Q3 2025 Mid America Apartment Communities Inc Earnings Call

Speaker #3: Good morning , ladies and gentlemen , and welcome to the May 3rd quarter , 2020 Earnings Conference call . During the presentation , all participants will be in listen only mode .

Operator: Good morning ladies and gentlemen and welcome to the MAA third quarter 2025 earnings conference call. During the presentation, all participants will be in listen only mode. Afterward, the company will conduct a question and answer session. As a reminder, this conference call is being recorded today, October 30, 2025, and in consideration of time we have a two question limit. I will now turn the call over to Andrew Schaeffer, Senior Vice President, Treasurer, and Director of Capital Markets of MAA for opening comments.

Speaker #3: Afterward , the company will conduct a question and answer session . As a reminder , this conference call is being recorded today , October 30th , 2025 .

Speaker #3: And in consideration of time , we have a two question limit . I will now turn the call over to Andrew Schaefer , Senior Vice President , treasurer and Director of Capital Markets of Ma , for opening comments .

Speaker #4: Thank you , Regina , and good morning , everyone . This is Andrew Schaefer , treasurer and director of capital markets for Ma .

Brad Hill: Thank you, Regina, and good morning, everyone. This is Andrew Schaeffer, Treasurer and Director of Capital Markets for Mid-America Apartment Communities Inc. Members of the management team participating on the call this morning are Brad Hill, Tim Argo, Clay Holder, and Rob DelPriore. Before we begin with prepared comments this morning, I want to point out that as part of this discussion, company management will be making forward-looking statements. Actual results may differ materially from our projections. We encourage you to refer to the forward-looking statements section in yesterday's earnings release and our 34 Act filings with the SEC, which describe risk factors that may impact future results. During this call, we will also discuss certain non-GAAP financial measures.

Speaker #4: Members of the management team call this morning are Brad Hill Tim Argo , Clay A. Holder and Rob Delpre . Before we begin with prepared comments this morning , I want to point out that as part of this discussion , company management will be making forward looking statements .

Speaker #4: Actual results may differ materially from our projections . We encourage you to refer to the forward looking statements section in yesterday's earnings release , and our 34 filings with the SEC , which describe risk factors that may impact future results .

Speaker #4: During this call , we will also discuss certain non-GAAP financial measures . A presentation of the most directly comparable GAAP financial measures , as well as reconciliations of the differences between non-GAAP and comparable GAAP measures , can be found in our earnings release and supplemental financial data .

Brad Hill: A presentation of the most directly comparable GAAP financial measures, as well as reconciliations of the differences between non-GAAP and comparable GAAP measures, can be found in our earnings release and Supplemental Financial Data. Our earnings release and supplement are currently available on the For Investors page of our website at www.maac.com. A copy of our prepared comments and an audio recording of this call will also be available on our website later today. After some brief prepared comments, the management team will be available to answer questions. I will now turn the call over to Brad. Thank you, Andrew, and good morning, everyone. As highlighted in our earnings release, our third quarter core FFO results met our expectations, reinforcing the resilience of our platform and strategy.

Speaker #4: Our earnings release and supplement are currently available on the . For Investors page of participating on the our website at WW . A copy of our prepared comments and an audio recording of this call will also be available on our website later today .

Speaker #4: After some brief prepared comments , the management team will be available to answer questions . I will now turn the call over to Brad .

Speaker #5: Thank you Andrew , and good morning everyone . As highlighted in our earnings release , our third quarter core FFO results met our expectations , reinforcing the resilience of our platform and strategy .

Speaker #5: While the broader economic environment has introduced some challenges , including slower job growth and tempered pricing power in new leases . We are still seeing recovery strong occupancy , solid collections , and year over year improvements in new renewal and blended lease rates .

Brad Hill: While the broader economic environment has introduced some challenges, including slower job growth and tempered pricing power in new leases, we are still seeing recovery, strong occupancy, solid collections, and year-over-year improvements in new, renewal, and blended lease rates in the third quarter demonstrate our momentum. Demand across our markets remains healthy, and we are encouraged that the record level of lease-ups in our region are being absorbed. With occupancy levels increasing 450 basis points over the past five quarters and now approaching pre-COVID levels, supply levels in our markets, though elevated historically, are trending down at a faster pace than many other regions. As new deliveries continue to decline each quarter, we anticipate a strong recovery in pricing power and operating performance. Importantly, new starts remain below long-term averages and have for the past 10 quarters, and we see no indication of an acceleration in starts.

Speaker #5: In the third quarter demonstrate our momentum demand across our markets remains healthy and we are encouraged that the record level of lease ups in our region are being absorbed with occupancy levels increasing 450 basis points over the five .

Speaker #5: The past five quarters and now approaching pre-COVID levels . Supply levels in our markets , though elevated historically , are trending down at a faster pace than many other regions as new deliveries continue to decline each quarter .

Speaker #5: We anticipate a strengthening recovery in pricing power and operating performance. Importantly, new starts remain below long-term averages and have for the past ten quarters.

Speaker #5: And we see no indication of an acceleration in starts . In fact , per our third party data provider , our markets saw just 0.2% of inventory in new starts in the third quarter and starts over the trailing four quarters were just 1.8% of inventory , roughly half the historical norm .

Brad Hill: In fact, per our third-party data provider, our market saw just 0.2% of inventory in new starts in the third quarter, and starts over the trailing four quarters were just 1.8% of inventory, roughly half the historical norm, positioning us for sustained improvement. Our diversified presence across high-growth markets and more affordable price point provides access to a broader segment of the rental market that is financially strong, supporting continued strong collections. Additionally, our region continues to capture one of the highest levels of annual wage growth, as evidenced by the increasing incomes of our new residents driving favorable rent-to-income ratios, which remain at a healthy low of 20%.

Speaker #5: Positioning us for sustained improvement . Our diversified presence across high growth markets and more affordable price point provides access to a broader segment of the rental market that is financially strong , supporting continued strong collections .

Speaker #5: Additionally , our region continues to capture one of the highest levels of annual wage growth , as evidenced by the increasing incomes of our new residents , driving favorable rent to income ratios , which remain at a healthy low of 20% , improving leasing conditions also bolster our redevelopment pipeline , offering residents a newly renovated unit at a more affordable price .

Brad Hill: Improving leasing conditions also bolster our redevelopment pipeline, offering residents a newly renovated unit at a more affordable price as compared to the higher-priced new multifamily supply due to persistent single-family affordability challenges, our strong customer service, and demographic trends that support renting. Residents are choosing to stay longer, with only 10.8% of our move outs occurring due to home purchases. Our balance sheet remains a key strength with our recent credit facility expansion, which Clay will discuss in a moment, providing exceptional flexibility. While the transaction market has been active at sub-5% cap rates, we continue to identify select accretive opportunities, such as our recent Kansas City acquisition, a stabilized suburban 318-unit property that we purchased for approximately $96 million and is expected to deliver a year one NOI yield of 5.8%.

Speaker #5: As the compared to higher priced new multifamily supply . Due to persistent single family affordability challenges . Our strong customer service and demographic trends that support renting residents are choosing to stay longer , with only 10.8% of our move outs occurring due to home purchases .

Speaker #5: Our balance sheet remains a key strength with our recent credit facility expansion , expansion , which Clay will discuss in a moment , providing exceptional flexibility .

Speaker #5: While the transaction market has been active at sub 5% , cap rates , we continue to identify select accretive opportunities such as our recent Kansas City acquisition , a stabilized suburban 318 unit property that we purchased for approximately $96 million and is expected to deliver a year .

Speaker #5: One NOI yield of 5.8% . Subsequent to quarter end . We purchased an adjacent land parcel for an Ada unit , phase two , that will expand the stabilized NOI yield on our total investment to nearly 6.5% .

Brad Hill: Subsequent to quarter end, we purchased an adjacent land parcel for an 88-unit Phase Two that will expand the stabilized NOI yield on our total investment to nearly 6.5%. After capturing additional scale and efficiencies from the Phase Two development, we are also advancing our development pipeline and securing additional attractive long-term investment opportunities. In today's equity-constrained environment, our access to capital and development expertise remain competitive advantages. Following quarter end, we acquired land, plans, and permits for a shovel-ready project in Scottsdale, Arizona, scheduled to begin construction in the fourth quarter. This project, like others we've recently launched, reflects our ability to capitalize on situations where developers faced equity challenges, allowing us to secure projects at a compelling basis. The Scottsdale development is expected to deliver a stabilized NOI yield of 6.1%.

Speaker #5: After capturing additional scale in efficiencies from the phase two development , we are also advancing our development pipeline and securing additional attractive long term investment opportunities in today's equity constrained environment , our access to capital and development expertise remain competitive .

Speaker #5: This Advantages . project , like others we've recently launched , reflects our ability to capitalize on situations where developers faced equity challenges , allowing us to secure projects at a compelling basis .

Speaker #5: The Scottsdale development is expected to deliver a stabilized NOI yield of 6.1% in total . We now own or control 15 development sites with approvals for over 4200 units , and if market conditions remain supportive , we anticipate starting construction on 6 to 8 projects over the next six quarters .

Brad Hill: In total, we now own or control 15 development sites with approvals for over 4,200 units, and if market conditions remain supportive, we anticipate starting construction on six to eight projects over the next six quarters, driving meaningful earnings contribution in the years ahead. With a 30-year track record of delivering through economic cycles, we remain confident in our ability to execute during this transition. Our focus on high-demand, high-growth markets, significant redevelopment opportunities, efficiency gains from technology initiatives rolling out in 2026 and beyond, and a growing external growth strategy position us for stronger earnings growth. Our portfolio will continue to benefit from job growth, wage growth, household formation and migration, and population trends that outpace other regions.

Speaker #5: Driving meaningful earnings contribution in the years ahead . With a 30 year track record of delivering through economic cycles . We remain confident in our ability to execute during this transition .

Speaker #5: Our focus on high demand , high growth markets , significant redevelopment opportunities , efficiency gains from technology initiatives , rolling out in 26 and beyond , and a growing external growth strategy position us for stronger earnings growth .

Speaker #5: Our portfolio will continue to benefit from job growth , wage growth , household formation and migration , and population trends that outpace other regions .

Speaker #5: We are encouraged by the building blocks that are in place and what we expect will be an acceleration of the recovery cycle in 2026 , leading to sustained revenue and earnings growth as new deliveries continue to decline and the recovery advances to all our associates across our properties and corporate offices .

Brad Hill: We are encouraged by the building blocks that are in place and what we expect will be an acceleration of the recovery cycle in 2026, leading to sustained revenue and earnings growth as new deliveries continue to decline and the recovery advances. To all our associates across our properties and corporate offices, thank you for your unwavering dedication and commitment during this busy leasing season. Your efforts continue to drive our success. I'll turn the call over to Tim.

Speaker #5: Thank you for your unwavering dedication and commitment during this busy leasing season . Your efforts continue to drive our success . So with that , I'll turn the call over to Tim .

Speaker #5: Thank you Brad , and good morning , everyone . For the third quarter , we saw increasing occupancy and strong retention and renewal lease rates , but experienced continued lack of traction in the ability to push on new lease rates .

Tim Argo: Thank you, Brad, and good morning, everyone. For the third quarter, we saw increasing occupancy and strong retention and renewal lease rates, but experienced continued lack of traction in the ability to push on new lease rates. We believe broad economic uncertainty and slower job growth, as evidenced by a downward revision to the job growth numbers, contributed to prospects being more cautious about making decisions to move and to operators prioritizing occupancy over new lease rents. Despite the challenging environment for new leases, we continue to see new lease-over-lease pricing improve over the prior year at -5.2%, up 20 basis points as compared to the third quarter of 2024. This is combined with the strong renewal lease-over-lease performance of +4.5%, which was up 40 basis points over the prior year. Blended pricing for the quarter was +0.3%, improving 50 basis points from the third quarter of last year.

Speaker #5: We believe broad economic uncertainty and slower job growth , as evidenced by a downward revision to the job growth numbers , contributed to prospects being more cautious about making decisions to move and to operators prioritizing occupancy over new lease rents .

Speaker #5: Despite the challenging environment for new leases , we continued to see new lease over lease pricing improve over the prior year . At minus 5.2% , up 20 basis points as compared to the third quarter of 2020 .

Speaker #5: Four . Combined with the strong renewal lease release performance of plus 4.5% , which was up 40 basis points over the prior year , blended pricing for the quarter was positive 0.3% , improving 50 basis points from the third quarter of last year .

Speaker #5: As mentioned , average occupancy sequentially improved to 95.6% in the third quarter , representing a 20 basis point increase from the second quarter .

Tim Argo: As mentioned, average physical occupancy sequentially improved to 95.6% in the third quarter, representing a 20 basis point increase from the second quarter. Additionally, we had another quarter of strong collections, with net delinquency representing just 0.3% of billed rents. A number of our mid-tier markets, particularly in the Mid Atlantic region, continue to be outperformers relative to the portfolio. Richmond and the D.C. area markets remain strong, and other markets such as Savannah, Charleston, and Greenville all demonstrated strong pricing power in the quarter. Of our larger markets, Houston continued to be steady, and we are seeing encouraging progress in Atlanta and the Dallas-Fort Worth area properties, where blended pricing in both of these markets improved sequentially from the second quarter and outperformed the same store portfolio.

Speaker #5: Additionally , we had another quarter of strong collections with net delinquency representing just 0.3% of billed rents . A number of our mid-tier markets , particularly in the Mid-Atlantic region , continue to be outperformers relative to the portfolio .

Speaker #5: Richmond and the D.C. area markets remained strong , and other markets such as Savannah , Charleston , and Greenville all demonstrated strong pricing power in the quarter of our larger markets .

Speaker #5: Houston continued to be steady , and we are seeing encouraging progress in Atlanta and the Dallas Fort Worth area properties where blended pricing in both these markets improved sequentially from the second quarter and outperformed the same store portfolio .

Speaker #5: The lagging markets we have noted for the past few quarters remain consistent with Austin continuing to work through its record supply pressure , resulting in weak new lease pricing and national facing significant pricing pressure as well .

Tim Argo: The lagging markets we have noted for the past few quarters remain consistent, with Austin continuing to work through its record supply pressure resulting in weak new lease pricing, and Nashville facing significant pricing pressure as well. In our lease-up portfolio, we had three properties, West Midtown, Daybreak, and Milepost 35, reach stabilization in the third quarter. We continue to make progress with our other four lease-up properties, which have a combined occupancy of 66.1% as of the end of the third quarter, and the two development properties that are currently leasing units. We have seen the uncertainty and higher leasing pressure impacted a portion of our lease-up portfolio and pushed the stabilization date by one quarter for Val Vista and Phoenix, while Liberty Row just started leasing. The other five properties with units delivered are well into the lease-up process and rents are in line with the original performance.

Speaker #5: In our lease up portfolio , we had three properties West , Midtown , Daybreak and milepost 35 reached stabilization in the third quarter .

Speaker #5: We continue to make progress with our other for lease up properties , which have a combined occupancy of 66.1% as of the end of the third quarter , and the two development properties that are currently leasing units , we have seen the uncertainty in higher leasing pressure impacted a portion of our lease up portfolio and pushed the stabilization date by one quarter for Val Vista and Phoenix , while Liberty Road just started leasing the other five properties with units delivered are well into the lease up process and rents are in line with the original Pro .

Speaker #5: This helps preserve the long term value creation opportunity despite the overall leasing velocity being a little bit behind original expectations . Our various targeted redevelopment and repositioning initiatives continued in the third quarter , and we still expect to accelerate these programs into 2026 .

Tim Argo: This helps preserve the long-term value creation opportunity despite the overall leasing velocity being a little bit behind original expectations. Our various targeted redevelopment and repositioning initiatives continued in the third quarter and we still expect to accelerate these programs into 2026. During the third quarter of 2025, we completed 2,090 interior unit upgrades, achieving rent increases of $99 above non-upgraded units and a cash-on-cash return in excess of 20%. This was an acceleration of both volume of completed units and rent growth achieved from the second quarter. Despite this more competitive supply environment, these units leased on average 10 days faster than non-renovated units when adjusted for the additional turn time.

Speaker #5: During the third quarter of 2025 , we we completed 2090 interior Unit upgrades , achieving rate increases of $99 above Non-upgraded units and a cash on cash return in excess of 20% .

Speaker #5: This was an acceleration of both volume of completed units and rent growth achieved from the second quarter . Despite this more competitive supply environment , these units leased on average ten days faster than Non-renovated units .

Speaker #5: When adjusted for the additional turn time , we still expect to renovate approximately 6000 units in 2025 , and for our common area and amenity Repositioning program , we continue the repricing phase at six recent projects with five of the six past the halfway point in repricing so far , the results are encouraging , with double digit NOI yields and rent growth far exceeding peer Emaar Properties .

Tim Argo: We still expect to renovate approximately 6,000 units in 2025 and for our common area and amenity repositioning program, we continue the repricing phase at six recent projects with five of the six past the halfway point in repricing. So far, the results are encouraging with double-digit NOI yields and rent growth far exceeding peer MAA properties. Five additional projects are now underway with anticipated repricing to coincide with the prime 2026 leasing season. We are live on five 2025 retrofit projects for community-wide Wi-Fi with go-live days planned through the remainder of 2025 at an additional 15 communities as we approach the end of October. Our current occupancy is 95.6% and 60-day exposure is 6.1%, 20 basis points and 30 basis points respectively, better than this time last year, which keeps us in a position for stable occupancy heading into the slower traffic season.

Speaker #5: Five additional projects are now underway , with anticipated repricing to coincide with the Prime 2026 leasing season . We are live on five 2025 retrofit projects for community wide Wi-Fi with go live dates planned through the remainder of 2025 .

Speaker #5: As an additional 15 communities . As we approach the end of October , our current occupancy is 95.6% and 60 day exposure is 6.1% .

Speaker #5: 20 basis points and 30 basis points , respectively . Better than this time last year , which keeps us in a position for stable occupancy heading into the slower traffic season .

Speaker #5: As Brad referenced , new supply of pressure continues to moderate and absorption remains strong with market level occupancies including lease ups at the highest level since mid 2019 .

Tim Argo: As Brad referenced, new supply pressure continues to moderate and absorption remains strong with market-level occupancies, including lease-ups at the highest level since mid-2019. Our theme of strong renewal performance continues in the fourth quarter with high retention rates and lease-over-lease growth rates on renewals accepted for October, November, and December ranging between +4.5% and +4.9%, moderating construction starts. Sunbelt market demand dynamics and high retention rates underlie our optimism for an improving leasing environment, particularly as we get into the spring and summer leasing season of 2026. That's all I have in the way of prepared comments, and now I'll turn.

Speaker #5: Our theme of strong renewal performance continues in the fourth quarter , with high retention rates and lease over lease growth rates on renewals accepted for October , November and December , ranging between plus four and a half and plus 4.9% moderating construction starts .

Speaker #5: Sunbelt market demand dynamics and high retention rates underlie our optimism for an improving leasing environment , particularly as we get into the spring and summer leasing season of 2026 .

Speaker #5: That's all I have in the prepared comments , now , I'll turn the call over to Colette . Thank you , Jim , and good morning , everyone .

Brad Hill: The call over to Clay. Thank you, Tim, and good morning, everyone. We reported core FFO for the quarter of $2.16 per diluted share, which was in line with the midpoint of our third quarter guidance. Favorable overhead expenses of $0.01 and same store expenses of $0.005 were offset by unfavorable same store revenues of $0.005 and non same store expenses of $0.01. As Tim alluded to in his comments, our occupancy and renewal lease performance remained strong and were in line with our projections for the quarter, while new lease rates performed below our expectations. During the quarter, we funded approximately $78 million in development cost for our current $797 million pipeline, leaving an expected $254 million to be funded on the current pipeline over the next three years. Our balance sheet remains well positioned to support these and other future growth opportunities.

Speaker #5: We reported .

Speaker #4: Quarter for the quarter .

Speaker #5: Of $2.16 per diluted share , which was in .

Speaker #6: Line with the midpoint of our third quarter guidance . Favorable overhead expenses of $0.01 and same store expenses of a half cent were offset by unfavorable same store revenues of a half cent and same store expenses of $0.01 .

Speaker #6: As Tim alluded to in his comments , our occupancy and renewal lease performance remains strong and were in line with our projections for the quarter .

Speaker #6: While new lease rates performed below our expectations during the quarter , we funded approximately $778 million in development costs for our current $797 million pipeline , leaving an expected $254 million to be funded on the current pipeline .

Speaker #6: Over the next three years . Our balance sheet remains well positioned to support these and other future growth opportunities . At the end of the quarter , we had $815 million in combined cash and borrowing capacity under our revolving credit facility and our net debt to EBITDA ratio was 4.2 times at quarter end .

Brad Hill: At the end of the quarter, we had $850 million in combined cash and borrowing capacity under our revolving credit facility, and our net debt to EBITDA ratio was 4.2 times. At quarter end, our outstanding debt was approximately 91% fixed with an average maturity of 6.3 years at an effective rate of 3.8%. Subsequent to quarter end, we amended our revolving credit facility, increasing the capacity of the facility from $1.25 billion to $1.5 billion and extending the maturity of the facility to January 2030. In addition, we amended our commercial paper program to increase the maximum amount of outstanding commercial paper borrowings to $750 million. We have an upcoming $400 million bond maturity in November that we expect to refinance in the fourth quarter.

Speaker #6: Our outstanding debt was approximately 91% fixed , with an average maturity of 6.3 years at an effective rate of 3.8% . Subsequent to quarter end , we amended our revolving credit facility , increasing the capacity of the facility from 1.25 billion to 1.5 billion and extending the maturity of the facility to January 2030 .

Speaker #6: In addition , we amended our commercial paper program to increase the maximum amount of outstanding commercial paper borrowings to $750 million . We have an upcoming $400 million bond maturity in November that we expect to refinance in the fourth quarter .

Speaker #6: Finally , we have adjusted our core FFO and same store guidance for the year , as well as revised other areas of our detailed guidance previously provided , primarily due to the lower recovery trajectory on new lease rents .

Brad Hill: Finally, we have adjusted our core FFO and same store guidance for the year as well as revised other areas of our detailed guidance previously provided, primarily due to the lower recovery trajectory on new lease rents. As the broader economy and employment markets moderated over the summer months, we are making slight adjustments to our guidance associated with same store rent growth. We are lowering the midpoint of effective rent growth guidance to negative 0.4% while maintaining average fiscal occupancy guidance at 95.6% for the year. Total same store revenue guidance for the year is revised to negative 0.05%. We are also lowering our same store property operating expense growth projections for the year to 2.2% at the midpoint. The lower guidance is primarily due to favorable third quarter property tax valuations as compared to our original expectations.

Speaker #6: As the broader economy and employment markets moderated over the summer months . We are making slight adjustments to our guidance associated with same store rent growth .

Speaker #6: We are lowering the midpoint of effective rent growth guidance to -0.4% , while maintaining average physical occupancy guidance at 95.6% for the year .

Speaker #6: Total same store revenue guidance for the year is revised to -0.05% . We are also lowering our same store property , operating expense growth projections for the year to 2.2% at the midpoint .

Speaker #6: The lower guidance is primarily due to favorable third quarter property tax valuations as compared to our original expectations . The changes to our same store revenue and profit property operating expense projections resulted in us adjusting our same store NOI expectation to negative 1.35% .

Brad Hill: The changes to our same store revenue and property operating expense projections result in us adjusting our same store NOI expectation to negative 1.35%. In addition to updating our same store operating projections, we are revising our 2025 guidance to reflect favorable trends in overhead expenses along with adjusting our acquisition and disposition volume for the year. Given the current transactions market, the impact of these adjustments combined with the updated expectations for our non same store portfolio resulted in us adjusting the midpoint of our full year core FFO guidance to $8.74 per share and narrowing the range to $8.68 to $8.80 per share. That is all that we have in the way of prepared comments. Regina, we will now turn the call back to you for questions.

Speaker #6: In addition to updating our same store operating projections , we are revising our 2020 guidance to reflect favorable trends in overhead expenses , along with adjusting our acquisition and disposition volume for the year .

Speaker #6: Given the current transactions , market , the impact of these adjustments combined with the updated expectations for our same store portfolio , resulted in us adjusting the midpoint of our full year quarter guidance to $8.74 per share and airing the range to $8.68 to $8.80 per share .

Speaker #6: That is all that we have in the way of prepared comments . So , Regina , we will now turn the call back to you for questions .

Speaker #3: We will now open the call up for questions . If you'd like to ask a question , please press star then one on your touchtone phone .

Operator: We will now open the call up for questions. If you'd like to ask a question, please press Star then one on your touchtone phone. If you'd like to withdraw your question, press Star one a second time. In the interest of time, the company has requested a two question limit. Our first question will come from the line of Eric Wolfe with Citigroup. Please go ahead.

Speaker #3: If you'd like to withdraw your question , press star one a second time . In the interest of time , the company has requested a two question limit .

Speaker #3: Our first question will come from the line of Eric Wolfe with Citi . Please go ahead .

Speaker #7: Hey , thanks . Good morning . A number of your peers have talked about worsening trends . In late September and into October , specifically on on new leases .

[Analyst]: Hey, thanks. Good morning. A number of your peers have talked about worsening trends in late September and into October, specifically on new leases beyond just the sort of normal seasonal. Can you maybe talk about recent pricing trends that you're seeing on new leases, and is there any markets that are moving abnormally at this time of year, and just sort of any thoughts on sort of how that could trend through the rest of the quarter?

Speaker #7: You know , beyond just the sort of normal seasonal curve . Can you maybe talk about recent pricing trends that you're seeing on new leases , and is any markets that are moving abnormally at this time of year and just sort of any thoughts on sort of how that that could trend through the rest of the quarter ?

Speaker #6: Yeah .

Speaker #5: Eric , this is Tim . I would say broadly , we've seen generally pretty typical seasonality . You know , actually , on the newly side saw saw our lease decline a little bit less than normal from Q2 to Q3 .

Tim Argo: Yeah, Eric, this is Tim.

Brad Hill: I would say broadly we've seen generally pretty typical seasonality.

Tim Argo: We actually on the new lease side saw our new lease decline a little bit less than normal from Q2 to Q3. It's normally in the 60 to 70 basis point moderation, and we moderated 40 basis points and then even did better on the renewal side. I think broadly we're seeing normal seasonality. You know, we typically see pricing kind of peak in July and then slowly moderate from there for the rest of the year as the traffic starts to die down. That's pretty much what we've seen. The trend was a little bit less seasonal, as I mentioned, but broadly happening as we would typically expect. In terms of markets, I mean, the D.C. market we talked about still on a relative basis doing well, but certainly moderated a little on the new lease side.

Speaker #5: Normally, we see a moderation in the 60 to 70 basis points range. However, we moderated by 40 basis points and did even better on the renewal side.

Speaker #5: So I think broadly we're seeing normal seasonality . You know , we typically see pricing kind of peak in July and then slowly moderate from there through the rest of the year .

Speaker #5: As the traffic starts to die down . And that's that's pretty much what we've seen . The trend was a little seasonal . As I mentioned .

Speaker #5: But but broadly happening as we would we would typically expect in terms of markets . I bit less mean , the D.C. market , we talked about , it's still on a relative basis , doing well , but certainly moderated a little on the on the newly side , the other , you know , some of the laggards , as we've talked about , have been similar , encouraging ones have been Dallas and Atlanta .

Tim Argo: The other, some of the laggards, as I talked about, have been similar. The encouraging ones have been Dallas and Atlanta both. We saw actually new lease acceleration from Q2 to Q3, and those are combined our two largest markets have seen some encouraging trends there, but broadly, you know, normal seasonality.

Speaker #5: Both . We saw actually new lease acceleration from Q2 to Q3 . And those are combined are two largest markets . And seeing some encouraging trends .

Speaker #5: There . But but broadly , you know , normal seasonality .

Speaker #7: That's helpful . And then could you maybe talk about any early thoughts on 2026 in terms of earning and contribution from other income ?

[Analyst]: That's helpful. Could you maybe talk about any early thoughts on 2026 in terms of earning and contribution from other income, essentially the more sort of predictable items for next year? Obviously, if you want to give your view of market rent growth, we'll take it, but realize it's a dynamic environment.

Speaker #7: Essentially , the more sort of predictable items for next year ? Obviously , if you want to give your your view of market rent growth , we'll take it .

Speaker #7: But realize it's a dynamic environment .

Speaker #5: Hey , Eric , this is Brad . I'll start and Tim can certainly jump in here , but I think , you know , as we look at and start thinking about what , 26 is likely to look like , just big picture .

Brad Hill: Hey Eric, this is Brad. I'll start and Tim can certainly jump in here. As we look at and start thinking about what 2026 is likely to look like, just big picture, I mean, I think really for us, to start with, we talk about the demand fundamentals and for us, everything ultimately boils down to what the demand side of the equation ultimately looks like long term. As we look at 2026 today, we really think that the demand fundamentals look pretty similar in 2026 to the way they've looked this year. Whether you're looking at migration trends, population growth, household formation, or just single family affordability headwinds, we really think all of those look very, very similar next year. Clearly the unknown for us is the job market and really what that looks like next year.

Speaker #5: I mean , I think really for us to start with , you know , we talk about the demand fundamentals . And for us , everything ultimately boils down to what the demand side of the equation ultimately looks like long term .

Speaker #5: And , you know , as we look at 20 , 26 today , we really , you know , think that the demand fundamentals , fundamentals look pretty similar in 26 to the way they've looked this year , whether you're looking at migration trends , population growth , household formation or just single family affordability headwinds , we really think , all of those look very , very similar next year .

Speaker #5: Clearly, the unknown for us is the job market and really what that looks like next year. Early projections that we see for next year show the job market looking a little bit softer than it does.

Brad Hill: Early projections that we see for next year show the job market looking a little bit softer than it does this year. I think one thing to keep in mind is next year is an election year. I do think the administration is going to be very focused on getting the tariffs kind of behind them and then really focused on job growth, the balance of the year, which we think could certainly help on the job growth side. I think certainly from a supply perspective, we know the supply pipeline next year is set to decline considerably from where it is this year, where next year's deliveries will be about a close to a 50% drop from the peak that we had in 2024. The picture looks a lot better on that front.

Speaker #5: This year . But , you know , I think one thing to keep in mind is next year is an election year . So I do think the administration is going to be very focused on , you know , getting the tariffs kind of behind them .

Speaker #5: And then really focused on job growth . The balance of the year , which we think , you know , could certainly help .

Speaker #5: On the job growth side . And then I think , you know , certainly from a supply perspective , we know the supply pipeline next year is set to decline considerably from where it is this year , where next year's deliveries will be about a close to a 50% drop from the peak that we had in 2020 .

Speaker #5: Four . So certainly the picture looks a lot better on that front . So , you know , despite our our recovery certainly not being quite as robust as what we had hoped for , this year .

Brad Hill: Despite our recovery certainly not being quite as robust as what we had hoped for this year, we are making progress and I think that progress will continue to manifest itself as we get into 2026. Tim, what would you add? On the earning piece?

Speaker #5: You know , we are making progress . And I think that progress will continue to manifest itself as we get into 2026 . Tim , what would you add on the earnings piece ?

Speaker #5: Yeah , on the on the on the earning piece . I mean , I think we're based on where we see rents at the end of this year .

Tim Argo: Yeah, on the earn end piece, I mean, I think we're based on where we see rents at the end of this year. You're probably somewhere around flat to slightly negative, which is a little bit of improvement of where we were heading into 2025. The last point I'll make on the yes, about the other income, it'll be the Wi-Fi projects that'll drive that. They've been slow to materialize this year as we wait on circuit deliveries and other things. We've got 20 or so that we think will be live by end of this year, and that group as a whole, once fully rolled out, is about a $5 million NOI piece. We'll get a piece of that. That'll be the biggest thing sort of above and beyond our normal run rate on fee and other income.

Speaker #5: You know , you're probably somewhere around flat to slightly negative , which is a little bit of improvement of where we were heading into 2025 .

Speaker #5: And then last point I'll make on the about the other income . It'll it'll be the Wi-Fi projects that'll , that'll drive that .

Speaker #5: They've been slow to materialize this year as we wait on circuit deliveries and other things . But we've got , you know , 20 or so that we think will be live by end of this year .

Speaker #5: And that that group as a whole , once it's fully rolled out , is about a $5 million NOI piece . And so we'll get a piece of that .

Speaker #5: So that'll that'll be the biggest thing sort of above and beyond our normal run rate on fee and other income . And then just just to follow up on the point on the earn in , as Tim mentioned , for for next year , flattish going into 2026 .

Brad Hill: To follow up on the point on the earn end, as Tim Argo mentioned for next year, flattish going into 2026, and just as a reminder, coming into 2025, it was a negative 40 basis points headwind. There is significant improvement going into 2026 as we sit here today.

Speaker #5: And just as a reminder , you know , coming into 2025 , it was a -40 basis points headwind . So significant improvement going into 2026 .

Speaker #5: As we sit here today .

Speaker #3: Our next question will come from the line of Jamie Feldman with Wells Fargo . Please go ahead .

Operator: Our next question will come from the line of Jamie Feldman with Wells Fargo. Please go ahead.

Speaker #8: Great . Thanks for taking the question . I guess following up on the guidance line of questioning on the expense side , anything , you know , as we think about year over year comparisons , anything in 26 that we should be aware of .

[Analyst]: Great, thanks for taking the question. I guess following up on the guidance line of questioning on the expense side, anything, you know, as we think about year over year comparisons, anything in 2026 that we should be aware of?

Speaker #6: Jamie , this is Clay , the one thing a couple of things that I would call out , I think starting with real estate taxes , you know , we saw some , some very good favorability in our original projections for real .

Brad Hill: Jamie, this is Clay, you know, the one thing, a couple things that I would call out, I think starting with real estate taxes, you know, we saw some very good favorability in our original projections for real estate taxes at this point in the year. A lot of that is due to some prior year adjustments, some one-time prior year adjustments that we realized this year. We'll have to anniversary that. Also thinking about the fact that, you know, we are projecting negative NOI growth for the year, so would expect property valuations to significantly increase going into next year. All said, we would expect real estate taxes to grow at a relatively normal rate of somewhere between 2.5% and 3.5%. I'm not giving guidance at this point, but just kind of where we think that that's where we're probably headed at this point.

Speaker #6: estate taxes . .

Speaker #5: At this point in the year .

Speaker #6: You know ,

Speaker #5: A lot of that .

Speaker #6: Is due to some prior year adjustments , some one time prior year adjustments that we realized this year . So we'll have to anniversary that .

Speaker #6: But also thinking about the fact that we are projecting negative NOI growth for the year . So we'd expect property valuations to significantly increase going into next year .

Speaker #6: So all said that , should we would expect real estate , real estate taxes to grow at a relatively normal rate of , you know , somewhere between two and a half , 3.5% .

Speaker #6: And I'm not giving guidance at this point , but just , you know , kind of where we think that that's where we're probably headed at this point .

Speaker #6: You know , other than that , I think insurance will continue to get some some tailwind from that , given our recent renewal .

Brad Hill: Other than that, I think insurance will continue to get some tailwind from that given our recent renewal. That'll benefit us in the front half of the year, and then we'll have to go through that process again next year. Wouldn't expect at this point any significant, significant increases in that line. Just probably normal typical run rates and then personnel, RNM costs, things of that nature. Brad mentioned the tariffs and expectation that that gets settled here over the course of the next several months. We would think that those would typically grow in line with just typical inflationary trends. Nothing really outside or the norm for those. Should get a little bit of a benefit in marketing expenses next year as we get past the levels of supply that we're facing this past year, and that should tail off a bit as well.

Speaker #6: So that'll benefit us in the front half of the year . And then we'll have to go through that process again next year .

Speaker #6: But , you know , wouldn't expect at this point any , any significant increases in that line . Just probably normal typical run rates .

Speaker #6: And then personnel costs , things of that nature . I mean , Brad mentioned the tariffs and expect expectation that that gets settled here over the course of the next , you know , several months .

Speaker #6: We would think that those would typically grow in line with just typical inflationary trends . So nothing really outside of the norm for for those should get a little bit of a benefit in marketing expenses next year as we get past the levels of supply that we're been facing this past year .

Speaker #6: And so that should tell off a bit as well . So all in all , I don't want to speak to overall guidance , but that's kind of how we're thinking about those those items .

Brad Hill: All in all, I don't want to speak to overall guidance, but that's kind of how we're thinking about those items.

Speaker #5: I might add one point real quick , just on the utility side , we talked about the Wi-Fi projects a minute ago . There is an expense component that hits in that utility utility line .

Tim Argo: I might add one point real quick. Just on the utility side, we talked about the WiFi projects a minute ago. There is an expense component that hits in that utilities line. There's obviously a much larger revenue component, but that'll impact utilities a little bit as well.

Speaker #5: That's obviously a much larger revenue component , but that'll that'll impact utilities a little bit as well .

Speaker #8: Okay , great . Super helpful color . And then just thinking about concessions and some of your bigger development markets or heavier supply markets , how would you .

[Analyst]: Okay, great. Super helpful color. Just thinking about concessions and some of your bigger development markets or heavier supply markets, how would you, you know, what's the scorecard on the pace of concessions today? Is it getting better, is it getting worse? Anything you'd call out there?

Speaker #8: What's the scorecard on on the pace of concessions today . Is it getting better . Is it getting worse ? Anything you'd call out there ?

Speaker #5: Yeah , I would say broadly concessions in Q3 were a little bit higher than what we were in Q2 . When we look at our comps , there was , you know , probably 55 , 60% or so of our comps have some sort of specials and that that's up a little bit from what it was in Q2 .

Tim Argo: Yeah, I would say broadly, concessions in Q3 were a little bit higher than what we were in Q2. When we look at our comps, there was probably 55% to 60% or so of our comps have some sort of specials, and that's up a little bit from what it was in Q2, but not significantly. I think the level of concessions at a given property is pretty similar. You're seeing anywhere from half a month to a month free is pretty typical, with a little bit higher in some of the highest supplied submarkets. We've seen a couple submarkets where they came down. I mentioned Atlanta earlier. We're seeing a little bit lower concessions. Buckhead, Uptown Dallas, we're seeing a little bit lower concessions. It's actually some of the more urban submarkets.

Speaker #5: But but not significantly . I think the level of concessions at a given property is pretty similar . You're seeing , you know , anywhere from half to half a month to a month .

Speaker #5: Free is pretty typical with a little bit higher in some of the some of the highest supplied submarkets . We've we've seen a couple of submarkets where they came down .

Speaker #5: You know , I mentioned Atlanta earlier , seeing a little bit lower concessions . Buckhead , Uptown Dallas . We're seeing a little bit lower concessions .

Speaker #5: So it's actually some of the more urban submarkets where we've seen concessions come down a little bit. Then we've seen them go up a little bit in Phoenix, a little bit in suburban Orlando, and a little bit in downtown Nashville.

Tim Argo: We've seen concessions come down a little bit, and we've seen it up a little bit in Phoenix, a little bit in suburban Orlando, a little bit in downtown Nashville, but broadly ticked up a little bit, but not hugely different than what we've been seeing.

Speaker #5: But broadly ticked up a little bit . But not not hugely different than what we've been seeing .

Speaker #3: Our next question will come from the line of Adam Kramer with Morgan Stanley . Please go ahead .

Operator: Our next question will come from the line of Adam Kramer with Morgan Stanley. Please go ahead.

Speaker #9: Hey , thanks for the time , guys . Maybe just wants to ask about sort of lease up if your development properties and maybe just how the cadence of that today compares to , lease up cadence .

[Analyst]: Hey, thanks for the time guys. Maybe just wanted to ask about sort of lease up for your development properties and maybe just how the cadence of that today compares to, you know, lease up cadence, you know, maybe six months ago or the same time a year ago.

Speaker #9: You know, maybe six months ago or the same time a year ago.

Speaker #5: Yeah . This is Tim . I mean , the the leasing velocity broadly has been a little bit slower . I don't think it's necessarily gotten slower than what it has been over the last couple of quarters .

Tim Argo: Yeah, this is Tim. I mean the leasing velocity broadly has been a little bit slower. I don't think it's necessarily gotten slower than what it has been over the last couple quarters. We've seen, obviously, with the supply over the last couple years that velocity has been a little bit slower to occur than what we originally underwrote. Broadly, rents are in line. When you think about the overall lease up portfolio, we're holding tight there and keeping, as I mentioned in the call comments, just keeping our value proposition in line. Broadly, leasing velocity is a little bit slower than what we expected, and we pushed back one of the stabilization dates on one of our lease up properties. Broadly, the rents are intact and feeling good, particularly as we move into the spring and summer. We expect those to really start to increase on that velocity.

Speaker #5: I mean , we've seen obviously with the with the supply over the last couple of years that that velocity has been a little bit slower to to occur than what we originally underwrote .

Speaker #5: But broadly , rents are in line when you think about the overall lease up portfolio . We're we're holding holding tight there and keeping , as I mentioned in the in the call comments , just keeping our value proposition in line .

Speaker #5: So broadly , leasing velocity a little bit slower than what we expected . And you know , we pushed back one of the stabilization dates on one of our lease up properties .

Speaker #5: But broadly the rents are intact and feeling good , particularly as we we move into the spring and summer . We expect those to to increase on that velocity .

Speaker #9: Great . And then maybe I know you touched on it a little bit earlier , but maybe just the specific new renewal and blended lease growth for October , if you're able to provide .

[Analyst]: Great. I know you touched on it a little bit earlier, but maybe just the specific new, renewal, and blended lease growth for October if you're able to provide.

Speaker #5: We're not gonna get into the details of the monthly , but I would say generally what we're expecting for , for Q4 is and I mentioned this earlier , is pretty normal seasonality , perhaps a little bit less than what we typically see as as supply continues to moderate .

Tim Argo: We're not going to get into the details of the monthly, but I would say generally what we're expecting for Q4, as I mentioned this earlier, is pretty normal seasonality, perhaps a little bit less than what we typically see as supply continues to moderate. I mentioned in the comments that renewals are holding up really well. I think on a blended basis could be a little bit better than last year and newly is probably trending somewhere maybe slightly better than where we were last year, but typically a little bit, typically normal seasonality with a little bit better performance on the renewal side.

Speaker #5: I mentioned in the comments the renewals are holding up really well . So I think on a on really start a blended basis could be a little bit better than last year .

Speaker #5: And new lease probably trending somewhere , maybe slightly better than where we were last year . But typically a little bit typically normal seasonality with with a little bit better performance on the renewal side .

Speaker #3: Our next question will come from the line of Steve Sakwa with Evercore ISI . Please go ahead .

Operator: Our next question will come from the line of Steve Sakwa with Evercore ISI. Please go ahead.

Speaker #10: Yeah . Thanks . Good morning . I guess I wanted to circle up on the Scottsdale project . I think you mentioned that the initial yield on that was 6.1 , and maybe with the new piece of land , it would go to six and a half .

[Analyst]: Yeah, thanks. Good morning. I guess I wanted to circle up on the Scottsdale project. I think you mentioned that the initial yield on that was 6.1% and maybe with the new piece of land it would go to 6.5%. Your stock's kind of trading sort of in that mid-6% range right now. How are you thinking about capital allocation, development yields, and what kind of hurdles do you need on projects going forward given the changing cost of capital?

Speaker #10: But , you know , your stock's kind of trading sort of in that mid sixes right now . So just how are you thinking about capital allocation development yields and what kind of hurdles do you need on projects going forward given the changing cost of capital .

Speaker #5: Yeah . Hey Steve this is Brad .

Brad Hill: Yeah. Hey Steve, this is Brad. A couple of things that I'll mention. One, just a clarification. What I mentioned in my comments was the Kansas City deal was about, that was an acquisition, was a 5.8. We went under contract in that back when our stock price was in the $150s. Certainly, cost of capital was a little bit different at that point for that project. When we add the phase two component to it, that'll bring the total investment yield on that one to about a 6.5. You're correct, the Scottsdale development is about a 6.1 NOI yield. That part's correct. In terms of capital allocation, when we're looking to make really any decision, a couple things that we're considering. One is where's our capital coming from, what's the cost of that capital, and really what's the potential long-term impact of that investment on our business.

Speaker #6: A couple .

Speaker #5: Of things that I'll mention .

Speaker #6: One , just a .

Speaker #5: Clarification . The you know what we I mentioned in my comments .

Speaker #6: Was .

Speaker #5: The Kansas City deal was about a that was an acquisition was a 5.8 . We went under contract in that back when our our stock price was in the one 50s .

Speaker #5: So certainly cost of capital was a little bit different at that point for that project . When we add the phase two component to it , that'll bring the total investment yield on that one to about a six and a half .

Speaker #5: You're correct . The Scottsdale Dale development is about A61 NOI yield . So so that part's correct . But but in terms of capital allocation , you know when we're looking to make really any decision , you know , a couple of things that we're considering .

Speaker #5: One is .

Speaker #6: You know , where's .

Speaker #5: Our capital coming from . What's the cost of that capital . And really what's the potential long term impact of that investment on our business and our primary focus in all of our decisions that we make is on generating compounded earnings growth to support a steady and growing dividend over the long term .

Brad Hill: Our primary focus in all of our decisions that we make is on generating compounded earnings growth to support a steady and growing dividend over the long term. That's really what we are at our heart really focused on. If you look at the performance that we've put up in terms of dividend performance over the last 10 years, I think we've been very successful in hitting those goals. We have probably one of the highest, if not the highest, 10-year CAGRs on dividend growth performance in the space, where it's at 7%. Earnings and dividends are really the best ways for us to deliver TSR on a REIT platform. When we're looking to invest capital, we can deploy it through external growth, as we were just talking about, via development or acquisitions.

Speaker #5: I mean , that's really what we are at our heart , really focused on . And if you look at the performance that we've put up in terms of dividend performance over the last ten years , I think we've been very successful in hitting those goals .

Speaker #5: We have probably one of the highest , if not the highest ten year takers on dividend growth , performance in the space where it's at 7% .

Speaker #5: So earnings and dividends are really the best ways for us to deliver TSR on a REIT platform . But , you know , when we're looking to invest capital , you know , we can deploy it through external growth is we were just talking about the development or acquisitions .

Speaker #5: We can invest in various internal opportunities that include technology investments, really geared towards strengthening our platform and driving efficiencies, improving margins of our existing portfolio.

Brad Hill: We can invest in various internal opportunities that include technology investments really geared towards strengthening our platform and driving efficiencies, improving margins of our existing portfolio, or we can reinvest in our existing shares. Those are really the options that we have. Certainly, at the moment, scaling our platform from acquisitions has really gotten materially more difficult given the dislocation that we see right now between private and public markets. Again, as I mentioned with the Kansas City, we are able to find select acquisition opportunities, but that's probably going to be even more difficult. As I mentioned in my opening comments, we do continue to find what we believe are compelling development opportunities where we're able to achieve yields in the 6% to 6.5% range, which if you look at that compared to our current cost of capital, it's still accretive.

Speaker #5: Or we can reinvest in our existing shares . Those those are really the options that we have . And certainly at the moment , you know , scaling our platform from acquisitions has really gotten materially more difficult given the dislocation that we see right now between private and public markets .

Speaker #5: But but we again , as I mentioned with the Kansas City , we are we are able to find select acquisition opportunities . But that's probably going to be even more difficult .

Speaker #5: But as I mentioned in my opening comments , we do continue to find what we believe are compelling development opportunities where we're able to achieve yields in the 6 to 6.5% range .

Speaker #5: Which if you look at that , compared to our current cost of capital , it's still a creative . And if you look at it on an after CapEx basis , it produces similar returns to what we would get if we were investing in our existing portfolio right now .

Brad Hill: If you look at it on an after CapEx basis, it produces similar returns to what we would get if we were investing in our existing portfolio right now. Importantly, I think you have to remember that by selectively determining where we're putting some of this capital in developments, we think we're able to drive better long-term growth prospects through that capital. Certainly, with six to eight projects that we think we can start over the next six quarters at a cost of $850 million, we have a pretty good runway for continued growth. We'll continue to lean into some of these numerous internal investment opportunities in 2026. As Tim Argo talked about, we're looking to expand our renovation and repositioning platforms, and you'll continue to see us do that. Having said all that, our focus is on driving long-term earnings growth and higher share value.

Speaker #5: But importantly , I think you have to remember that by selectively determining where we're putting some of this capital in developments , we think we're able to drive long , better , long term growth prospects through that capital .

Speaker #5: And certainly with 6 to 8 projects that we think we can start over the next six quarters at a cost of $850 million .

Speaker #5: We have a pretty good runway for continued growth . You know , we'll continue to lean into some of these numerous internal investment opportunities in 2026 .

Speaker #5: And as Tim talked about , we're looking to expand our renovation and repositioning platforms . And so you'll continue to see us do that .

Speaker #5: But having said all of that , you know , our focus is on driving long term earnings growth . And higher share value .

Speaker #5: And if we find that our best investment opportunity to do that is to invest in our existing portfolio via share repurchases , you know , we have an authorization in place .

Brad Hill: If we find that our best investment opportunity to do that is to invest in our existing portfolio via share repurchases, we have an authorization in place. We've done it before and we wouldn't hesitate to do that again if conditions warranted it. It's something that we continue to monitor at every one of our investment opportunities and we'll continue to do so.

Speaker #5: We've done it before, and we wouldn't hesitate to do that again if conditions warranted. So, it's something that we continue to monitor.

Speaker #5: And every one of our investment opportunities , and we'll continue to do so .

Speaker #10: Thanks . Maybe just as a second or maybe a follow up , just I guess taking that in , Okay . maybe stretching it out a bit , just would dispositions accelerating dispositions , kind of be part of the the philosophy maybe to fund both the development and share buybacks ?

[Analyst]: Okay, thanks. Maybe just as a follow up, just I guess taking that and maybe stretching it out a bit. Would accelerating dispositions kind of be part of the philosophy maybe to fund both the development and potential share buybacks? It seems like pricing is pretty good in the apartment market, despite some of the slowdowns we all talked about here on the leasing side. Could you lean into dispositions at this point?

Speaker #10: It seems like pricing is pretty good in the apartment market , despite some of the slowdowns . We all talked about here . On the leasing side .

Speaker #10: So could you lean into dispositions at this point ?

Speaker #6: Yeah .

Speaker #5: I mean , we definitely could . I mean , frankly , our disposition strategy is really based on , you know , trying to improve the overall quality of the portfolio , while not introducing earnings volatility , you know , so we wouldn't want to significantly scale up dispositions to to take advantage of some market level arbitrage and introduce earnings volatility .

Brad Hill: Yeah, I mean, we definitely could. Frankly, our disposition strategy is really based on trying to improve the overall quality of the portfolio while not introducing earnings volatility. We wouldn't want to significantly scale up dispositions to take advantage of some market level arbitrage and introduce earnings volatility. As part of our annual strategy, we're generally looking to dispose of around $300 million worth of assets. If we find that we can continue to do that, and when we dispose of those assets, the best use of that capital is to go into share repurchases, then I think we would continue to look to do that. From my perspective, the share buyback is really an alternative based on current cost of capital. Current returns is an alternative to what we would do with that disposition capital where normally we would roll it back into the acquisition market.

Speaker #5: assets , the best use of that capital is to go into share repurchases . Then I think we would continue to look to do that .

Speaker #5: You know , from my perspective , the share buyback is really an alternative based on current cost of capital , current returns is an alternative to the what we would do with with that disposition capital , where normally we would roll it back into the acquisition market .

Speaker #5: And that's just not a broad opportunity for us at the moment .

Brad Hill: That's just not a broad opportunity for us at the moment.

Speaker #3: Our next question will come from the line of Yana Galon with Bank of America . Please go ahead .

Operator: Our next question will come from the line of Jana Galan with Bank of America. Please go ahead. Thank you. Good morning. Following up on your comments on the transaction market and seeing assets trading at sub-5% cap rates, can you help us understand how investors are underwriting the rent growth at this point in the Sunbelt recovery and maybe the types of financing they have available to them to get them there?

Speaker #11: Thank you . Good morning . Following up on your comments on the transaction market and seeing , you know , assets trading at sub five cap rates , can you help us understand how investors are underwriting the rent growth at this point in the Sun recovery .

Speaker #11: And maybe the types of financing they have available to them to get them there ?

Speaker #6: Sure .

Speaker #5: I you know , I think the number one driver right now from the deals that we're looking at of those cap rates , is the cost of capital .

Brad Hill: Sure. I think the number one driver right now from the deals that we're looking at of those cap rates is the cost of capital. I think if you look today where folks are generally able to get five-year money today from the agencies, it's probably in the maybe 5.25% range, maybe just under that. Most folks are able to buy down the rate by 25, 30 basis points, and by the time they do that, they're at a sub-5% interest rate. At that point, they're generally underwriting a couple of years of a little bit more aggressive rent growth to get their returns to make sense. I would say the number one driver is just given where the cost of capital is today, it's really supporting cap rates to be sub-5%, especially when you layer onto that the buy down of the rate.

Speaker #5: I think if you look today where folks are generally able to get , five year money today from the agencies , is probably in the maybe five and a quarter range , maybe just under that .

Speaker #5: And most folks are able to buy down the rate by 25 , 30 basis points . And so by the time they do that , they're at a sub 5% interest rate .

Speaker #5: And then at that point , you know , they're they're generally underwriting a couple of years of a little bit more aggressive rent growth to to get their returns to , to make sense .

Speaker #5: But I would say the number one driver is just given where the cost of capital is today . It's really supporting cap rates to be sub 5% .

Speaker #5: And and especially when you layer on to that , the buy down of the rate .

Speaker #11: Thank you . And then kind of different topic . But you know you guys have always been very strong in your Google scores .

Operator: Thank you. On a different topic, you guys have always been very strong in your Google scores and reviews. I'm curious how you're implementing AI and looking at different ways as search moves more over to those types of platforms to continue this reputation that you have out there.

Speaker #11: And reviews . I'm curious kind of how your implementing AI and and looking at different ways as search moves more over to those types of platforms to kind of continue this , you know , reputation that you have out there .

Speaker #5: And yeah , I'm glad you brought up Google reviews . We're we continue to do really well there . We're number one in the sector for seven or so is our average with a lot of volume .

Tim Argo: Hey, this is Tim. I'm glad you brought up Google reviews where we continue to do really well there. We're number one in the sector. 4.7 or so is our average with a lot of volume. We put a lot of emphasis on that. In terms of our use of AI, we're using it obviously in multiple areas of the company and something that we're expanding more now as we think about leasing and some of the communication. We'll have some more pilots and tests on that as we get into next year. Obviously, a key part of our go forward platform is continuing to look at all the various uses of that.

Speaker #5: So we put a put a lot of emphasis on that . I mean , in terms of our use of AI , I mean we're using it obviously in multiple areas of the company and something that we're expanding more now as we think about leasing and , and some of the communication .

Speaker #5: And we'll have some more pilots and tests on that as we as we get into next year . But so obviously a key , key part of our go forward platform is to continue to look at all the various uses of that .

Speaker #3: Our next question will come from the line of Austin Wurschmidt, KeyBanc Capital Markets. Please go ahead.

Operator: Our next question will come from the line of Austin Worsmith with KeyBanc Capital Markets. Please go ahead.

Speaker #12: Thanks . Good morning everybody . You talked about how 2026 could look a lot like 25 from a demand perspective . And supply .

[Analyst]: Thanks. Good morning everybody. You talked about how 2026 could look a lot like 2025 from a demand perspective, and supply obviously coming down pretty meaningfully. Should we just continue to see lease rate growth improve versus the prior year? Or, I guess asked a little bit differently, should schedule rent continue to accelerate from here into 2026?

Speaker #12: Obviously coming down pretty meaningfully . I guess . Should we just continue to see lease rate growth improve versus the prior year or or I guess asked a little bit differently , should schedule rent continue to accelerate from here into 2026 ?

Speaker #5: Hey , Austin , this is Tim . Yeah . I mean , I think I think we're we're back in terms of the normal seasonality of things this year has been the most seasonal that we've seen in the last few years .

Tim Argo: Hey Austin, this is Tim. Yeah, I mean, I think we're back in terms of the normal seasonality of things. This year has been the most seasonal that we've seen in the last few years. I think generally that seasonality will hold as you strengthen through the spring and summer and then moderate a little bit into the fall and winter. I mean, I think we're obviously not giving guidance right now, but when you think about how much supply is moderating and look at construction starts, we're expecting deliveries next year to be significantly down from where they were this year.

Speaker #5: I think generally that seasonality will hold as you , you know , strengthen through the spring and summer and then and then moderate a little bit into the into the fall and winter .

Speaker #5: So , I mean , I think , you know , we're obviously not giving guidance right now , but when you think about how much supply is moderating and look at construction starts and you know , we're expecting deliveries next year to be significantly down from where they were this year .

Speaker #5: And with a similar demand environment we have right now , which is , you significant . If you look at any of the demand variables , whether it's job growth , household formation and migration , you know , our region of the country , while perhaps a little bit weaker than it was earlier this year and expectations for next year a little bit weaker as materially stronger than the rest of the country .

Tim Argo: With a similar demand environment we have right now, which is significant, you look at any of the demand variables, whether it's job growth, household formation, immigration, our region of the country, while perhaps a little bit weaker than it was earlier this year and expectations for next year a little bit weaker, is materially stronger than the rest of the country. When you balance that relative demand with rapidly decreasing supply, I think you see a normal seasonal curve, but a much steeper curve to where we see some new lease rents start to accelerate. Would expect our renewals to hang in where they are. We can see out for the next three months or so that those are continuing to hold strong. Yeah, I think continued expected strength is what we'd expect, or enhanced strength, if you will, as we get into 2026.

Speaker #5: So when you when you balance that relative to demand with rapidly decreasing supply , you know , I think you see a normal seasonal curve .

Speaker #5: But a much steeper curve to where we see some some new lease rents start to start to accelerate . Would expect our renewals to hang in where they are .

Speaker #5: We've we can see how for the next three months or so that those are continuing to holding strong . So yeah , I think continue to expect strength is what we'd expect or enhanced strength if you will .

Speaker #5: As we get into 2026 .

Speaker #12: Helpful . And then just going back to the sequential improvement you flagged around Atlanta and Dallas , I guess , was this just as simple as , you know , less competition from supply ?

[Analyst]: Helpful. Just going back to the sequential improvement you flagged around Atlanta and Dallas, was this just as simple as less competition from supply? Was there a comp issue? Are there any markets that you'd highlight that are on the cusp of seeing kind of a similar dynamic that you referenced in Atlanta and Dallas, that sort of sequential acceleration from Q2 to Q3 and new lease rate growth? Thanks.

Speaker #12: Was there a comp issue and then are there any markets that you'd highlight that are on the cusp of seeing kind of a similar dynamic that that you referenced in Atlanta and Dallas , that sort of sequential acceleration from to Q3 ?

Speaker #12: Q and new lease rate growth . Thanks .

Speaker #5: Yeah . For for Atlanta and Dallas , what we saw particularly was some improved performance in the more urban and towns . So we obviously have several properties in Uptown Dallas that we sold do better .

Tim Argo: Yeah, for Atlanta and Dallas, what we saw particularly was some improved performance in the more urban in town. We obviously have several properties in uptown Dallas that we saw do better. We have a fair amount of exposure in Midtown, downtown, and Buckhead Atlanta. That's where we're really starting to see that inflection point where those are the submarkets that got most of the supply, they're starting to work through that. Concessions are coming down. There's a comp issue there, but there's just a general improvement, performance improvement there as well as they've absorbed that supply. Atlanta is one of our highest absorption markets over the last four quarters of any of them. Those are the two that I would call out. There's not any others at the moment where we're seeing obviously Q2 to Q3 operation is a little bit opposite of normal seasonality.

Speaker #5: And then we have a fair amount of exposure in Midtown , downtown and Buckhead Atlanta . And that's that's where we've really starting to see some that inflection point where those are the submarkets that got most of the supply .

Speaker #5: They're starting to work through that . Concessions are coming down . So there's certainly there's a comp issue there , but there's just a general improvement of performance improvement there as well as as they've absorbed that supply .

Speaker #5: Atlanta is one of our highest absorption markets over the last four quarters of any of them . So those are the two that I would call out , you know , the there's not any others at the moment where we're seeing , you know , obviously Q2 to Q3 acceleration is a little bit opposite of normal seasonality .

Speaker #5: So we're not seeing a lot that completely bucked that trend like Dallas and Atlanta did . But , you know , the ones that have continued to be strong have have done that , you know , the the markets I mentioned and the Carolinas continue to be strong .

Tim Argo: We're not seeing a lot that completely bucked that trend like Dallas and Atlanta did. The ones that have continued to be strong have done that. The markets I mentioned in the Carolinas continue to be strong. Dallas and Atlanta are certainly the standouts.

Speaker #5: So Dallas , Atlanta are certainly the standouts .

Speaker #3: Our next question will come from the line of Nick Yulico , Scotiabank . Please go ahead .

Operator: Our next question will come from the line of Nick Ulico with Scotiabank. Please go ahead.

Speaker #13: Thanks . Good morning . So I guess first off , on on the the negative 5% new lease rate growth in the quarter .

[Analyst]: Thanks. Good morning. I guess first off on the negative 5% new lease rate growth in the quarter, how much is that number being impacted by concessions? Meaning if you just listed all concessions, is there any way to give a feel for what that number would look like?

Speaker #13: How much is that number being impacted by concessions , meaning like if you just listed all concessions . Is there any way to give a feel for what that number would look like ?

Speaker #5: Well , I'll tell you this , Nick , in terms of cash concessions this quarter , ours was about 0.6 0.7% of rents for our portfolio .

Tim Argo: In terms of cash concessions this quarter, ours was about 0.6%, 0.7% of rents for our portfolio. That can give you some idea. Obviously, we spread concessions throughout the term of the lease, but that can give you a little bit of insight into that.

Speaker #5: So that can give you some idea . Obviously , we spread concessions throughout the term of the lease , but that can give you a little bit of insight into that .

Speaker #13: Okay . Thanks . And then second question is if I go back to the original guidance for the year and you had that bridge of FFO per share benefit , and there's that bucket of development lease up and other non same store NOI , which was originally said to be a 20 cent benefit .

[Analyst]: Okay, and then second question is if I go back to the original guidance for the year and you had that bridge of FFO per share benefit and there's that bucket of development lease up and other non same store NOI which was originally said to be a $0.20 benefit this year, I wanted to see if that's still the same number in the new guidance. Secondly, if there's any way to give a feel for if you just stabilized all the developments or lease up assets in that pool, how much extra annual FFO per share benefit would that be from that entire pool? Thanks.

Speaker #13: This year . I wanted to see if that's still , you know , the same number in the new guidance . And then secondly , if there's any way to give a feel for if you just stabilized all the developments or at least the assets in that pool , like how much extra annual FFO per share benefit would that be from that entire pool ?

Speaker #13: Thanks .

Speaker #6: Yeah , this is Claudia . To your point , we we introduced the guidance coming into the year with with that pool of of of the portfolio of , you know , benefiting about $0.20 for for the full year going back to the discussion that Tim had with just the longer leasing velocity that we've seen , you know , with those with those properties , I mean , it hasn't been quite that strong , but it has been a positive benefit to us over the course of the year .

Brad Hill: Yeah, Nick, this is Clay. To your point, we introduced the guidance coming into the year with that pool of the portfolio benefiting about $0.20 for the full year. Going back to the discussion that Tim had with just the longer leasing velocity that we've seen with those properties, it hasn't been quite that strong, but it has been a positive benefit to us over the course of the year. Whenever you think about those and when they fully stabilize.

Speaker #6: And so we now whenever you think about those and when they fully stabilize and . And are generating , you know , ongoing NOI growth , those , those properties on a year to year basis , we expect to be anywhere between ten and $0.12 stabilized earnings growth .

Tim Argo: We are generating.

Brad Hill: Ongoing NOI growth with those properties on a year-to-year basis, we expect to be anywhere between $0.10 and $0.12 of stabilized earnings growth. Excuse me, after considering what the cost of capital is running. That's kind of what we would see on a long-term basis. I'm talking specifically when I say the $0.10 to $0.12, really our development and lease-up portfolio itself. Keep in mind there's some other things in that non-same store pool.

Speaker #6: Excuse me , after considering what the cost of capital is running . So that's that's kind of what we would see on a on a long term basis .

Speaker #6: And I'm talking specifically when I say the 10 to $0.12 really our development and lease up portfolio itself . Keep in mind there's some other things in that in that non same store pool that are stabilized properties , properties that haven't moved into the same store pool .

Tim Argo: That are stabilized properties, properties that haven't.

Brad Hill: Moved into the same store pool. When I mentioned the $0.10 to $0.12, kind of our current development lease up pipeline, that's going to contribute another $0.10 to $0.12 in any given year.

Speaker #6: But when I mentioned the 10 to $0.12 kind of our current development lease up pipeline , that's going to contribute another 10 to $0.12 on any given year .

Speaker #3: Our next question will come from the line of Michael Goldsmith with UBS . Please go ahead .

Operator: Our next question will come from the line of Michael Goldsmith with UBS. Please go ahead. Hi, this is Amy, I'm with Michael. We were wondering, was there any change in your fourth quarter forecast, or did the updated same store revenue guide mainly bake in just the softer third quarter?

Speaker #14: Hi , this is Amy . I'm with Michael . We were wondering , was there any change in your fourth quarter forecast , or did the updated same store revenue guide , mainly bacon , just the softer third quarter .

Speaker #5: Yeah . That's fair . We we brought down I mean we we adjusted the new lease rates for Q4 forecast based on what we saw in Q3 actually brought up a renewal rates a little bit .

Tim Argo: Yeah, it's Tim, we brought down, I mean, we adjusted the new lease rates for Q4 forecast based on what we saw in Q3. Actually brought up our renewal rates a little bit, but brought down the new lease rates. In terms of forecast, it's really carrying through the Q3 new lease rates. Those have more of an impact, obviously, but broadly just brought down the new lease rate run rate a little bit.

Speaker #5: But but brought down the new lease rates . But in terms of forecast , it's really it's really carrying through the Q3 new lease rates that have more of an impact .

Speaker #5: Obviously . But broadly just brought down the new lease rate , run rate a little bit .

Speaker #14: Got it . Thanks . And then where do you ultimately see the balance between your large and mid-tier markets ? Are there any other markets that you're targeting for acquisitions , and how do cap rates broadly across these markets compare with some of the larger markets ?

Operator: Got it, thanks. Where do you ultimately see the balance between your large and mid tier markets? Are there any other markets that you're targeting for acquisitions, and how do cap rates broadly across these markets compare with some of the larger markets?

Speaker #5: Tim , do you want to handle the performance between those two markets ? Yeah , yeah , I'll in terms of what we're seeing in the performance between the two , I mean , the the mid-tier markets broadly have done a little bit better and continue to do slightly better .

Brad Hill: Tim, do you want to handle the performance between those two markets?

Tim Argo: Yeah, in terms of what we're seeing in the performance between the two, the mid tier markets broadly have done a little bit better and continue to do slightly better. I mentioned several of them in the prepared comments, but we are starting to see that dynamic narrow a little bit. As I mentioned with Dallas and Atlanta and some others, we're starting to see that performance narrow a bit and would expect that to continue to squeeze as we saw most of the supply over the last couple of years or more of the supply focused on some of those larger markets and some of those more urban sub markets.

Speaker #5: I mentioned several of them in the prepared comments , but we are starting to see that that dynamic narrow a little bit . As I mentioned with Dallas and Atlanta and some others , we're starting to see that performance narrow a bit .

Speaker #5: But and would expect that to continue to squeeze as we saw , you know , most of the supply over the last couple of years or , or more of the supply focused on on some of those larger markets and some of those more urban submarkets .

Speaker #5: Yeah . And in terms of where we're looking to deploy capital , I mean , I think it's both the large and mid-tier markets .

Brad Hill: Yeah, in terms of where we're looking to deploy capital, I mean I think it's both the large and mid tier markets. I mean we like our current exposure between those markets where we are, I think we have 70% or so of our allocation to large markets and about 30% to the mid tier markets. You'll see us continue to try to maintain that by deploying capital similar to that in the large and mid tier markets. Clearly, as we talked about a moment ago, acquisitions, it's tough for us right now. Mainly focused on doing that through development. In terms of our pricing differentials between those markets, really not much. I mean we're really seeing similar cap rates for similar quality assets across those markets.

Speaker #5: I mean , we like our current exposure between those markets where we are . I think we have 70% or so of our allocation to large markets , and about 30% of the mid-tier markets .

Speaker #5: So you'll see us continue to try to maintain that BI deploying capital similar to that in the large and mid-tier markets . But clearly , as we talked about a moment ago , acquisitions , it's tough for us right now .

Speaker #5: So mainly focused on doing that through development . But in terms of pricing differentials between those markets , really not much . I mean , we're really seeing similar cap rates for similar quality assets across those markets .

Speaker #3: Our next question will come from the line of Hendel , just with Mizuho . Please go ahead .

Operator: Our next question will come from the line of Hendel Senjust with Mizuho. Please go ahead.

Speaker #15: Hey , there . Let's see what I got left here . So maybe one on . I think you mentioned earlier that you're seeing new starts on an LTM basis .

[Analyst]: Hey there. Let's see what I got left here. Maybe one on you. I think you mentioned earlier that you're seeing new starts on an LTM basis now around 1.8% of stock, I think you mentioned, which is half a long-term average. I'm curious how that figure is trending. It sounds like it's ticking up from where we were earlier this year. I guess my question is what's your sense of private developers' ability to obtain financing, get underwriting, get their underwriting to clear their hurdles, and if that's getting any better with the lower cost of debt we've seen here. Thanks.

Speaker #15: Now , around 1.8% of stock . I think you mentioned , which is half the long term average . But I'm curious how that figures trending .

Speaker #15: It sounds like it's ticking up from where we were earlier this year . So I guess my question is what's your sense of private developers ability to obtain financing ?

Speaker #15: Get underwriting , get their underwriting to to clear their hurdles . And if that's getting any better with the lower cost of debt , we've seen here , thanks , Jay .

Brad Hill: Hey, this is Brad. In terms of the trend of starts per quarter that we're seeing, that trend actually just continues to come down. The trailing 12 month starts in our region, as I mentioned, was 1.8, which implies 45, 50 basis points, 45 basis points or so per quarter. Last quarter, third quarter, it was 0.2. We're seeing that trend generally come down. I think that those numbers really track with the anecdotal evidence and information that we get from our partners, from the developers that we partner with. What we continue to hear from them is it is getting more difficult to raise capital than it is. It's certainly not getting easier. It's getting more and more difficult, even with the backdrop of interest rates coming down. We're certainly hearing some of the smaller developers are having trouble even getting bank financing at this point.

Speaker #6: And .

Speaker #5: This is .

Speaker #6: Brad . And you know .

Speaker #5: In terms of the trend of starts per quarter that we're seeing is , that trend actually just continues to come down the trailing 12 month starts in our region .

Speaker #5: As I mentioned , was 1.8 , which , you know , implies , you know , 45 , 50 basis point 45 basis points or so per quarter .

Speaker #5: Last quarter . Third quarter , it was 0.2 . So we're seeing that trend generally come down . And I think that those numbers really track with you know , the anecdotal evidence and information that we get from from our partners from , from the , the developers that we partner with , I mean , what we continue to hear from them is it is getting more difficult to raise capital than it is .

Speaker #5: It's certainly not getting easier . It's getting more and more difficult , even with the backdrop of , you know , interest rates coming down , we're certainly hearing some of the small developers , smaller developers are having trouble even getting bank financing at this point .

Speaker #5: The large developers can get bank financing , but they're having a hard time getting equity in the current environment . So and then just based on the results that we're seeing on the deals , like the Scottsdale , Arizona project , the Richmond project , we started last year , I mean , we continue to see opportunities for us to step in to developments where someone bought the land , achieved entitlements , sometimes got plans , but then could not get their financing lined up .

Brad Hill: The large developers can get bank financing, but they're having a hard time getting equity in the current environment. Just based on the results that we're seeing on the deals like the Scottsdale, Arizona project, the Richmond project we started last year, we continue to see opportunities for us to step into developments where someone bought the land, achieved entitlements, sometimes got plans, but then could not get their financing lined up. We just continue to see more and more opportunities in that area. Some of those still don't underwrite for us, but some do. Broadly speaking, it seems like it's getting more difficult to put a shovel in the ground than it has been. Yeah, I appreciate the color there, Brad.

Speaker #5: We just continue to see more and more opportunities in that area . Some of those still don't underwrite for us , but some do .

Speaker #5: So just broadly speaking , it seems like it's getting more difficult to put a shovel in the ground than it is than it has been .

Speaker #15: God , I appreciate .

Speaker #16: That color there . Brad .

Speaker #15: And then one more , maybe just also a bit of a follow up from last quarter . I think you mentioned where you said you'd be willing to lean into debt a bit more , given the lower the lower cost that you had about a billion of buying power with your leverage down around four times debt EBITDA .

[Analyst]: One more, maybe just also a bit of a follow up from last quarter. I think you mentioned where you said you'd be willing to lean into debt a bit more given the lower cost, that you had about $1 billion of buying power with your leverage down around 4 times debt to EBITDA. I'm curious if that view might be changing or evolving at all, given the softer macro, the pricing that you're seeing out there. I don't think cap rates have budged at all really, and maybe other opportunities might be considering. I'm curious, you know, that view on leaning into leverage to acquire assets, how that might be different today versus maybe 90 days ago. Thanks.

Speaker #15: I guess I'm curious if that view might be changing , evolving at all , given the softer macro , the the pricing that you're seeing out there .

Speaker #15: I don't think cap rates have at all , really . And maybe other opportunity might be considering . So I guess I'm curious .

Speaker #15: You know , that view on leaning into leverage to acquire assets , how that might be different today versus maybe 90 days ago ?

Speaker #15: Thanks .

Speaker #5: Yeah . I mean , I think yeah , I think based on our current cost of capital , you generally won't see us buy much at this at current pricing .

Brad Hill: I think based on our current cost of capital, you generally won't see us buy much at this point. The pricing that we would have to be able to achieve on an acquisition would have to be substantially different than it was just a few months ago. You probably won't see us lean into acquisitions in any way, shape or form at the moment. I do think from a funding perspective, what you'll see us do is lean into debt funding for our development pipeline. We'll continue to fund that, as we talked about, generally through our commercial paper program. Once we get our debt to a certain level, we'll then look to go and issue bonds to clear that up. That's generally how we'll continue to look to finance the business.

Speaker #5: So I mean , the pricing that we would have to be able to achieve on an acquisition , you know , would have to be substantially different than it was just a few months ago .

Speaker #5: And so you probably won't see us lean into acquisitions in any way, shape, or form at the moment. But I do think from a funding perspective, what you'll see us do is lean into debt funding for our development pipeline.

Speaker #5: We'll continue to fund that . As we talked about generally through our commercial paper program . And then once we get our debt to a certain level , we'll then look to go and issue bonds to to clear that up .

Speaker #5: So that's generally how we'll continue to look to finance the business right now at 4.2 times , you know , we could continue to expand the balance sheet to somewhere in the four and a half , 5% range .

Brad Hill: Right now at 4.2 times, we could continue to expand the balance sheet to somewhere in the 4.5% range, keep it in that range and be completely fine with our credit rating agency. We'll continue to move forward with that type of strategy.

Speaker #5: Keep it in that range . And be completely fine with our credit rating . Rating agency . So we'll continue to to move forward with that type of strategy .

Speaker #3: Our next question will come from the line of Brad Heffern with RBC Capital Markets . Please go ahead .

Operator: Our next question will come from the line of Brad Heffern with RBC Capital Markets. Please go ahead.

Speaker #17: Yeah . Hi everybody . One of your peers talked on their call about how Sunbelt lease ups are seeing challenges removing concessions when it comes time for the first renewal .

[Analyst]: Yeah. Hi everybody. One of your peers talked on their call about how Sunbelt lease ups are seeing challenges removing concessions when it comes time for the first renewal. Just curious if that's a dynamic that you've seen in your own lease ups and is that a source of any broader pressure?

Speaker #17: Just curious if that's a dynamic that you've seen in your own lease UPS and is that a source of any broader pressure ?

Speaker #5: I mean , certainly the when when you start having those renewals turn that that is the most difficult part of the lease up where you're , you know , you're trying to keep the back door shut and have more people coming in the front door .

Tim Argo: I mean, certainly when you start having those renewals turn, that is the most difficult part of the lease up where you're trying to keep the back door shut and have more people coming in the front door. We have seen that a little bit. I think more broadly, we're just seeing the concession environment stay elevated, if you will. Despite, you know, I made this comment in my prepared comments that despite continuing increasing occupancies, we've seen five straight quarters where market level occupancy has increased in our markets, the concession environment stays pretty elevated. I think that just speaks to the uncertainty that is out there right now. It is impacting the lease ups a little bit as well and driving that slower leasing velocity that we talked about.

Speaker #5: So we have seen that a little bit . I mean , I think more broadly , we're just seeing the concession environment stay elevated , if you will .

Speaker #5: You know , despite , made this comment in my prepared comments that despite continuing increasing occupancies , you know , we've seen five straight quarters where market level occupancy has increased in our markets .

Speaker #5: The concession environment stays pretty elevated . And I think that just speaks to the uncertainty that is out there right now . So it is impacting the lease ups a little bit as well .

Speaker #5: And driving that slower , leasing velocity that we talked about . Hey Brad , this is Brad . Just one point that I would add up with regard to our lease ups .

Brad Hill: Hey, Brad, this is Brad. Just one point that I would add with regard to our lease ups. In terms of our renewals on our lease ups, they're performing in line with our existing portfolio generally in terms of retention rates. The renewal rates that we've been able to get is about 11% in the third quarter on our lease up property. We are getting really good traction there on the renewal side. I wouldn't think that the hang of the concession side of things on our renewals has been impacting us, especially in the third quarter.

Speaker #5: You know , in terms of our renewals on our lease ups , there performing in line with our existing portfolio , generally in terms of retention rates .

Speaker #5: But the renewal rates that we've been able to get is about 11% in the third quarter on our on our lease up properties .

Speaker #5: So we we are getting really good traction there on the renewal side . So , you know , I wouldn't think that the hangover of the concession side of things on our renewals has , has been impacting us , especially in the third quarter .

Speaker #17: Okay . Thanks for that . And then maybe I missed it , but can you give the current gain or loss to lease ?

[Analyst]: Okay, thanks for that. Maybe I missed it, but can you give the current gain or loss to lease?

Speaker #5: Yeah , we're at a gain to lease of around 1% right now , which is not too unusual given this time of year .

Tim Argo: Yeah, we're at a gain to lease of around 1% right now, which is not too unusual given this time of year.

Speaker #3: Our next question will come from the line of Connor Mitchell with Piper Sandler . Please go ahead .

Operator: Our next question will come from the line of Connor Mitchell with Piper Sandler. Please go ahead.

Speaker #18: Hey . Good morning . Thanks for taking my question . I appreciate all the commentary on the pricing and the markets . I guess we kind of would have thought that maybe the smaller markets would have been insulated from some of the pressure that the larger markets are facing , but it sounds like that's kind of dwindling on the other side of the equation .

[Analyst]: Hey, morning. Thanks for taking my question. Appreciate all the commentary on the pricing in the markets. I guess we kind of would have thought that maybe the smaller markets would have been insulated from some of the pressure that the larger markets are facing, but it sounds like that's kind of dwindling on the other side of the equation. Could you talk about what you're seeing in the, any differentiations between the demand factors for some of those mid tier markets versus the larger markets and how that's impacting performance?

Speaker #18: Could you talk about what you're seeing in the any differentiations between the demand factors for some of those mid-tier markets versus the larger markets , and how that's impacting performance ?

Speaker #5: Not really anything different ? I mean , the , you know , our our strongest markets for the for several quarters now have been markets like Charleston and Greenville and Richmond , which , you know , still in a relative basis have have gotten a fair amount of supply .

Tim Argo: Not really anything different. I mean, our strongest markets for several quarters now have been markets like Charleston, Greenville, and Richmond, which still on a relative basis have gotten a fair amount of supply. There are huge demand drivers there as well. Some of our best job growth, I think Charleston right now is our best job growth market that we have. There is still a ton of demand there even with the supply scenarios. We are, as I mentioned, starting to see, I don't think it's a lack of strength in the secondary or mid tier. It's more of some strengthening in some of the larger markets where they've started to work through some of those concessions. They started to get the net absorption.

Speaker #5: But there's huge demand drivers there as well that some of our best job growth , I think Charleston , right now is our best job growth market that we have .

Speaker #5: So there's there's still a ton of demand there , even with the supply scenarios . But we are , as I mentioned , I think we're starting to see I don't think it's a lack of strength in the secondary or mid-tier .

Speaker #5: It's more of some strengthening and some of the larger markets where they've started to work through some of those concessions , they started to get the net absorption .

Speaker #5: And I think it's a more a function of like a Dallas and Atlanta , as I mentioned , on the way up versus some of the mid tears coming down .

Tim Argo: I think it's more a function of like Dallas and Atlanta, as I mentioned, on the way up, versus some of the mid tiers coming down.

Speaker #18: Okay , that makes sense . And then maybe following kind of the same line , but again switching to the supply side of it , it does seem like supply will be coming down compared to this year .

[Analyst]: Okay, that makes sense. Maybe following kind of the same line, but again switching to the supply side, it does seem like the supply will be coming down compared to this year and past couple of years. It's just kind of dragging out from what we expected earlier in the year, even in the mid summer. Do you see the extending of supply just dragging out having more of an impact on some of the larger markets than you expected earlier this year, or what kind of supply pressure are you expecting now versus earlier in the year, especially from the larger markets but overall as well?

Speaker #18: In the past couple of years, it’s just kind of dragging out from what we expected earlier in the year, even in the mid-summer.

Speaker #18: Do you see , do you see kind of the extending of supply just dragging out , having more of an impact on some of the larger markets than you expected earlier this year , or just kind of what kind of supply pressure are you kind of expecting now versus earlier in the year for especially some of the larger markets ?

Speaker #18: But overall as well ?

Speaker #5: Yeah , I mean , on the supply side , I don't I don't think it's moved a ton in terms of our expectations of what that impact is going to be .

Tim Argo: Yeah, I mean on the supply side I don't think it's moved a ton in terms of our expectations of what that impact is. I think some of the weakening we've seen in new lease pricing has been more a function of some of the job growth numbers and what we talked about before. A little bit weaker demand but certainly much stronger in our region of the country. The absorption continues to be great. We've had the past three quarters I mentioned of increasing occupancies in our markets. There's been about 300,000 apartments absorbed over the last five quarters in our markets and that continues to hold up strong. Assuming demand kind of hangs in where it is now, we would expect this to continue to get better and strengthen particularly as we get to the spring and the summer of next year.

Speaker #5: I mean , I think the some of the weakening we've seen in pricing is has been more a function of some of the job growth numbers .

Speaker #5: And what we talked about before . So a little bit weaker demand , but certainly much stronger in our region in the country .

Speaker #5: So you know the the absorption continues to be great . I mean there's we've had five straight quarters I mentioned of increasing occupancies in our markets .

Speaker #5: There's been about 300,000 apartments absorbed over the last five quarters in our markets . And that so that continues to hold up strong .

Speaker #5: So, assuming demand kind of hangs in where it is now, we would expect this to continue to get better and strengthen, particularly as we get to the spring and the summer of next year.

Speaker #3: Our next question will come from the line of Rich Hightower with Barclays . Please go ahead .

Operator: Our next question will come from the line of Ridge Hightower with Barclays. Please go ahead.

Speaker #19: Hey , good morning guys . Covered a lot of ground , so just one for me , but I'm going to go back to the stat on I guess all time low .

Brad Hill: Hey, good morning guys. Covered a lot of ground, so just one for me. I'm going to go back to the stat on, I guess, all-time low move-out for home purchases. I think we all understand the dynamic driving that, but I guess in your opinion, is affordability the only gating factor to that number kind of moving up back towards historical averages going forward? It just sort of feels like there's this massive, massive pent-up demand to buy houses, and how would that affect your business? What are your thoughts?

Speaker #19: Move out for home purchases and you know , I think we all understand the dynamic driving that . But I guess in your opinion is the affordability , the only gating factor to that number kind of moving up back towards historical averages , going forward .

Speaker #19: And , you know , it just sort of feels like there's this massive , massive pent up demand to buy houses . And so how would that affect your business ?

Speaker #19: What are your thoughts? Thanks. Rich.

[Analyst]: Thanks.

Speaker #6: This is .

Brad Hill: Rich, this is Brad. I think in general that's certainly a component, but I don't think that's the only component. I think if you look at the demographics of our renters, where they are, 80% are single. If you look at the average income for us now, it is approaching $100,000 given where current home prices are. There is definitely an affordability issue there, but I think just given the demographics, we're seeing certainly more single person households being formed, which definitely leans more into the rental market than it does the for sale market. There are demographic shifts. I think what folks are looking for, one of the number one reasons why folks are renting is because they want a maintenance free lifestyle, which you can't get in the single family market, but you can in the multifamily market.

Speaker #5: This is Brad . I mean , I think in general , that's certainly a component , but I don't think that's the only component .

Speaker #5: I think if you look at the . Demographics of our renters , where they are , you know , 80% are single . If you look at the average income for us now is approaching 100,000 , given where , you know , current home prices are .

Speaker #5: Yeah , I mean , there is definitely an affordability issue there . But I think , you know , just given the demographics , you know , we're seeing certainly more single person households being formed , which definitely I think leans more into the rental market than it does the for sale market .

Speaker #5: But there are demographic shifts . I think the what folks are looking for , you know , of the number one reasons why folks are renting is because they want a maintenance free lifestyle , which you can't get in the single family market , but you can in the multifamily market .

Speaker #5: So I think there are other things going on that are driving some of the retention rates . We've seen that trend declining for the last ten plus years .

Brad Hill: I think there are other things going on that are driving some of the retention rates. We've seen that trend declining for the last 10 plus years. Certainly, it's as low as it is today, partly because of the single family affordability. There are other trends that were in place years ago that started that trend. I think it will continue to be in the ballpark of where it is today for the foreseeable future. All right, thanks very much.

Speaker #5: Certainly it's it's as low as it is today , partly because of the single family affordability . But there are other trends that were in place .

Speaker #5: Years ago that started that trend . And I think I think it will continue to to be in the in the ballpark of where it is today for the foreseeable future .

Speaker #19: All right . Thanks very much .

Speaker #3: Our next question will come from the line of Wes Golladay with Baird . Please go ahead .

Operator: Our next question will come from the line of Wes Golladay with Baird. Please go ahead.

Speaker #20: Hey , good morning everyone . I just want to see if there's any early indicators of a demand slowdown . Is your exposure in line with normal levels ?

Brad Hill: Hey, good morning everyone.

[Analyst]: I just want to see if there's any early indicators of a demand slowdown.

Brad Hill: Is your exposure in line with normal levels?

Speaker #20: And you did call out Atlanta as having high absorption. Are there any markets that are experiencing decelerated absorption?

[Analyst]: You did call out Atlanta as having high absorption. Are there any markets that are having a deceleration in absorption?

Speaker #5: Hey Wes , this is Tim , our on your first question , exposure where it's 6.1% , which is about 30 basis points lower than it was this time last year .

Tim Argo: Hey Wes, it's Tim. On your first question, exposure, we're at 6.1%, which is about 30 basis points lower than it was this time last year. As I mentioned, we're around 95.6% occupancy, which is a good 20 basis points or so higher than it was this time last year. I think as we head into the slower leasing season, we're certainly in good shape in terms of those metrics. No, I mean, broadly there's not any markets where we're seeing a material slowdown in absorption. Q3 absorption wasn't quite as high as Q2, but Q2 is sort of a record of anything that we've ever seen. We did still see market level occupancies from Q2 to Q3 moved up about 30 basis points.

Speaker #5: As I mentioned , we're we're around 95.6% occupancy , which is , you know , a good 20 basis points or so higher than it was this time last year .

Speaker #5: So I think as we head into the , you slow releasing season , we're certainly in a good shape in terms of of those metrics .

Speaker #5: But no , I mean , broadly , there's not not any markets where we're seeing a material slowdown in absorption . I mean , Q3 absorption wasn't quite as as high as Q2 , but Q2 was sort of a record of , of anything that we've ever seen .

Speaker #5: But did still see market level occupancies from Q2 to Q3 moved up about 30 basis points . So , you know , outside of some of the weaker markets that are still below , you know , in Austin , still at a 91 , 92% occupancy level , market wide , we're much better than that .

Tim Argo: You know, outside of some of the weaker markets that are still below, you know, in Austin, still at a 91-92% occupancy level market wide, where we're much better than that, but including the entire market. Huntsville is one that, you know, smaller market, but it has had a record kind of supply there. That's another one that's struggling a little bit with absorption, but broadly continuing to see uptick in that absorption level and occupancy levels.

Speaker #5: But including the entire market , Huntsville's one that , you know , it's a smaller market , but it is at a record ton of supply there .

Speaker #5: That's another one that's struggling a little bit with absorption . But but broadly continuing to see uptick in that absorption level in levels .

Speaker #20: Okay . Thank you .

[Analyst]: Okay, thank you.

Speaker #3: Our next question will come from the line of Linda Sy with Jefferies . Please go ahead .

Operator: Our next question will come from the line of Linda Tsai with Jefferies. Please go ahead. Hi, I'm 26, Ernin, being flat to slightly down, what was this like 90 days ago? And from an internal reporting standpoint, how.

Speaker #21: Hi . I'm 26 Earnin . I'm being flat to slightly down . What was this like 90 days ago ? And from an internal reporting standpoint , how frequently do you update Earnin expectations ?

[Analyst]: How frequently do you update earnings expectations? Do you always have a point-in-time metric available? Just wondering if this could change quickly as supply drops further in 2026.

Speaker #21: Do you always have a point in time metric available ? Just wondering if this could change quickly as supply drops further in 26 .

Speaker #5: I mean , we we look at it typically when we're , you know , we're we look at our forecasts and look at at that every , every month and every quarter .

Tim Argo: We look at it typically when we're, you know, we look at our forecast and look at that every month and every quarter. It certainly came down a little bit just based on our new lease growth expectations. The way we look at earning is just all the leases that we expect to be in place at December 31. You just sort of assume that rent roll carried through to next year. It's going to be dependent on where those new lease rates head. Right now that's kind of what we're thinking is that somewhere around flat for next year.

Speaker #5: So you know , it's certainly came down a little bit just based on our new lease growth expectations . So you know , the way we look at earnings is just , you know , all the leases that we expect to be in place at December 31st .

Speaker #5: And just sort of assume that the rent roll carries through to next year. So, you know, it's going to be dependent on where those new lease rates head.

Speaker #5: But you know , right now that's that's kind of what we're thinking is that somewhere around flat for next year .

Speaker #21: Thank you .

Operator: Thank you. Our next question will come from the line of Alex Kim with Zelman & Associates. Please go ahead.

Speaker #3: Our next question will come from the line of Alex Kim with Zelman . And Associates . Please go ahead .

Speaker #22: Hey , guys . Thanks for taking the question . Just a quick follow up on the retention question from Rich earlier and ask , just how do you think turnover should trend during the recovery portion of the cycle ?

[Analyst]: Hey guys, thanks for taking the question. Just a quick follow-up on the retention question from Rich earlier, and asked how do you think turnover should trend during the recovery portion of the cycle?

Speaker #5: You know , right now we don't we don't expect material changes in turnover . I mean , it's hard to believe it gets a lot lower from here .

Tim Argo: Right now we don't expect material changes in turnover. I mean, it's hard to believe it gets a lot lower from here, but I don't think there's a lot of signs pointing to it getting much higher either. I mean, for all the reasons Brad Hill talked about on single family homes, expect that to move much. Job changes, job transfers are always our number one reason for turnover. If that starts to tick up, it's probably a sign that the economy is doing pretty well. Even though turnover could pick up a little bit in that scenario, it's probably good more broadly and we're getting better rent growth as well. Nothing we see would suggest that turnover changes a lot from where it is right now.

Speaker #5: But I don't think there's a lot of signs pointing to to it getting much higher either . I mean , the for all the reasons Brad talked about on single family homes , expect that to move much .

Speaker #5: I mean , job , job changes , job transfers are are always our number one reason for turnover . If that starts to pick up , it's probably a sign that that the economy's doing pretty well .

Speaker #5: So even though turnover could pick up a little bit in that scenario , it's probably good . More broadly . And we're getting better rent growth as well .

Speaker #5: But you know , nothing we see would suggest that turnover changes a lot from where it is right now .

Speaker #3: Our next question will come from the line of Ann Chan with Green Street . Please go ahead .

Operator: Our next question will come from the line of Ann Chan with Green Street. Please go ahead. Hey, thanks for taking a question. Just one for me. You noted earlier that migration and household formation trends should remain pretty stable in 2026 relative to what we see in 2025. Given that and following up on a comment from a few months ago, do you still anticipate new lease rate growth possibly turning positive by next summer, or is job growth enough of a wild card in 2026 that might cause a slower pace of supply absorption that might push out the new lease recovery timeline further?

Speaker #23: Hey, thanks for taking questions. Just one for me. So you noted earlier that migration and household formation trends should remain pretty stable in 2026 relative to what we see in 2025.

Speaker #23: So just given that and following up on a comment from a few months ago , do you still anticipate new lease rate growth , possibly turning positive by next summer , or is job growth enough of a wild card in 26 that might cause a slower pace of supply absorption that might push out the new lease recovery timeline out further .

Speaker #5: Well , as you said , we're not we're not giving guidance for 2026 . But , you know , I do think if the demand side remains kind of where it is right now and where we're thinking that we expect to see continued or expect to see acceleration in new lease rates .

Tim Argo: As we said, we're not giving guidance for 2026. You know, I do think if the demand side remains kind of where it is right now, where we're thinking that we expect to see continue or expect to see acceleration in new lease rates. I mean it's difficult to know exactly where it's going to be several months from now. It's at least obviously the most volatile in terms of how your competitors are behaving and all that. You know, given what we know today with the demand trends, we know what supply is doing and we're in a great position in sort of all the other metrics. I would just leave it as we expect to see new lease rates to continue to get better on a year over year basis as they have this year.

Speaker #5: I mean , it's difficult to exactly where it's going to be several months from now . It's it's at least . Obviously , the most volatile in terms of how your competitors are behaving and all that .

Speaker #5: But , you know , given given what we know today with the demand trends , we know what supply is doing . And we're in a great position and sort of know all the other metrics , I would just leave it as we expect to see new lease rates to continue to get better on a year over year basis , as they have this year .

Speaker #23: Great . Thank you .

Operator: Thank you. Our next question will come from the line of Omotayo Okusanya with Deutsche Bank. Please go ahead.

Speaker #3: Our next question will come from the line of Omotayo Okusanya with Deutsche Bank . Please go ahead .

Speaker #24: Go ahead .

Speaker #25: Hi . Yes , good morning everyone . While your markets generally are not tend not to be prone to any kind of rent control type provisions , just kind of curious as we're kind of going through the current election cycle , if there's anything on any ballot in any of your key states that you're kind of watching that could have implications for your operating performance going forward .

Tim Argo: Hi.

Brad Hill: Yes, good morning everyone.

[Analyst]: While your markets generally are not, tend not to be prone to any kind of rent control type provisions, just kind of curious as we're kind of going through the current election cycle, if there's anything on any ballot in any of the key states that you're kind of watching that could have implications for your operating performance going forward.

Speaker #26: Hi . It's Rob there are , as we've talked about before and as you indicated , our markets , 90% of our NOI is in states that have a state level prohibition preventing local governments from passing rent control rules .

Brad Hill: It's Rob there. As we've talked about before and as you indicated, our markets, 90% of our NOI is in states that have a state-level prohibition preventing local governments from passing rent control rules. We're not really seeing anything on rent control in any of our markets that's going on. There are a few out there in the country, but there is also a lot of pushback really saying rent control is not really the answer to the affordability issue. I think we're keeping an eye on it, but nothing that we're really concerned about right now.

Speaker #26: We're not really seeing anything on rent control in any of our markets that that's going on . There are a few out there in the country , but there are also a lot of pushback , really saying that rent control is not really the answer to the affordability issue .

Speaker #26: And really so so I think we're we're keeping an eye on it , but nothing that we're really concerned about right now .

Speaker #25: Thank you .

[Analyst]: Thank you.

Speaker #3: Our final question will come from the line of JP with BNP . Please go ahead .

Operator: Our final question will come from the line of JP Flankos with BNP. Please go ahead.

Speaker #27: Hi . Just one given the time that has been weaker and not a lot of innovation appeared to fall that have lower annual income relative to the private industry as a whole .

[Analyst]: Hi, just one given the has been weaker, appear to fall that have lower annual income relative to the private industry as a whole. Earlier you mentioned that the projection.

Speaker #27: Earlier you mentioned that the projection .

Speaker #6: Hey JP .

Brad Hill: Hey, you're breaking up pretty bad. Maybe you can try again. We're having a hard time hearing you. No, not getting you. Are you on? Maybe try one more time.

Speaker #28: Is breaking up pretty bad . We maybe you can try again . We're having a hard time hearing you .

Speaker #27: Now .

Speaker #28: No , not not getting you . Are you on ? Maybe try one more time .

Speaker #27: Now .

[Analyst]: Now.

Speaker #6: The try to repeating your question .

Brad Hill: Try repeating your question.

Speaker #27: Can you hear me ?

[Analyst]: Can you hear me?

Speaker #28: Yeah . You're kind of coming in and out .

Brad Hill: Yeah, you're kind of coming in and out.

Speaker #27: Well , we'll just leave it there . Thanks .

[Analyst]: We'll just leave it there. Thanks.

Speaker #28: Okay .

Brad Hill: Okay, we can follow up with you offline, JP.

Speaker #6: We can follow up with you offline . JP .

Speaker #3: With that , I'll return the call back to Ma for any closing comments .

Operator: With that, I'll return the call back to Mid-America Apartment Communities Inc. for any closing comments.

Speaker #28: All right .

Speaker #29: We appreciate everybody joining today . And we'll see you guys all in the upcoming conference .

Brad Hill: All right, we appreciate everybody joining today, and we'll see you guys all in the upcoming conference season. If you've got any questions, don't hesitate to reach out. Thanks.

Speaker #28: Season .

Speaker #5: If you .

Speaker #29: Got any questions .

Speaker #5: Don't hesitate to reach out .

Speaker #7: Thanks .

Operator: This concludes today's program. Thank you for your participation. You may disconnect now at any time.

[Analyst]: SA.