall between both policies issued it is expected to be a net decrease the liability expenses.
Speaker Change: Smaller insurance premium expense is far smaller than the property income correct.
Jim Sebra: Okay, so just to make sure I heard it right, you're assuming a 10% increase, but you think it'll be meaningfully lower, maybe even a decrease? Yes. Okay. That's nice.
Speaker Change: Okay. So just to make sure I heard it right youre, assuming a 10% increase but you think it will be meaningfully lower maybe even a decrease.
Speaker Change: Yes.
Speaker Change: Okay.
Jim Sebra: And then any other OpEx line items we should be thinking about that, you know, you think are either trending in line with guidance or things might be changing, better or worse? Yeah, I would say one of the items that I mentioned in the prepared remarks that trended in the Q1 better than guidance was repairs and maintenance and turnover costs. We just had better retention than we would originally assume in guidance. That's obviously sticky rather than a timing thing. And that obviously will move and shake throughout the year as retention changes. And I would say the rest of the categories continue to kind of be aligned with guidance.
Speaker Change: Right and then.
Speaker Change: Any other Opex line items, we should be thinking about that you think are either trending.
Speaker Change: In line with guidance.
Speaker Change: That might be changing better or worse.
Yes, I would say one of the items as I mentioned in the prepared remarks that trended in Q1 better than guidance was repairs and maintenance and turnover costs. We just have better retention than we would originally assumed in guidance.
Speaker Change: That's obviously sticky rather than a timing thing and that obviously will move and shapes throughout the year as retention changes.
Speaker Change: And obviously the rest of the categories continue to kind of be in line with guidance.
Jim Sebra: The big boy of real estate taxes, that is a TBD that we won't get the vast majority of our assessments in until a call at the end of June or early mid-July. So we'll have a lot more commentary for you in the market in our July earnings call.
The Big Boy of real estate taxes that is a TBD that we'll we won't get the vast majority of our assessments until call. It the end of June early July so.
Speaker Change: So we'll have a lot more commentary for obviously, you and the market in our July earnings call.
Yeah.
Linda Tsai: Your next question is from a line of Linda Tsai with Jeffreys. Hi, sorry about that earlier and I might have missed this.
Speaker Change: Your next question is from the line of Linda Tsai with Jefferies.
Linda Tsai: Hi, sorry about that earlier and I might have missed this.
Scott Schaeffer: So you exited Birmingham, are there any other markets you would expect to exit by year end? Yeah, at this point, no, our dispositions, you know, guidance is currently, you know, complete. We're obviously always reviewing the portfolio, but there's no expected, you know, changes this very moment. And, you know, once there is an update, we'll be obviously happy to give it.
You exited Birmingham are there any other markets you would expect to exit by year end.
Speaker Change: Yeah at this point.
Speaker Change: Dispositions guidance is currently.
Speaker Change: Complete we're obviously always reviewing the portfolio, but there's no expected change at this very moment. Once there is an update will be obviously happy to give it.
Scott Schaeffer: And then in terms of June and July being your highest expiration months, kind of any initial color you could give there? in terms of leasing velocity. I mean, yeah, you're right. June and July are our highest expiration months. Obviously, Janice and the team are working expeditiously to try to, you know, drive leasing ahead of those expiration months. As I mentioned, you know, here in the month of May, the net demand is 25% better this year than it was last year at this point. So we're excited about kind of where we are heading into leasing season.
Speaker Change: And then in terms of June and July being your highest exploration months kind of any initial color you could give there.
Speaker Change: In terms of.
Leasing velocity means yet.
Speaker Change: You're right June and July are our highest exploration months.
Speaker Change: Obviously, Janus and the team are working expeditiously to try to drive leasing ahead of those exploration months as I mentioned here in the month of May the net demand is 25% better this year than it was last year at this point. So we're excited about kind of where we are heading into the leasing season and.
Operator: And we're trying to continue to keep retention as high as we can to really offset any kind of negative new lease pressure or lease pressure in the back of the year so we can really take advantage of that waning supply. As a reminder, if you would like to ask a question, press star followed by the number one on your telephone keypad.
Speaker Change: And we're trying to continue to keep retention is high as we can to really offset any kind of negative negative new lease pressure or at least pressure.
Speaker Change: In the back half of the year. So we can really take advantage of that waiting supply.
Speaker Change: As a reminder, if you would like to ask a question press star followed by the number one on your telephone keypad.
Mason Guell: Your next question is from the line of Mason Guell, Bear. Thanks.
Speaker Change: Your next question is from the line of May Cingal Baird.
Scott Schaeffer: Good morning everyone. Could you talk about the blend difference between your Midwest and Sunbelt markets in general, and then kind of how you expect that to trend throughout the year? We're seeing as anticipated blends in the Midwest, where, you know, anywhere between two to three percent based on seasonality. And then in our Sun Belt, we're starting to see positive trajectory on our blended from January through April, and we'll continue to see that through the rest of the year.
Speaker Change: Thanks, Good morning, everyone could you talk about the difference between your Midwest. Good morning could you talk about the blend difference between your Midwest and Sunbelt markets in General and then kind of how you expect that to trend throughout the year.
Speaker Change: We're seeing.
Anticipated blends in the Midwest.
Speaker Change: We're anywhere between.
Speaker Change: <unk>, 3%.
Speaker Change: Based on seasonality and then in our Sunbelt, we're starting to see positive trajectory on our blended from January through April and we will continue to see that through the rest of the year.
Scott Schaeffer: Thanks for that. And then on your acquisitions, I mean, you guys expect to acquire one and lease up and one stabilized, I guess going forward, do you have a preference for one or the other? Or do you kind of see it as more opportunistic? It's more opportunistic, you know, there are certain markets where we're looking to add exposure. But, you know, as I said before, we're always focused on doing or acquiring assets that will be accretive to earnings in year one. I will add that everything in our pipeline today is the values would be below replacement cost.
Speaker Change: Thanks for that and then on your acquisitions I mean, you guys expect to acquire one in lease up and one stabilized I guess going forward do you have a preference for one or the other or do you kind of see it as more opportunistic.
Speaker Change: It's more opportunistic.
Speaker Change: There are certain markets, where we're looking to.
Speaker Change: <unk> exposure.
Speaker Change: But as I said before we're always focused on doing.
Speaker Change: We're acquiring assets it will be accretive to earnings.
Speaker Change: In year one.
Speaker Change: I will add that everything in our pipeline today.
Speaker Change: Is.
Speaker Change: The values would be below replacement cost. So we think any acquisition.
Scott Schaeffer: So, you know, we think any acquisition, you know, will fare well, you know, over the next few years.
Speaker Change: We will fare well.
Speaker Change: Over the next few years.
Linda Tsai: You have a follow-up question from the line of Linda Tsai with Jeffer. Hi, thanks. I just want to ask, I know Class B is holding up a bit better, and that's the majority of your portfolio.
Speaker Change: You have a follow up question from the line of Linda Tsai with Jefferies.
Linda Tsai: Hi, Thanks, I just wanted to ask I know quality is holding up a bit better and thats. The majority of your portfolio.
Jim Sebra: Any sort of color around the delta between the performance of Class A versus B? I apologize, you broke up at the beginning of the question, would you mind just starting over again? Sure. Class B is holding up better within your portfolio, which I understand is the majority. I was just wondering what the delta is in performance between Class A and Class B. Yeah, I don't have the the NOI kind of differences right now between the A's and the B's. I would say that the rental rate growth is certainly better in the B's. The blends in the first quarter on the B portfolio was about positive.
Speaker Change: Any sort of color around the delta between the performance of class a versus b.
Speaker Change: I apologize you broke up at the beginning of the question would you mind just starting over again.
Speaker Change: Sure.
Speaker Change: <unk> is holding up better within your portfolio, which I understand is the majority.
Speaker Change: Just wondering what the Delta is in performance between class a and class B.
Speaker Change: Yes, I don't have the NOI kind of differences right now between the as and the BS I would say that.
Speaker Change: The rental rate growth is certainly better than the BS the blends in the first quarter on.
Speaker Change: On the <unk> portfolio was about positive.
Jim Sebra: Call it, you know, 40 basis points and the blends on the Class A, which is only 17 properties, was about minus, call it 80 basis points.
Speaker Change: About 40 basis points and blends on the class, a which is only 17 properties.
Speaker Change: It was about.
Speaker Change: Call It 80 basis points.
Jim Sebra: Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Operator: This concludes today's call. We thank you for joining. You may now disconnect your line.
Speaker Change: This concludes today's call we thank you for joining.
Speaker Change: You may now disconnect your lines.
Speaker Change: Okay.
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