Q4 2025 BSR Real Estate Investment Trust Earnings Call

March 12, 2026

Speaker #2: Good day, everyone, and welcome. My name is Jim, and I will be your conference operator today. At this time, I'd like to welcome everyone to the BSR REIT Q4 2025 Financial Results Conference Call.

Speaker #2: All lines have been placed on mute to prevent any background noise , and after management's prepared remarks , there will be a question and answer session .

Speaker #2: If you would like to ask a question during that time, simply press star one on your telephone keypad. Removing yourself from the queue is just as simple.

Speaker #2: Just repeat the steps of star and one. I would now like to turn our conference over to Mr. Spencer Andrews, Vice President of Investor Relations and Marketing.

Spencer Andrews: Thank you, Jim, and good morning, everyone. Welcome to BSR REIT's conference call to discuss our financial results for the Q4 and year ending December 31, 2025. I'm joined on the call today by our CEO, Dan Oberste, our Chief Financial Officer, Tom Cirbus, and our Chief Operating Officer, Susan Rosenbaum, who are all available to answer your questions after our prepared remarks. Before we begin, I want to remind listeners that certain statements made on this conference call about future events are forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. In addition, we will reference certain non-GAAP financial measures that we believe are useful supplemental information about our financial performance.

Speaker #2: Please go ahead, sir.

Speaker #3: Thank you . Jim , and good morning , everyone . Welcome to BSR Conference Call to discuss our financial results for the fourth quarter and year ending December 31st , 2025 .

Speaker #3: I'm joined on the call today by our CEO , Dan Oberstein , our chief Financial officer , Tom service , and our chief operating officer , Suzy Rosenbaum , who are all available to answer your questions .

Speaker #3: After our prepared remarks. Before we begin, I want to remind listeners that certain statements made on this conference call about future events are forward-looking in nature.

Speaker #3: Any such information is subject to risks , uncertainties and assumptions that could cause actual results to differ materially . In addition , we will reference certain non-GAAP financial measures that we believe are useful supplemental information about our financial performance .

Spencer Andrews: For more information, please refer to the cautionary statements on forward-looking information and a description of our non-GAAP financial measures in our news release and MD&A dated March 11, 2026. Dan, over to you.

Speaker #3: For more information, please refer to the cautionary statements on forward-looking information and a description of our non-GAAP financial measures in our news release.

Speaker #3: And MDA dated March 11th , 2026 . Dan , over to you

Dan Oberste: Thanks, Spencer. Our 2025 financial performance reflects a REIT in transition, one that deliberately rotated nearly $1 billion of property during that year. The transition is now largely complete. We completed a strategic disposition of stabilized assets, redeployed capital into newer lease-up assets with greater growth potential, and streamlined our capital structure with the cancellation of roughly 75% of our Class B units or 27% of our total units as converted. All of these things make the REIT a far more attractive investment today than it was at this time a year ago. Amid all this change, our team continued to perform at a high level despite a persistently challenging leasing environment across our core Texas markets. We are generating incremental improvements in performance, supported by lease-up of our new properties and other growth initiatives.

Speaker #4: Thanks, Mr. Our 2025 financial performance reflects a REIT in transition, one that deliberately rotated nearly $1 billion of property during that year.

Speaker #4: The transition is now largely complete. We completed a strategic disposition of stabilized assets, redeployed capital into newer lease-up assets with greater growth potential, and streamlined our capital structure.

Speaker #4: With the cancellation of roughly 75% of our Class B units, or 27% of our total units as converted, all of these things make the REIT a far more attractive investment.

Speaker #4: Today, than it was at this time a year ago. Amid all this change, our team continued to perform at a high level despite a persistently challenging leasing environment across our core Texas markets.

Speaker #4: We are generating incremental improvements in performance, supported by lease-up of our new properties and other growth initiatives during the year. Same community revenue declined a modest 40 basis points.

Dan Oberste: During the year, same community revenue declined a modest 40 basis points, despite all the challenges I just mentioned. Same community NOI declined by 1.6%, due in part to a strategic decision to retain overhead, positioning the REIT for future growth. Same community weighted average occupancy closed the year at 94.3%. Our retention rate was 59.5% at quarter end, a 130 basis point expansion from the end of Q3 and up from 56% a year ago. We made significant progress at our two primary lease-up assets. Aura 3550 ended 2025 at 92% occupied. That compares to 86.6% at the end of Q3 and the low 20s in early 2025.

Speaker #4: Despite all the challenges I just mentioned, same community NOI declined by 1.6%, due in part to a strategic decision to retain overhead, positioning the REIT for future growth.

Speaker #4: Same community weighted average occupancy closed the year at 94.3%. Our retention rate was 59.5% at quarter-end, a 130 basis point expansion from the end of Q3 and up from 56% a year ago.

Speaker #4: And we made significant progress at our two primary lease-up assets, with Aura 3550 ending Q4 '25 at 92% occupied. That compares to 86.6% at the end of Q3.

Dan Oberste: A full year of a physically stabilized Aura 3550 will provide year-over-year upside in 2026, and The Ownsby closed the year at 70.4% occupied, representing additional upside to the non-same community portfolio in 2026. Despite all the good we achieved in 2025, our Q4 and full year 2025 results, as well as our preliminary 2026 guidance, reflect a few unavoidable realities. First, new lease rate recovery has somewhat lagged our expectations. But with 24+ months of minimal new supply ahead, we see a clear path to rate improvement. Second, we are operating in a materially different interest rate environment than existed several years ago. While our interest hedging program certainly helped to shield our investors from interest volatility, which allowed the REIT to distance itself from ZIRP reliance, ultimately, we expect little future benefit from zero interest rate policies.

Speaker #4: And the low 20s in A full year of a physically stabilized aura , 3550 will provide year over year upside in 26 , and the OSB closed the year at 70.4% , occupied , representing additional upside to the same community portfolio in 26 .

Speaker #4: Despite all the good we achieved in 25 , our fourth quarter and full year 25 results , as well as our preliminary 26 guidance , reflect a few unavoidable realities First , new lease rate recovery is somewhat lagged .

Speaker #4: Our expectations , but with 24 plus months of minimal new supply ahead , we see a clear path to rate improvement Second , we are operating in a materially different interest rate environment than existed several years ago .

Speaker #4: While our interest hedging program certainly helped to shield our investors from interest volatility , which allowed the REIT to distance itself from Zerp reliance Ultimately , we expect little future benefit from zero interest rate policies .

Dan Oberste: Finally, rotating capital into newer lease-up focused assets has an immediate positive impact to our portfolio quality, but it takes time to fully flow through our financials. To state the obvious, we earn $0 from vacant apartments. However, the earnings drag from lease-up assets is finite, or Aura 3550 is already at 92%, and the odds of its ramp up is underway. Thus, our team is going to keep doing what it does best, focus on what we can control, and adeptly manage risk versus return. We will continue to drive occupancy at new assets, capitalize on organic growth opportunities embedded in our properties, minimize our cost of capital, and pursue external growth opportunities that provide accretion on a per unit basis.

Speaker #4: And finally , rotating capital into newer lease up focused assets has an immediate positive impact to our portfolio . Quality . But it takes time to fully flow through our financials .

Speaker #4: To state the obvious . We earn $0 from vacant apartments However , the earnings drag from lease up assets is finite or at 3550 is already at 92% and the ramp up is underway .

Speaker #4: Thus, our team is going to keep doing what it does best: focus on what we can control and adeptly manage risk versus return.

Speaker #4: We will continue to drive occupancy at new assets , capitalize on organic growth opportunities embedded in our properties , minimize our cost of capital , and pursue external growth opportunities that provide accretion on a per unit basis .

Dan Oberste: With market fundamentals steadily improving in our core Texas markets, albeit at a slower pace than we would like, and with the best in class portfolio in tow, we like our relative position in the market moving into 2026. I'll now invite Tom to review our financial results and 2026 guidance in more detail. Tom.

Speaker #4: With market fundamentals steadily improving in our core Texas markets , albeit at a slower pace than we would like And with the best in class portfolio in tow , we like our relative position in the market .

Speaker #4: Moving into 2026 . I'll now invite Tom to review our financial results in 2026 . Guidance in more detail . Tom .

Tom Cirbus: Thanks, Dan. Our operational performance in Q4 was essentially in line with management's expectations and consistent with the typical Q4 slowdown in leasing activity we see annually. The seasonal slowdown did have a negative impact on rates, particularly with respect to new leases. As a result, a 2.2% increase in renewal rates was more than outweighed by a 6.3% decline in new lease rates, driving blended rates down 1.3% in the quarter. Though January continued to experience a deceleration in blended rate decreases, we were encouraged to see a modest sequential improvement in blended rates in February of this year relative to January. We are continuing to monitor absorption in our markets relative to remaining vacancy and expect a bit more near-term monthly rate progression and regression.

Speaker #5: Thanks, Dan. Our operational performance in the fourth quarter was essentially in line with management's expectations and consistent with the typical Q4 slowdown in leasing activity.

Speaker #5: We see annually . The seasonal slowdown did have a negative impact on rates , particularly with respect to new leases , as a result , a 2.2% increase in renewal rates was more than outweighed by a 6.3% decline in new lease rates , driving a driving rates down 1.3% in the quarter , though January continued to experience a deceleration in blended rate decreases .

Speaker #5: We were encouraged to see a modest sequential improvement in blended rates in February of this year relative to January . We are continuing to monitor absorption in our markets relative to remaining vacancy and expect a bit more near-term monthly rate progression and regression However , with minimal new product expected to be added over at least the next 24 months , we are confident that the general trajectory of blended rate changes will continue to improve in the coming quarters .

Tom Cirbus: However, with minimal new product expected to be added over at least the next 24 months, we are confident that the general trajectory of blended rate changes will continue to improve in the coming quarters given the fundamental setup in our markets. More broadly, same community revenue decreased 1.2% year-over-year in Q4, primarily driven by the lower average monthly in-place leases I just spoke to. Average monthly in-place leases declined to $1,436 per month as of 31 December 2025, from $1,447 per month last year. Lower average monthly rent was partially offset by an increase in other property income. Other income continues to benefit from internalization initiatives, including expansions of our existing valet trash, and bulk internet initiatives. We expect these initiatives to materially enhance our organic growth beginning this year.

Speaker #5: Given the fundamental setup in our markets more broadly, same community revenue decreased 1.2% year over year in Q4, primarily driven by the lower average monthly in-place leases.

Speaker #5: I just spoke to average monthly in-place leases declined to $1,436 per month as of December 31st , 2025 , from $1,447 per month last year Lower average monthly rent was partially offset by an increase in other property income .

Speaker #5: Other income continues to benefit from internalization initiatives, including expansions of our existing Valley trash and bulk internet initiatives. We expect these initiatives to materially enhance our organic growth beginning this year.

Tom Cirbus: Same-community NOI for Q4 2025 was $12.7 million, a 6.1% decrease from last year. The decline was attributable to the lower revenue I just described, the strategic decision to retain overhead, which pushed an additional $0.3 million of expenses to same-community properties relative to the comparative period, as well as a $0.2 million increase in real estate taxes and a $0.1 million increase in both repair and maintenance, and utility expenses, all of which was partially offset by a decrease in property insurance expense of $0.2 million. Below NOI, G&A expenses increased by $0.6 million due to payroll costs and legal and professional fees, and net finance costs were up $0.1 million due to resets experienced in the REIT's interest rate derivative portfolio.

Speaker #5: Same community NOI for Q4 2025 was $12.7 million, a 6.1% decrease from last year. The decline was attributable to lower revenue.

Speaker #5: I just described the strategic decision to retain overhead, which pushed an additional $0.3 million of expenses to same community properties relative to the comparative period, as well as a $0.2 million increase in real estate taxes and a $0.1 million increase in both repair and maintenance.

Speaker #5: And utility expenses . All of which would partially offset by a decrease in property insurance expense of $0.2 million below NOI G&A expenses increased by $0.6 million due to payroll costs and legal and professional fees , and net finance costs were up $0.1 million due to resets experienced in the interest rate derivative portfolio .

Tom Cirbus: In total, FFO in Q4 2025 was $0.14 per unit, compared to $0.19 per unit in Q3 and $0.22 per unit in Q4 2024. Likewise, AFFO per unit finished the quarter at $0.11 per unit versus $0.17 per unit in Q3 and $0.20 per unit last year. The sequential decline in per unit measures between Q3 and Q4 were primarily related to the timing of real estate tax appeal proceeds, as well as legal and professional fees associated with those appeals. The declines in FFO and AFFO per unit on a year-over-year basis were driven primarily by three items in order of impact. First, headwinds of higher relative interest rates on the REIT. Second, the inherent lag in earnings that is created when rotating capital, and particularly when rotating capital from stabilized properties into a lower number of newer lease-up properties.

Speaker #5: In total , FFO in Q4 25 was $0.14 per unit , compared to $0.19 per unit in the third quarter and $0.22 per unit in Q4 of 24 .

Speaker #5: Likewise , AFFO per unit finished the quarter at $0.11 per unit versus $0.17 per unit in Q3 and $0.20 per unit last year The sequential decline in per unit measures between Q3 and Q4 were primarily related to the timing of real estate tax appeal proceeds , as well as legal and professional fees associated with those appeals The declines in FFO and AFO per unit on a year over year basis were driven primarily by three items in order of impact First , headwinds of higher relative interest rates on the REIT Second , the inherent lag in earnings that is created when rotating capital and particularly when rotating capital from stabilized properties into a lower number of new release up .

Tom Cirbus: Third, the leasing environment in Q4 relative to Q4 2024. The same holds true for our full year financial results. Full year 2025 FFO per unit was CAD 0.79 per unit versus ninety-six percent, excuse me, CAD 0.96 per unit in 2024, and AFFO per unit was CAD 0.70 versus CAD 0.88 in 2024. To reiterate, there are a lot of moving pieces here, but in summary, the declines in FFO and AFFO per unit on our full year results also primarily relate to higher realized interest rates, timing drags created in rotating the portfolio, and a softer leasing environment in 2025 relative to 2024. On the balance sheet, the net debt to gross book value as of 31 December was 51.2%, essentially consistent with Q3.

Speaker #5: And third , the leasing environment in Q4 relative to Q4 24 , the same holds true for our full year financial results Full year 25 FFO per unit was $0.79 per unit versus 96% .

Speaker #5: Excuse me , $0.96 per unit in 2024 . And a F per unit was $0.70 versus $0.88 in 2020 . For . To reiterate , there are a lot of moving pieces here , but in summary , the declines in FFO and AFFO per unit on a full year .

Speaker #5: Our full year results also primarily relate to higher realized interest rates. Timing drags were created in rotating the portfolio and a softer leasing environment.

Speaker #5: In 2025, relative to 2024 on the balance sheet, the REIT's debt to gross book value as of December 31st was 51.2%, essentially consistent with Q3.

Tom Cirbus: This amounts to $723.1 million of debt outstanding, with a weighted average interest rate of 4%, 99% of which is either fixed or economically hedged to fixed rates. On the liquidity front, total liquidity was $52.7 million at year-end, including cash and cash equivalents of $6.3 million and $46.4 million available under our revolving credit facility. As usual, we have the ability to obtain additional liquidity by adding unencumbered properties to the current borrowing base of the facility. In December, we refinanced our revolving credit facility, extending the maturity to December 2030, assuming the exercise of the REIT's one-year extension option. The refinancing of the credit facility reduced the interest rate margin for most leverage points in the agreement.

Speaker #5: This amounts to $723.1 million of debt outstanding , with a weighted average interest rate of 4% . 99% of which is either fixed or economically hedged to fixed rates On the liquidity front , total liquidity was $52.7 million at year end , including cash and cash equivalents of $6.3 million and $46.4 million available under our revolving credit facility .

Speaker #5: As usual , we have the ability to obtain additional liquidity by adding unencumbered properties to the current borrowing base of the facility . In December , we refinanced our revolving credit facility , extending the maturity to December of 2030 .

Speaker #5: Assuming the exercise of the right's one-year extension option, the refinancing of the credit facility reduced the interest rate margin for most leverage points in the agreement.

Tom Cirbus: We also extended our $160 million term loan an additional year from December 2026 to December 2027, locking in the highly attractive cost of capital on that tranche of debt for another year. Please note that our subsequent events highlight that the REIT's only previously remaining 2026 maturity, a $28 million loan related to our Vail luxury property in Houston, was refinanced onto our credit facility this week, and thus the REIT has no remaining 2026 maturities. Finally, turning the page to 2026. Last night, we released our preliminary full-year FFO per unit guidance of $0.75 to 0.79 per unit or $0.77 per unit at the midpoint, and full-year AFFO per unit guidance of $0.68 to 0.74 or $0.71 per unit at the midpoint.

Speaker #5: We also extended our $160 million term loan . An additional year from December of 2026 to December of 27 , locking in the highly attractive cost of capital on that tranche of debt for another year Please note that our subsequent events highlight that the rates only previously remaining 26 maturity , a $28 million loan related to our Vail Luxury property in Houston was refinanced onto our credit facility this week , and thus the REIT has no remaining 2026 maturities Finally , and turning the page to 2026 last night we released our preliminary full year FFO per unit guidance of $0.75 to $0.79 per unit , or $0.77 per unit at the midpoint and full year AFFO per unit guidance of $0.68 to $0.74 , or $0.71 per per unit .

Tom Cirbus: This guidance assumes 50 to 150 basis points of same community revenue growth, 100 to 200 basis points of same community property operating expense, and real estate tax growth amounting to 0 to 100 basis points of same community NOI growth. Importantly, and again appreciating there are a lot of moving pieces here, we have also included an annual bridge from our 2025 FFO per unit actuals to our 2026 FFO per unit guidance at the midpoint for illustrative purposes. The key takeaway is that we expect our core real estate business to remain healthy despite an uncertain macro backdrop, adding $0.03 per unit or 3.5% growth to the business from 2025.

Speaker #5: At the midpoint, this guidance assumes 50 to 150 basis points of same community revenue growth, 100 to 200 basis points of same community property operating expense and real estate tax growth, amounting to 0 to 100 basis points of same community.

Speaker #5: NOI growth Importantly , and again , appreciating , there are a lot of moving pieces here . We have also included an annual bridge from our 2025 FFO per unit actuals to our 2026 FFO per unit guidance .

Speaker #5: At the midpoint, for illustrative purposes. The key takeaway is that we expect our core real estate business to remain healthy, despite an uncertain macro backdrop, adding $0.03 per unit or 3.5% growth to the business from 2025.

Tom Cirbus: Unfortunately, we can currently expect this growth to be more than fully offset by increased net interest impact as we continue building revenue from our lease-up activity along with marginal additional overhead costs. Note, we only intend to release this bridge once a year in conjunction with our guidance initiation. We will of course, update this guidance as needed throughout the year. I will now turn it back to Dan for his closing remarks.

Speaker #5: Unfortunately , we can currently expect this growth to be more than fully offset by increased net interest , net interest impact , as we continue building revenue from our lease up activity , along with marginal additional overhead costs Note we only intend to release this bridge once a year in conjunction with our guidance initiation .

Speaker #5: We will, of course, update this guidance as needed throughout the year. I will now turn it back to Dan for his closing remarks.

Dan Oberste: Thanks, Tom. To put 2025 in plain terms, we absorbed the impact of roughly $1 billion in total rotations, and that cost showed up in our per unit numbers. That chapter is now behind us. I want to reiterate, the practical growth potential we highlighted in December remains ahead of us. Our outlook and strategy has not changed. Here's why we think these numbers reflect an inflection point. Again, Aura 3550 ended the year at 92% occupied from the low 20s at the beginning of the year. The Ownsby is leasing up in 2026. Our two Houston acquisitions, while fairly occupied upon purchase, will stabilize and contribute more fully in the back half of 2026. A full year of physical stabilization across all four assets flows directly into cash flow in a way that 2025 simply could not reflect.

Speaker #4: Thanks , Tom . To put 25 in plain terms , we absorb the impact of roughly $1 billion in total rotations , and that cost showed up in our per unit numbers .

Speaker #4: That chapter is now behind us. I want to reiterate the practical growth potential we highlighted in December remains ahead of us.

Speaker #4: Our outlook and strategy has not changed Here's why we think these numbers reflect an inflection point Again , Ora , 3550 , ended the year at 92% occupied from the low 20s .

Speaker #4: At the beginning of the year . The OSB is leasing up in 26 . Our two Houston acquisitions , while fairly occupied upon purchase , will stabilize and contribute more fully in the back half of 26 .

Speaker #4: A full year of physical stabilization across all four assets flows directly into cash flow in a way that 2025 simply could not reflect.

Dan Oberste: That alone drives meaningful year-over-year improvement before we get any credit from the market. We're not waiting on the market. We can control two growth levers that are independent of where new lease rates land. First, occupancy revenue from lease up and stabilization at our 2025 acquisitions all are on track to reach physical stabilization by year-end. Second, the internalization of certain real estate adjacent business functions. For example, as of today, six of our 26 properties are up and running on our bulk internet initiative. We are in active negotiations with vendors on the remaining 20 and expect to begin rollout in the relative near term.

Speaker #4: That alone drives meaningful year over year improvement . Before we get any credit from the market , but we're not waiting on the market We can control two growth levers that are independent of where new lease rates land First , occupancy revenue from lease up and stabilization at our 2025 acquisitions , all are on track to reach physical stabilization by year end Second , the internalization of certain real estate adjacent business functions , for example , as of today , six of our 26 properties are up and running on bulk .

Speaker #4: On our bulk internet initiative, we are in active negotiations with vendors on the remaining 20 and expect to begin rollout in the relatively near term.

Dan Oberste: This is a revenue line item that did not exist in our portfolio 18 months ago, and as we communicated in December, we expect up to $0.08 per unit of incremental earnings stabilizing in early 2028. These initiatives alone will accelerate growth above and beyond whatever the market ultimately dictates is possible with market rents. Speaking of market rents, the 24-month macro setup in our Texas market is working in our favor relative to the past 24 months. The supply wave that pressured new lease rates since mid-2023 is being absorbed, and the forward pipeline is minimal. There has been a lot of focus on the supply situation over the last couple of years, and rightfully so. It can obscure the continued population and economic growth that greatly exceeds the national average and the robust absorption that continues.

Speaker #4: This is a revenue line item that did not exist in our portfolio 18 months ago, and as we communicated in December, we expect up to $0.08 per unit of incremental earnings stabilizing in early '28.

Speaker #4: These initiatives alone will accelerate growth above and beyond whatever the market ultimately dictates is possible with market rents. And speaking of market rents, the 24-month macro setup in our Texas market is working in our favor relative to the past 24 months.

Speaker #4: The supply wave that pressured new lease rates since mid 23 is being absorbed , and the forward pipeline is minimal . There There has been a lot of focus on the supply situation over the last couple of years , and rightfully so .

Speaker #4: But it can't obscure the continued population and economic growth that greatly exceeds the national average. And the robust absorption that continues—the demand side of this equation—has never been in question.

Dan Oberste: The demand side of this equation has never been in question. It was always a supply story, and that story is turning. To summarize, our portfolio is by far the highest quality it has ever been. The trough is behind us. The lease-up ramp is underway, and we have incremental forward growth initiatives firing that are entirely within our control. We like where we stand. Before we open the line, I want to acknowledge two board transitions. Daniel Hughes retired from the board at the start of January. Daniel founded BSR's predecessor company and was an integral part of the BSR team for nearly three decades. He's a personal mentor of mine, and I can't overstate his contributions to our business. Yesterday, we announced that Bryan Held will be stepping down at the upcoming annual meeting.

Speaker #4: It has always it was always a supply story . And that story is turning . So to summarize , our portfolio is by far the highest quality it has ever been .

Speaker #4: The trough is behind us. The lease-up ramp is underway, and we have incremental forward growth initiatives firing that are entirely within our control.

Speaker #4: We like where we stand before we open the line. I want to acknowledge two board transitions. Daniel Hughes retired from the board at the start of January.

Speaker #4: Daniel founded Bsr's predecessor company and was an integral part of the BSR team for nearly three decades . He is a personal mentor of mine , and I can't overstate his contributions to our business .

Speaker #4: And yesterday we announced that Brian Held will be stepping down at the upcoming annual meeting. Brian has been a trustee since the formation of the REIT in 2018, notable for his high ethical standards and instrumental in leading our Audit Committee and, most recently, our Governance Committee. Brian has been an invaluable member of our team and we are grateful to both Brian and Daniel for their contributions in their places.

Dan Oberste: Bryan has been a trustee since the formation of the REIT in 2018. Notable for his high ethical standards and instrumental in leading our audit committee and most recently, our governance committee. Bryan has been an invaluable member of our team, and we are grateful to both Bryan and Daniel for their contributions. In their places, we welcome Mark Decker, who joined the board in January to replace Daniel. Mark is the President, CEO, and Director of Kyron Real Estate, and previously led Centerspace, a fellow US multifamily REIT. At the annual meeting, the board, at the recommendation of the CGNC, has resolved to nominate Corinne McEndoo to replace Bryan. Corinne has 30 years of experience, primarily in real estate and capital markets, including multiple REIT trusteeships. Both Mark and Corinne bring skills and experience that will be a tremendous benefit to our team.

Speaker #4: We welcome Mark Decker , who joined the board in January , to replace Daniel . Mark is the president , CEO and director of Kiran Real Estate and previously led center Space , a fellow U.S.

Speaker #4: multifamily REIT , and at the annual meeting , the board at the recommendation of the CNC , has nominate Kareem McAdoo to replace Brian Corinne has 30 years of experience , primarily in real estate and capital markets , including multiple REIT Trusteeships .

Speaker #4: Both Mark and Corinne bring skills and experience that will be a tremendous benefit to our team. That concludes our prepared remarks this morning.

Dan Oberste: That concludes our prepared remarks this morning. Tom, Susie, and I would now be pleased to answer your questions. Jim, please open the line for questions.

Speaker #4: Tom, Susie, and I would now be pleased to answer your questions. Jim, please open the line for questions.

Operator 2: Certainly. Thank you. To our phone audience joining today at this time, we are ready to take your questions. A reminder, please press star and one on your telephone keypad to signal for a question, and I will open your lines one at a time. Once again, ladies and gentlemen, that is star and one on your telephone keypad. We'll hear first today from the line of Brad Sturges at Raymond James.

Operator: Certainly. Thank you. To our phone audience joining today at this time, we are ready to take your questions. A reminder, please press star and one on your telephone keypad to signal for a question, and I will open your lines one at a time. Once again, ladies and gentlemen, that is star and one on your telephone keypad. We'll hear first today from the line of Brad Sturges at Raymond James.

Speaker #2: Certainly . Thank you . And to our phone audience joining today at this time , we are ready to take your questions . A reminder , please press star one on your telephone keypad to signal for a question , and I will open your lines one at a time .

Speaker #2: Once again, ladies and gentlemen, that is star and one on your telephone keypad. We'll hear first today from the line of Brad Sturgis at Raymond James.

Brad Sturges: Hey, guys. Thanks for taking my question. Just maybe just starting with the guidance for 2026, and really do appreciate the buildup provided to get to the midpoint. Just curious, in terms of the underlying assumptions, I'm wondering if you could just talk a little bit more in terms of what you're expecting maybe from a broader range on leasing spreads and occupancy as part of your revenue guidance there.

Speaker #6: Hey , guys . Thanks for the taking . My question . Just maybe just starting with the the the guidance for 2026 and really do appreciate the , the build up provided to get to the midpoint .

Speaker #6: Just curious in terms of the assumption underlying assumptions , I wonder if you could just talk a little bit more in terms of what you're expecting .

Speaker #6: Maybe from a—maybe a broader range on leasing spreads and occupancy as part of your revenue guidance, there—

Tom Cirbus: Yeah, Brad, it's Tom. At the top line, as we've always said on the occupancy side, we think healthy occupancy is somewhere between 94 and 96%. Our guidance assumes, let's just call it the midpoint of that from an occupancy perspective. From a rate perspective, I'd say we think rates are gonna be flat to up 1%. Again, let's call that the midpoint in the 50 basis point range, generally speaking.

Speaker #5: Yeah . Brad , it's Tom At the top line . As we've always said , on the occupancy side , we think healthy occupancy is somewhere between 94 and 96% .

Speaker #5: Our guidance assumes—let's just call it the midpoint of that—from an occupancy perspective. From a rate perspective, I'd say we think rates are going to be flat to up a percent.

Speaker #5: So again, let's call that the midpoint in the 50-basis-point range. Generally speaking,

Brad Sturges: Are you able to comment, I guess from a leasing concession point of view, what that would represent within the guidance, maybe on a percentage of revenue terms or any other way you wanna frame it?

Speaker #6: And are you able to comment . I guess from a leasing concession point of view , what that would represent within the guidance ?

Speaker #6: Maybe on a percentage of revenue terms, or any other way you want to frame it.

Tom Cirbus: Yeah, Brad, as a reminder, our revenue is net effective or net of all concessions. When we think through guidance, we kind of almost don't even have to take a view on concessions. It's our guidance is net effective, and whether we get that through a six-week concession or a zero-week concession, we're managing towards a revenue number. I don't have a fantastic answer for you there, but that's how we genuinely think about the business.

Speaker #5: Yeah . Brad , as a reminder , our , our revenue is net effective or net of all concessions . So when we think through guidance , we kind of almost don't even have to take a view on concessions .

Speaker #5: It's our guidance is not effective . And whether we get that through a six week concession or a zero week concession , we're managing towards a revenue number .

Speaker #5: So, I don't have a fantastic answer for you there, but that's how we genuinely think about the business.

Brad Sturges: Yeah. Understood. I guess my other question would be just, you know, part of not only the go-forward plan for 2026, but for the next three years is the ancillary revenue opportunity. Just how much of that would be baked into 2026 and how should we think about the ramp-up there?

Speaker #6: Yeah . Understood . I guess my other question would be just , you know , part of the not only the , the go forward plan for 26 , but for the next three years is the , the ancillary revenue opportunity .

Speaker #6: Just how much of that would be baked into '26, and how should we think about the ramp-up there?

Susan Rosenbaum: Yeah, sure, Brad. For 2026, it's got about $400,000 baked in for the 5 properties that went live with bulk internet at the end of this year or at the end of 2025. You gotta remember that's part of the build-up. When it's stabilized, when you get to 2028, those 5 should be contributing about $1.1 million. Now we have 20 properties to go that we will start the implementation of in 2026. They're not gonna contribute to NOI in 2026, but the ramp-ups will be in place by 2027. Those should contribute another $2.5 million in 2027, and then complete the ramp-up at $2.8 million in 2028.

Speaker #7: Yeah , sure . Brad . So for 2026 , it's got about $400,000 baked in for the five properties that went live with bulk internet at the end of this year .

Speaker #7: Or at the end of 2025 . But you got to remember that's that's part of the build up . And when it's stabilized , when you get to 2028 , those five should be contributing about 1.1 million .

Speaker #7: Now we have 20 properties to go that we will start the implementation of in 2026 . They're not going to contribute to NOI in 2026 .

Speaker #7: But the ramp ups will be in place by 2027 . So those should contribute another 2.5 million in 2027 . And then complete the ramp up at 2.8 million in 2028 .

Brad Sturges: Just for clarification, as you're bringing properties online through that program, would there be a little bit of a near-term margin impact as the expense could be kind of in front of the revenue stream, so to speak? Like, would you see a bit more upfront cost first and then the revenue comes online? Or how do we think about that?

Speaker #6: And just for clarification, as you're bringing properties online through that program, would there be a little bit of a near-term margin impact because the expense could be kind of in front of the revenue stream, so to speak?

Speaker #6: Like , would you see a bit more upfront cost first ? And then the revenue online ? Or how do we think about that

Tom Cirbus: Yeah, you're thinking about it the right way, Brad. Today, the way we do internet, as we explained in December, we collect kind of participation fees with the internet service provider. When we become in control of that, obviously those participation fees go away. There's a temporary lease-up within the bulk internet initiative as well as they come online and as the rent roll turns, and we bring more tenants on the program, there's a temporary drag to margin as it leases up. It will be more than offset in the future. That makes it a very warranted investment decision, particularly from a margin perspective once the program is even marginally, if you will, occupied by tenants, let alone fully stabilized.

Speaker #5: Yeah , you're thinking about it the right way . Brad . Today , the way we do internet , as we explained in December , we collect kind of participation fees with the internet service provider .

Speaker #5: And when we come in , become in control of that . Obviously those participation fees go , go away . So there's a temporary lease up within the bulk internet initiative as well as they come online .

Speaker #5: And as we bring in the rent roll turns and we bring more tenants on the program, there's a temporary drag to margin as it leases up, but it will be more than offset in the future.

Speaker #5: That makes it a very warranted investment decision from a particularly from a margin perspective , once the program is even marginally , if you will , occupied by tenants , let alone fully stabilized .

Susan Rosenbaum: It's about $150,000 for this year for those five.

Speaker #7: Yeah, it's about $150,000 for this year for those five.

Brad Sturges: Okay. I appreciate it. I'll turn it back. Thank you.

Speaker #6: Okay. I appreciate it. I'll turn it back. Thank you.

Operator 2: Our next question today will come from Sairam Srinivas at ATB Capital Markets.

Operator: Our next question today will come from Sairam Srinivas at ATB Capital Markets.

Speaker #2: Our next question today will come from Sarahm Srinivasan at ATB Carmart Capital Markets.

Sairam Srinivas: Thank you, operator. Good morning, everybody. Dan, you mentioned lagging expectations in terms of the new lease rates. When you see Q4 2025, and if you compare it to a prior winter quarters, Q4 2024 maybe, how has the expectations turned? Was it like worse than a normal seasonality or is it normally in line with expectations for a slower winter quarter?

Speaker #8: Thank you . Good morning everybody . Dan , you mentioned lagging expectations in terms of the new lease rates . When you see Q4 25 and if you compare it to a prior winter quarters , Q4 24 , maybe .

Speaker #8: However, expectations turned. Was it worse than a normal seasonality, or is it normally in line with expectations for a slower winter quarter?

Tom Cirbus: Yeah, I'll try to take the general answer and then I'll ask Susie to speak to specifics. Yeah, there's always been some seasonality, Sai, in Q4 numbers. From a very high level, I just expect us to lease half as many units in Q4 than any other quarter. We also have half as many move-outs. People aren't moving in December, if that makes sense, Sai. You really focus as an operator on the lease-up season, and I'll say the bookends between the beginning and end of summer. That's where we've historically seen performance. Susie, is there anything else you'd like to add?

Dan Oberste: Yeah, I'll try to take the general answer and then I'll ask Susie to speak to specifics. Yeah, there's always been some seasonality, Sai, in Q4 numbers. From a very high level, I just expect us to lease half as many units in Q4 than any other quarter. We also have half as many move-outs. People aren't moving in December, if that makes sense, Sai. You really focus as an operator on the lease-up season, and I'll say the bookends between the beginning and end of summer. That's where we've historically seen performance. Susie, is there anything else you'd like to add?

Speaker #4: Yeah , I'll try to take the general answer and then and then I'll ask Susie to speak to specifics . Yeah . There's always been some seasonality psi in Q4 numbers .

Speaker #4: And from a very high level , I just expect us to lease half as many units in Q4 than any other quarter . And so when I'm when I'm and we also have half as many move outs , it's just people aren't people aren't moving in December .

Speaker #4: If that makes sense. And so you really focus as an operator on the lease-up season. And I'll say the bookends are between the beginning and end of summer.

Susan Rosenbaum: Yeah, absolutely. Dan is absolutely right. You know, we sign less leases when it's cold, and that always picks up in the spring. Normally the Q2 and Q3 are our best. I'd also like to point out the fact too that Q4 year-over-year is getting better. Just blended last year on a same-store basis, Q4, we had negative blends of about 3.4%, and that's moved to negative 1.3% for Q4 2025. Renewals in 2024 were positive by 1.6%, and they are positive by 2.2% in Q4 of 2025. New leases were negative 8.4% in Q4 of 2024, and now they are negative by 6.3%.

Speaker #4: And that's where we've historically seen performance . Susie , is there anything else you'd like to add ?

Speaker #7: Yeah , absolutely . So Dan is absolutely right . You know , we signed leases when it's cold and that always picks up in in the spring Normally the second and third quarters are our best , but I'd also like to point out to the fact too , that fourth quarter year over year is getting better .

Speaker #7: Just blended last year on a same store basis , Q4 we were we had negative blends of about 3.4% , and that's a move to negative 1.3% for Q4 2025 renewals in 2024 were positive by 1.6% , and they are positive by 2.2% in Q4 of 2025 .

Speaker #7: And new leases were negative 8.4% in Q4 of 2024, and now they are negative by 6.3%. So you can see right now that we're closing in on the gulf.

Susan Rosenbaum: You can see right now that we're closing in on the gulf.

Sairam Srinivas: That's actually a really good point, Susie. Maybe then going back to the volumes, have the volumes stayed consistent as well quarter-over-quarter, or has the volumes looked better in terms of the number of move-outs and move-ins?

Speaker #8: That's actually a really good point, Susie. Maybe then, going back to the volumes, have the volumes stayed consistent as well, quarter over quarter?

Speaker #8: Have the volumes looked better in terms of the number of new outs and movements?

Susan Rosenbaum: The volumes of leases we're signing are about the same quarter-over-quarter. It's about 1,000 in Q4, which is similar to last year. Again, that starts to double up in the spring and summer.

Speaker #7: The volumes of leases were signed or about the same quarter over quarter . It's about a thousand in in Q4 , which which is similar to last year .

Speaker #7: And again, that starts to double up in the spring and summer.

Sairam Srinivas: Okay, that makes sense. Maybe just kind of picking off that, as you know, as you saw in January and February, like how has the leasing momentum been so far in Q1, and how is it kind of shaping up to be towards as we head into spring?

Speaker #8: Okay , that makes sense . And maybe just kind of picking up that as you're seeing , as you , as you saw in January and February , how has the leasing momentum been so far in Q1 and how is it kind of shaping up to be towards as we head into spring ?

Susan Rosenbaum: Okay. Yeah, you know, February improved and we expect it to continue improving. In our minds, our guidance points to things turning more positive at the end of March and early April.

Speaker #7: Okay . So yeah , you know , February improved and we expect it to continue in our minds . Things , our guidance points to things turning more positive at the end of March and early April

Sairam Srinivas: That's great color, Susie. Maybe then last question for you. You know, you mentioned one of the goals is to reduce the cost of capital looking into the year ahead. What are the levers available to actually act on that, and how do you think of that relative to the REIT swap termination coming up?

Speaker #8: That's great. And then, last question for you. You know, you mentioned one of the goals is to reduce the cost of capital.

Speaker #8: Looking into the year ahead, what are the gears available to you to actually action that, and how do you think of that relative to the REIT swap termination coming up?

Tom Cirbus: Sai, I'm sorry that you were cutting out. Are you asking if the guidance reflects any near-term swap resets?

Dan Oberste: Sai, I'm sorry that you were cutting out. Are you asking if the guidance reflects any near-term swap resets?

Speaker #4: Sorry. I'm sorry that you were cutting out. Are you asking if the guidance reflects any near-term swap resets?

Sairam Srinivas: Yes, that. Also like, you know, going back to your comment on reducing cost of capital, how do you marry that with the swaps coming up for termination out there?

Speaker #8: Yes , that and also , you know , going back to your comment on reducing cost of capital , how do you marry that with the swaps coming up for termination out there

Tom Cirbus: Yeah. On the swap book side, you saw us in the subsequent events do a couple of trades early this year. There was 2 trades done, one extended a term and one placed a new trade in to address some of our floating rate maturities that we incurred in the beginning of the year. Those were done at 3.13% and 3.19%. We now have a potential slate of maturities mid-year in July, and we're actively marketing or managing that every day and looking at our alternatives to lock in our rate there beyond July, assuming we get placed into the trade.

Speaker #5: Yeah . So the swap book side , the you saw us in the subsequent events , do a couple of trades early this year .

Speaker #5: There was two trades done , one extended a term and one placed a new new trade into address . Some of our floating rate maturities that we incurred in the beginning of the year .

Speaker #5: Those were done at 3.13% and 3.19% . They we now have a a potential slate of maturities mid-year in July . And we're actively marketing or managing that every day and looking at our alternatives to lock in our rate .

Speaker #5: There . Beyond July , assuming we get placed into the trade regardless , the market today is right in between the goalposts of what what we did earlier this year , somewhere between three one and 325 .

Tom Cirbus: Regardless, the market today is right in between the goalposts of what we did earlier this year, somewhere between 3.1 and 3.25, so right in the middle there. That's our assumption that's baked into the guidance from a cost of capital perspective. I don't think there's any other material fluctuations in our cost of capital, that we're considering in our guidance at this point.

Speaker #5: So right in the middle there, that's our assumption that's baked into the guidance from a cost of capital perspective. I don't think there's any other material fluctuations in our cost of capital that we're considering in our guidance at this point.

Sairam Srinivas: That is great color, Tom. Thank you. I'll turn it back.

Speaker #8: That is great. Thank you. I'll turn it back.

Operator 2: Next, we'll hear from Kyle Stanley at Desjardins.

Operator: Next, we'll hear from Kyle Stanley at Desjardins.

Speaker #2: Next, we'll hear from Kyle Stanley at Desjardins.

Kyle Stanley: Thanks. Good morning, everyone. Maybe just looking at some of the more one-time in nature realty tax items from Q4. Can you just walk through a little bit of what that was and maybe, you know, how that flows through 2026? Like, do you see any potential opportunities that might offer for your numbers in 2026?

Kyle Stanley [Managing Director and Equity Research Analyst: Thanks. Good morning, everyone. Maybe just looking at some of the more one-time in nature realty tax items from Q4. Can you just walk through a little bit of what that was and maybe, you know, how that flows through 2026? Like, do you see any potential opportunities that might offer for your numbers in 2026?

Speaker #9: Thanks . Morning , everyone . Maybe just looking at some of the the more . One time in Nature Realty tax items from the fourth quarter .

Speaker #9: Can you just walk through a little bit of what that was and maybe , you know how that that flows through 2026 , like , do you , do you see any potential opportunities that that might offer for , for your numbers in 26 ?

Tom Cirbus: Sure, Kyle. We got hit in the Q4 in a few different ways on real estate taxes, and let me provide some color there. First, we got zero tax refunds in the Q4. By way of example, in the Q3, we got about $730,000 worth of tax refunds. For the full year, we got $2.1 million of tax refunds, and again, zero in the Q4. You can Q1, Q2, and Q3 saw the benefit of tax refunds, and Q4 is just taking the hit of not getting any refunds. At the same time, on the opposite side, the real estate tax expense, as everyone knows, we accrue for our tax expense throughout the year, and we true it up when more perfect information comes our way.

Speaker #5: Sure, Kyle. So we got hit in the fourth quarter in a few different ways on real estate taxes. And let me provide some color there.

Speaker #5: First, we got zero tax refunds in the fourth quarter. By way of example, in the third quarter, we got about $730,000 worth of tax refunds for the full year.

Speaker #5: We got $2.1 million of tax refunds. And again, zero in the fourth quarter. So you can see Q1, Q2, and Q3 saw the benefit of tax refunds, but not Q4.

Speaker #5: Was just taking the hit of not getting any refunds at the same time , on the opposite side , the real estate tax expense , as everyone knows , we accrue for our tax expense throughout the year and we drew it up when more perfect information comes our way in the fourth quarter .

Tom Cirbus: In Q4, that true-up related primarily to assets we acquired during the year, where there's the most gray zone on what an appraiser originally is going to tell us versus what's their original stance going to be versus what we think reality is for the comps in the marketplace. That when those initial appraisals came in in Q4, they were a bit higher than what we would have said. Based on our experience, we feel great about getting appeal proceeds in 2026, but since we don't have a leg to stand on from a technical accounting perspective, we true those up in Q4. That also hampered us in Q4 from a real estate tax perspective.

Speaker #5: That true up related primarily to assets . We acquired during the year where there's the most gray zone on what is an appraiser originally going to tell us versus or what's their original stance going to be versus what we think reality is for the comps in the in the marketplace .

Speaker #5: And so that was an adverse, that when those initial appraisals came in in the fourth quarter, they were a bit higher than what we would have said if, based on our experience. We feel great about getting proceeds in 2026.

Speaker #5: But since we don't have a leg to stand on from a technical accounting perspective, we drew those up in the fourth quarter, and that also hampered us in the fourth quarter from a real estate tax perspective.

Tom Cirbus: Finally, it's worth noting, we got a bunch of refunds towards the end of the Q3 last year, and we used a legal expert to do that. Some of the legal fees that went up in the Q4 as well, that was just the bill received to those. It's a bit of a timing nuance. This happens every once in a while where the, if you will, refund is not matched with the expense related to achieving that refund. That's a bit transitory in nature. Looking forward to 2026, we mentioned in the guidance that property operating expense and real estate taxes will be up between 100 and 200 basis points. A portion of that is certainly real estate taxes.

Speaker #5: And then finally , it's worth noting , we got a bunch of refunds towards the end of the third quarter last year . And we use a legal expert to to do that .

Speaker #5: So some of the legal fees that went up in the fourth quarter as well, that was just the bill received to those.

Speaker #5: So it's it's a bit of a timing nuance . This happens every once in a while where the , if you will , refund is not matched with the expense related to achieving that refund .

Speaker #5: So that's a bit transitory in nature . Looking forward to 26 . We mentioned in the guidance that property operating expense and real estate taxes will be up between 100 and 200 basis points and a portion of that is certainly real estate taxes .

Tom Cirbus: I think real estate tax expense we expect to be, let's call it flat, maybe down 1%, actually, as mill rates really haven't changed, and we have confidence in our ability to find the right appraisal levels. Given all the success we've had in refunds, we expect the refunds probably to be about half or so of what we got in 2025. That will drive, in the same circle, that will drive those real estate taxes 5% higher. That's the primary driver of why our same-store operating expense guidance is moving higher is really on account of taxes.

Speaker #5: I think real estate tax expense , we expect to be , let's call it flat . Maybe down a percent . Actually , as mill rates really haven't changed .

Speaker #5: And we have confidence in our ability to find the right appraisal levels. But given all the success we've had in refunds, we expect the refunds are probably going to be about half or so of what we've gotten historically, or what we got in 2025.

Speaker #5: That will drive In the same store pool that will drive those real estate taxes , 5% higher . So that's the primary driver of why our same store operating expense guidance is moving higher is really a on account of taxes .

Kyle Stanley: Okay. No, I think that checks out. Your comment that you made there just about feeling pretty confident about success on the appeal front, especially for the assets acquired in 25, but just not having a leg to stand on yet. Would that be, you know, the success on the appeal front, would that be baked into your guidance already, at this point?

Kyle Stanley [Managing Director and Equity Research Analyst: Okay. No, I think that checks out. Your comment that you made there just about feeling pretty confident about success on the appeal front, especially for the assets acquired in 25, but just not having a leg to stand on yet. Would that be, you know, the success on the appeal front, would that be baked into your guidance already, at this point?

Speaker #9: Okay . No , I think that that checks out your comments that you made there just about feeling pretty confident about success on the appeal front , especially for the assets acquired in 25 .

Speaker #9: But just not having a leg to stand on yet . Would that be , you know , the success on the appeal front ?

Speaker #9: Would that be baked into your guidance already at this point?

Tom Cirbus: Yes and no, right? We make our best estimates on what we assume our refunds will be and what we can realistically underwrite to in conjunction with our third-party experts and in consultation based on our experience. Some portion of that is certainly included in the guidance today, but maybe not 100% of it. TBD on that. It's kind of at the whim of appraisals in courts, so hard to say. We try to be appropriate there.

Speaker #5: So yes and no . Right . We make our best estimates on what we assume our refunds will be and what we can realistically underwrite to in conjunction with our third party experts and in in consultation based on our experience .

Speaker #5: So some portion of that is certainly included in the in the guidance today , but maybe not 100% of it . TBD on that .

Speaker #5: It's kind of at the whim of appraisals and courts, so hard to say. So we try to be appropriate there.

Kyle Stanley: Okay, fair enough. Maybe, just moving over to your lease-up assets. In the past, you've kind of mentioned obviously, as you approach stabilization, likely seeing an improvement in the NOI margin. I'm wondering if, you know, you'd be able to disclose or talk about maybe where the NOI margin at Aura 3550, given it is, you know, quite near, if not at stabilization already, where that might sit today versus where maybe The Ownsby is, just to give us a sense of, you know, how that, maybe progresses over time.

Kyle Stanley [Managing Director and Equity Research Analyst: Okay, fair enough. Maybe, just moving over to your lease-up assets. In the past, you've kind of mentioned obviously, as you approach stabilization, likely seeing an improvement in the NOI margin. I'm wondering if, you know, you'd be able to disclose or talk about maybe where the NOI margin at Aura 3550, given it is, you know, quite near, if not at stabilization already, where that might sit today versus where maybe The Ownsby is, just to give us a sense of, you know, how that, maybe progresses over time.

Speaker #9: Okay . Fair enough . Maybe just moving over to your your lease up assets in the past , you've kind of mentioned , obviously , as you approach stabilization , likely seeing an improvement in the NOI margin .

Speaker #9: I'm wondering if you'd be able to disclose or talk about maybe where the NOI margin at Aurora 3006 50, given it is quite near, if not at, stabilization already—where that might sit today versus where maybe the Owens B is, just to give us a sense of how that maybe progresses over time.

Tom Cirbus: Kyle, I don't have it in front of me, so I don't want to misquote you. Let me circle back to you on that one. I just don't have it in front of me.

Speaker #5: Kyle , I don't have it in front of me , so I don't want to misquote you . So let me let me circle back to you on that one .

Kyle Stanley: Okay, fair enough. Just the last one for me. Obviously, the three-year guidance that was provided through 2028 at the Investor Day, you know, just high-level thoughts on that still remains intact. How do you see, you know, over three years, how do you see that maybe flowing through your results? Obviously, I think with the guidance at $0.77 for 2026, we see a little bit of a step down versus 2025. Then, you know, how do you see that kind of ramping in 2027, 2028, if you can talk through that.

Kyle Stanley [Managing Director and Equity Research Analyst: Okay, fair enough. Just the last one for me. Obviously, the three-year guidance that was provided through 2028 at the Investor Day, you know, just high-level thoughts on that still remains intact. How do you see, you know, over three years, how do you see that maybe flowing through your results? Obviously, I think with the guidance at $0.77 for 2026, we see a little bit of a step down versus 2025. Then, you know, how do you see that kind of ramping in 2027, 2028, if you can talk through that.

Speaker #5: I just don't have it in front of me .

Speaker #9: Okay . Turn it off . And just the last one for me , obviously , the three year guidance that was provided through 2028 at the Investor Day , you know , just , I guess , high level thoughts on that still remains intact .

Speaker #9: How do you see , you know , over three years ? How do you see that maybe flowing through your results ? Obviously , I think with the guidance .

Speaker #9: At $0.77 for 2026, we see a little bit of a step down versus '25. But then, you know, how do you see that kind of ramping in '27 and '28, if you can talk through that?

Dan Oberste: Yeah. Kyle, this is Dan. I think and Susie may have touched on this a little bit. You know, when you take the bulk internet, right? I think there's a penny sitting in 2026 in bulk internet, right? I think there's 6 sitting in 2027, and I think there's an extra penny in Q1 2028, right? That's the way I look at it if I was gonna compare and contrast the bulk internet and valet trash initiatives that we discussed in December. Then if I think over at the occupancy side, I think as of December, we had 250, or as of that LQA, we had 250 apartments to lease. I think as of year-end, we had 188 apartments to lease at year-end 2025.

Speaker #4: Yeah . Kyle , this is Dan . I think , and Suzy may have touched on this a little bit . You know , when you take the bulk internet , right ?

Speaker #4: I think there's a penny sitting in 26 in bulk internet , right . I think there's six sitting in 27 . And I think there's an extra penny in the first quarter of 28 .

Speaker #4: Right . That's the way I look at it . On if I was going to compare and contrast the bulk internet and valet trash initiatives that we discussed in December , and then if I think over at the occupancy side , I think as of December , we had 250 or as of as of that .

Speaker #4: LKA we had 250 apartments to lease , I think as of year end , we had 188 apartments to lease and year end 25 .

Dan Oberste: Our expectation, naturally, is that we're gonna lease all 188 throughout the course of this year, right? You gotta think about, and we're still not ready to talk about the margin on that because the first of that 188 is gonna have a much lower margin than the last of that 188, right? Therein lies the problem on getting into the lagging impact of lease-up financials. While the properties are gonna be occupied this year, I think that's a first step, but I think you see the full benefit flow through all the way into 2027. You're gonna see that acceleration quarter-over-quarter sequential, driven by occupancy improvement. The team's gonna get another bite at the apple in 2027, where you're fully occupied, but we call this stabilization.

Speaker #4: And then our expectation , naturally , is that we're going to lease all 188 throughout the course of this year . Right . And you got to think about and we're still not ready to talk about the margin on that because the first of that 188 is going to have a much lower margin than the last of that 188 .

Speaker #4: Right . And therein lies the problem on getting into the lagging impact of lease up financials . So while the properties are going to be occupied this year , I think that's a first step .

Speaker #4: But I think you see the full benefit flow through all the way into '27. You're going to see that acceleration quarter over quarter, sequentially driven by occupancy improvement.

Speaker #4: And then the team is going to get another bite at the apple in '27, where you're fully occupied. But we call this stabilization.

Dan Oberste: You're fully occupied, and those residents may have been concessed to come into the market by 4% or 8%. That's two weeks or one month. In 2027, you're renewing those leases at higher rates. You may not get the full concession, right? But you're going to get some benefit of that renewal as markets ramp up and reset. Now, as far as I'm concerned, that the 2027 or the December 2027 investment presentation, that's we're right on track, I mean, to earning that money. I think the frustrating thing for our investors, and I empathize with them, is that the nature of these investments, buying lease up assets, making initial investments in bulk internet, they don't show up tomorrow, you know? They show up over the course of year one, and we see them showing up.

Speaker #4: You're fully occupied, and those residents may have been consistent to come into the market by 4% or 8%. That's two weeks or one month.

Speaker #4: And in '27, you're renewing those leases at higher rates. You may not get the full concession, right, but you're going to get some benefit of that renewal as markets ramp up and reset.

Speaker #4: Now , as far as I'm concerned , that the , the , the 27 or the December 27th investment presentation , that's we're right on track .

Speaker #4: I mean , to , to earning that money . I think the frustrating thing for our investors and I empathize with them is that the nature of these investments , buy and lease up assets , making initial investments in bulk internet .

Speaker #4: They don't show up tomorrow . You know , they show up over the course of year one , and we see them showing up and then as a public company , you start to see that that lagging impact as as lease ups really materialize .

Dan Oberste: As a public company, you start to see that lagging impact as lease ups really materialize, as that last unit gets leased up at 100 margin, right? You got another bite at the apple in 2027, where you see accelerated growth from compression of concessions on renewal.

Speaker #4: Is that last unit gets leased up at 100 margin , right . And then you got another bite at the apple in 27 where you see accelerated growth from compression of , of , of concessions on renewal Okay .

Dan Oberste: Okay.

Kyle Stanley [Managing Director and Equity Research Analyst: Okay.

Dan Oberste: Kyle, all in. That turns into a choppy 15, right? I'd rather. What's the saying? I'd rather take a choppy 15 than a smooth 10.

Speaker #4: All in Kyle , all in that turns into a choppy 15 . Right . But I'd rather . What's the saying . I'd rather take a choppy 15 than a smooth ten .

Tom Cirbus: Sounds about right. Okay. Thank you very much. I will turn it back.

Kyle Stanley [Managing Director and Equity Research Analyst: Sounds about right. Okay. Thank you very much. I will turn it back.

Speaker #9: Sounds about right. Okay. Thank you very much. I will turn it back.

Operator 2: Dean Wilkinson at CIBC, you have our next question.

Operator: Dean Wilkinson at CIBC, you have our next question.

Speaker #2: Dean Wilkinson at CIBC, you have our next question.

Dean Wilkinson: Well, thank you. Dan, this is less of a modeling question, more of a big picture. In some of the commentary from some of the larger acquirers down in Texas have said they're basically pens down on acquisitions of a meaningful size. I guess, you know, one, do you think this is counterintuitive because in this environment, you know, on valuations such that they are, that that's an opportune time to buy? Do you think once you've turned the corner on the rent growth going, you're gonna get a wave of capital that just starts chasing assets, and that's gonna push prices up?

Speaker #10: Well , thank you Dan , this is less of a modeling question , more of a a big picture . Some of the commentary from some of the larger acquirers down in Texas have said their they're basically pens down on acquisitions of a meaningful size .

Speaker #10: I guess , you know , one , do you think this is an counterintuitive . Because in this environment , you know , on valuations such that they are that that's an opportune time to buy .

Speaker #10: And do you think once you've turned the corner on the rent growth going, you're going to get a wave of capital that just starts chasing assets, and that's going to push prices up?

Dan Oberste: Yes, Dean. I'm just kidding. No, yeah, I think it's what really what we're looking at is cap rates versus cost of capital.

Speaker #4: Yes . Dean , I'm just kidding . No , no . Yeah . I think it's what really what we're looking at is cap rates versus cost of capital .

Dean Wilkinson: Mm-hmm.

Dan Oberste: There's still some irrational movement between what someone can afford to finance an acquisition for and what you know, kind of a concerned developer seller is willing to sell an asset for. There's a ton of money sitting on both ends of that spectrum, right? They're inching closer to meeting in the middle. I think patience is important right now. Just as we've seen many times in the past, once those parties start agreeing, you see a significant amount of volatility or, I mean, a significant amount of transaction volume. We think that the market has improved and I guess just deployment of capital a little bit in the last few months, and we expect continued improvement. Again, we're looking at what is our relative cost of capital?

Speaker #4: And there's still some irrational movement between what someone can afford to finance an acquisition for, and what a, you know, kind of a concerned developer-seller is willing to sell an asset for.

Speaker #4: And there's a ton of money sitting on both ends of—of that stadium, right? And they're inching closer to meeting and agreeing.

Speaker #4: And I think patience is important right now , but just as we've seen many times in the past , once those parties start agreeing , then you see a significant amount of volatility or I mean , a significant amount of transaction volume .

Speaker #4: We think that the market has improved and the, in, I guess, just deployment of capital a little bit in the last few months.

Speaker #4: And we expect continued improvement. Again, we're looking at what is our relative cost of capital, what are our available capital alternatives?

Dan Oberste: What is our available capital alternatives? What would be the impact on our leverage? What would be any potential dilution to our, or accretion to our FFO earnings plus our per unit NAV of our investors? Okay, that's number one. Number two, what return can we make if we acquire some assets at an opportune time? It's getting closer and closer, but we're gonna remain pretty disciplined with any deployment of external capital at this time.

Speaker #4: What would be the impact on our leverage? What would be any potential dilution to our or accretion to our FFO earnings, plus our per unit NAV of our investors?

Speaker #4: Okay . That's number one . And number two , what return can we make if we acquire some some assets at an opportune time ?

Speaker #4: It's getting closer and closer, but we're going to remain pretty disciplined with any deployment of external capital at this time.

Dean Wilkinson: I hear you. In essence, if the defensive end could pass the physical, you would have taken them. You know where I'm going with that one. Thanks, guys. I'll hand it back.

Speaker #10: I hear you . So in essence , if the defensive end could pass the physical , you would have taken them . You know , you know where I'm going with that one .

Dan Oberste: There you go. If Crosby would've passed the physical, we would've taken him.

Speaker #10: Thanks, guys. I'll hand it back.

Speaker #4: There you .

Speaker #10: Go .

Dean Wilkinson: That's it, right? All right. Thanks, guys.

Speaker #4: There you go. If Crosby would have passed the physical, we would have taken him.

Speaker #10: Yeah . That's it . Right . All right . Thanks , guys .

Operator 2: Next, we'll hear from Jonathan Kelcher at TD Cowen.

Operator: Next, we'll hear from Jonathan Kelcher at TD Cowen.

Speaker #2: Next, we'll hear from Jonathan Kelcher at TD Cowen.

Jonathan Kelcher: Thanks. Good morning. Just going back to Kyle's question on the lease-up properties. Can you guys quantify maybe how much NOI is missing from when they're eventually gonna be stabilized?

Speaker #11: Thanks . Good morning . Just going . Just going back to Kyle's question on on the lease up properties . Can you guys quantify maybe how much NOI is is missing from from when they're eventually going to be stabilized

Tom Cirbus: Jonathan, Dan mentioned the 188 at market rents in revenue. That's $3 to 3.75 million of gross revenue. Like Dan said, I don't think we're necessarily quite ready to tell you exactly what the margin on that is gonna be. When we did it in December, we had a bit of a range on it. I'd encourage you to keep using that. I don't think we have a great answer on NOI, but that's the top line point we're at sitting as of 31 December.

Speaker #5: Jonathan Dan mentioned the 188 at market rents in revenue. That's three to three and three quarters million dollars of gross revenue.

Speaker #5: Like Dan said, I don't think we're necessarily quite ready to tell you exactly what the margin on that is going to be.

Speaker #5: When we did it in December, we had a bit of a range on it. I'd encourage you to keep using that.

Speaker #5: I don't I don't think we have a great answer on NOI , but that's the top line point where we're at sitting as of December 31st .

Dan Oberste: Yeah. Tom, if I may, this is Dan. Not to pile on, but we wanted to quote revenue numbers and provide our investors with margin underwriting if they'd like to choose it. It's my view, Jonathan, that it shows up. It shows up, but it's in disguise, I would say, in the back half of the year. Then it starts to accelerate, and you really see it Q1, Q2, Q3, and then culminated in Q4 of 2027. That's when the real impact of all of that revenue shows up on FFO per unit, and is not otherwise distorted by any other leasing costs or things like that.

Speaker #4: Yeah . And Tom , if I may . This is Dan , not to pile on , but we wanted to quote revenue numbers and provide our investors with margin underwriting if they'd like to choose it .

Speaker #4: It's my view . Jonathan , that that shows up . It shows up . But it's in disguise . I would say in the back half of the year .

Speaker #4: And then it starts to accelerate, and you really see it in Q1, Q2, Q3, and then culminated in Q4 of ’27.

Speaker #4: That's when that's when the real impact of all of that revenue shows up on FFO , FFO per unit , and is not otherwise distorted by any other leasing costs or things like that .

Jonathan Kelcher: Okay. Still better part of 2-year build and then 2028 will be like just fully stabilized and kind of disappeared into the same property, right?

Speaker #11: Okay, so still a better part of two-year build, and then '28 will be just fully stabilized and kind of disappeared into the same property, right?

Dan Oberste: Yeah. That's fair to say. I mean, 2027 will reflect a lot of this money, but it'll come in quarter-over-quarter sequential, continue to come in. We got 8 quarters of quarter-over-quarter sequential. And then you sit there in Q4 2027, and you can underwrite almost an annualized runway with some organic improvement in 2028.

Speaker #4: Yeah , that's , that's fair to say . I mean , 27 will look very , I mean , 27 will reflect a lot of this money , but it'll come in quarter over quarter sequential , continue to come in .

Speaker #4: So we got eight quarters of quarter-over-quarter sequential. And then you sit there in Q4 '27 and you can underwrite almost an annualized run rate with some organic improvement in '28.

Tom Cirbus: Jonathan, just one other thing on that. Just as a reminder, our guidance includes a bridge from 2025 to 2026. The non-same community pool, which would include the lease-ups on an FFO per unit perspective at the midpoint, is about $0.19 in 2026.

Speaker #5: And Jonathan , just one other thing on that , just as a reminder , the our guidance includes a bridge from 25 to 26 .

Speaker #5: The non same community pool , which would include the lease ups on an FFO per unit perspective at the midpoint , is about $0.19 in 2026 .

Jonathan Kelcher: Okay. Yeah. Okay. Second question on the guidance and you gave a little bit of color on the leasing trends in January and February. Like, would it be fair to say that you're more back-end weighted as kinda lease-ups start to stabilize more? How should we think about the cadence of growth this year or guidance this year?

Speaker #11: Okay . Yeah . Okay . And then second question on on the guidance and I guess , and you gave a little bit of color on , on the leasing trends in January and February .

Speaker #11: I think it be fair to say that the , your more back end weighted as kind of lease ups start to stabilize more ?

Speaker #11: How should we think about the cadence of growth, this year, guidance this year?

Tom Cirbus: I think that's right, Jonathan. I think by definition, with lease-up assets in tow and being a material mover throughout the year, we expect it to ramp in the back half of the year as once that asset is, you know, 100% stabilized in December, it'd be greater than the 70% it is today, right? I think by definition it would be a back-end ramp. We expect that to play out. Of course, there's a lot of moving pieces in any given quarter, so it may not be quite linear as we've explained in real estate taxes earlier today. Directionally, yes, it should be back-end loaded.

Speaker #5: I think that's right . Jonathan . I think by definition , with lease up assets in in tow and being a material mover for throughout the year , we expect it to ramp in in the back half of the year as once that asset is or 100% stabilized in December , it'd be greater than the 70 it is today .

Speaker #5: Right ? So I think by definition it would be a back end ramp . And we expect that to play out . Of course , there's a lot of moving pieces in any given quarter .

Speaker #5: So it may not be quite linear as we've explained in real estate taxes earlier today . But directionally , yes , it should be back end loaded .

Jonathan Kelcher: Yeah. Should we think about that the same sorta way on the same community, revenue growth profile?

Speaker #11: Yeah. And should we think about that the same sort of way, on the same community revenue growth profile?

Tom Cirbus: Correct. Yes.

Susan Rosenbaum: Correct. Yes.

Tom Cirbus: Yes.

Jonathan Kelcher: Okay. Thanks. I'll turn it back.

Speaker #7: Correct . Yes .

Speaker #5: Yes .

Speaker #11: Okay. Thanks. I'll turn it back.

Operator 2: Star one, ladies and gentlemen, for a question or follow-up. We'll hear next from Himanshu Gupta at Scotiabank.

Operator: Star one, ladies and gentlemen, for a question or follow-up. We'll hear next from Himanshu Gupta at Scotiabank.

Speaker #2: Star one . Ladies and gentlemen , for a question or follow up , we'll hear next from Himanshu Gupta at Scotiabank .

Himanshu Gupta: Thank you, and good afternoon, everyone. Just on the, you know, the acquisitions done last year, say around $300 million or so, what is the stabilized cap rate and how big is the spread between this going in versus the stabilized cap rate?

Himanshu Gupta [Director and Equity Research Analyst: Thank you, and good afternoon, everyone. Just on the, you know, the acquisitions done last year, say around $300 million or so, what is the stabilized cap rate and how big is the spread between this going in versus the stabilized cap rate?

Speaker #12: Thank you and good afternoon everyone . So just on the you know , the acquisitions done last year , say around $300 million or so , what is the stabilized cap rate and how big is the spread between this going in versus the stabilized cap rate ?

Dan Oberste: Himanshu, as we've said every quarter for the last 32 quarters, we don't report cap rates. We've explained that the reason we don't is because there's, you know, there's 13 analysts in the room. If I quote a cap rate, everybody thinks of a different way to get there. Just kinda like if I say, everybody think of a dog, everybody's thinking of a different dog. BSR quoting cap rates is a lot different than open market cap rates. It's a lot different than the way other companies are. Given the translation gap between our two countries, we fear that that creates a whole lot of distortion. Again, from now and in the immediate future, the BSR will not quote going in cap rates.

Speaker #4: So as we've said , every quarter for the last 30 two quarters , we don't report cap rates . And we've explained that the reason we don't is because there's , you know , there's 13 analysts on the room .

Speaker #4: If I quote a cap rate, everybody thinks of a different way to get there. Just kind of like if I say, 'Everybody think of a dog,' everybody's thinking of a different dog.

Speaker #4: So, BSR quoting cap rates is a lot different than open market cap rates. It's a lot different than the way other companies are.

Speaker #4: And given the translation gap between our two countries , we fear that that creates a whole lot of distortion . So again , from now and in the immediate future , the BSR will not quote going in cap rates .

Dan Oberste: Now to your question on cap rate velocity spread on a look back, we have discussed that in the past. Generally, as we said, in new development transactions, we like to see 2 to 250 basis points spread relative to our cost of capital to develop an asset. In lease-up transactions, we like to see 125 to 150 basis points spread on a look back cap rate like a year two or a year three, versus our going in. Then on a stabilized asset, we like to see between 100 and 125 basis points of look back cap rate expansion between the acquisition date and year two or year three look back.

Speaker #4: Now to your question on cap rate , velocity spread on a look back , we have discussed that in the past and generally , as we said in in new development transactions , we like to see 2 to 250 basis points spread relative to our cost of capital to develop an asset and lease up transactions .

Speaker #4: We like to see 125 to 150 basis points spread . On a look back cap rate , like a year , two or a year three versus our going in .

Speaker #4: And then, on a stabilized asset, we like to see between 100 and 125 basis points of lookback cap rate expansion between the acquisition date and year two or year three.

Dan Oberste: In the case of the transactions that we made last year, as I said in my remarks, all of those transactions are leasing up. They're right on schedule, and we see no reason at this time to deviate from the methodology that we've explained in quarters past. We like what we see.

Speaker #4: Look back in the case of the transactions that we made last year, as I said in my remarks, all of those transactions are leasing up.

Speaker #4: They're right on schedule, and we see no reason at this time to deviate from the methodology that we've explained in quarters past.

Himanshu Gupta: Okay. No, thanks, Dan, appreciate your comment. I mean, the guidance came in lower than, you know, some of us we were expecting. I was, you know, kind of wondering maybe we were always overestimating the, you know, the NOI contribution from the new acquisitions. Appreciate your comment there. Okay, then the next question is, what is the effective interest rate in 2026? I mean, based on all the swaps you do and versus the last year. Just trying to see that how much of interest rate is a headwind in 2026 FFO versus the last year.

Himanshu Gupta [Director and Equity Research Analyst: Okay. No, thanks, Dan, appreciate your comment. I mean, the guidance came in lower than, you know, some of us we were expecting. I was, you know, kind of wondering maybe we were always overestimating the, you know, the NOI contribution from the new acquisitions. Appreciate your comment there. Okay, then the next question is, what is the effective interest rate in 2026? I mean, based on all the swaps you do and versus the last year. Just trying to see that how much of interest rate is a headwind in 2026 FFO versus the last year.

Speaker #4: We like what we see.

Speaker #12: Okay , thanks , I appreciate your comment . I mean , the guidance came in lower than , you know , some of us , we were expecting .

Speaker #12: So I was , you know , kind of wondering , maybe we were always overestimating the , you know , the NOI contribution from the new acquisitions , but appreciate appreciate your comment there .

Speaker #12: Okay . And then the next question is , what is the effective interest rate in 2026 ? I mean , based on all the swaps you do and versus the last year , just trying to see that , how much of interest rate is a headwind in 2026 FFO versus the last year

Tom Cirbus: The midpoint guidance would point to a $0.04 headwind related to interest rates in 2026.

Speaker #5: PSI and the midpoint guidance would point to a forecast headwind related to interest rates in 2026.

Himanshu Gupta: Okay. $0.04 in 2026 versus 2025 on the interest expense side. Okay.

Himanshu Gupta [Director and Equity Research Analyst: Okay. $0.04 in 2026 versus 2025 on the interest expense side. Okay.

Speaker #12: Okay . So for cents in 2026 versus 2025 on the interest expense side , okay . All right . Okay . Okay . Fair enough .

Tom Cirbus: Correct.

Himanshu Gupta: Okay. Okay, fair enough. And maybe the last question I would say. Yes, the last question is, has your 2026 FFO, you know, internal expectations changed since December? I mean, in the last 2 months. Or you were always expecting this run rate and then the ramp up happening in the next 2 years?

Himanshu Gupta [Director and Equity Research Analyst: Okay. Okay, fair enough. And maybe the last question I would say. Yes, the last question is, has your 2026 FFO, you know, internal expectations changed since December? I mean, in the last 2 months. Or you were always expecting this run rate and then the ramp up happening in the next 2 years?

Speaker #12: And maybe the last question , I would say yes , the last question is , has your 20 , 26 FFO ? You know , internal expectations changed since December ?

Speaker #12: I mean, in the last two months, were you always expecting this run rate, and then the ramp up happening in the next two years?

Dan Oberste: Yeah. That's a great question, Himanshu, and I can speak for myself. I think that my expectations have changed for December in that I expected. You know, as I mentioned in my comments, I expected rate improvement in our markets to occur a little bit earlier than we're seeing. I think that impact, in my view, in January or in December when we spoke with our investors, all in is about a 1% number on rate for 2026. I think what's interesting is what's happening in the market projections for 2027 and the back half of 2026. It looks like market expected rent growth is a little bit higher than our initial expectations in December in 2027. You know, the market's playing a little hide the ball with us.

Speaker #4: Yeah , that's a that's a great question , Himanshu . And I can speak for myself . I think that my expectations have changed for December and that I expected , you know , as I mentioned in my comments , I expected rate improvement in our markets to occur a little bit earlier than we're seeing .

Speaker #4: I think that that impact, to my view, in January or in December, when we spoke with our investors, all plan is about a 1% number on rate for '26.

Speaker #4: I think what's interesting is what's happening in the market projections for 27 in the back half of 26 . So it looks like market expected rent growth is a little bit higher than our initial expectations in December , in 20 , in 2027 .

Dan Oberste: I think 26 is about 1% lighter in revenue than I would've hoped, but I'm seeing about 1% more in organic expectations in the back of 26 and really all the way through 27. Again, in my prepared remarks, I'd say that it's always been a supply story. I think that rate expectation by all of our economists, CoStar, everyone else, that movement directly attributes to lower deliveries, lower expected deliveries, and continued domestic migration, particularly in our markets.

Speaker #4: So , you know , the market's playing a little hide the ball with us . I think 26 is about a percent lighter in revenue than I would have hoped .

Speaker #4: But I'm seeing about a percent more in organic expectations in the back of '26 and really all the way through '27.

Speaker #4: And again , in my in my prepared remarks , I'd say that it's it's always been a supply story . And I think that rate , that rate expectation by all of our economists , co-star , everyone else , that movement directly attributes to lower deliveries , lower expected deliveries and continued domestic migration , particularly in our markets .

Himanshu Gupta: Got it. Okay. Thank you so much, and I'll turn it back. Thank you.

Himanshu Gupta [Director and Equity Research Analyst: Got it. Okay. Thank you so much, and I'll turn it back. Thank you.

Operator 2: Next, we'll hear from Jimmy Shan at RBC Capital Markets.

Operator: Next, we'll hear from Jimmy Shan at RBC Capital Markets.

Speaker #12: Okay. Thank you so much. And I'll turn it back. Thank you.

Jimmy Shan: Thanks. Just a couple of quick ones from me. First on the renewal rates, how would the renewal rates compare with the market rent across the different markets? Then the second one would be on the retention rate. You know, it is quite high. Is your expectation that it'll continue at this level?

Speaker #2: Next, we'll hear from Jimmy Chan at RBC Capital Markets.

Speaker #13: Thanks. Just a couple of quick ones for me. So first, on the renewal rates, how would the renewal rates compare with the market rent across the different markets?

Speaker #13: And then the second one would be on the retention rate. You know it is quite high. Is your expectation that it will continue at this level?

Susan Rosenbaum: Yeah, Jimmy. The renewal rates, they pretty much drive across the markets the same way I gave you for the whole portfolio earlier. They're looking better in Q4 2025 than they did in Q4 2024. Same goes as well, I guess, if you're looking at that, the average effective rate for 2025, it was $1,436 a month, right? 2026, we're looking at $1,446. So that's a 70 basis point increase in average effective rates over time. And the market's following suit.

Speaker #7: Yeah . Jimmy . So the renewal rates I yeah , they pretty much drive across the markets the same way I gave you for the whole portfolio earlier .

Speaker #7: They are , they're , they're looking better in Q4 of 25 than they did in Q4 of 24 . Same same goes as well .

Speaker #7: I guess if you're looking at that , the average , the , the average effective rate for 2025 , it was $1,436 a month , right ?

Speaker #7: 2026. We're looking at 1,446. So that's a 70 basis point increase in average effective rates over time. And the markets follow a similar suit.

Jimmy Shan: Okay. What about the retention rate?

Susan Rosenbaum: Yeah. The retention rate is about as high as it's ever been. We'll continue to press renewals right now given that they're more profitable than new leases. Yes.

Speaker #13: Okay. And what about the retention rate?

Speaker #7: Yeah, so the retention rate is about as high as it's ever been, and we'll continue to press renewals right now, given that they're more profitable than new leases.

Operator 1: Okay. You expect it to be kind of at this level still?

Jimmy Shan: Okay. You expect it to be kind of at this level still?

Speaker #7: So yes

Speaker #13: Okay. So you expect it to be kind of at this level still.

Susan Rosenbaum: I'm sorry, I didn't hear your last question.

Jimmy Shan: I'm sorry. I guess you're expecting the retention rate to continue to remain at this high level.

Speaker #7: I'm sorry, I didn't hear your last question.

Speaker #13: I'm sorry . I , I , I guess you're expecting the retention rate to be to continue to remain at this high level

Susan Rosenbaum: For right now, yes.

Jimmy Shan: Okay. Thank you.

Susan Rosenbaum: Sure.

Speaker #7: For right now, yes.

Operator 2: Matt Kornack at National Bank Financial, please go ahead with your question.

Operator: Matt Kornack at National Bank Financial, please go ahead with your question.

Speaker #13: Okay. Okay. Thank you.

Matt Kornack: Hey, guys. Just if you could give us a sense on the demand side. I know this has always been preface to the supply issue, but how demand is holding up and what metrics you kind of look at. And then also maybe as a tangent to that, we'll see how long like this current geopolitical situation lasts, but energy prices are up and obviously Texas, there's some exposure to oil and gas. If you could give a sense if you think that would be a net positive from a demand standpoint as well.

Speaker #2: Sure. And Matt Cornock at National Bank Financial, please go ahead with your question.

Speaker #14: Hey , guys , just if you could give us a sense on the demand side , I know this has always been prefaced as the supply issue , but how how demand is holding up and what metrics you kind of look at .

Speaker #14: And then also, maybe as a tangent to that, we'll see along this current geopolitical situation. Last, but energy prices are up.

Speaker #14: And obviously Texas, there's some exposure to oil and gas. So if you could give us a sense if you think that would be a net positive from a demand standpoint as well.

Dan Oberste: Yeah. I'll answer the questions backwards to forwards, Matt. As far as the war and the political situation, are you speaking to the war or are you speaking to tariffs or has there been a tweet during the earnings call that I'm unaware of?

Speaker #4: Yeah , I'll , I'll answer the questions backwards to forwards . Matt . So as far as the war and the political situation .

Speaker #4: Are you speaking to the war, or are you speaking to tariffs, or has there been a tweak during our call that I'm not aware of?

Matt Kornack: Let's stay on the war for now.

Dan Oberste: With respect to the war, we discussed that internally. There's no impact to our guidance or our estimate as a result of the war on interest rates or on our revenue estimate. I don't think we see any current impact on population growth and migration patterns resulting from the war. We have no direct exposure to military bases. We're not concerned regarding an exodus of our residents following deployment, as would likely be the cases in San Diego, San Antonio, parts of North Carolina. The war, we're not seeing any impact, and we don't anticipate seeing any impact right now in the near term to our occupancy and our FFO per unit.

Speaker #14: Okay .

Speaker #4: So

Speaker #14: For now

Speaker #4: With respect to the war , you know , I don't think that that we discussed that internally . There's no impact to our guidance or our estimate as a result of the war on interest rates or , or on , on our revenue estimate .

Speaker #4: I don't think we see any current impact on population growth and migration patterns resulting from the war. We have no direct exposure to military bases.

Speaker #4: We're not concerned regarding an exodus of our residents following deployment, as would likely be the case in San Diego, San Antonio, parts of north North Carolina.

Speaker #4: The war Really , we don't see . We're not seeing any impact , and we don't anticipate seeing any impact right now in the near term to our to our occupancy and our in our FFO per unit as it relates to demand drivers .

Dan Oberste: As it relates to demand drivers, I mean, I think, I hope that our investors, and Matt, I know you are looking at the same info we are, the CoStar, the CBRE, JLL, Witten. I think, domestic migration remains intact. International migration remains intact. Our markets are not necessarily driven by international migration or haven't been as much as domestic. That remains intact. If I look forward on population change projections, you know, Austin's in 2026 is sitting at 1.53%, DFW is at about 1%. Houston's at about 1.15%. What's changed versus the past five years is the gap between these three markets and the national average. I just quoted 1.5, 1, and 1.15, right?

Speaker #4: I mean , I think , I hope that our investors in Matt , I know you are looking at the same info . We are the costar , the CBRE , JLL , Witton , I think domestic migration remains intact .

Speaker #4: International migration remains intact. Our markets are not necessarily driven by international migration or haven't been as much as domestic. That remains intact.

Speaker #4: If I look forward on population change projections , you know , Austin's in 26 is sitting at 1.5 , 1.53% , DFW is at about 1% , Houston's at about 1.15% .

Speaker #4: And what's changed versus the past five years is the gap between these three markets and the national average. So I just quoted one and a half, one, and one-fifteen, right.

Dan Oberste: The national average population growth for 2026 is 0.22%. Now I can say our markets are expected to grow by six times the pace of the US average, not just above the national average. I think the four-year population growth projections for our markets are even better. Austin at 1.65. DFW at 1.19. Houston at 1.27 versus the US at 0.23. That multiple just expands on the four-year. It kind of emboldens us in investing in this triangle. It's driven by domestic migration. It's driven by job growth, which continues to outpace any job impact to the market. It's because I think of our discipline, Matt, of finding fast-growing markets with multiple pillars of GDP growth.

Speaker #4: And the national average population growth for '26 is 0.22%. So now I can say our markets are expected to grow at six times the pace of the U.S. average.

Speaker #4: Not just above the national average . I think the four year population growth projections for our markets are even better . Austin , at 1.65 .

Speaker #4: DFW at 1.19 . Houston at 1.27 versus the US at 0.23 . So that multiple just expands on the four year . It kind of emboldens us in investing in this , in this triangle , it's driven by domestic migration .

Speaker #4: It's driven by job growth , which continues to outpace the any , any job impact the market . And it's because I think of our discipline , Matt , of finding fast growing markets with multiple pillars of GDP growth .

Dan Oberste: You speak to the Houston energy market. I wanna say Houston might be the second-largest health sciences market in the country, right? If we look into these ADP, these payroll numbers, for the last couple of months, there's a couple of interesting facts. Number one, January national payroll was somewhat distorted by 34,000 jobs related to a nursing strike that should be added back in March or April, right? Secondly, one of the two areas of the country that see payroll growth are health sciences. We're invested in a market that has sure, it's got an energy concentration, but it also has a massive healthcare and health sciences concentration.

Speaker #4: You speak to the Houston energy market. I want to say Houston might be the second largest health sciences market in the country.

Speaker #4: Right . And if we if we look into these ATP , these payroll numbers for the last couple of months , there's a couple of interesting facts .

Speaker #4: Number one , January , national payroll was somewhat distorted by 34,000 jobs related to a nursing strike . That should be added back in and in March or April .

Speaker #4: Right . But secondly , one of one of the I want to say , two areas of the country that see that see payroll growth are health And we're invested in a market that has .

Speaker #4: Sure . It's got an energy concentration , but it also has a massive healthcare and health sciences concentration . So those disciplines plus , you know , as I've said in the past , population growth , you know , outstripping national averages , you buy apartments where people are moving to and eventually they get filled up and eventually there's no more apartments built and eventually rates go up .

Dan Oberste: Those disciplines, plus, you know, as I've said in the past, population growth, you know, outstripping national averages. You buy apartments where people are moving to, and eventually they get filled up, and eventually there's no more apartments built, and eventually rates go up. Tried and true.

Matt Kornack: Awesome. Thanks. No, I appreciate the update on those figures. Maybe a very quick last one on the accounting side for G&A. Was there anything one-time in nature in Q4, or is that just a seasonality type difference? I know it's been up and down over the course of the year, so I'm just trying to get a sense as to what a good run rate figure is there or what would be in the guidance.

Speaker #4: Tried and true

Speaker #14: Awesome . Thanks . No , I appreciate the update on those figures . Maybe a very quick last one on the accounting side for for G and a , was there anything one time in nature in Q4 , or is that just a seasonality type difference ?

Speaker #14: You know, it's been up and down over the course of the year. So I'm just trying to get a sense as to what a good run-rate figure is.

Tom Cirbus: Yeah. No, I think in the guidance, G&A is expected to be flat-ish, I think, slightly up, but basically flat. There's some one-time noise certainly in G&A in Q4. It's probably not the best run rate to look at. I would look at the year as a whole. It's a better depiction of G&A and where we stand today. I can bore you on all the nuances, but I'll spare you from that. I'd look at the year as a whole, and I think year-over-year it's gonna be generally flat.

Speaker #14: There, or what would be in the guidance.

Speaker #5: Yeah , I think in the guidance G and A is expected to be flat ish . I think slightly up , but basically flat and there's some one time noise certainly in in G and A in the fourth quarter .

Speaker #5: It's probably not the best run rate to , to look at . I would look at the year as a whole . It's a better , it's a better depiction of G and A , and where we stand today , I can bore you on all the nuances , but I'll spare you from that .

Matt Kornack: Okay. No, that's enough for us. Okay. Thank you. Take care, guys.

Speaker #5: So I look at the year as a whole, and I think year over year it's going to be generally flat.

Tom Cirbus: Thanks, Matt.

Speaker #14: Okay . Nope , that's enough for us . Okay . Thank you . Take care guys

Operator 2: We'd like to thank all of our audience members who shared their questions. At this point, I'm happy to turn the call back to our management team and to Dan for any additional or closing remarks.

Operator: We'd like to thank all of our audience members who shared their questions. At this point, I'm happy to turn the call back to our management team and to Dan for any additional or closing remarks.

Speaker #5: Thanks , Matt .

Speaker #2: And we'd like to thank all of our audience members who shared their questions. At this point, I'm happy to turn the call back to our management team and to Dan for any additional or closing remarks.

Dan Oberste: Thanks, Jim. You know, 2025 was an ugly win, but it was a win, and I'll take an ugly win over a pretty loss any day of the week. I wanna remind everybody that we're a real estate company, not a bond alternative. Real estate companies make strategic moves designed to create value for our investors. We don't prioritize making those moves over a concern towards choppy Q4 earnings quality. We do empathize with the potential volatility that ensues, but embedded in our DNA is a deadly focus on buying low and selling high. We have proven that time and time again, year over year over year. We've proven it in 2021. We've proven it in 2022. We've proven it in 2019.

Speaker #4: Thanks , Jim . You know , 2025 was an ugly win , but it was a win . And I'll take an ugly win over pretty loss any day of the week .

Speaker #4: I want to remind everybody that we're a real estate company, not a bond alternative. Real estate companies make strategic moves designed to create value for our investors.

Speaker #4: We don't prioritize making those moves over a concern towards choppy Q4 earnings quality. We do empathize with the potential volatility that ensues, but embedded in our DNA is a deadly focus on buying low and selling high.

Speaker #4: We have proven that time and time again, year over year over year. We've proven it in '21. We've proven it in '22.

Dan Oberste: To us, this is business as usual, though we do empathize with the frustration of some or many of you on our Q4 FFO per unit sequential impact to Q3 FFO per unit. We certainly do. That concludes our call today. Thank you all for joining us, and we look forward to speaking with you again following the release of our Q1 results in May.

Speaker #4: We've proven it in 19 . To us , this is business as usual , though we do empathize with the frustration of of of some of , some or many of you on our Q4 , FFO per unit sequential impact to Q3 , FFO per unit .

Speaker #4: We certainly do. That concludes our call today. Thank you all for joining us, and we look forward to speaking with you again.

Operator 2: Ladies and gentlemen, this does conclude today's session, and we thank you all for your participation. You may now disconnect your lines. Enjoy the rest of your day.

Operator: Ladies and gentlemen, this does conclude today's session, and we thank you all for your participation. You may now disconnect your lines. Enjoy the rest of your day.

Speaker #4: Following the release of our Q1 results in May,

Speaker #2: Ladies and gentlemen, this does conclude today's session, and we thank you all for your participation. You may now disconnect your lines.

Q4 2025 BSR Real Estate Investment Trust Earnings Call

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