Q3 2025 Independence Realty Trust Inc Earnings Call

Jim Sebra: Foreign.

Speaker #3: Ladies and gentlemen , thank you for standing by . At this time , I would like to welcome everyone to the INDEPENDENCE REALTY TRUST, INC. Q3 2025 Earnings Call .

Operator: Ladies and gentlemen, thank you for standing by. At this time I would like to welcome everyone to the Independence Realty Trust Q3 2025 earnings 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, press STAR one again. I would now like to turn the conference over to Stephanie Krewson-Kelly. You may begin.

Speaker #3: 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 .

Stephanie Krewson-Kelly: Good morning and thank you for joining us to review Independence Realty Trust's third 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. 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.

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 Form 8-K that 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.

Scott Schaeffer: Thanks Stephanie, and thank you all for joining us this morning. Third quarter results were in line with expectations due to our continued focus on managing revenues and expenses. During the third quarter, our average occupancy remained stable as we continue to prioritize occupancy over rental rate in this competitive leasing environment. We finished the quarter at 95.6% occupancy, a 20 basis point improvement from the end of the second quarter. Our resident retention of 60.4% helped support this stable occupancy. Same-store revenue also increased in the quarter, driven by higher average rents per unit and improved bad debt versus a year ago. We outperformed expectations on bad debt in the quarter, which now represents less than 1% of same-store revenues and demonstrates the effectiveness of the improved processes and technology we have implemented since early 2024. Our value-add renovations contributed to revenue growth as well.

Scott Schaeffer: We completed 788 units during the quarter, achieving an average monthly rent increase of approximately $250 over unrenovated market comps, which equates to a weighted average return on investment of 15% during the quarter. Same-store operating expense decreased over the prior year, driven primarily by lower property insurance and turnover costs. In terms of transactions during the quarter, we acquired two communities in Orlando for an aggregate purchase price of $155 million. These acquisitions more than double our number of apartment units in Orlando, improving our market presence and our ability to realize meaningful operating synergies. We currently have three communities held for sale, one of which is expected to close later this year, the other two early next year. While we maintain an active pipeline of acquisition opportunities, we recognize the current disconnect between our implied cap rate and market cap rates.

Scott Schaeffer: We will continue to evaluate all investment opportunities, including value-add renovations, acquisitions, deleveraging, and share buybacks as we allocate capital to drive long-term shareholder value. Market dynamics remain competitive, but green shoots are emerging in several of our markets as supply pressures ease. Signs of market recovery are most evident in Atlanta, where occupancy has increased 60 basis points since January 1, all while our asking rents have increased 5%. Jim will provide more detail in other markets, but the point here is that we are seeing early encouraging signs of recovery. New deliveries in IRT submarkets have declined 56% from the 2023 to 2024 quarterly averages, and supply is forecasted to grow by less than 2% per year for the next several years, which would be meaningfully below the trailing 10-year average of 3.5% per year.

Jim will provide more detail on other markets, but the point here is that we are seeing early encouraging signs of recovery.

Scott Schaeffer: Against these improving supply fundamentals, we expect apartment demand to remain steady in our markets, driven by employment opportunities, quality of life dynamics, and a rent versus buy economics that will continue to favor renting. We have seen positive net absorption in our markets for two consecutive quarters. During the third quarter, over half of our markets, encompassing 60% of our NOI exposure, registered positive net absorption, and Atlanta, which is our largest market, moved into positive net absorption for the nine months ended September 30 with occupancy increasing 50 basis points. Other markets like Coastal Carolina and Charleston are also seeing positive net absorption, while markets like Tampa, Denver, and Dallas are still working through their supply challenges. Before I turn the call over to Jim, I just wanted to reiterate a few things.

New deliveries in IRT submarkets have declined 56% from the 2023 2024, quarterly, averages and Supply is forecasted to grow by less than 2% per year. For the next several years, which would be meaningfully below the trailing 10-year average of 3.5% per year.

Against these improving Supply fundamentals. We expect Department demands. We met steady in our markets, driven by employment opportunities, quality of life, Dynamics, and a rent versus buy economics. That will continue to favor raining.

We have seen positive net absorption in our markets for two consecutive quarters during the third quarter. Over half of our markets, encompassing 60% of our NOI exposure, registered positive net absorption. Atlanta, which is our largest market, moved into positive net absorption for the nine months as of September 30th, with occupancy increasing by 50 basis points.

Other markets, like Coastal Carolina and Charleston, are also seeing positive net absorption, while markets like Tampa, Denver, and Dallas are still working through their supply challenges.

Scott Schaeffer: Market fundamentals are improving, and while it's taking longer than we all expected, there is light at the end of the tunnel, and we see pricing power increasing. We will remain focused on optimizing near-term performance through stable occupancy, managing expenses, and investing in our value-add program with its consistent outsized returns. Over the long term, the three factors that underpinned our past performance will drive our future outperformance. First is our differentiated portfolio of Class B apartment communities and markets that will continue to outperform the national average for employment and population growth. Second is the efficiency of our management platform, which has a proven track record of optimizing revenues while also diligently managing expenses. Third is our disciplined approach to allocating capital.

Before I turn the call over to Jim, I just wanted to reiterate a few things. Market fundamentals are improving, and while it's taking longer than we all expected, there is light at the end of the tunnel, and we see price and power increasing. We will remain focused on optimizing near-term performance through stable occupancy, managing expenses, and investing in our value-add program with its consistent outsized returns.

Over the long term. The 3 factors that underpinned. Our Paris performance will drive our future outperformance. First is our differentiated portfolio Class B apartment, communities, and markets, that will continue to outperform the national average for employment and population growth.

Scott Schaeffer: We will continue to be deliberate, patient, and nimble in deploying capital to the highest best uses, including our value-add program capital, recycling, deleveraging, and share buybacks. With that, I'll turn the call over to Jim.

Second is the efficiency of our management platform which has a proven track record of optimizing revenues while also diligently managing expenses. And third is our disciplined approach to allocating Capital. We will continue to be deliberate patient and minimal and deploying Capital to the highest best uses including our value at program, Capital recycling, be leveraging and share BuyBacks.

Jim Sebra: Thanks Scott and good morning everyone. Third quarter 2025 Core FFO per share of $0.29 was in line with our expectations. Same-store NOI grew 2.7% in the quarter, driven by a 1.4% increase in same-store revenue and a 70 basis point decrease in operating expenses over the prior year. During the third quarter, our point-to-point occupancy increased 20 basis points against a slower than normal leasing season, while our new lease tradeouts were lower than we anticipated at negative 3.5%. We've been clear about our desire to maintain stable high occupancy to position as well as we head into 2026. Our renewal rate increases of 2.6% came in line with our general expectations as we expected low renewal increases to support retention and help maintain and grow occupancy during the third and fourth quarter. This strategy is working as expected with retention at 60.4% in the third quarter.

And with that, I'll turn the call over to the agenda.

Thanks Scott and good morning, everyone. Third quarter of 2025 Court of vote per share of 29 cents was in line with our expectations.

Same store and Ally, grew 2.7% in the quarter driven by a 1.4% increase in same store revenue and a 70 basis point decrease in operating expenses over the prior year.

Georgia third quarter are point-to-point occupancy, increased 20 basis points against this lower than normal, leasing season. While our new lease trade-offs were lower than we anticipated at negative 3.5%. We've been clear about our desire to maintain stable, High occupancy, to position as well as we head into 2026. Our renewal rate increases of 2.6% came in line with our general expectations, as we expected lower renewal increases to support retention and help maintain and grow occupancy during the third and

The quarter past strategy is working as expected, with retention at 60.4% in the third quarter.

Jim Sebra: We're beginning to see signs of stabilization across several of our markets through improvement in asking rents along with the ability to maintain occupancy. Let's look at a few of our markets that are experiencing these green shoots since the beginning of this year through the end of September. As Scott mentioned, Atlanta's occupancy has increased 60 basis points since January, new lease tradeouts are 410 basis points better, and asking rents are up 5% this year. Indianapolis asking rents are up 3.5% while maintaining stable occupancy at 95.3%. Oklahoma City's asking rents are up 80 basis points and new lease tradeouts have improved 260 basis points, all while maintaining stable occupancy of 95.5%. Nashville's asking rents have improved 240 basis points this year with stable occupancy of 96%. Cincinnati's rents have increased 11 percentage points with occupancy increasing 100 basis points to 97.5%.

We're beginning to see signs of stabilization across several of our markets, through improvement in asking rents, along with the ability to maintain occupancy. Let's look at a few of our markets that are experiencing these green shoots since the beginning of this year, through the end of September.

As Scott mentioned, Atlanta's occupancy has increased 60 basis points, since January new lease trade out from 410 base points, better and asking rents are up 5% this year.

.5% while maintaining stable occupancy at 95.3%.

Oklahoma City is asking rents are updating basis points and new lease trade outs. Have improved 260 basis points all while maintaining stable occupancy of 95.5%.

Nashville's asking rents have improved 240 basis points this year with stable occupancy of 96%.

Cincinnati existing rents have increased 11% points.

Jim Sebra: The Coastal Carolina markets have seen asking rents improve 5.7% and occupancy has grown 2.1% to 95.9%. Lastly, Lexington, Kentucky asking rents are up 22% this year with occupancy growing 70 basis points to 97%. These markets highlight that fundamentals are firming and pricing power is beginning to return in key regions of our portfolio. For the third quarter, bad debt was 93 basis points of same-store revenue, which represents a 76 basis point improvement over Q3 of last year as well as a 46 basis point improvement sequentially from second quarter. Our team's efforts and the technology enhancements we've implemented since early 2024 are the drivers behind this improvement as underlying collection fundamentals have improved such that overall charge offs as a percentage of revenue were down 40 basis points compared to third quarter 2024.

With occupancy, increasing 100 basis points to 97.5%.

The Coastal Carolina markets have seen asking rents improve by 5.7%, and occupancy has grown by 2.1% to 95.9%.

And lastly Lexington, Kentucky is asking rents are up 22% this year with occupancy. Growing 70 basis points. To 97% these markets highlights that fundamentals are affirming and pricing. Power is beginning to return in key regions of our portfolio.

For the third quarter fed, that was 93 basis points of sales to our Revenue, which represents a 76 basis point improvement over Q3 of last year, as well as a 406 basis, point of improvement sequentially. From second quarter,

Jim Sebra: In addition, accounts receivable balances were 40% lower at September 30 as compared to Q3 of last year, and recoveries from our third-party collection firm were also higher. All in all, the improved performance on our bad debt is exciting to see, and we expect to see continued progress in the coming quarters as we focus on stabilizing our bad debt sustainably below 1% of revenues. Same-store operating expenses decreased 70 basis points over the prior year quarter, reflecting our continued focus on managing expenses within controllable expenses, which were flat year over year. Higher advertising spend was offset by lower repairs and maintenance expenses. Our strong resident retention contributed to lower repairs and maintenance expenses in the quarter. Within non-controllable expenses, the 2.3% decrease over the prior quarter reflected our favorable renewals on our insurance premiums from earlier this year.

Our team's efforts and the technology enhancements we've implemented. Since early 2024 are the drivers behind this Improvement as underlying collection. Fundamentals have improved such that overall charge offs as a percentage of Revenue are down 40s compared to third quarter 2024. In addition accounts receivable balances were 40%, lower at September 30th as compared to Q3 of last year and recoveries from our third-party collection. Firm were also higher

All in all the improved performance on our bed, that is exciting to see. And we expect to see continued progress in the coming quarters as we focus on stabilizing our bad debt sustainably below, 1% of revenues.

Same store operating, expenses decreased, 70 basis points, over the prior year, quarter reflecting. Our continued focus on managing expenses within controllable expenses which are flat year-over-year. Higher advertising spend was offset by lower repairs and maintenance expenses. Our strong resident, retention contributed to lower repairs and maintenance expenses in the quarter.

Jim Sebra: During the quarter, we further enhanced the long-term growth prospects of our portfolio by acquiring two communities in Orlando for an aggregate purchase price of $155 million and an average economic cap rate of 5.8%. One of these properties is phase two of an existing IRT community, and the other is in close proximity to another IRT community such that we expect to realize meaningful operating synergies. We used $101 million of our forward equity proceeds to fund these acquisitions and now have $61 million of forward equity remaining on our assets held for sale. We now expect one asset to transact in 2025, and the two remaining assets will be sold in 2026.

Within non-controllable expenses, the 2.3% decreased over the prior year quarter reflected, our favorable renewals on our insurance premiums from earlier this year.

During the quarter, we further enhance the long-term growth prospects of our portfolio, by acquiring 2, communities of communities. In Orlando for an aggregate purchase, price of 155 million, and an average economic cap rate of 5.8%. 1 of these properties is Phase 2 of an existing iot community and the other is in close. Proximity to another iot Community such that we expect to realize meaningful operating centers.

we use a 101 million dollars of our forward, Equity proceeds to fund these Acquisitions and now have 61 million of forward Equity remains

On our assets for sale.

Jim Sebra: On our asset held for sale at Denver, we recorded a $12.8 million impairment in the third quarter due to the recent pressures observed in the Aurora submarket and its impact on the performance of this community. The third quarter was also busier than normal with respect to our joint venture investments. In July, our JV partner in Richmond completed the sale of Metropolis in Innsbrook. We received $31 million in cash, which included a $10.4 million gain in our income from unconsolidated real estate investments. This gain was excluded from Core FFO since it is associated with a property sale. In October, our partner in Nashville redeemed our preferred investments, which resulted in the return of our initial investment and the receipt of $3.3 million in preferred return, which we will recognize in the fourth quarter.

We now expect 1 asset to transact in 2025 and the 2 remaining assets will be sold in 2026.

On our asset health for sale at Denver, we recorded a 12.8 million pyramids, in the third quarter. Due to the recent pressures observed in the Aurora, submarket, and its impact on the performance of this community.

The third quarter was also busier than normal, with respect to our joint venture investments. In July, our JV partner in Richmond, completed the sale of metropolis in hbro, we received 31 million dollars in cash, which included a 10.4 million dollar game in our income from unconsolidated Real Estate, Investments, line items.

This game was excluded from corporate phones since it is associated with a property sale.

Jim Sebra: This preferred return will be included in Core FFO consistent with historical treatment as it is not associated with an asset sale. From a capital allocation perspective, we will continue to prioritize our value-add program as it represents the best use of capital given the steady mid-teen returns and the margin expansion renovated units create from increased rents and reduced turn costs. We will continue to evaluate other capital allocation decisions between buying back shares, pursuing acquisitions, and deleveraging. Our balance sheet remains flexible with strong liquidity. As of September 30, our net debt to adjusted EBITDA ratio was 6 times, and we are on track to further improve this ratio in the fourth quarter to the mid-fives as expenses decline seasonally.

In October, our partner in Nashville, and DMR preferred Investments, which resulted in the return of our initial Investments and the receipt of 3.3 million in the preferred return, which we will recognize in the fourth quarter.

This preferred return will be included in core FFL consistent with historical treatment. As it is not associated with an asset sale.

From a capital allocation perspective, we will continue to prioritize our value at program, as a representative, the best use of capital, given the steady mid team returns, and the marginal expansion renovated units create from increased rents and reduced, turn costs, we will continue to evaluate other Capital, allocation decisions between buying back shares pursuing Acquisitions Andor delivery.

Jim Sebra: We continue to have very manageable debt insurance with only $335 million, or 15% of our total debt, maturing between now and year-end 2027, and nearly all of our debt is either fixed rate or hedged. With respect to our full year 2025 guidance, we are narrowing our ranges on same-store revenue and expense growth while keeping the midpoints unchanged. With respect to transactions, we are reducing our acquisition and disposition guidance ranges due to timing. Our updated acquisition guidance of $215 million reflects only the acquisitions that have closed to date. Our updated disposition guidance of $161 million reflects the disposition that closed earlier this year and the sale of one asset expected to close in November. These reduced volumes are the primary driver behind our lower expected interest expense and the lower weighted average shares for 2025.

To the new files as expensive to client. Seasonally we continue to have very manageable debt insurance with only 335% of our total debt, ensuring between now and year-end 2027.

10, nearly all of our debt is either fixed rate or Hedge.

With respect to our full year 2025 guidance. We are narrowing our ranges on the same store revenue and expense growth while keeping the midpoints unchanged.

With respect to transactions, we are reducing our acquisition and disposition guidance for ages due to timing our updated acquisition, guidance of 215 million, reflects only the Acquisitions that have closed today.

our updated disposition guidance of 161 million, reflects the disposition that a closed earlier this year, and the sale of 1 asset expected to close in November,

Jim Sebra: Lastly, from a Core FFO per share perspective, we have narrowed our guidance range and our midpoint of $1.17 is unchanged. Scott, back to you.

These reduced volumes of the primary driver behind our lower expected interest expense, and the lower weighted average shares for 2025.

Scott Schaeffer: Thanks, Jim. For the past few years, the residential sector has navigated historic levels of apartment deliveries while supply pressures are receding. It's too early to call a broad market recovery, but we are cautiously optimistic that 2026 will be a better operating environment than 2025. With our differentiated portfolio of Class B assets and highly desirable markets, our efficient management platform, proven value-add program, and strong balance sheet, we are well positioned to generate attractive Core FFO per share growth. We thank you for joining us today. You can now open the call for questions.

And lastly, from a core fulfilled per share perspective, we have narrowed or got our guidance range and our midpoint of a dollar 17.5 cents is unchanged. Scott back to you.

Thanks Jim.

For the past few years, the residential sector has navigated historic levels of apartment deliveries. While Supply pressures are receding. It's too early to call a broad Market recovery, but we are cautiously optimistic, that 2026 will be a better operating environment in 2025.

With our differentiated portfolio of Class B assets, and highly desirable markets, our efficient management platform, proven value, ad program, and strong balance sheet. We are well. Positioned to generate attractive core, SFO per share growth,

We thank you for joining us today. Not bringing you now open the call for questions.

Operator: Thank you. As a reminder, to ask a question, you will need to press Star, then the number one on your telephone keypad. If you would like to withdraw your question, press Star one again. We do request for today's session that you please limit to one question and one follow-up. Your first question comes from the line of Brad Heffern with RBC Capital Markets. Your line is open.

Thank you as a reminder to ask a question. You will need to press star then the number 1 on your telephone keypad. And if you would like to withdraw your question, press star 1 again, we do request for today's session. That you please limit to 1 question and 1 follow-up.

Jim Sebra: Yeah, hi. Morning everyone. You talked about the green shoots in the prepared remarks. Can you just talk through how the pressure of supply today feels different than it did last quarter or earlier in the year? When do you expect things to get back to something resembling normal?

Your first question comes from the line of Brad heffern with RBC Capital markets. Your line is open.

Yeah, hi morning everyone. Um you talked about the green shoots in the prepared remarks. Can you just talk through how the pressure of Supply today? Feels different than it did last quarter or uh earlier in the year and when do you expect things to get back to something? Resembling normal?

Janice Richards: We have some markets that were a little softer than anticipated, such as Raleigh, Dallas, Denver, and Huntsville. Raleigh was more of a lingering effect of the supply that was produced. We're seeing stable occupancy. Asking rents are a little bit lower than anticipated, feeling the pressure of supply and concessions. We feel that this one's rather short lived and we'll start to see some movement early next year. Dallas obviously has had some pretty heavy supply entering in the market. Occupancy has been stable above that 95.5% that we're looking for, but still feeling some pressure from supply and a competitive market with concessions entering in and making it a major play. Denver's challenging, occupancy decline of about 200 basis points as well as asking rents, feeling the pressure from supply.

Janice Richards: There's 7.5% delivered in 2025, so we'll work through that and make sure that we are definitely being patient as well as disciplined within all of our strategies in Denver to maximize. Huntsville, one of our smaller markets, has seen an occupancy decline year over year, but holding stable above that 95%. Asking rents are feeling pressure from the supply, and we're working through that 5.7% that was released. We feel that each one of these markets has potential to start movement on the asking rents and work through the supply. We do see 2026 supply decreasing in all of these markets, which is the light at the end of the tunnel that we're going to be working through. I think we'll start to see some benefit in the second half of 2026.

Um well we have some some markets um that were a little softer than anticipated uh such as Raleigh Dallas. Denver and Huntsville, you know, Raleigh was more of a lingering effect, um, of the supply that was produced. And so we're seeing stable occupancy, asking rents are a little bit, uh, you know, lower than anticipated, uh, feeling the pressure of supply and concessions. We feel that this 1's, rather short-lived and we'll start to see some some movement, um, early next year. Dallas obviously has had some pretty heavy Supply entering in the market. Occupancy, has been stable above that, 95 and a half that we're looking for. Um, but still feeling some, uh, Supply from or pressure from Supply and competitive market with concessions entering in and making it, you know, a major play. Uh Denver Denver's, challenging occupancy, declined, uh of about 200 basis points. Um as well as asking rents feeling the pressure from Supply, you know there's 7.5% delivered in uh 25 so we'll work through that. Um,

and, uh, make sure that we are, uh, definitely being um,

Patient as well as disciplined within all of our strategies in Denver to maximize. And then Huntsville 1 of our smaller markets, uh, has seen an occupancy, uh, decline year over year, but holding stable above that 95% asking rents or feeling pressure from the supply. And we're working through you know that 5.7% that was released um we feel that you know each 1 of these markets has

Jim Sebra: Yeah. Brad, just to kind of bring it all full circle, I think the supply pressures we definitely feel are waning. We definitely see a light at the end of the tunnel coming. If you look at some of the most recent CoStar forecasts for fourth quarter and now 2026, the forecast now in 2026 are much lower than what they were earlier this year because, as we've been all highlighting, it does seem like supply was delivered earlier this year than what was supposed to be delivered next year. Again, really great, positive opportunity here in 2026. The one thing we do watch in terms of, obviously, each day and each quarter, each month is just this kind of the conversion, right, from lease to leases. That has been improving for us right from month to month to month throughout the third quarter.

Jim Sebra: That tells us that the pressure of new supply is certainly waning and we're being able to see more throughput into the leasing. Okay, got it. Thank you. Jim, on the forward equity, you obviously need to settle that by the end of the year, but there's no additional acquisitions contemplated in the guide. Are you planning to extend that, or is there a chance that you'll let that expire? We can obviously always extend it. We do have two forward equities, one from September that got closed out, and that'll be kind of closed out this quarter. The one that we did in the first quarter of 2025, we actually have until the end of the first quarter, 2026. The $61 million that's left remaining is primarily that, and we have until March 31st to close that one out. Okay, thanks.

From leads to leases, and that has been improving for us right from month to month throughout the third quarter. So that tells us that the pressure of new supply is certainly waning, and we're being able to see more throughput into the leasing.

Okay, got it. Thank you. Um, and then Jim on the the forward Equity, you obviously need to settle that by the end of the year. Uh, but there's no additional Acquisitions contemplated in the guide. Are you planning to extend that? Uh, or is it there a chance that you'll let that expire?

So um, we can obviously always extend it. Um, you know, we do have 2 forward equities 1 from September that got closed out and that'll be kind of closed out this quarter. Uh, and then the 1 that we did in the first quarter of 2025, we actually have until the end of the first quarter of 2026. So the 61 million that's left remaining is primarily that and that have we have until March 31st to close that 1 out.

Okay, thanks.

Operator: Your next question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.

[Analyst]: Great. Thank you for taking the question. Given the sequential moderation in blends, especially on the renewal side, can you talk about what your latest thoughts are on earning for 2026 and your current loss to lease?

Your next question comes from the line of James Feldman with Wells. Fargo, your line is open

Great. Thank you for taking the question. Um,

Jim Sebra: Yeah. Great. Jamie, obviously, good morning. Good to see you. Loss to lease today, it's actually gain to lease of about 1.5% and that our earning right now for 2026 looks to be about 20 basis points. Obviously, we have to finish the year before the earning is actually locked in, but it's about 20 basis points.

You know, given the sequential moderation and blends, especially on the renewal side. Can you talk about what your latest thoughts are on earning for 26 and Lott and your current loss to lease?

Yeah, uh, great. Um, Jamie, always good morning. Nice to see you. Uh, lost to lease today, it's actually gained a lease of about 1.5%. And that are earning, um, right now for 2026, uh, looks to be about 20 basis points. Obviously, we have to finish the year before the earning is actually locked in, but it's about 20 basis points.

[Analyst]: Okay, thank you for that. I guess just thinking about renewals down so much sequentially, I think if you look across the peer group, it's at the lower end. I know you said you wanted to keep occupancy at the expense of rate. Are there certain markets where you're really kind of surprised at how hard you have to fight to keep people? Just maybe talk us through the different regions if it's any or different markets. Is it pretty similar to what you said before on the renewal side?

Okay, thank you for that.

Jim Sebra: Yeah, I would say similar to the markets that Janice went through before in terms of the more supply heavy market. Markets certainly have a little more competition that we have to work harder to keep people at. I would say generally the retention rate, you know that 60% has been a focus of ours, and we baked into our original guidance earlier this year a steady decline in that renewal rate because we knew that we wanted to keep occupancy high heading into the slower seasonal periods of the fourth quarter. I would say even though it's sequentially lower, we've been pretty clear about we've expected this all throughout the year. What we see right now so far for fourth quarter, that renewal rate is actually about 40 basis points higher. We see a little bit of strength redeveloping.

And then I guess just thinking about, you know, renewals down so much sequentially. I think if you look at the peer group, it's at the lower end. I know you said you wanted to keep occupancy at the expense of rate are there certain markets where you're really kind of surprised at how hard you have to fight to keep people. Um, just maybe talk us through the different regions. If it's any or different markets or is it pretty similar to what you said before?

On the renewal side. Yeah no I I would say it's similar to to the markets that Janice went through before in terms of the more the more Supply heavy markets certainly have a little more competition that we have to work harder to keep people at. I would say, generally the retention rate, you know about 60% has been a focus of ours, and, and we, we baked into our original guidance earlier this year. A steady decline in that renewal rate, because we knew that, um, we wanted to keep occupancy High heading into the slower, seasonal periods of the fourth quarter. Um, so I would say even though with sequentially lower, we've been pretty clear about. We've expected this all throughout the year. Um, what we see right now, so far for fourth quarter, that renewal rates actually about 40 basis points higher. So we see a little bit of strength,

Jim Sebra: The difficulties in terms of really we're having to, quote unquote, work hard or working hard every day. Right. No, it's definitely in those markets that Janice has mentioned.

3, you know, redeveloping. Um, but the, the, the the difficulties in terms of really, we're having to quote, unquote work hard. We're working hard every day, right? Uh, but no, it's definitely in those markets that Jadis mentioned

[Analyst]: You're saying your renewals are up 40 bps already in the fourth.

Jim Sebra: Quarter for the 2.6% the spreads, yes.

So you're saying your renewals are up. 40 basis points already in the fourth quarter, uh, for the 26th.

[Analyst]: Okay. What about new leases and blends?

The spread, yes.

Jim Sebra: New leases are pretty much in line with what you saw in the third quarter, and blends are about, call it 50 to 60 bps. About 90% of our expectations for renewals for the fourth quarter have already been signed.

Okay. And what about new leases and blends?

Uh, new leases are pretty much in line with what you saw in the third quarter and blends are about calling 50 to 60 basis points. And about 90% of our expectations for renewals for the fourth quarter have already been signed.

[Analyst]: Okay, great. Thanks for the color.

Okay, great. Thanks for the caller.

Yep.

Operator: Next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets, your line is open.

Next question, comes.

[Analyst]: Great, thanks. Good morning everybody. Going back to some of the green shoots that you referenced in your prepared remarks, coupled with, I guess, the softness in the back half of this year and just broader uncertainty, how do you approach the 2025 outlook and kind of the sequential improvement in fundamentals and think about sort of that ramp in the first part of next year?

From Market, your line is open.

Great. Thanks. Good morning, everybody. Um, so going back to some of the green shoots that you referenced in your prepared remarks, you know, coupled with I guess the the the softness in the back half of this year and and just brought her uncertainty. I mean, how do you how do you approach the the 2025 Outlook and kind of the sequential Improvement in fundamentals and think about sort of that ramp in the first part of next year?

Jim Sebra: Be a little more specific in terms of ramping because obviously we're staying away from really talking about any kind of 2026 guidance. I would say that our expectation is to continue to drive occupancy here in the fourth quarter. As I just mentioned, we're definitely seeing some improvements on the renewal spreads and just continue to manage the business for the long term value creation of our shareholders.

[Analyst]: I guess there was this expectation for lease rate growth to inflect in many of the Sunbelt markets late this year. Is that more likely a first half of 2026? Do you see new lease rate growth, which I think you referenced, are kind of in line with where they've been trending? Does that begin to improve over the several months ahead? What's sort of the thought on how that trajectory looks from here?

Uh, be a little more specific in terms of ramping because obviously we're staying away from really talking about 20, any kind of 2026 guidance. You know, I would say that our expectation is to continue to drive occupancy here in the fourth quarter. Um, as I just mentioned, you know, we're definitely seeing some some, you know, improvements on the renewal spreads uh and just continue to manage the business um, for the long term value creation of our shareholders.

This expectation for lease rate growth to, in fact, in many of the Sunbelt markets late this year. So is that more likely a first half of '26? Do you see, you know, new lease rate growth, which I think you referenced, or are we kind of in line with where they've been trending? Does that begin to improve over the several months ahead? What sort of the thought? Yeah, I know.

Jim Sebra: As we've mentioned, the desire that we have is to continue to keep occupancy at a nice, stable, high level for us as we end the year and get ready for 2026. That's always been our goal and we've been pretty vocal about trading rate, especially on new leases to accomplish that goal. As a result, new leases have kind of flattened out right where they are today in the third quarter when we were expecting them to continue to get better. We do see some progress in future months. They are getting better, but we're obviously being cautious because again, we want to continue to maintain this high stable occupancy. If you look at our expiration schedule, you look at what leases are expiring month by month for next year.

Look.

Jim Sebra: Again, without prognosticating on market rent growth and so on and so forth, we do expect that new leases should begin to kind of hit that break even point in the first half of next year.

[Analyst]: Can you just talk about how concessions have trended in some of the markets where you're seeing sort of some of that competition? Janice, you highlighted some details in the market. Are concessions getting worse, are they stable, getting better? Just trying to get a sense high level of that competition that you're facing from the new lease ups.

Still got you as, as we've mentioned, you know, the the desire that we have is to continue to, you know, keep occupancy at a nice stable, high level for us, as we end the year and, and get ready for 2026. You know, that's always been our goal. And we've been talking in pretty been pretty vocal about, you know, trading rates, especially on new leases to accomplish that goal. Um, so as a result, right? New leases have kind of flattened out, right where they are today and the third quarter, uh when we were expecting them to continue to get better, um, we do see some progress in, you know, future months that they are getting better but we're obviously being cautious because again, we want to continue uh continue continue to maintain this High stable occupancy. If you look at our expiration schedule, you look at what leases are expiring month by month for next year. And again, without kind of prognosticating on Market, rent growth, and so on and so forth. Yeah, you we do expect that new leases should begin to kind of hit that break even Point uh, in the first half of next year.

Jim Sebra: I don't have that. Janice will, in a moment, talk about maybe individual markets. I would say, generally speaking, if you look at all of our leasing activities of renewals, new leases, everything in the third quarter of this year, 23% of all of our leases had some type of concession associated with it. That is down from 30% in Q3 of last year. The average concession is up slightly to $735 per lease, and that's up from $710 in Q3 of last year. As you look at it, kind of looking sequentially from quarter to quarter, that 23% is slightly higher from the second quarter. If I look out in October, we're down from where we were in the third quarter in terms of overall volume. Hopefully that helps.

And then, can you just talk about how concessions have trended in some of the markets where you're seeing, sort of, some of that competition? Janice you highlighted some details on the market. But I mean, there's our concessions, getting worse. Are they stable getting better? Just just trying to get a sense. High level of, um, you know, that that competition that you're facing from the new lease UPS.

Yeah. So uh I don't have Janice will in a moment to talk about maybe individual markets, I would say, you know, generally speaking if you look at all of our leasing activities. So renewals new, leases everything in the third quarter of this year, 23% of all of our leases had, some type of concession associated with it. That is down from 30% in Q3 of last year.

Um, the average concession is up slightly to 735 per call, Lise, um, up and that's up from 7103 of last year.

Um, as you look at a kind of looking from, you know, from sequentially from a quarter to quarter that 23% is slightly higher from second quarter. Uh, but if I look at in October we're down from where we were in the third quarter in terms of overall volume,

Janice Richards: Yeah. As we monitor competition very closely in the four softer markets that we talked about, we are seeing some ebbs and flows in concession, obviously based on the lingering supply and what we would consider stalled lease up. Nothing that has been outlandish or unsurprising. Very surprising, however, we've seen a slight increase of concession usage in what I would say Dallas and possibly in Raleigh and in specific pockets. Denver is definitely a concessionary market and will probably continue to be so as we work through that 7.5% of supply that was released in 2025 and doesn't anticipate to ebb as fast as some of the other markets that we are in.

so hopefully, that helps

And as we, you know, monitor our competition very closely and the the 4, uh, you know, software markets that we talked about. Um, we are seeing some EPs, and flows in concession, obviously based on the lingering Supply and or what we would consider stalled Lisa. Um, nothing that is been outlandish or unsurprised, uh, very surprising. However, we've seen a slight increase of concession usage in what I would say. Dallas and possibly, in Raleigh and and specific Parks uh Pockets. Uh, Denver is definitely a concessionary market and we'll probably continue to be. So as we work through that 7.5%

Supply that was released in 2025 doesn't anticipate to grow as fast as some of the other markets that we are in.

[Analyst]: Helpful. Thanks for the time.

Jim Sebra: Thanks, Austin.

Helpful, thanks for the time.

Yep. Thanks Austin.

Operator: Next question comes from the line of Eric Wolfe with Citigroup. Your line is open.

[Analyst]: Hey, good morning. Looks like your net acquisition guidance came down, and you have some asset sales teed up early next year. Could you just talk about your appetite for buybacks and how you think about the spread between your stock trading today versus where you can sell assets?

next question comes from the line of Eric wolf with City, your line is open,

Hey, good morning. Um looks like your net acquisition guidance came down and you got some asset sales teed up for early next year. So could you just talk about your appetite for for BuyBacks and how you think about the spread between your stock is trading today, versus where you can sell assets?

Scott Schaeffer: Thanks. This is Scott. The acquisition guidance came down because we had a small portfolio under contract, and in due diligence we became aware of some significant structural issues. It was an all or nothing, so we walked away from it. At this point, we clearly recognize the disconnect between where markets are trading, where properties are trading relative to our implied cap rate at our share price. We have a strong appetite for buybacks. We want to be disciplined. Obviously, it's a very good use of capital at this point, but we also continue to work down our leverage. We're going to do it with retained earnings and other capital that won't impact our EBITDA.

Uh, thanks. This is this is Scott. So, um, the the acquisition guidance came down, um, because we had a, we had a, a small portfolio under contract and in due diligence, um, we uh, became aware of some significant structural issues, uh, and it was an all or nothing. So, um, we walked away from it. Uh, and, you know, at this point we clearly recognize the disconnect between where, uh, you know, markets are trading. I mean, we were properties are trading, um, relative to our, uh, implied cap rate, uh, at our share price. So, um, we have, we have a strong appetite for BuyBacks. Um, you know, we want to, we want to be, we want to be disciplined obviously. Um, clearly, it's a very good use of capital at this point. Um, but we also, were, are continue to work on our leverage. So, um, you know, we're

To do it with retained earnings and other uh, Capital that won't impact our ebi.

[Analyst]: Understood. I guess I was trying to think through to what extent you could sell additional assets and try to take advantage of that spread if you thought it was material. I know there are sometimes tax implications from that. There is also sort of a descaling of the enterprise that you have to be careful about. I was just curious to what extent we could see you ramp up the dispositions next year and then try to use those proceeds to be a bit more aggressive on a buyback in a leverage neutral manner.

Understood. Yeah, I guess I was trying to think through like to what extent you could sell, you know, additional assets and try to take advantage. Um, you know, of that spread if you thought it was material. I know there's sometimes tax implications from that. There's also sort of a descaling, uh, of the

Of the Enterprise that you have to be sort of careful about. Um but you know, it was just curious to what extent

Scott Schaeffer: I think it's a balance and it's a balance with the deleveraging strategy. We still want our leverage to come down, which it has been doing, and we want it to continue to come down. The thought of selling assets and giving up the EBITDA of that asset and then using the capital to buy back stock, while it might be a great return, is going to increase our leverage. I'm not sure anyone wants to see that. We have the $60 million on the forward available to us and we also have some of the JV programs that are not EBITDA producing during the construction. As those funds come back to us, that's available for us to use as capital for share buybacks.

Manner.

Jim Sebra: To clarify, the $61 million on the forward, we can net share settle that today. We don't actually issue a bunch of shares and have to buy back a bunch of shares. To Scott's point, that forward was issued at, I think, an average price of $20.60, and we're trading well below that. There's an opportunity there to take some of that, quote, unquote, gain and buy back incremental shares.

Well, I I think it's a balance, uh, and it's a balance with the deleveraging, um, strategy. And and we still, we still want our leverage, uh, to come down, which it has been doing and we wanted to continue to come down. So, um, the thought of selling assets and giving up the Eva of that asset and then using the, the capital to buy back stock. While it might be a great return. It's going to increase our leverage and I'm not sure anyone wants to see that. So we have the 60, some million dollars on the forward available to us. And we also have, um, some of the JV, uh, programs that are not even our producing during uh, the construction. So as those funds come back to us that's available for us to use as um, you know, capital for share BuyBacks and and just to clarify, um, the 61 million on the forward we can net share, settle that today. So we don't actually, you know, issue a bunch of shares and have that buy back, a bunch of shares. Um but the Scott's point, you know, that that forward that forward was issued at I think an average price of $20.60 and we're Trading

Well, below that. So there's an opportunity there to take some of that quote, unquote game, uh, and buy Bank incremental shares.

[Analyst]: Understood. Thank you.

Scott Schaeffer: Thank you.

Understood, thank you.

Thank you.

Operator: Next question comes from the line of John Kim with BMO Capital Markets.

Next question comes from the line of John Kim with BMO Capital markets.

[Analyst]: Good morning. I want to go back to your renewals that you signed this quarter back in September. In your presentation, you talked about the renewal trade out being in line or tracking expectations. I'm wondering if something happened in September where it decelerated quicker than you had thought, or was this 2.6% what you anticipated?

To your renewals. Uh, we signed this quarter um, back in September and your presentation, you talked about the renewal trade out being in line or tracking expectations.

So I'm wondering if something happened in September, where it decelerated quicker than you thought. Or was this?

Jim Sebra: I think the point I was trying to make earlier is that we actually anticipated the renewals to go down in the third quarter. When we kind of talked about them tracking in line with their expectations, that was clear that that was our expectations. Certainly, as we've mentioned earlier, we are obviously working in a very competitive environment and we are obviously looking to renew and retain as much of our residents as possible because not only are you saving a negative lease trade out, but you're also saving the vacancy costs, turn costs, and all the other stuff that goes along with it. I would say that the 2.6% was very much in line with our expectations.

Uh, the 2.6 budget anticipated.

[Analyst]: Just to clarify, that 40 basis point improvement, is that what you're sending out, sending renewals out today or what you're signing?

No, I think, uh, the point where we were I was trying to make earlier is that we actually anticipated the renewals to go down in the third quarter. So when we kind of talked about them tracking a line with their expectations, uh, that was clear that that was our expectation, you know, certainly, you know, as we've mentioned earlier, you know, we are obviously working in a very competitive environment, and we are obviously looking to renew and retain as much of our residents as possible because not only are you, uh, saving a, a negative lease trade out, but you're also saving the vacancy costs, turn costs and all the other stuff that goes along with it. So um, no, I would say that the 2.6 was very much in line with our expectations.

Jim Sebra: Based on what we've signed.

[Analyst]: Okay, my second question is the cap rate on the Aurora sale. I'm wondering if you could disclose that. I think you said in the prior call that this was related to the Steadfast portfolio. I'm wondering if you're looking at Denver as a market that you're looking to potentially sell more assets out of, just given the supply pressures.

And just to clarify that 40 basis, point Improvement is that what you're sending it out sending renewals out today or what you're signing. Uh, what what we signed?

Jim Sebra: Yeah, I don't have the cap rate on the Aurora Denver Health for sale asset that is not closed yet. Obviously, it's not even under contract. I would say it would be a cap rate based on our internal view of valuation. I can get back to you on that specifically.

Okay, um my second question is the cap rate on the Aurora sale? Wonder if you could disclose that and I think you said in the prior call that uh this was related to the steadfast portfolio, but I'm wondering if you're looking at Denver as as a market that you're looking to potentially sell more assets out of just given the the supply pressures.

Yeah, I don't have the cap rate on the Aurora uh Denver Health for sale asset. That is not that is not closed yet obviously. Um it's not even under contract. So I would say uh it would be a cap rate based on our internal view evaluation. Um but I can get back to you on that specifically.

[Analyst]: Okay. Denver as a market.

Okay. And then Denver as a market.

Scott Schaeffer: We'Re.

Scott Schaeffer: Not looking to exit the Denver market. The property in Aurora was a steadfast property. It's an older property, expensive to run, high CapEx, and that's why it was identified as held for sale.

We're not, we're not looking to, to exit the Denver Market, uh, the, the property in Aurora, uh, was a steadfast property. It's an older property, uh, expense of the Run, High capex, and that's why it was identified, uh, as health for sale.

[Analyst]: Got it. Thank you.

Got it. Thank you.

Operator: Next question comes from the line of Wes Golladay with Baird.

Jim Sebra: Hey.

Next question comes from the line of West Gellady with Beard.

[Analyst]: Good morning, everyone. I want to look at your number two market, Dallas. It looks like your same-store revenue growth is accelerating. I believe I heard you in the commentary talking about more concessions in the market. I'm just trying to see what's going on there.

Hey, yeah, good morning everyone. I want to look at your number 2 Market Dallas. It looks like your same store Revenue growth is accelerating. But I believe, I heard you in the commentary talking about more concessions in the market. So, I'm just trying to see what's going on there.

Janice Richards: Yeah, I think in Dallas, what we're seeing is targeted markets and submarkets that have had high supply are becoming more concessionary as we go into the slower seasonal months in order to maintain that occupancy. We're just making sure that we're staying competitive within the market. Market concessions are increasing as we've kind of seen a lingering effect of that supply. We're still able to maintain our occupancy, so the demand factor is still stable. It's just making sure that we can work through that supply on a timing factor.

Jim Sebra: Yeah.

Jim Sebra: I think, specifically with Dallas, you saw the average occupancy this quarter up 40 basis points over the third quarter of last year. That's a contributor to the acceleration.

Yeah, I think, uh, in Dallas what we're seeing is, you know, targeted markets and submarkets that have had high supply are becoming more, uh, concessionary as we go into the solar seasonal months in order to maintain that occupancy. Um, and so we're just making sure that we're staying competitive within the market. Concessions are increasing. As we've kind of seen a lingering effect of that, um, of that supply, you know, we're still able to maintain our occupancy. So the demand factor is still stable. It's just making sure that we can work through, uh, that supply and a timing factor.

[Analyst]: Okay, thanks for that. Looking at this year, you talked about your tech contributions being a bit of a tailwind. Do you think that momentum continues into next year? Will the bad debt expense coming down lower be a tailwind again next year?

Yeah, I think West specifically, without, yeah, I specifically with Dallas. I think you saw the average occupancy of this quarter, you know, up 40 basis points over the third quarter of last year. So that's a contributor to the acceleration.

Jim Sebra: I'll start with the last one, bad debt. Yes, we expect that the bad debt will continue to be, as I mentioned in the prepared remarks, we're working to keep that sustainably below 1%. That should be a nice tailwind or support to 2026 and beyond. I would say that on the technology side, yes, obviously we've implemented a series of pieces of technology both on the kind of front of house leasing and sales and tours as well as back of the house. Payables, processing, other things that we are definitely working on. We're going to continue to expand that to continue to drive lower expenses and better property improvements throughout the chain.

Then we'll the bad debt expense coming down, lower be, uh, Tailwind again next year.

[Analyst]: Okay, thanks for that. That's all for me.

It is, uh, I'll start with the last bed debt. Yes, we expected the bed debt to continue to be, as I mentioned in the pre-prepared remarks. You know, we're working to keep our sustainability below 1%, uh, so that should be a nice tailwind or support to 2026 and beyond. Um, I would say that on the technology side, yes. You know, obviously, we've implemented a series of pieces of technology, uh, both on the kind of front of house, leasing and sales, and tours, as well as, um, back of the house. So, payables processing, you know, other things, uh, that we are definitely working on, and we're going to continue to expand that, um, to continue to drive, you know, lower expenses, um, and better, you know, property improvements, uh, throughout the chain.

Okay. Uh, thanks for that. That's all for me.

Yep.

Operator: Next question comes from the line of Ami Probandt with UBS. Hi, I'm wondering were there any moving pieces within the same-store revenue guide such as blended rent assumptions, occupancy changes, bad debt.

Next question, comes from the line of Amy. Proband would you be s?

Hi. Um, I'm wondering. Were there any moving pieces within the same store re Revenue guide? Um, such as Blended? Rent, assumptions, occupancy, changes, bad debt.

Jim Sebra: Ami? Ami, are you there?

Amy.

Operator: Can you hear me now?

Did you get Amy? Are you there?

Jim Sebra: Yes. Okay, great. Would you mind restating that? You broke up there.

Can you hear me now?

Operator: Sorry about that. I was wondering if there were any moving pieces within the same-store revenue guidance, such as changes in blended rent.

Yes. Okay. Great. Would you mind restating that you broke up there?

Jim Sebra: Occupancy or bad debt for what, fourth quarter?

Yep. Sorry about that. Um, I was wondering if there were any moving pieces within the same store Revenue guidance, um, such as changes in Blended, rent Blended, rent, occupancy or bad debt.

Operator: Within the guidance, if you had maybe increased your assumptions on occupancy and decreased on rent, any moving pieces to get you to that, to the guidance midpoint?

For what fourth quarter.

Jim Sebra: Sure. The assumptions in guidance for occupancy was 95.5% in the fourth quarter. Blended rent growth of 20 basis points, other income growth of about 3%. We've assumed a similar improvement in bad debt as we saw in the third quarter. Bad debt in fourth quarter last year was about 2%. If you reduce that by that roughly 70, 80 basis point improvement we saw this quarter, that's what's factored into Q4.

Operator: Got it, thanks. You mentioned materially lower supply delivery levels. I'm wondering if you think that we may see extended lease-up periods and if you're factoring that into your thought process at all.

Uh, yeah, for, for within the guidance, um, if you had maybe yeah, increase your assumptions on occupancy and decrease done. Rent any, any moving pieces to get you to that? To the guidance midpoint. Oh yeah sure. Sure. Um, so, uh, you know the assumptions and guidance for occupancy was 95.5% in the fourth quarter, uh, Blended rank growth of 20 basis points, um, other income growth of about 3%, uh, and then we've assumed the similar Improvement in bad debt as we saw in the third quarter, uh, bad debt in fourth quarter last year, was about 2%. Um, so if you kind of did reduce that by that roughly you know, 70 to 80 basis point approval, we saw this quarter that's kind of what's backed up into Q4.

Got it. Thanks. And then you mentioned materially lower Supply delivery levels but

Jim Sebra: We are thinking about that. As you can imagine, we have not put out 2026 guidance yet. We are evaluating that with respect to what that budget will look like for next year and how significant it will be. The deliveries have come down quite significantly. Even throughout 2025, even though the deliveries are higher than we all anticipated, the level of deliveries in 2025 is still significantly under 2024. We are expecting to see a lot of the lease ups, if not done, but if there is some extension, it should be a very small effect in the early to mid part of 2026.

but I'm wondering if you think that we may see extended lease up periods and if you're factoring that into your thought process at all,

Operator: Got it, thank you. Next question comes from the line of Omatayo Okosanya with Deutsche Bank.

We are we are uh thinking about that. We are as you can imagine. We have not put out 2026 guidance yet. So we are evaluating that with respect to what those what that budget will look like for next year. Uh, and how significant um, it will be, you know, the deliveries have come down quite significantly, you know, even throughout 2025 even though the deliveries are higher than we all anticipated, the level of deliveries in 25 are still significantly under 2024. Uh, so we are, we are expecting to see a lot of the lease UPS if not done. Uh, but if there is some extension, it should be a very small effect in the kind of early to mid part of 2026.

Got it. Thank you.

Next question comes from the line of omato with Dolce Bank.

[Analyst]: Yes, good morning everyone. Really good color in regards to kind of supply and what's happening in your market. Curious if you could talk a little bit on the demand side. I mean, is some of the pressure on blended rates really more because there's just a lot of supply and people have options, or is there like an actual demand issue where, you know, whether it's because of slowing job growth or things like that, you're getting a little bit more pushback as well in terms of asking rents and renewals. Sure.

Uh, yes uh good morning everyone. Uh, really good color in regards to kind of supply and what's happening in your market. So let's see if you could talk a little bit on the demand side. I mean it it's some of the pressure on on on on uh on on on on Blended rates really more because there's just a lot of supply and people have options or is there like an actual demand issue where, you know, whether it's because of slowing job growth or things like that. You're getting a little bit more, push back as well.

Jim Sebra: I mean, I think you've heard us previously as well as a lot of our apartment peers, the leasing season kind of started a little earlier, ended a little earlier. I would say, just generally speaking on the demand side, if you look at just our submarkets and you look at absorption levels and demand levels, it's in Q2 and Q3, their peaks over historical recent history in terms of what they were. Obviously that's because of lease ups, everything else. I would say the demand is still quite healthy for apartments. A lot of our resident base that we cater to in our differentiated Class B portfolio is not the white collar jobs that might be experiencing job losses. It's hospital workers, it's nursing home workers, it's retail workers, it's not the typical white collar including, we have factory workers and blue collar workers.

Jim Sebra: It's a much, what we think, more defensive, you know, in the air than what folks appreciate or think might be affecting apartments down the road. We do track reasons for move outs because of job losses. I would say there's really no elevation there over the past six to nine months. It's not something we are watching. It's not something that we're overly concerned about at the moment, but we are watching and paying attention to it.

Uh, we think more defensively, you know, in the AI era, than, um, than what, you know, folks appreciate or think might be affecting apartments down the road. Um, we do track reasons for move-outs because of job losses, and I would say, uh, there's really no elevation there over the past 6 to 9 months. So it's not something we are watching. It's not something that we're overly concerned about at the moment, but we are watching and paying attention to it.

[Analyst]: Gotcha. Last one for me, just because it's election season at this point, anything on any ballots in any of your key markets that you're kind of watching that could potentially impact your business?

Gotcha. And then my last 1 for me just because it's election season. At this point anything on any ballots in any of your key markets. So you're kind of watching us that could potentially impact

Jim Sebra: The school district in my local town I don't like very much, but that's a different story. No, we're not aware of anything. We're not aware of anything in our markets where we should be concerned.

Uh, your business.

Well, my, the school district in my local town, I would like very much, but that's a different story. Uh, no, we're not aware of anything. We're not aware of anything in, uh,

[Analyst]: Great, thank you.

Uh, in our markets where we should be concerned.

Great. Thank you.

Operator: Our final question comes from the line of John Pawlowski with Green Street.

Our final question comes from the line of anchen with Green Street.

Stephanie Krewson-Kelly: Hi, good morning. Are you seeing any labor availability issues resurfacing for any type of employees or geographic markets?

Hi, good morning. Um so are you seeing any labor availability issues reservist for any type of employees or Geographic markets?

Jim Sebra: You mean inability for us to hire employees?

Uh, you mean inability for us to hire employees.

Stephanie Krewson-Kelly: Yes.

Jim Sebra: I would say generally speaking, from our renovations team to our onsite teams to our corporate teams, jobs are filling kind of in the expected timeframe. There's no real concern or issue there with availability.

Yes.

Scott Schaeffer: We've also seen a marked reduction in.

Yeah. No, I was I would say generally speaking from our Renovations team, they're on-site teams to our corporate teams uh you know, jobs are filling, you know, kind of in the expected time frame. So there's no real concern or issue there with availability.

Scott Schaeffer: The turnover within our on-site, which is encouraging going forward.

We've also seen a market reduction in the turnover within our on-site teams.

Which is encouraging. Yeah, going forward.

Stephanie Krewson-Kelly: Great, thank you. Second question for me. I know you mentioned earlier that you haven't seen any larger demand shift with the tenants. I'm just wondering if you've observed in Q3 and over 2025 any kind of emerging shifts in just general tenant behavior that might influence rent growth, differing between the markets, such as shorter lease terms or higher concessions, move-in timing shifts towards a Class B product type or anything like that. From that perspective, which markets appear more resilient versus more vulnerable to these types of tenant behaviors?

Great, thank you. Uh, and the second question,

Jim Sebra: Yeah, we haven't seen, I would say, tenant behaviors in terms of payment patterns or work order developments that would cause us any level of concerns. I would say that the one thing that continues to shift and we continue to try to be on the leading edge of it is the whole, you know, how does a prospect find us? Right. The whole marketing engine, the advertising engine. You see us spending more money on advertising dollars between ILS services, paid search, as well as just pure organic SEO, and then also getting deeper into the kind of how the AI tools are working where you can type into ChatGPT, show me an apartment for whatever in Atlanta. How do we show up in that list each and every time? Today we're ranking on page one of some of the Google searches, just organic searches for many, many keywords.

Um, you haven't seen any larger demand shift um with the tenants. Um, just wondering if you've observed in 3 q and over 2025 any kind of emerging shifts and just general tenant behavior, that might influence rent growth. Um, you know, different between the markets such as like shorter lease terms or higher concessions, moving timing, um, ships for the class, B product type or anything like that. Um, and from that perspective, which markets appear, more resilient versus more vulnerable to to these types of, uh, tenant behaviors.

Jim Sebra: We still have more room to go. We're going to keep pushing on that, but that's an area that we're spending a lot of time and energy on.

Yeah, we haven't seen, I would say you know tenant behaviors in terms of payment patterns or you know work order, the developments that would cause us any level of concerns. I would say that the 1 thing that continues to shift and we continue to try to be on the Leading Edge of it is the whole, you know, how does a, how does a prospect find us, right? The whole marketing engine, the advertising engine, you see a spending more money on advertising dollars between iOS Services paid search as well as just pure organic SEO, uh, and then also getting deeper into the kind of how the AI tools are working. Where you can type in the chat CPT show me an apartment for whatever or in Atlanta and how do we show up in that list every and every time, um, you know, today we're ranking on page 1 of, you know, some of the Google searches, just organic searches on, uh, for many, many keywords. We still have more room to go, and we're going to keep pushing on that, but it's, um, that's an area that we're spending a lot of time and energy on.

Stephanie Krewson-Kelly: Great, thank you.

Great. Thank you.

Operator: Seeing no further questions, I would now like to turn the call back over to Scott Schaeffer for closing remarks.

Seeing no further questions.

Scott Schaeffer: Thank you all for joining us this morning, and we look forward to speaking with you again next quarter.

Like to turn the call back over to Scott Shafer for closing remarks.

Thank you all for joining us this morning and we look forward to speaking with you again next quarter.

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

Ladies and gentlemen, thank you all for joining today's call. You may now disconnect.