Independence Realty Trust IRT Earnings Transcript

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Date

Feb. 12, 2026, 9 a.m. ET

Call participants

• Chief Executive Officer — Scott Schaeffer
• President and Chief Financial Officer — James J. Sebra
• Executive Vice President of Operations — Janice Richards
• Senior Vice President of Investments — Jason Lynch
• Senior Vice President, Investor Relations — Stephanie Krewson-Kelly

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Takeaways

• Core FFO per share -- $0.32 for the quarter and $1.17 for the year, matching company guidance.
• Same-store NOI growth -- Increased 1.8% in the quarter, driven by a 2% quarterly revenue increase and a 2.4% increase in operating expenses, and increased 2.4% for the year, based on 1.7% growth in revenues and a 50 basis point increase in operating expenses.
• Revenue drivers -- Full-year revenue growth led by an 80 basis point rise in effective monthly rents, a 30 basis point gain in occupancy, and a 70 basis point improvement in bad debt.
• Guidance for 2026 -- Core FFO per share projected between $1.12-$1.16; EPS guided at $0.21-$0.28 per share.
• Same-store NOI 2026 outlook -- Expected to increase 80 basis points at the midpoint on 1.7% same-store revenue growth and a 3.4% total same-store operating expense increase.
• Blended rental rate growth -- Guidance assumes 1.7% blended effective rent growth, with new lease trade-outs at negative 75 basis points and renewal trade-outs at 3.25%.
• Occupancy -- Same-store occupancy stable at 95.6% at year end; 2026 guidance assumes average occupancy of 95.5%.
• Wi-Fi program -- Expected to generate $5,500,000 in incremental revenue beginning July, with associated contract costs of $1,900,000 included in 2026 controllable expenses.
• Share repurchases -- 1,900,000 shares repurchased during the quarter for $30,000,000 at an average price of $16 per share.
• Major transactions -- Sold a 356-unit Louisville community for $15,000,000 at a 5.2% cap rate; acquired a 140-unit Columbus community for $30,000,000 at a 5.6% cap rate; consolidated a $115,000,000 Austin property after acquiring the partner's 10% JV interest.
• Capital structure -- Net debt to adjusted EBITDA at 5.7x; no debt maturities until 2028 after refinancing activities with a new $350,000,000 unsecured term loan.
• Value-add program -- Renovated 2,003 units in 2025 at a 15.3% unlevered ROI; guidance expects approximately 2,000-2,500 units to be renovated in 2026 with comparable ROIs.
• Expense drivers -- Controllable operating expenses projected up 5.1% in 2026, primarily due to payroll increases in the 6%-7% range, utility inflation, and Wi-Fi contract costs.
• Development -- No new development spend planned for 2026; lease-up drag expected from Flatiron and Austin developments due to slower stabilization and increased concessions.
• Interest expense -- 2026 forecast up $8,000,000, driven by $3,000,000 from recent acquisitions, $3,900,000 lower capitalized interest, and $1,000,000 from swap expirations.

Summary

Independence Realty Trust (NYSE:IRT) reported full-year and quarterly results on track with prior guidance, with management stating, "we delivered same-store NOI growth that exceeded our initial guidance." The company completed multiple capital recycling actions, using proceeds from community sales and JV exits to acquire higher-yielding assets and repurchase shares. Entering 2026, management communicated that "The outlook for 2026 is meaningfully better than 2025," with expectations of recovery in most markets, specifically highlighting expansion of its value-add program and the rollout of its Wi-Fi initiative as key drivers for the coming year. While some lease-up developments are stabilizing slower than planned, balance sheet flexibility remains a focus, supported by no debt maturities until 2028 and ongoing deleveraging. The company’s segment guidance details varying performance by geography, with Midwest and Sun Belt markets described as supporting blended rent growth and Denver remaining pressured by new supply.

• CEO Schaeffer said, "We expect market fundamentals to continue to improve across our portfolio of well-located communities in desirable submarkets."
• Guidance assumes value-add renovations will represent the "best use of capital," with ROIs expected to hold near historical levels even in shifting supply conditions.
• The non-same-store portfolio at the start of 2026 includes eight communities, with two held for sale and anticipated to be divested midyear, potentially freeing capital for redeployment or deleveraging.
• Company representatives cited price stability and "Blended rent growth is showing momentum." in core markets such as Atlanta, Nashville, and Raleigh for 2026, with negative blended growth expected in Denver due to persistent oversupply.
• Interest rate hedging strategy will be more weighted to floating rates in the near term, with two interest rate swaps maturing in 2026 and only one replaced with a forward-starting swap.

Industry glossary

• FFO (Funds From Operations): A REIT-centric performance metric measuring net income plus depreciation and amortization, excluding gains/losses from property sales, used as a proxy for cash flow from operations.
• NOI (Net Operating Income): The operating income generated from real estate properties, calculated as total revenues less operating expenses, before interest, taxes, or capital costs.
• Cap rate: A ratio expressing a property's net operating income as a percentage of its acquisition price, used to compare property investment yields.
• Value-add program: Corporate initiative to renovate, reposition, or upgrade rental properties to enhance rents and raise asset values, targeting higher returns on investment.
• Trade-out: The percentage change in rent between departing and incoming leases, separately tracked for new and renewal leases in apartment REITs.
• Controllable/noncontrollable operating expenses: Operating costs that management can directly influence (controllable; e.g., payroll, utilities) versus those subject to external factors (noncontrollable; e.g., property taxes, insurance).

Full Conference Call Transcript

Scott Schaeffer, Chief Executive Officer; James J. Sebra, President and Chief Financial Officer; Janice Richards, Executive Vice President of Operations; and Jason Lynch, Senior Vice President of Investments. Today's call is being recorded and webcast through the Investors section of our website at irtliving.com, and a replay will be available shortly after this call ends.

Stephanie Krewson-Kelly: Before we begin our prepared remarks, I will remind everyone we may make forward-looking statements based on current expectations and beliefs as to future events and financial performance. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and Independence Realty Trust, Inc. does not undertake to update them except as may be required by law. Please refer to Independence Realty Trust, Inc.'s press release, supplemental information, and filings with the SEC for further information about these risks.

A copy of Independence Realty Trust, Inc.'s earnings press release and supplemental information is attached to Independence Realty Trust, Inc.'s current report on Form 8-K that is available in the Investors section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most direct comparable GAAP financial measure. With that, it is my pleasure to turn the call over to Scott Schaeffer. Thanks, Stephanie, and thank you all for joining us this morning. 2025 was a solid year for Independence Realty Trust, Inc.

Scott Schaeffer: During another year of challenging market fundamentals, we delivered same-store NOI growth that exceeded our initial guidance. We also adopted new technologies that will drive operating efficiencies and cost savings for years to come. Some of the most impactful initiatives included implementing our AI leasing agent to support the time and talents of our property teams, fine-tuning how we manage bad debt, and reducing the turn time on our value-add renovations to an average of just 25 days. We also successfully rolled out our Wi-Fi initiative and will be expanding it to 63 communities covering 19,000 units as part of our 2026 plan.

On the capital front, last year, we sold two older communities and redeployed the proceeds into three newer communities with higher rental rates and lower CapEx profiles. We profitably exited two joint ventures, and invested into new joint ventures. Lastly, we purchased 1,900,000 of our shares, taking advantage of market dislocation. Because of these and other initiatives, our company is stronger than ever and ready to capitalize on the growth opportunities ahead. So before I say anything else, I want to thank the entire Independence Realty Trust, Inc. team for last year's extraordinary efforts and successes. Regarding capital allocation, we continue to view investments in our value-add program as our best use of capital.

In 2025, we renovated 2,003 units, achieving an average unlevered return on investment of 15.3%. In 2026, we expect to renovate between 4,500 units at ROIs that are consistent with our historical results and have added six new communities to the value-add program. We expect market fundamentals to continue to improve across our portfolio of well-located communities in desirable submarkets. In 2026, CoStar forecasts inventory will increase by 2.1% across our markets, weighted by our NOI exposure. This increase is significantly lower than the 3.7% increase in 2025, the 5.9% increase in 2024, and the 3.2% long-term average prior to 2024. Drivers of apartment demand in our markets remain solid.

Job growth, population growth, and household formation rates within our markets are expected to outpace the national average for 2026. For example, according to CoStar, job growth across our markets is forecasted to average 60 basis points, double the national average of 30 basis points. Our major markets like Atlanta, Dallas, Indianapolis, and Raleigh are forecasted to achieve 50 to 80 basis points of job growth. This shows that people will continue migrating to our markets for employment opportunities and a better quality of life. As evidenced in the 2025 U-Haul Growth Index, nearly 70% of our NOI is generated from communities located in seven of the ten highest in-migration states.

And the high cost of homeownership will continue to support apartment fundamentals. Against this backdrop of improving supply and demand, we see the majority of our markets recovering this year. With that, I will now turn the call over to James J. Sebra.

James J. Sebra: Thank you, Scott, and good morning, everyone. Core FFO per share during the fourth quarter and the full year of 2025 was $0.32 and $1.17, respectively, in line with our guidance. Same-store NOI grew 1.8% in the quarter, driven by a 2% increase in same-store revenue and a 2.4% increase in operating expenses over the prior year. For the year, same-store NOI increased 2.4% based on 1.7% growth in revenues and a 50 basis point increase in operating expenses. We are pleased with our performance this year amidst a difficult environment and ultimately delivering better same-store NOI growth than we originally anticipated.

As compared to the prior year period, fourth quarter same-store revenue growth was led by a 124 basis point improvement in bad debt over 2024, a 60 basis point increase in average effective monthly rents, and partially offset by a 10 basis point decrease in average occupancy. The year-over-year increase in fourth quarter same-store operating expense was due to higher repairs and maintenance related to a greater volume of turns, timing of certain projects, and increased contract services related primarily to ancillary services offered to residents that were offset by other income. These cost increases were mitigated by overall lower real estate taxes and insurance costs.

For the full year, 2025 same-store revenue growth was led by an 80 basis point increase in average effective monthly rents, a 30 basis point increase in average occupancy, and a 70 basis point improvement in bad debt year over year. Same-store operating expenses in 2025 were modestly higher than in 2024 due to higher advertising and contract service costs largely offset by lower insurance and real estate taxes. Sequential point-to-point occupancy during the fourth quarter in our same-store portfolio was stable at 95.6%. Our strategy of having higher year-end occupancy is supporting the solid start to 2026 leasing, which I will address momentarily. Rental rate growth in the quarter was in line with our expectations.

New lease trade-outs in the seasonally slower fourth quarter were negative 3.7%, 20 basis points lower sequentially from the third quarter. Renewal rates increased 30 basis points to 2.9% in the quarter and resident retention increased another 100 basis points to 61.4%. Regarding leasing so far in 2026, asking rents in our same-store portfolio have increased 73 basis points since December 31, and new lease trade-outs remain consistent with the fourth quarter. Renewal lease trade-outs in January were 20 basis points higher than in Q4. We are making good progress on our February and March renewals and expect to achieve approximately 3.5% trade-outs for those months.

This leasing activity to date is in line with the trajectory of our 1.7% blended effective rental rate growth assumed in our 2026 full year guidance, which I will discuss momentarily. Regarding transactions, during the quarter, we sold the 356-unit community that we had held for sale in Louisville for $15,000,000, reflecting an economic cap rate of 5.2%. Also during the quarter, we entered into a new joint venture in Indianapolis to develop a 318-unit community that is slated for completion during 2027. Subsequent to the quarter, we purchased a 140-unit community in Columbus for $30,000,000, which represented an economic cap rate of 5.6%. The community is located two miles from existing Independence Realty Trust, Inc. communities.

We also acquired our JV partner's 10% interest in the Tisdale at Lakeline Station in Austin, Texas, and began consolidating this $115,000,000 asset on our balance sheet. The property is fully developed and currently in lease-up. We have been busy on the capital markets front as well. During the quarter, we allocated $30,000,000 to buy back 1,900,000 of our common shares at an average price of $16 per share. Additionally, we entered into a new $350,000,000 four-year unsecured term loan and used the proceeds to repay our $200,000,000 term loan and mortgages that mature later this year. Our balance sheet remains flexible with strong liquidity.

As of December 31, our net debt to adjusted EBITDA ratio was 5.7x, and we intend to continue improving this ratio to the mid to low 5x. Adjusting our full-year stats for the term loan activity I just discussed, we have zero debt maturities between now and 2028. Turning to our outlook for 2026, our markets are in various stages of recovery driven by receding supply pressures and demand fueled by job growth, continued population, and migration into our markets. In this improving leasing environment, we expect to drive NOI growth by capturing recovery market rents and maintaining our focus on operating efficiencies to keep costs low, while providing a well-maintained, safe environment for our residents and their families.

We are establishing full-year EPS guidance of between $0.21 and $0.28 per share and core FFO guidance in the range of $1.12 to $1.16 per share. The bridge from our $1.17 starting point of core FFO in 2025 to the $1.14 midpoint of our 2026 guidance includes the following components: a $0.01 increase from same-store NOI growth and a $0.01 increase in non-same-store NOI growth.

These two are offset by $0.01 from lower preferred income from our joint ventures during the year, $0.03 of higher interest expense caused primarily by lower levels of capitalized interest, incremental interest expense from recent acquisitions, and the expiration of our 2026 SOFR swap, and $0.01 associated with higher corporate costs reflective of inflationary pressures and increased training and development costs for our community teams. Our 2026 guidance assumes same-store NOI increases 80 basis points at the midpoint driven by 1.7% same-store revenue growth and a 5.1% increase in controllable operating expenses, and a 50 basis point increase in noncontrollable operating expenses, resulting in overall a 3.4% increase in total same-store operating expenses for the year.

The midpoint of our same-store rental revenue growth of 1.7% is based on the following assumptions: average occupancy of 95.5%, an average increase of 20 basis points from 2025; bad debt of 90 basis points of revenue, which is approximately 20 basis points lower than 2025; a 5.4% increase in other income, primarily comprised of the incremental revenue from our Wi-Fi program of $5,500,000, which is expected to commence in July 2026; and lastly, a blended effective rent growth of 1.7%.

Operator: Our blended rental rate growth assumption

James J. Sebra: is comprised of new lease trade-outs of negative 75 basis points and a renewal trade-out of 3.25%, along with a resident retention rate of 60%. As part of our rental rate expectation, we are expecting that market rents will increase approximately 1.5% to 2%. Operating expenses are expected to grow 3.4% at the midpoint, driven by a 5.1% increase in controllable operating expenses and a 50 basis point increase in property tax and insurance expense. The 5.1% increase in controllable operating expenses includes $1,900,000 of Wi-Fi contract costs in our contract services line item. Excluding the Wi-Fi costs, our controllable expenses are increasing 3.5%.

The 50 basis point increase in noncontrollable costs is comprised of a 2.6% increase in real estate taxes and an 11.5% decrease in property insurance costs. Our non-same-store portfolio to start 2026 consists of eight communities aggregating 2,541 units. Two of these communities are currently held for sale and are expected to be sold by midyear. The remaining six communities include two communities that are in lease-up: our legacy development deal in Bloomfield, Colorado, and our most recent JV acquisition in Austin, Texas. Both of these deals are leasing up, albeit at a slower pace than anticipated and with larger concessions than we previously modeled.

We expect both these communities will reach their targeted NOI just later than expected, as rent growth will come once the communities hit a stabilized occupancy. Overall, for 2026, the midpoint of our guidance assumes non-same-store NOI of between $25,000,000 to $26,000,000. G&A and property management expense guidance for the full year is $56,000,000, reflecting standard inflationary growth and incremental costs associated with expanded training and development of our community teams. We forecast an $8,000,000 increase in interest expense driven primarily by $3,000,000 of higher interest expenses associated with our net acquisitions last year and our two acquisitions earlier this year, $3,900,000 of lower expected capitalized interest on development projects, and $1,000,000 associated with hedges burning off.

Scott, back to you.

Scott Schaeffer: Thanks, Jim. The outlook for 2026 is meaningfully better than 2025. Some headwinds remain in a few markets where supply is still being absorbed, but in all cases, market fundamentals are improving. Demand in our submarkets continues to be driven by population and job growth that exceed the national average. People continue to migrate to the Sun Belt and Midwest for jobs and quality of life. And the lower cost of renting favors apartment demand. We will maintain our focus on operational stability and efficiency to maximize the flow of revenue growth to the bottom line, and we will remain nimble and disciplined in allocating capital to the highest and best uses to create value for shareholders.

We thank you for joining us today. Operator, you can now open the call for questions.

Operator: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We do request for today's session that you please limit to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Austin Todd Wurschmidt with KeyBanc Capital Markets. Your line is now open. Please go ahead.

James J. Sebra: Hey. Good morning, guys. Jim, just curious how the new lease rate growth assumption, 75 basis point decrease this year, does that fully incorporate that you capture the 1% to 2% market rent growth? And then can you break out how that 75 basis points is comprised for the first half of the year and then the back half of the year? Yeah. Great question. Thank you for, Austin, obviously, the insight. The 75 basis points of new lease obviously starts negative in January, like I kind of mentioned, very consistent with fourth quarter, and continues to get better throughout the year.

The new lease growth that we have got baked into guidance for the first half of the year is down about 2.25%. And then the second half of the year, it is up roughly 75 basis points, such that for the year, new lease growth is about—sorry—negative 75 basis points for the year. And that does assume that you capture—I do not know the exact, I cannot remember the exact percentage—but a vast majority of that market rent growth. That is helpful. And then just on the non-same-store pool, I mean, can you talk a little bit about how that stacks up, I guess, versus the same-store pool?

It sounds like you have a little bit of slower growth there from some of the drag on the lease-up. But is there any conservatism in that figure based on what you have experienced more recently? And just trying to think about, you know, kind of the brackets on upside downside risk for that pool of assets.

Stephanie Krewson-Kelly: Thanks.

James J. Sebra: Yes. Great question. I will break it into two components.

Janice Richards: Obviously, the same-store properties that we bought last—I'm sorry—the non-same-store that we bought last year are very much performing kind of in line with our expectations. The two deals that are in development are behind where we want them to be from a lease perspective and from, obviously, as I mentioned, a little bit higher concessionary environment. They are both—the guidance numbers assume some conservatism in the buildup of that NOI throughout the year. Specifically, the deal we bought in Austin—the JV we took over in Austin—our expectation is that we will probably end up selling that asset maybe later this year and really begin to kind of cut off some of that drag.

But, again, for guidance purposes, it is assumed that we own it for the full year.

Stephanie Krewson-Kelly: Understood.

James J. Sebra: For the time.

Operator: Your next question comes from the line of James Colin Feldman with Wells Fargo. Please go ahead.

James J. Sebra: Great. Thanks for taking the question and good morning. Can you talk about the impact of concessions burning off and what you think that will do to help your rent growth projections? And if you could provide any more color on just your confidence in going from the minus two and a quarter to the plus 75, that would be helpful too.

Janice Richards: Yeah. No. Great. I will start with the last one. The new lease trend is obviously very much a function of just asking rent trends throughout the year and then, obviously, the expiring rents in each month. As I mentioned in the prepared remarks, our asking rents in January are up 75 basis points from where they were at December 31. As I mentioned earlier, the market rent growth assumption is about 1.5%. We are halfway there. And, obviously, the year has to continue to play out. But we are quite excited to see the strength in the asking rent growth so far this year.

When you look at where the asking rents are today versus the expiring rents out month by month throughout the year, you pretty much hit that kind of breakeven point June/July time frame, you turn positive on new lease trade-outs in the back half of the year. From a concession standpoint, we do assume lower concessions in the back half of the year. I do not have the exact improvement at my fingertips, so I will get back to you on that one. But I think, ultimately, it does produce better comps for us in terms of the ability to grow that rental rate, specifically on renewals in the back half of the year.

But I just want to be clear. There has been some conservatism baked into what those renewals are just because we want to make sure we had

James Colin Feldman: Okay. And then I guess just turning to the markets,

James J. Sebra: I think you said most of your markets will be in recovery this year. Can you just talk about some that are the standouts on both the best markets that are kind of surprising you to the upside and where you think the drags will be? And then maybe focus specifically on the Midwest markets where you have unique exposure.

Stephanie Krewson-Kelly: Absolutely. So the Midwest—Columbus, Indiana, Kentucky—delivered consistent performance throughout 2025.

Operator: Anticipate this to continue in 2026, and all signs and starting point indicate that. And all throughout 2026.

Stephanie Krewson-Kelly: Consistent performance, yeah.

Operator: Some of our emerging markets, as we would say, is Atlanta showing strong fundamentals

Stephanie Krewson-Kelly: delivering a 100 basis points improvement in occupancy and 490 basis point expansion in blended growth from January 2025 to December 2025.

James Colin Feldman: So we are positioned to continue this growth

Stephanie Krewson-Kelly: and momentum in 2026.

Operator: Nashville has maintained stable occupancy through 2025. It created the ability to have pricing power in the second half of the year. Delivered a 280 basis point expansion in blended growth from January 2025 to December 2025. Dallas occupancy remained stable as well through 2025, providing consistent foundation.

Stephanie Krewson-Kelly: Blended rent growth is showing momentum. As alluded to, we are excited about the asking rent momentum we are seeing through the start of 2026. So there are clear signs that the market inflection is on its way, and we are anticipating the comparison in the second half of 2026.

Operator: Raleigh blended rent growth momentum is building here. Net absorption is projected to be positive in 2026.

Stephanie Krewson-Kelly: And so we anticipate seeing that inflection point in 2026 as well. Some of the markets that are weaker are

Operator: Memphis. Memphis is facing a slower macro growth environment in 2026, with jobs and population. However, we are going to remain focused on protecting that occupancy while we wait for gradual improvement in the fundamentals

Stephanie Krewson-Kelly: and fundamentals start to recover.

Operator: New supply is elevated in Denver and in our submarkets. Lease-ups are taking a little longer to stabilize, as we mentioned with Flatiron. And concessions are remaining above normalized levels.

Stephanie Krewson-Kelly: We believe primarily this is due to timing of delivery—sorry. Our focus in 2026 is disciplined occupancy management as the market works through the supply, and we position ourselves for 2027.

James Colin Feldman: Okay. Great. Thanks for all that color.

Janice Richards: Yeah. Jamie, just a quick follow-up. Obviously, the market performance and the new lease performance go, obviously, hand in hand. But when you look at 2024 to 2025 and our thinking about 2026 guidance, there is acceleration in new lease trade-outs in eight of our ten top markets, just to put a finer point on how excited we are about what we see coming and the acceleration of asking rents and the burn-off of—or I should say where the expiring rents are relative to those asking rents.

James Colin Feldman: Alright. Thank you. Your next question comes from the line of Eric Jon Wolfe with Citi.

Operator: Please go ahead.

James J. Sebra: Hi. Thanks. You mentioned that market rent growth was up 75 basis points in January from December. Is that a relatively normal increase from December? Just trying to put it into context with what you normally see at this time of year and maybe what you have

Janice Richards: seen over the last couple of months?

Eric Jon Wolfe: So

Janice Richards: it is probably a little bit faster pace than what we would normally see in the seasonally slower period of January. It is slower, though, than what we saw in January last year. So it gives us confidence that we are back to—while it is a little bit faster pace, it is not as fast or as extreme as it was in January last year. So it gives us confidence that the asking rent growth could firm up in this area.

Eric Jon Wolfe: Got it. And then could you talk about how you set your bad debt guidance? Maybe how it trended fourth quarter, where you ended the year, and what you are expecting in 2026 relative to 2025.

Janice Richards: Yeah. Great question. For the year of last year, we ended at 110 basis points of revenue. The fourth quarter alone ended at 72 basis points of revenue. For purposes of setting guidance for 2026, we assumed 90 basis points of revenue, starting a little higher in the first quarter—so call it somewhere in the 100 basis point range—and then stepping down to the 80–70 basis point range in 2026.

Eric Jon Wolfe: Got it.

Eric Jon Wolfe: Thank you.

Operator: Next question comes from the line of Bradley Barrett Heffern with RBC Capital Markets. Please go ahead.

Eric Jon Wolfe: Yeah. Hey. Good morning, everyone. This is a follow-on to the last question. You said last January had stronger growth than this January did. Obviously, last year, that proved to be kind of a head fake. So I guess what gives you confidence that we are not in a similar situation this time?

Janice Richards: Yeah. Well, the asking rent growth in early January of last year was probably three times as high as it is today. We also see just a little more stability around the demand picture. We do not see the ebb and flow that we saw in January and February last year.

Eric Jon Wolfe: Okay. Got it. Then you have a couple of assets designated for sale. Do you have a likely use of those proceeds at this point?

Janice Richards: We do not have a use of proceeds. We obviously assumed in guidance that they are sold in the middle of the year. And we will use the capital to either acquire something else, delever, or buy back stock.

Eric Jon Wolfe: Okay. Thanks.

Operator: Your next question comes from the line of Ami Probandt with UBS. Please go ahead. Thanks. I was hoping that you could break down the blended spread forecast into a Sun Belt and Midwest buckets. And then if you could comment on what impact value-add has on the blends, that would be great. Thank you.

Janice Richards: Value-add impact on the blends, I will start with that one first. We have a bunch of properties in the value-add program. They do get a nice premium over comps. It is supporting the blend by roughly 70 basis points on the individual units, but for the overall blends, about 20 to 30 basis points of support. In terms of the blended rental rate growth trajectory throughout the year, we expect it to be about 1% in the first half of the year, about 2.5% in the second half of the year.

In terms of looking at the individual market growth between the Sun Belt markets, the Midwest markets, and Denver, we expect negative overall blended rent growth in Denver throughout the year simply because, as I mentioned, the overall supply pressures and what it is expected to do on new lease growth. In terms of the Midwest, we expect the blends for the full year to be right around 2.5% to 3%, really supporting it. And then the Sun Belt, you are just under 2%.

Operator: Thanks for that. And then how does the lower supply environment impact your decisions around capital allocation for redevelopment? And do you typically see higher returns on redevelopment in the lower supply environment?

James J. Sebra: Yes. Of course. Because the

Scott Schaeffer: redeveloped units are competing directly with the newer product. With less newer product, we will have better pricing power on our renovated units.

Operator: Are you able to provide any context how much higher the returns could be?

Scott Schaeffer: Well, last year, the return on investment was about 15.3%. And in years prior to all of this supply hitting, we were in the high teens, 18%–19%, and then in a couple of years, even north of 20%.

Stephanie Krewson-Kelly: Correct.

Operator: Great. Thank you. Your next question comes from the line of Omotayo Tejumade Okusanya with Bank. Please go ahead.

Stephanie Krewson-Kelly: Yes. Good morning, everyone. Was wondering if you could talk

James J. Sebra: was wondering if you could talk a little bit about the same-store OpEx guide for 2026.

Omotayo Tejumade Okusanya: I think, again, the controllable expenses—you did talk a little bit about the Wi-Fi program having some impact on it. But even ex the Wi-Fi, still about 3.5%, which is kind of higher than where you trended recently. So just kind of curious what else is trending up within those controllable expenses?

Janice Richards: Yeah. No. Great question. I think if you look at the rest of the controllable expenses, the increases are primarily heavier increases that I would say above inflationary, primarily in payroll and utilities. They are the other drivers. But, again, even as I mentioned in the prepared remarks, if you remove the cost of the Wi-Fi program, your controllable expenses are only growing about 3.5%. But it is really the payroll and the utilities pushing up a little bit.

Omotayo Tejumade Okusanya: And then payroll is because you are hiring more people or you are paying to compete with the market? Just kind of curious what is happening there.

Janice Richards: So it is a variety of things. It is primarily inflationary increases for the team members. It is also increased incentive compensation to drive results. Those are the key drivers. There is also a little bit of—there were some benefits in healthcare savings in 2025 that are not expected to repeat in 2026. But I think the overall increase in payroll is in the 6% to 7% range, which is almost entirely driven by some of that savings on benefit programs in 2025.

Omotayo Tejumade Okusanya: Okay. That is helpful. And then development spend and guidance as well. I mean, you only have one development project left. It is pretty much almost complete. You are already in lease-up mode on that project. I think you were still forecasting a meaningful amount of development spend in 2026. I am kind of curious what that pertains to.

Janice Richards: We were not forecasting development spend in 2026. But you are right. We did have one final on-balance-sheet development called Flatirons. That one was completed, and all of that development spend has been incurred. So there is not really an expected increased development spend this year. We obviously continue to expect to spend redevelopment money on value-add programs, but not development money.

Stephanie Krewson-Kelly: Gotcha. Okay. That is helpful.

Omotayo Tejumade Okusanya: And then, sticking with the redevs, for the 2026 guidance, again, good to see the amount of units that are going to probably be up versus 2025, but curious what kind of yields are being assumed, again, just given some of the yield pressure that we have seen in this past year or so.

Janice Richards: So I apologize. We will have to make this your last question so we can get to some other analysts. But, ultimately, on the redev, we did about 2,000 units in 2025. We are planning to do somewhere in the 2,000 to 2,500 units in 2026. The ROIs that we assumed on the six new properties that we are adding to the redevelopment program were very consistent with historical trends of that 15%–16%.

As Scott mentioned earlier, as the market cycles come back and the supply pressures wane, we should be able to see more pricing power in our redevelopment program and, therefore, be able to compete more directly with some of the Class A stuff and even generate higher returns.

Omotayo Tejumade Okusanya: Thank you.

Stephanie Krewson-Kelly: Thanks. Your next question comes from the line of John Kim

Operator: with BMO Capital Markets. Please go ahead.

Janice Richards: Thank you. Just

James J. Sebra: going to your Flatiron development, it is expected to be a drag this year as you lease up the asset and you are expensing the interest.

John Kim: But where do you see occupancy stabilizing in terms of timing? Then maybe if you could just comment on why it has taken longer to lease up the asset. Sure. I will

Janice Richards: the occupancy forecast—the guidance assumes that we hit occupancy at about 90% in the month of June. That is about a quarter behind expectations and certainly not fully stabilized yet, but at 90%, we would want to see 93%–95%. But I think the other component of just the drag on earnings is lower actual rents we are signing and having higher concessions. Janice, if you want to add anything, feel free.

Operator: I think we are seeing the submarket as a whole in Broomfield.

Stephanie Krewson-Kelly: Obviously, there has been an onslaught of supply in that market that kind of all

Operator: came

Stephanie Krewson-Kelly: to fruition at the same time. And so we are really just working through that fundamental. We are seeing high conversion of the leads that are coming through the door. Tours are strong. And so with that

Operator: continued momentum, we see that we are going to hit that stabilized marker.

John Kim: And then just going back to your blended guidance, you are expecting, I guess, a pickup in the second half of the year. And that goes against what you have experienced the last few years where blended rents have kind of peaked in the first half. I understand there are the easier comps and concessions, but what other assumptions do you have in terms of the dynamics and getting that improvement later in this year?

Janice Richards: I think it is primarily obviously better comps in the back half of the year. Just like I mentioned before, a little bit lower concessionary expectations. We also think, generally speaking, the market rent growth is going to be better in the second half of the year simply because supply pressures are less, and then all the lease-up deliveries that have happened should be leased up by then, really further enhancing the opportunity for pricing power.

James Colin Feldman: Okay. Thank you.

Operator: Your next question comes from the line of John Pawlowski with Green Street. Please go ahead.

Eric Jon Wolfe: Thanks. Good morning. Jim, it would be helpful to hear what kind of balance between fixed and floating rate debt you are going to target in the next

James J. Sebra: about two to three years. Do you have a significant amount of swaps or collars expiring, as well as just the duration of debt with maturities in 2028–2029? Would love to hear your strategy in the next couple of years.

Janice Richards: Great question. Obviously, we just did this $350,000,000 bank term loan—we thank all of our banking partners for participating in that. The expectation we had this year was that when all the debt that was returning this year, we would be hitting the investment grade market, which is why we got the rating a few years ago. Obviously, the investment grade costs are much more expensive today than where a floating-rate environment is, and we actually are okay being a little more floating rate in today's environment than trying to fix everything.

We want to be able to enjoy some of that expected—either where SOFR is today relative to Treasuries or a potentially declining SOFR curve over the next few months and quarters, again, depending on what the Fed decides to do. For the 2028 maturities, our goal is to be in the investment grade market for some or all of those expirations. When we hit it and how fast we hit it or how sizable the individual bond issuance is will depend. But the goal is to—many of those maturities are going to start happening in 2028—are mortgages. That will improve the unencumbered pool and potentially allow us to further enhance our rating profile and maybe even secure a better rating.

Eric Jon Wolfe: Okay. That helps.

James J. Sebra: So we should assume, I think—

John Pawlowski: maybe you already took this swap out or it rolled—but

James J. Sebra: about $250,000,000 in swaps maturing this year. We should expect you guys just roll to floating rate debt.

Janice Richards: So there are two swaps maturing this year. There is one that is maturing in March 2026. That was a one-year swap we put in place last year simply because of where we saw the interest rate curve for one year and wanting to protect our interest expense during 2025 versus where we saw maybe the interest curve may not be as steep. The actual cuts were not going to happen as planned, and we thankfully won on that swap from a cash flow perspective. We are not anticipating redoing that swap. We are going to stay floating.

And we will enjoy about a 30 basis point improvement on the underlying SOFR from the 3.9% that we were swapped at to the 3.6% that SOFR is today. For the June swap that is maturing of $150,000,000, we have already put a forward-starting swap in place. That swap that is maturing is 2.2%, and we have put a new swap in place that is swapping at 3.25% SOFR.

Eric Jon Wolfe: Okay.

Janice Richards: Thanks for all the color. We are not, at this point, anticipating putting any other swaps in place. That being said, we are watching the interest rate markets like a hawk, and we will continue to protect as best we can the interest rate expense going forward.

Eric Jon Wolfe: Okay. Thanks.

Operator: Your last question comes from the line of Mason Guell with Baird. Please go ahead.

John Kim: Hey. Good morning, everyone.

James J. Sebra: For your Mustang joint venture property in Dallas, is the call option period open? What are your thoughts on exercising the call, and what is the forward NOI yield? So, yes, the call option is open. When we look at where that property would trade today, or be valued today, it is still at a cap rate that is not our best use of capital to buy it. So I would anticipate that property being sold this year because we can use that capital in better ways, again, as Jim said, through deleveraging and/or buying back our shares.

Janice Richards: Better ways relative to owning that asset.

James J. Sebra: To owning that asset. Correct.

John Kim: Great. And then, kind of following on that, you have repurchased

Michael Gorman: some shares in the quarter. Kind of talk about your thought process for doing so?

Janice Richards: Sure. Obviously, like a lot of our peers, there is a fundamental disconnect between implied cap rates and market cap rates. We looked at that as a good opportunity to take capital or earnings from non-EBITDA generating sources and use that capital to buy back stock. If you sell an asset, you lose the EBITDA and the earnings. We are very much focused on the long term. Ever since our start, we have always said we are going to be patient and disciplined, and we are going to continue to be that way.

That being said, we did have a lot of capital that came in last year from the sale of one of our joint venture assets as well as the embedded gain that existed in the forward contracts. We took those proceeds and used that to buy back stock in a positive and accretive way for shareholders. Great. Thank you.

Operator: There are no questions at this time. I would now like to turn the call back over to Scott Schaeffer, CEO, for closing remarks.

James J. Sebra: Well, thank you all for joining us this morning. I just want to reiterate how excited we are about 2026 and the forward trajectory that we see for our portfolio. Thanks for joining us, and we look forward to speaking with you next quarter.

Operator: Ladies and gentlemen, that does conclude our conference call for today. Thank you all for joining, and you may now disconnect. Everyone, have a great day.

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