Q2 2025 Independence Realty Trust Inc Earnings Call
Bailey: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the INDEPENDENCE REALTY TRUST Q2 2025 earnings conference call. 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. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star and one. Please limit your questions to one initial and one follow-up question. I will now turn the call over to Stephanie Krewson-Kelly. You may begin.
Thank you for standing by. My name is Bailey and I will be your conference operator today.
At this time I would like to welcome everyone to the independent reality trust Q2 2025 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After this speakers remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.
If you would like to withdraw your question. Again, press star and 1.
Please limit your questions to 1 initial and 1 follow-up question.
Stephanie Krewson-Kelly: Good morning, and thank you for joining us to review INDEPENDENCE REALTY TRUST's second quarter 2025 financial results. On the call with me today are Scott Schaeffer, Chief Executive Officer; James Sebra, President and Chief Financial Officer; and Janice Richards, Executive Vice President of Operations. Today's call is being recorded and webcast through the investors' section of our website at irtliving.com, and a replay will be available shortly after this call ends. Before we begin our prepared remarks, I'll remind everyone we may make forward-looking statements based on our current expectations and beliefs as to future events and financial performance. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially.
I will now turn the call over to Stephanie cruise and Kelly you may begin.
Good morning, and thank you for joining us to review Independence. Realty, Trust second quarter 2025 Financial results on the call with me today, are Scott Schaffer Chief Executive Officer, Jim seabra, president and Chief Financial Officer, and Janice Richards, Executive Vice President of Operations.
Today's call is being recorded and webcast through the investor section of our website at irl.com and a replay will be available shortly after this call ends.
Stephanie Krewson-Kelly: Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and IRT does not undertake to update them except as may be required by law. Please refer to IRT's press release, supplemental information, and filings with the SEC for further information about these risks. A copy of IRT's earnings press release and supplemental information is attached to IRT's current report on the Form 8-K, which is available in the investors' section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most direct comparable GAAP financial measure. With that, it's my pleasure to turn the call over to Scott Schaeffer.
Before we begin our prepared remarks. I'll remind everyone. We may make forward-looking statements based on our current expectations and beliefs, as to future events and financial performance, these statements are not guarantees a future performance, and involve risks and uncertainties that could cause actual results to differ materially.
Such statements are made in good faith for pursuant to the safe harbor, provisions of the private Securities. Litigation before Act of 1995 and IRT, does not undertake to update them, except as may be required by law.
Please refer to irt's, press release, supplemental, information, and filings with the SEC for further information about these risks.
James Sebra: Thanks, Stephanie, and thank you all for joining us this morning. Second quarter SameStore NOI and core FFO per share results were in line with our expectations as operating expense savings offset lower than expected revenue growth. SameStore revenues increased 1% over the prior year. We finished the quarter modestly ahead of expectations on renewal leasing due to another quarter of strong retention. Bad debt continued to decline, and average occupancy rose modestly versus a year ago. However, our blended rent growth in the quarter lagged our expectations due to market conditions that were softer than anticipated. Lingering supply pressures in some markets and potential residents being more discerning due to continuing macroeconomic uncertainties pressured market rents to a greater degree than we originally anticipated, as we sought to continue to maintain occupancy during this timeframe.
The copy of Artis burnings, press release. And supplemental information is attached to irt's current report on. The formate K that is available in the investor section of our website. They contain reconciliations of non-gaap financial measures referenced on this, call to the most direct comparable, gaap Financial measure with that. It's my pleasure to turn the call over to Scott shaper.
Thanks Stephanie, and thank you all for joining us this morning. Second quarter, same store on oi and core ffo. For share results. We're in line with our expectations. As operating expense agents offset, lower than expected Revenue growth.
Same store revenues increased 1% over the prior year. We finished the quarter modestly ahead of expectations, on renewal, leasing due to another quarter of strong. Retention bad debt continued to decline and average occupancy. Rose modestly versus a year ago.
James Sebra: Jim will cover our revised outlook for 2025 with respect to leasing spreads and overall revenue growth. On the positive side, SameStore operating expenses decreased 60 basis points over the prior year quarter and fully offset the softer revenue growth. Lower repair and maintenance and turnover costs, lower real estate taxes, and a reduction in our insurance premium renewal all contributed to this improvement in expenses. We completed 454 value-add renovations during the quarter and a total of 729 completions for the first six months of the year, achieving a weighted average return on investment of 16.2% for both periods. As Jim will discuss later, given our stronger-than-planned retention rates year to date, we expect to complete about 650 fewer renovations this year as compared to our original goal, which is still a 26% increase over 2024 completions.
However, our Blended rank growth in the quarter of lag. Their expectations due to market conditions that were softer than anticipated lingering Supply. Pressures in some markets and potential residents being more Discerning due to continuing macroeconomic. Uncertainties pressured Market rents to a greater degree than we originally anticipated. As we saw to continue to maintain occupancy during this time frame.
Jim will cover a revised outlook for 2025, with respect to the leasing spreads and overall Revenue growth.
On the positive side, same store, operating expenses decreased, 60 basis points. Over the prior year quarter and fully offset, the software Revenue growth lower repair and maintenance and turnover costs. Lower real estate taxes and a reduction in our insurance premium, renewal all contributed to this Improvement in expenses.
James Sebra: In terms of investment activity, we are seeing opportunities to deploy capital accretively by trading out of older vintage assets with higher future CapEx needs and to newer communities with lower CapEx profiles. On the disposition side, during the quarter, we identified three assets that we expect to sell during the fourth quarter. For new investments, we are under contract to acquire two communities in Orlando during the third quarter for an aggregate purchase price of $155 million. Both properties are in close proximity to existing IRT communities, which improves our market presence and should enable us to realize meaningful operating synergies. Beyond these pending transactions, our acquisition pipeline remains strong. Our updated guidance implies an additional $315 million of acquisitions before year-end, and we have ample liquidity to fund these accretive investments on a leverage-neutral basis through capital recycling.
Completed 454 value-add renovations during this quarter, and the total of 729 completions for the first six months of the year achieved a weighted average return on investment of 16.2% for both periods. As Jim will discuss later, given our stronger than planned retention rates year to date, we expect to complete about 650 fewer renovations this year compared to our original goal, which is still a 26% increase over 2024 completions.
In terms of investment activity, we are seeing opportunities to deploy, capital of creatively, by trading out of older, vintage assets with higher future capex needs, and to newer communities, with lower capex profiles on the disposition side. During the quarter, we identified 3 assets that we expect to sell during the fourth quarter.
For new Investments, we are under contract to acquire 2 communities. In Orlando, during the third quarter for an aggregate purchase price of 155 million. Both properties are in close proximity to existing IRG communities, which improves our Market presence and should enable us to realize meaningful operating synergies.
James Sebra: Regarding our markets, the good news is that deliveries in general are tapering off across our portfolio, with permitting and starts data supporting our outlook for more muted supply growth for the next few years. Looking at market-level data from CoStar, Yardi Matrix, and GreenStreet, we're seeing a reduction in deliveries settling out to less than 2% supply growth in our markets in 2026, which represents a 43% reduction from 2024 actual deliveries. As a result, we believe things continue to set up nicely for a stronger leasing environment in 2026, as demand for apartments in our markets is expected to remain strong. I'll now turn the call over to Jim.
Beyond these pending transactions, are acquisition pipeline remains strong, our updated guidance implies an additional 315 million of Acquisitions before year end and we have the ample liquidity to fund these decree of Investments on a leverage neutral basis through Capital recycling.
Regarding our markets, the good news is that deliveries in general are tapering off across our portfolio with permitting and start status supporting our outlook for more muted Supply growth for the next few years looking at Market level data from co-star yardi Matrix and Green Street. We're seeing a reduction in deliveries settling out to less than 2% Supply growth in our markets in 2026, which represents a 43% reduction from 2024 actual deliveries. As a result, we believe things continue to set up nicely for a stronger. Leasing environment in 2026 as demand for apartments in our markets is expected to remain strong.
Scott Schaeffer: Thanks, Scott, and good morning, everyone. Core FFO per share was 28 cents in the second quarter of 2025, up from 27 cents per share in Q1 of this year. SameStore NOI grew 2% in the quarter, driven by a 1% increase in SameStore revenue and a 60 basis point decrease in operating expenses over the prior year. SameStore revenue growth was supported by a 10 basis point increase in average occupancy, a 90 basis point increase in average effective monthly rents, and a 20 basis point improvement in bad debt compared to the prior year. The decline in SameStore operating expenses reflected a 90 basis point increase in controllable expenses and a 3% decline in non-controllable expenses, both as compared to Q2 of last year. Within controllable expenses, we attribute the below-inflationary increase to stronger-than-expected retention rates that led to a 6.7% reduction in R&M and turn costs.
I'll now turn the call over to Jim.
Thanks Scott and good morning, everyone.
Corporate fellow per share was 28 cents in the second quarter of 2025 up from 27, cents per share in q1 of this year. Same store and a library 2% in the quarter driven by a 1% increase in the same store, revenue and a 60 basis point decrease in operating expenses over the prior year, same store Revenue growth was supported by a 10 Basin Point increase in our doy, a 90 basis point increase, in average effective monthly rents and a 20 basis point Improvement in bad debt, compared to the prior year.
the decline in sensor operating expenses, reflected a 90 basis point increase in controllable expenses and a 3% decline in non-controllable expenses both as compared to Q2 of last year,
Scott Schaeffer: Within non-controllable expenses, we saw lower real estate taxes and a reduction in our property insurance premium of 18%. In terms of leasing trends, renewal rate increases of 3.9% coupled with 58% retention support the 70 basis points of blended rent growth in the quarter. New lease trade-offs during the first half improved sequentially each month, albeit at a slower pace than anticipated in our original guidance. For the second quarter, new lease trade-offs were down 3.1%, with supply-heavy markets like Atlanta, Dallas, Denver, Raleigh, and Charlotte contributing heavily to these negative new lease trade-offs. On the capital recycling front, during the second quarter, we classified three wholly-owned communities located in Denver, Memphis, and Louisville as held for sale. Additionally, last week, our JV partner in Richmond completed the sale of Metropolis in Innsbruck.
Within controllable expenses, we attribute the below inflationary, increase the stronger than expected retention rates. That led to a 6.7% reduction in r&m and turn costs within non-controllable expenses. We saw lower real estate taxes and a reduction in our property insurance premium of 18%.
In terms of leasing Trends, renewal rate increases of 3.9%, coupled with 58% retention support, the 70 basis points of Blended rank growth. In the quarter new these trade-offs, during the first half improved sequentially each month, albeit at a slower Pace than anticipated in our original guidance.
For the second quarter, new lease, trade-offs were down 3.1% but Supply heavy market for Atlanta Dallas, Denver rally in. Charlotte contributing heavily to these negative new lease trade-offs.
Scott Schaeffer: We received $31 million in cash, consisting of a return of our investment and a $10.4 million gain that we will record in the third quarter within the income from unconsolidated real estate investments. This gain will be excluded from core FFO since it is associated with a property sale. We will recycle proceeds from active sales into newer communities with higher growth profiles. As detailed in the press release last night, we have two communities under contract in Orlando, Florida. Later today, we expect to close in the first of these communities, a 240-unit property built in 2024 for a purchase price of $60 million. The community is close to an existing IRT community. We expect to close in the second property later this quarter. It is a 403-unit community built in 2019 that is directly adjacent to an existing IRT community.
On the capitol reception front. During the second quarter, we classified 3 whole year in communities located, in Denver, Memphis. And Louisville has held for sale. Additionally of last week, our JV partner in Richmond, we completed the sale of metropolis. In Israel, we received 31 million in cash, consisting of a return of our investment and a 10.4 million gain that we will record in the third quarter, within the income from unconsolidated Real Estate Investments. This game will be exclusive
Included some core fulfilled, since it is associated with the property sale.
We will recycle proceeds from asset sales in their newer communities with higher growth profiles, as detailed. And oppression of these last night, we have 2 communities under contract in Orlando. Florida later today, we expect to close in the first of these communities, a 240 unit property built in 2024 for a purchase price of $60 million.
The community that is close to existing iot community.
Scott Schaeffer: The blended economic cap rate on both of these acquisitions is a 5.9%, which includes operating synergies from our increased scale in the market. We canceled our pending acquisition of a community in Colorado Springs because the lease-up slows and signed rents were lower than our underwriting. While we like this market long-term, we do see other opportunities where we can put that capital to work. The $315 million of other acquisitions included in our updated guidance could further enhance our operating efficiencies and be accretive to AFFO. We will fund the Orlando and other pending acquisitions using the $162 million of forward equity commitments outstanding and proceeds recycled from asset sales, all done on a leverage-neutral basis. Our balance sheet remains flexible with strong liquidity. As of June 30th, we have only $337 million or 16% of our total debt maturing between now and year-end 2027.
We expect to close in the second property later this quarter. It is a 403 unit Community built in 2019. That is directly adjacent to an existing IRG community.
The Blended economic cap rate on both of these Acquisitions is a 5.9% which includes operating synergies from our increased scale in the market.
we canceled our pending acquisition of a community in Colorado Springs because the lease up slowed and signed rents were lower than our underwriting,
So, we can put that Capital to work.
The $315 million of other acquisitions included in our updated guidance should further enhance our operating efficiencies and be accretive to AFL. We will fund the Orlando and other pending acquisitions using the $162 million of forward equity commitments outstanding and proceeds recycled from asset sales, all done on a leverage-neutral basis.
Scott Schaeffer: Nearly 100% of our debt is fixed-rate or hedged. With respect to our full-year 2025 guidance, we are adjusting some of our underlying assumptions to reflect our performance in the first half of this year and expectations for the second half. From a big-picture perspective, our reduced outlook for revenue growth is offset by lower expense growth, resulting in slightly higher SameStore NOI growth and the same midpoint for core FFO per share. The guidance updates for our operating metrics are as follows. Our 2025 SameStore portfolio now consists of 105 properties, reflecting the removal of the three properties held for sale. Our updated outlook assumes full-year SameStore revenue growth of between 1.5% to 1.9%, which represents a 90 basis point reduction at the midpoint. The decrease is driven primarily by lower new lease growth offset by slightly better occupancy as compared to our original guidance.
Our balance sheet remains flexible with strong liquidity. As of June 30th, we have only $337 million, or 16% of our total debt, maturing between now and year-end 2027.
Nearly 100% of our debt is fixed rate or hedged.
With respect to our 4 year 2025 guidance. We are adjusting some of our underlying assumptions to reflect our performance in the first half of this year and expectations for the second half.
From a big picture perspective, our reduced outlook for Revenue. Growth is all set by lower expense growth resulting in slightly higher sales or noi growth. And the same midpoint for core ffo per share. The guidance updates for our operating metrics are as follows.
Our 2025 same store portfolio. Now consists of 105, properties, reflecting the removal of the 3 properties held for sale.
Or updated Outlook. As soon as 4 year, same store, Revenue growth in between 1.5 percent to 1.9%, which represents a 90 basis point reduction at the midpoint
Scott Schaeffer: On the new lease growth front, in our original guidance, we assume that effective new lease growth would improve throughout the year, such that for the year, effective new lease growth would be flat. We are now assuming that new lease growth for the second half of 2025 will be down 2.7%, which, when coupled with the negative 4.4% new lease growth in the first half of 2025, means that our full-year new lease growth is now estimated to be down 3.4%. Overall, our renewal rental increases are still expected to be approximately 3.5% for the year, which leads to approximately 50 basis points of blended rent growth for 2025.
The decrease is driven primarily by lower new lease growth, all set by slightly better occupancy as compared to our original guidance.
On the new lease growth front in our original guidance. We assume that effective new lease growth would improve throughout the year. Such that for the year effective new lease growth would be flat.
We are now assuming that new lease growth for the second half of 2025 will be down 2.7% which when coupled with the negative 4.4% new lease growth in the first half of 2025 means that our full year. New lease growth is now estimated to be down. 3.4%
Scott Schaeffer: Just to summarize, our revised revenue guidance is based on the following inputs for the second half of 2025: average occupancy of 95.7%, blended rental rate growth of 60 basis points on our remaining lease expirations that total 53% of our available units, bad debt of 1.3% of revenue, and 2.7% growth in other income over the second half of 2024. With regards to property operating expenses, we have a more favorable outlook due to the reductions in both controllable and non-controllable expenses. On controllable expenses, higher retention is reducing our R&M and turnover costs, while our site teams are continuing to manage expenses for contract services and others exceedingly well. Overall, controllable expenses are now estimated to grow by 1.9%, which is down 190 basis points from the previous midpoint of 3.8%.
Overall, our renewal rental increases are still expected to be approximately 3.5% for the year which leads to a approximately 50 basis points of Blended rank growth for 2025.
Just to summarize.
Our revised Revenue guidance, is based on the following inputs for the second half of 2025, average occupancy of 95.7%.
Blended rental rate growth of 60 basis points. On our remaining lease expirations, that total 53% of our available units, bad debt of 1.3%, of Revenue and 2.7% growth in other income over the second half of 2024.
With regards to the property operating expenses, we have a more favorable Outlook due to the reductions in both controllable and non-controllable expenses.
On controlled work expenses higher retention is reducing our RNA and turnover costs. While our site teams are continuing to manage expenses for Contract Services and others. Exceeding, the wealth.
Scott Schaeffer: On non-controllable expenses for real estate taxes and insurance, we now expect these expenses will decline in 2025 by approximately 40 basis points, which is down 345 basis points from the previous midpoint due to the 18% savings we secured on our 2025 property insurance premiums and further improvements in real estate taxes. In total, the 1% midpoint of our revised guidance range for total operating expenses for the full year 2025 is 245 basis points better than the midpoint of our previous guidance range. From the SameStore NOI perspective, the midpoint of our NOI growth increased by five basis points to 2.1%. Additionally, we expect lower G&A and property management expenses for the year, and our new midpoint of $55 million is $1 million less than our prior midpoint, given by efficiency savings from our recent rollout of AI leasing tools.
Overall controllable expenses are now estimated to grow by 1.9%, which is down 190 basis points from the previous midpoint of 3.8%.
On non-controllable expenses, for real estate, taxes and insurance. We now expect these expenses will decline in 2025 by approximately 40 basis points, which is down, 345 basis points from the previous midpoint due to the 18% savings we secured on our 2025 property, insurance premiums, and further improvements in real estate taxes,
In total, the 1% Bitcoin of our revised guidance range for total operating expenses for the 4-year 2025 is 245 basis points better than the midpoint of our previous guidance range.
From the same store noi perspective, the midpoint of our noi goes increased by 5 basis points to 2.1%.
Scott Schaeffer: Finally, from a core FFO per share perspective, our midpoint of $1.17 and a half cents is unchanged. Scott, back to you.
Additionally, we expect lower GNA and Property Management expenses for the year and our new midpoint of 55 million is 1 million less than our prior midpoint given by efficiency savings from our recent rollout of AI leasing tools.
Finally, from a core fulfilled per share perspective, our midpoint of a dollar 17 and a half cents is unchanged.
James Sebra: Thanks, Jim. We continue to believe we are at the beginning stages of a multi-year period of improving fundamentals and growth in the multifamily sector and for IRT. Supply growth should remain muted in the next few years and support positive new lease growth as we head into 2026. Additionally, occupancy is stable, renewals and retention are strong, bad debt is declining, and year-to-date tour volumes are up over 2024 levels, all which point to continued strong demand for our communities. Given these improvements, we believe our markets and our company remain positioned to outperform as fundamentals continue to improve. We thank you for joining us today. An operator, you can now open the call for questions.
Scott back to you.
Improvements. We believe our markets and our company remain position to outperform as fundamentals, continue to improve. We thank you for joining us today an operator, you can out in the call for questions.
Bailey: At this time, I would like to remind everyone, in order to ask a question, press star and the number one on your telephone keypad. Please limit your questions to one initial and one follow-up. Your first question comes from the line of Austin Werschmidt with KeyBank Capital Markets. Your line is open.
at this time, I would like to remind everyone in order to ask a question press star and the number 1 on your telephone keypad,
please limit your questions to 1 initial and 1 follow-up.
Analyst: Great, thanks. Good morning, everybody. Jim.
Your first question comes from the line of Austin wormit with keybanc capital markets. Your line is open.
James Sebra: Morning.
Analyst: I appreciate all of the detail you provided around the second half outlook. I guess, given some of the lingering supply challenges and change in renter behavior that you and Scott highlighted in the prepared remarks, I mean, can you share how you approached your revised outlook versus maybe historical or typical seasonality and month-to-month trends? Just trying to get a sense here of kind of the implied acceleration in lease rate growth and what's driving that.
James Sebra: Yeah, no, good question. Thank you, Austin. And certainly, Scott, Janice, feel free to chime in. I would say the way that we went about kind of our expected, kind of, excuse me, new lease trajectory for the back half of the year was just looking at what is the average and call it effective rental rate of the leases that are expiring each month, what we know today based on who has renewed and who hasn't renewed or who is "likely" to renew, and then comparing those kind of expiring rents versus what we think would be an asking rent based on where our asking rents are today and kind of our expectations for kind of how that would move month by month through the rest of the year.
Great, thanks. Uh good morning everybody. Um Jim, I appreciate all of the detail you provided um around second half the second half Outlook, I guess given some of the lingering Supply challenges and and change in runner behavior that you and Scott highlighted in the prepared remarks. I mean, can can you share how you approached your revised Outlook, you know, versus maybe you know, historical or typical seasonality and month-to-month Trends. Um, just trying to get a sense here of kind of the implied acceleration, um, and Lease rate growth and and you know what's driving that
Yeah, no good question. Thank you, Austin. Yeah. And and certainly Scott Janice, you know, feel free to chime in, you know, I would say, you know, the way that we went about kind of our called, uh, expected, you know, kind of excuse me, new lease trajectory, for the back, half of the year was just looking at, you know, what is the average of how it effective, rent rental rate, uh, of the pieces that are expiring each month? What we know today, based on, who has renewed, and who hasn't renewed, or who is quote, quote unquote, likely to renew.
James Sebra: And then, obviously, as you and I have talked about, it's just math, right, in terms of just calculating what that kind of implied tradeout would be.
Um and then comparing those kind of expiring rents versus what we think would be at uh an estimate rent uh based on where our asking rents are today and kind of our expectations for uh kind of how that move month by month through the rest of the year and then obviously as you and I have talked about it's just Mass right in terms of just calculating what that kind of implied trade out would be.
Analyst: So should we think that you're going to see kind of a seasonal slowdown or things flatten out, or does it assume any additional reacceleration? And then just secondarily, I guess, have you seen any change in sort of traffic or conversions versus what you were seeing play out in the spring and early summer and just kind of high level for maybe how July operating conditions?
James Sebra: Yeah, what we expect is that as you look at the new lease tradeouts heading into the back half of the year, there's going to be some continued improvement month by month as compared to kind of where we were in the first half of the year. I think the assumption right now is that the new lease tradeout is going to be a negative 2.7% in the second half of the year, where it was negative 4.4% in the first half of the year. So again, continued improvement. In terms of leasing trends, yes, we continue to see good lead volume. I think lead volumes are up roughly 3% to 4% over the same time last year, which that last year was up, call it, 20% of the year before that. So we see really great demand.
So should should we think that you're going to see kind of a, a seasonal slowdown or things flatten out, or does it assume any additional re acceleration and then just secondarily, I guess. Have you seen any change in sort of traffic or conversions versus what you were seeing play out in the spring and early summer, and just kind of, you know, high level for for maybe how July operating conditions?
James Sebra: And we're seeing, as we mentioned in our neighboring debt, we'll continue to see really good kind of tour velocity as well in terms of converting those leads to tours. So we are seeing really good kind of solid demand even in the back half of the year as we see July and what's developing for August.
Yeah, what we what we expect is that, you know, as you look at the new lease trade outs, you know, heading into the back end of the year, there's going to be some continued improvements, you know, month by month as compared to kind of where we are in the first half of the year. I think you, you know, the the Assumption right now is that the new lease trade out is going to be a negative 2.7%. Then the second half of the Year where it was negative 4.4% in the first half of the year. So again, you know, continued Improvement in terms of leasing Trends. Yes, we continue to see, you know, good lead volume. I think lead volumes are up roughly 3 to 4% over the same time last year, which that last year was up call at 20% of the year before that. So we see really great demand and um we're seeing as we mentioned in our Navy deck, we'll continue to see really good. Kind of tour velocity as well.
In terms of converting those leads towards. Um so we have we are seeing really good kind of solid demand, even in the back half that you hear. As we see you know, July and what's developing for August
Analyst: Great, thank you.
Great. Thank you.
Bailey: Your next question comes from the line of Eric Wolfe with CITI. Your line is open.
Analyst: Hey, thanks. Maybe just a sort of broader follow-up to that. I'm just curious, you know, why do you think you're not seeing, I guess, a big pickup sort of in new lease growth when you have 60% retention, 4% renewals? Is it just that private peers aren't seeing the same dynamic? I guess I would just think that with retention high across the industry, occupancy high, your expectation for occupancy to increase, you'd see better market rate growth. So what is sort of holding it back right now?
Your next question comes from the line of Eric wolfless City. Your line is open
Hey, thanks, maybe just a sort of broader follow-up to that. Um, I'm just curious, you know, because why do you think you're not seeing, I guess a big pickup sort of a new new lease growth when you have 60% retention, 4%, renewals
James Sebra: Yeah, it's not so much the, I mean, certainly the market rate growth. You know, I think as we've all kind of talked about, we are seeing continued supply pressure. And as we said in our prepared remarks, some of the macroeconomic uncertainties are kind of holding market rates down a little bit. What we are seeing from our standpoint on the tradeouts is our average renter stays with us, call it, two to two and a half years. So the leases that are expiring and are not renewing, they're just coming from a higher kind of rent that they signed two to two and a half years ago. And that's what's causing the negative tradeout.
Is it just that private peers aren't seeing the same Dynamic? I guess? I would just think that with, you know, retention High across the industry occupancy, High, your expectation for occupancy to increase, you'd see better market rate growth. So like, what is, what is sort of holding it back right now?
Yeah, it's not so much. The I mean, certainly the market rate growth, you know, I think as we've all kind of talked about we are seeing you know, continued supply pressure and as we said in our prepared remarks, you know some of the macroeconomic uncertainties are kind of holding Market rates, you know, down a little bit. Um what we are seeing from our standpoint on on the trade outs is you know our average renter stays with us, call it 2 to 2 and a half years so the leases that are expiring and are not renewing. They're just coming from a higher kind of rent that they signed to the 2 and a half years ago. Uh and that's what's causing the negative trade-off.
Analyst: Got it. And I think you said that you expect occupancy to increase to 95.7% in the back half. I think it came down a bit in Q2. Just curious, you know, what gives you the confidence in that prediction? Have you already started to see occupancy rise in July? You've seen sort of forward indicators that would suggest that that occupancy is sustainably going to be higher. Just trying to understand why you're predicting higher back half occupancy.
James Sebra: Sure, yeah. No, as we mentioned, obviously, the May, June, and early part of July months were obviously, I would say, a difficult, a little bit of a difficult environment operating to, but we did see occupancy in the back half of July continue to click up closer to that kind of 95.6%. So we feel confident about being able to drive that a little further north and maintain it in the back half of the year.
Sure. Yeah. Know as as um as you mentioned obviously the, the May June and uh early part of July months, for obviously, you know, I would say uh, a difficult a little bit of a difficult environment operating too but we have we did see occupancy in the back half of July, you know, continue to click up um closer to that kind of 95.6%.
So we feel confident about being able to, you know, drive that a little further north in maintained at the back half of the year.
Analyst: Thank you.
Thank you.
Bailey: Your next question comes from the line of Brad Herfrin with RBC Capital Markets. Your line is open.
Analyst: Yeah. Hey, everybody, thanks. For the assets you guys have held for sale, is there any common thread there between either the three markets or the three assets? And then in those markets, would you continue to downsize in any of them?
Your next question comes from the line of Brad Hearn with RBC Capital markets. Your line is open.
Yeah, hey everybody thanks um for the assets you guys have held for sale. Is there any Common Thread there between either the, the 3 markets, or the 3 assets? And then in those markets? Would you continue to downsize in any of them?
James Sebra: Thanks, Brad. In terms of the common thread, I would just say that generally speaking, two of the assets, the one in Memphis and the one in Louisville, two legacy IRT assets that have gone through the value-add program, and we feel that we've kind of maximized value there. They're a little also a little older on the vintage side and a little more expensive to run from a CapEx load. The deal in Denver, the legacy Steadfast deal, again, a little older on the vintage side and certainly a little higher on the CapEx load. So the common theme is kind of higher CapEx load, more expensive to run, older deals, and the goal is to continue to recycle that capital out of those types of assets and into newer assets with better growth profiles.
Yeah, thanks Brad. Um, in terms of the Common Thread I would just say, you know, generally speaking you know 2 of the assets, the 1 in Memphis and the 1 in uh Louisville to Legacy IRS that's uh that have gone through the value, add program and we feel that we've kind of maximized value there. Uh they're little also a little older in the Vintage side and a little more expensive to run from a capex load. Uh the deal in Denver the Legacy steadfast deal. Uh again a little older on the Vintage side and certainly a little higher on the capex load. So the common theme the common theme and theme is you know kind of higher capex, loads more.
Ron older deals. Uh, and the goal is to continue to recycle that Capital out of, uh, those types of assets and into newer assets with better growth profiles.
Analyst: Okay, got it. And then on the increase in the acquisition guidance, you obviously have the $155 million under contract already. For the rest of that, are those assets identified already? Any color you can give on what the rest of the volume might look like?
Okay, got it. Um, and then on the increase in the acquisition guidance, you obviously have the the 155 million under contract already for the rest of that are those um assets identified already. Um, any color you can give on on what the rest of the volume might look like,
Scott Schaeffer: Yes, hi. This is Scott. Yes, assets are identified. We do have a very full semi-nap pipeline, and it really is matching up with the dispositions of the communities that are held for sale. Obviously, as we work through the process and consider alternatives and better allocations of capital or potentially better allocations of capital, we will make a decision when those sales happen of the three that are held for sale. We'll make a decision as to what's the best use of that capital at that time. But we have an active pipeline and at values that will be accretive to what we're selling and at below replacement cost. So we'll just continue to work that, and we'll see where we are, again, as those three properties sell.
Analyst: Okay, thank you.
Yes. Hi. This is Scott. Um yes assets are identified. Uh we do have a very full summon active Pipeline and uh it really is matching up with uh the dispositions of of the communities that are held for sale. You know, obviously as we work through the process and, you know, consider alternatives and better allocations of capital or potentially better allocations of capital, you know, we will make a decision when those sales happen of the 3 that are held for sale, um, uh, we'll make a decision as to what's the best use of that Capital at that time. Um, but we have an active pipeline, um, and at values that will be, uh, accretive uh, to what we're selling, um, and at below replacement cost. So, uh, you know, we'll we'll just continue to work that and and we'll see where we are again as those 3 properties sell.
Scott Schaeffer: Thank you.
Okay, thank you.
Thank you.
Bailey: Your next question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.
Analyst: Great, thanks for taking the question. I just was hoping you could get a little bit more granular on the market. You know, where would you say conditions have moved the fastest against your expectations? Where do you think you have kind of the lowest visibility or even the best visibility on your outlook for the back half of the year?
Your next question comes from the line of Jamie seldman with Wells Fargo, your line is open.
Great thanks for taking the question. Um I just was hoping you could get a little bit more granular on the markets. Um you know, where would you say conditions have moved the fastest against your expectations?
Where do you think you have kind of the lowest visibility? Uh, or even the best visibility on your, your outlook for the back half of the year?
Janice Richards: Absolutely. What we've seen against our expectations is kind of Dallas was surprising with the amount of increased supply in the first half of the year. The McKinney area, especially, we saw increased concessions, sequential rent reductions. Occupancy is stable, but it's at the price, it's at the consequence of pricing power and also just slugging through that supply that's in the market. We've seen really strong absorption, so it's a promise that we're getting towards the end of the line at the end of the tunnel. And we've noted extended pre-leasing timeframes from delivery to occupied, but at a pace in which we're comfortable with that eventually we will get back to a normal supply level in Dallas. So that one was a bit of a slow start versus our anticipation. Tampa also was a bit of a slow start on the pricing power side.
Absolutely. Um,
Janice Richards: First quarter, we saw not an inflection of supply, but we saw some hangover of high occupancy due to maybe some of the weather events that happened in the third and fourth quarter. And then so people were staying put. And then as we started to trade, we weren't able to accelerate that rent as quickly as we anticipated. We do feel that Tampa's second half of '25 into '26 is very strong, and we're seeing strong absorption in that market. And then lastly, obviously, there's Denver. So Denver has had an onslaught of new supply and will continue to do so through most '25 into '26. And so it's really just making sure that we are maximizing where we can and ensuring that we're hedging the bet on occupancy, but also looking for opportunity on the rent side.
What we've seen against our, uh, expectations is kind of Dallas was surprising with the amount of increased Supply in the first half of the year, uh, the McKenna area. Especially uh, we saw increased concessions. Uh, you know, sequential reproductions, uh, occupancy is stable. Um, but is that the price is that the uh, consequence of pricing power? And also, you know, just slugging through that Supply that's in the market. We've seen really strong absorption. So it's a promise that we're getting towards the end of the, the line, at the end of the tunnel. And, uh, We've noted extended pre-leasing time frames from delivery to occupied, but at a pace in which we're comfortable with that eventually, we will get back to the normal Supply level and down so that 1 was a bit of a slow start um versus our anticipation. Uh, Tampa also was a bit of a slow start on the pricing power side. Um, you know, first quarter.
Janice Richards: So those are the three markets that probably were a challenge comparatively to what is anticipated. Charlotte, again, is still high with supply, and so we're working through that, but that was anticipated. We've seen some great movements in Lexington, Columbus, and Oklahoma City. And so we're hoping to capitalize on that for the rest of the year as well.
Need to do so through most 25 into 26. And so it's really just making sure that we are maximizing where we can and ensuring that. Uh, you know, we're we're hedging the bet on occupancy, but also looking for opportunity on the right side.
So those are the 3 markets that uh, probably were uh a challenge comparatively to when it was anticipated. Uh, Charlotte again is still high with a supply and so we're working through that but that was, uh, that was anticipated. Uh, we've seen some great, um, movements in Lexington Columbus and Oklahoma City. Um, and so we're hoping to capitalize on that for the rest of the year as well.
Analyst: Okay, great. And then given the expectation for improvement, can you give an update on your July numbers, like where new, renew, and blend rents? And then what are you going out for renewals on for August?
Okay great. Um and then given the uh, expectation for improvement. Can you give an update on your July numbers, like, where new renew and blend rents and then what are you going out for renewals on for August?
James Sebra: Sure, Jamie. So we're obviously staying away from giving monthly data, but I would just tell you that the information, as I mentioned earlier, on occupancy was kind of in that 95.6. I would say new lease tradeouts are kind of largely in line with June. There is obviously a little bit of, again, a peak of expirations. And then when you get into kind of renewals, you know, August renewals we sent out a long time ago, we sent them out at roughly a 3, 3.5% renewal rate, and that's what we see developing. And then as you look at kind of September and October, we're closer to that 3% range.
Uh sure Jamie. So we we're obviously staying away from giving, you know, monthly data. But I would just tell you that, the, the information, as I mentioned earlier, on occupancy was cut in at 95.66% of largely, in line with June. Um, there is obviously a little bit of a, you know, again, a high, a peak of a expirations. Um, and then when you get into kind of, uh, uh, renewals, you know, August renewals, we set out a long time ago. Uh, we sent them out at roughly at 3 3 and a half percent, uh, renewal rate. And that's what we, you know, see, developing. And then as you look at kind of September and October, uh, we're closer to that 3% range.
Analyst: Okay, thank you.
Okay, thank you.
Bailey: Your next question comes from the line of Wes Goliday with Baird. Your line is open.
Question comes from the line of West.
Analyst: Hey, yeah, good morning, everyone. Do you anticipate buying any of the JV assets? And can you give us an idea of the size of the asset recycling bucket? You know, how many older assets do you have left?
Hey, good morning everyone. Do you anticipate buying any of the JB assets? And can you give us an idea of the size of the asset, recycling bucket? You know how many older assets do you have left?
Scott Schaeffer: So good question. On the JV front, we have, as we announced, the Richmond asset was sold to a third party. We looked at it, and it would have been our only asset in Richmond, so we decided not to buy it through our option. We're pleased with the way that it turned out. One of the JVs in Nashville, we were just alerted by the developer partner that we will be paid off in either late August or early September. We are not going to acquire that one at this time. I mean, we're not going to acquire that one. There's two more in Texas that are complete and lease up, and we have about a year from now before we have to make a decision. So we will continue to watch the progress of lease up and market conditions, and we'll make a determination when we have to.
So, uh,
Good question. Um, on the JV front, uh, we have uh, as we announced the, the Richmond asset
Um, uh, was sold, uh, to a third party. Uh, we looked at it and it would have been our only, uh, asset in Richmond. So, we decided not to, to buy it, uh, through our, our option. Um, we're pleased with the way the way that it turned out, uh, 1 of the JVS in Nashville, we were just, uh, alerted by the developer partner, um, that we will be paid off.
Uh, in, uh, either late, August or early September. Um, we are not going to acquire that 1, um,
At this time, I mean we were not going to require that 1. Uh, there's there's 2 more, uh, in Texas that are a complete and Lisa and we have about a year from now uh, before we have to make a decision. So we will continue to watch uh, the progress of Lisa and and, you know, market conditions, and we'll make a determination, you know? Uh, when we have to, um,
Scott Schaeffer: I'm sorry, what was the second part of your question?
Analyst: Oh, yeah, in the second one, just like you're using the, I guess, the non-core older assets to, I guess, fund acquisitions. Just kind of curious, what is the size of that bucket? How much more asset recycling can you do?
I'm sorry. What was the second part of your question? Oh yeah. And the second 1 was just like you're using the I guess the non-core older assets to to I guess fund Acquisitions. Just kind of curious. What is the size of that bucket? How much more asset recycling can you do?
Scott Schaeffer: There's always recycling that we can do. I mean, you know, every year, the asset's getting year older. So really, it's not just the age. It's changes in markets, and it's CapEx costs. And what is an alternative use for that capital? Is it buying back stock? Is it redeploying in newer, better long-term assets? Is it deleveraging? And as I said in our earlier remarks, you know, that's a determination that we'll make when we know the capital's coming back.
Analyst: Got it. Thank you.
Uh, there's always recycling, uh, that we can do. I mean, you know, every year the the the assets getting year older. Um, so really, it's not just the age. It's it's changes in markets and its its capex cost and and what is an alternative use for that Capital? Uh, is it buying back stock? Is it redeploying in? Uh, you know, uh, you know, newer, uh, better long term assets? Uh, is it is it deleveraging? And as I said in in, uh, you know, our earlier remarks, you know, that's determination that will make. Um, you know, when, when we know the capital's coming back,
got it. Thank you.
Bailey: Your next question comes from the line of Amy Probunt with UBS. Your line is open.
Analyst: Hi, thanks. So supply is typically pretty well known at the start of the year. So what would you say surprised you about supply trends this year? And have you seen any indications that supply of single-family rentals may have also been a factor in addition to apartment delivery?
Your next question comes from the line of Amy probant with UBS, your line is open.
Hi, thanks.
James Sebra: Hey, Amy. Thanks for the question. You know, I think the biggest surprise that we've just experienced relative to kind of our expectations from the earlier year and kind of how the year has developed is really just kind of two parts on supply. One, just the lingering pressure and how long it's kind of been hanging around for. And then B, the volume of incremental deliveries relative to expectations. You know, we were obviously using CoStar data that suggested end of last year, early this year, that the deliveries across our submarkets in our portfolio was going to be roughly two to, I think it's 2.6% of existing stock. That number is now 3.5%. And it appears that deliveries are being pulled forward from 2026 into 2025.
So Supply is typically pretty well known at the start of the year. So what would you say, surprise you about Supply Trends this year and have you seen any indications that supply of single family rentals may have also been a factor in addition to, um, apartment deliveries
James Sebra: So it makes 2026 even better, but it is a little bit more of a surprise that we've been having to kind of wrestle with. And as Janice mentioned, you know, when you look at specifically the Dallas market, you know, CoStar was originally anticipating a lot of deliveries in Q4 of 2025, and they seem like they've moved all into Q1 and Q2 of 2025. So that's been like the biggest surprise. And then I think from the single-family rental standpoint, we don't believe that is really affecting us. You know, our reasons for move-out to rent a home continue to be in that 2% to 3% of our move-outs. It hasn't increased. So we don't believe that's been really a factor for us.
2.6% of existing stock. That number is, now 3 and a half percent and it appears that it's, you know, in, you know, deliveries are being pulled forward from 2026 into 2025, so it makes 202 2026 even better, but it is a little bit more of a surprise that we've been having to kind of wrestle with. And as Janice mentioned, you know, when you look at specifically the Dallas Market, you know, co-star was originally anticipating a lot of deliveries in Q4 of 2025 and they seem like they've moved all into q1 and Q2 of 25 2025 so that's been like the biggest surprise and then I think from the single family rental standpoint um we don't believe that is really affecting us, you know, our reasons for move out to rent a home, you know. Continue to be in that 2 to 3% of our move out. So it has an increase. Uh so we don't we don't believe that's been really a factor for us.
Analyst: Great, thanks. And then just a quick one. For the assets held for sale, what do you expect for the cap rates on those? And I assume you're quoting economic cap rates.
James Sebra: Yes, we'll quote economics. So obviously, we haven't obviously nailed down final sales prices and all that. So it's still a potential moving, but it's in the low to mid-fives.
Great, thanks. And then, just a quick 1, um, for the assets health for sale. What do you expect for the cap rates on those? And I see you're quoting economic cap rates.
Uh, yes, we'll quote economics. So uh, obviously we haven't obviously nailed down.
Analyst: Okay, great. Thank you very much.
Our final sales prices and all that. So it's still a potential moving but it's in the low to mid fives.
Okay, great. Thank you very much.
Bailey: Your next question comes from the line of Anne Chan with GreenStreet. Your line is open.
Your next question comes from the line of anchan with Green Street. Your line is open.
Analyst: Hey, good morning. Thanks for taking my question. So first one, just on the current transaction environment, could you give us a sense of the bid-ask spreads you're seeing on both the buy and sell sides? Are there any signs that price discoveries are in a reset or that distress-driven opportunities are emerging?
Hey, good morning. Uh thanks for taking my question. Uh, so first 1 just on the current transaction environment, could you give us a sense of the bid ass spreads? You're seeing on both the buy and sell sides. Um, are there any signs that price Discovery starting to reset or that distress driven opportunities are emerging
James Sebra: So you're, I'm sorry, it broke up a little bit. Your bid-ask spreads on just the transaction market?
Analyst: Yes.
Yes.
Scott Schaeffer: So the acquisitions or the properties that we have under contract in Orlando are in close proximity to existing IRT communities, which generate significant operating synergies. So as we look at those two assets, we're expecting them to generate a 5.9 CAPRA yield in year one. So that's very healthy. I think as far as bid-asked, what we're seeing is that especially in the newer, more recently completed communities, that the sellers have now come to their senses and recognize where values are and that bid-ask gap has narrowed. There is some pressure from continuing high interest costs. There's pressure because lease-up is taking a little longer on the newer communities. And for those reasons, sellers are being more reasonable or realistic.
So, the Acquisitions, or the, the properties that we have under contract in Orlando. Uh, you know, are in close proximity to existing, uh, IRG communities, which generate, uh, significant operating synergies. So as we look at those 2 assets, we're we're expecting them to to generate a 5.9 cap rate yield uh, in year 1. Um, so that's very healthy. Uh, I think as far as bid ask what what we're seeing is that, especially in the newer, um, more recently completed communities. That the sellers have now, uh, come to their senses and recognize uh, where values are. And that bid ask Gap has narrowed
Um, there is some pressure from, from continuing High interest costs. Uh, there's pressure because lease up is taking a little longer on the newer communities. And for those reasons, um, sellers are being more re, uh, reasonable or realistic.
Analyst: Thanks. And you highlighted Orlando as one of the growth markets with opportunities to drive scale and synergies. Are there any other MSAs in the pipeline where you're seeing similarly compelling fundamentals or where you'd look to build additional scale?
thanks and, um,
You highlighted Orlando.
Scott Schaeffer: Well, we still believe in the Sun Belt. We like the Midwest generally. Indianapolis and Columbus have both been strong for us. Indianapolis is a little stronger more recently. My plan is to keep our ratio of Sun Belt exposure to Midwest exposure somewhat consistent. So as you see us continue to grow in Sun Belt over time, expect that growth in the Midwest as well to keep that ratio consistent. We haven't announced any additional acquisitions in other markets than Orlando. So at this time, I would just stick with that. Orlando has been at the top of our list for growth for some time. We've never been able to, or we haven't been able to, I should say, find something that fit within the area in Orlando that we wanted, also at a price that made sense. These two assets that we're buying fit our strategy completely.
Scale, and and synergies. Uh, are there any other msas in the pipeline where you're seeing similarly compelling fundamentals? Um, or where you look to build additional scale?
Well, we still believe in the Sun Belt. Um, uh, we like the Midwest. Generally uh, Indianapolis and Columbus have both been strong for Us. Indianapolis a little more uh a little stronger more recently. Um my plan is to keep our ratio of Sunbelt exposure uh to Midwest, exposure somewhat consistent. So as you see us,
Continue to grow in the Sun Belt over time. We expect that growth in the Midwest as well to keep that ratio consistent.
Um, you know, we haven't announced any any additional Acquisitions in other markets than Orlando. So, uh, at this time, I would, I would just stick with that. Uh, Orlando has been at the top of our list for growth for some time, we've never been able to, or we haven't been able to, I should say, uh, you know, find something that's fit within, uh, uh, the area in Orlando, that, that we wanted also at a
Scott Schaeffer: The second one that we'll close, we expect later here in August, is literally across the street and phase two of our existing Orlando asset. So that's why there's great operating synergies for us to acquire that one. And the other one is within a five-minute drive of an existing IRT community. So we're excited about adding those to the portfolio, and we continue to analyze markets, and we'll act accordingly as, again, capital is to be deployed into new assets.
Price that made sense. Um these 2 assets that we're buying uh fit our strategy, completely the, the second 1 that will close. Um, we expect later here in August uh is literally across the street and and Phase 2 of our existing Orlando asset. So that's why there's great operating synergies for us to to acquire that 1. Um and the other 1 is is within a 5 minute, drive of an existing IRG Community. Um so we're excited about adding those to the portfolio and you know we continue to analyze markets uh and you know we'll act accordingly uh you know as again Capital um is is to be deployed into new assets.
Analyst: Thank you.
Thank you.
James Sebra: Thank you.
Thank you.
Bailey: And your next question comes from the line of Omotaro Okusano with Deutsche Bank. Your line is open.
And your next question comes from the line of okano with Deutsche Bank. Your line is open
Analyst: Hi, yes, good morning, everyone. Not apologies if I missed this earlier on, but could you talk a little bit just around like July operating trends and what you're seeing in terms of kind of demand? Is this the kind of a lot of supply pressure that you're kind of seeing that easing? What does that mean for your blended lease rate?
James Sebra: Sure. Yeah, we did talk a little bit about this earlier. Obviously, occupancy has been building throughout the month of July. Our lead volume, tour volume continues to be kind of really healthy and above levels of last year. New lease tradeouts are, I would say, relatively consistent with what we experienced in the month of June. And renewal spreads are also very consistent. We think that for the second half of the year, our new lease tradeouts will be kind of negative 2.7%, and that for the year, our renewal increases will be kind of averaging out to about 3.5%. So all of the July metrics are in line with that trajectory.
Uh, yes, good morning everyone. Um, not apologies if I missed this earlier on, but could you talk a little bit just around like July operating Trends and what you're seeing in terms of kind of, you know, demand is just the kind of a lot of supply pressure that you're kind of seeing that easing. What does that mean for your Blended lease rate?
Sure. Uh, yeah, we did talk a little bit about this earlier, um, you know, obviously, uh, occupancy has been building throughout the month of July, uh, our lead volume tour, volume continues to be kind of really healthy and, and, and above levels of last year, you know, new lease trade outs, or I would say relatively consistent with what we experienced in the month of June. Um and renewal spreads are also very consistent. We you know, we think that for the second half of the Year our new lease trade out to be kind of negative 2.7% and that for the year, our renewal increases will be kind of averaging out to about 3 and a half percent.
So, all of those, all of the July metrics are in line with that trajectory.
Analyst: Gotcha. That's helpful. And then just on the supply front, again, I mean, it just looks like based on your results and some of your peers, you know, it just feels like, I don't know whether it's the private owners or who it was in Q2, but in a lot of your markets, that owners have got a little bit more aggressive with pricing. Maybe it's just, again, concerns about tariffs or things like that. Just kind of curious if you could just kind of talk about if that's still the feeling in the air, if pricing is getting a little bit more rational at this point as we've kind of moved beyond that point.
Gotcha, that's helpful. And then if and then just on the supply front again I mean it it just looks like based on your results and some of your update, your peers, you know, it just feels like, you know, I don't know whether it's a project owners or who it was, it is but a lot of your markets that, you know, owners just got a little bit more aggressive with pricing. Maybe it's just again concerns about tariffs or things like that. It's kind of curious. If you just kind of talk about it, if, if that's still the feeling in the air, if pricing is getting a little bit more rational at this point, as you kind of move beyond that point.
James Sebra: Yeah, no, great question. And you know, I think as we just kind of were chatting with Anna about, you know, we do think that sellers are becoming more rational and that kind of bid-ask spread is narrowing, you know, for all the reasons you suggest, macroeconomic uncertainty around tariffs, etc., as well as, you know, what the current forward curve has applied for the 10 years. We do think that, generally speaking, that that gap is narrowing.
Yeah, no. Uh, great question. And and um, you know, I think, as we just kind of, we're chatting with an about, you know, the we do think that sellers are becoming more rational, and that kind of bid ass spread is narrowing. Uh, you know, for all the reasons you suggest, you know, macro economic macro economic uncertainty around tariffs Etc. Um, as well as you know what the the current forward curve has applied for the tenure. So we do think that generally speaking that that, that Gap is narrowing.
Analyst: Okay, that's helpful. And then one last one from my end. Again, as you kind of think about the consumer today, and again, maybe on the rental end of things, the kind of, you know, more attractive concessions and rates that are kind of getting given the oversupply on the Class A side, could you just talk a little bit about, again, how much that's impacting your, you know, your predominantly Class B portfolio? Again, whether you kind of feel like you're losing customers to, you know, the Class A space where they're offering too much rent-free and just those kind of dynamics of what's kind of happening to your core consumer and kind of how are they looking at your building?
Okay, that's helpful. And then 1 last 1 from my end again as you kind of think about the the consumer today. And again maybe on the rental Pro, uh end of things, the kind of, you know, more attractive, concessions and rates that kind of getting, uh, given the over Supply on the class a side. You just talk a little bit about again.
James Sebra: Sure. Yeah, I think, you know, generally speaking, when you have new supply delivered where a developer is behind the lease-up or the lease-up isn't kind of going at the pace that he or she would like it to go, they do offer, obviously, more aggressive concessions to get the lease-up done. You know, as those concessions get more aggressive, you know, that tends to, you know, potentially cherry-pick residents away from the Class B. But, you know, fundamentally, it just requires more, obviously, work for us, right, to continue to maintain occupancy and drive rents. And when that happens, it just reduces our ability to manage rents higher through time.
How much that impacting your, you know, your predominantly Class B portfolio. Again, whether you kind of sort of like you're losing customers to, you know, the class A Space where they're offering 2 months to rank free. And just those kind of dynamics of what what kind of happening to your core consumer and kind of how are they looking at at your building?
James Sebra: So I think, you know, just fundamentally, you know, as we saw last year, you know, the whole kind of Class A to Class B transition, especially on the new supply, you know, certainly impacted us and impacted a lot of players out there. And we see a little bit of that stickiness and sponginess continuing here in the first half of this year.
Sure. Um yeah I think you know, generally speaking when you have uh new Supply delivers where a developer is behind the Lisa or Lisa is in kind of going at the pace that he or she would like to go but they do offer obviously more and more aggressive concessions to get the lease up done, you know, as those concussions get more aggressive, you know, that tends to, you know, uh, potentially cherry-picked, uh, you know, residents away from the class B. Um, but, you know, fundamentally it just requires more obviously, work for us, right to continue, to maintain occupancy and drive rents. Um, and when that happens, it just reduces our ability to, to, to manage rents higher through time. So I think, you know, just fundamentally, you know, as we talk as we as we saw last year, you know, the whole kind of Class A to class B, you know, transition especially around the new Supply, you know, certainly impact us and impact that a lot of players out there and we see a little bit of that stickiness, and fogginess continuing here in the first half of this year,
Bailey: And there are no further questions at this time. Scott Schaeffer, I will turn the call back over to you.
Scott Schaeffer: Well, thank you all for joining us today, and we look forward to speaking with you again next quarter. Have a good day.
And there are no further questions at this time. Scott, Schaffer I will turn the call back over to you.
Well, thank you all for joining us today. We look forward to speaking with you again, next quarter.
Bailey: Thank you. This concludes today's conference call. You may now disconnect.
Have a good day.
Thank you. This concludes today's conference call. You may now disconnect