BSR REIT (BSRT) Q4 2026 Earnings Call Transcript

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DATE

Thu, Nov. 12, 2026

CALL PARTICIPANTS

• Vice President of Investor Relations and Marketing - Spencer Andrews
• Chief Executive Officer - Daniel Oberste
• Chief Financial Officer - Thomas Cirbus
• Chief Operating Officer - Susan Rosenbaum Koehn

TAKEAWAYS

• Total Revenue -- $34.5 million, representing a 4.3% increase driven by the continued lease-up of the 2025 acquisitions class.
• Same Community Revenue -- $26.4 million, representing a 0.6% decrease reflecting lower average occupancy of 94.1% compared to 94.3% last year.
• FFO Per Unit -- $0.19, remaining flat compared to the prior year as centralization expense savings offset higher net finance costs.
• AFFO Per Unit -- $0.16, down from $0.17 last year due to the timing of maintenance capital expenditures and absolute FFO shifts.
• Total Portfolio NOI -- $17.7 million, increasing 2.4% year over year primarily due to progress toward stabilization of non-Same Community properties.
• Same Community NOI -- $13.7 million, decreasing 4.5% due to the timing of real estate tax refunds and higher administrative expenses.
• Non-Same Community NOI Margin -- 49.2%, up from 44.7% last year as the company works to compress the 400-basis-point gap with the same community portfolio.
• Retention Rate -- 60.3%, reaching a record level and increasing 210 basis points over the third quarter of the prior year.
• Weighted Average Ending Occupancy -- 94.0%, finishing the quarter with a physical occupancy rate of 94.1% for the same community portfolio.
• New Lease Rate Change -- (4.4%), reflecting a seasonal slowdown in September and a strategic shift in management focus toward maintaining occupancy levels.
• Renewal Lease Rate Change -- 2.6%, helping the company maintain a nearly flat blended lease trade-out of (0.2%).
• Debt to Gross Book Value -- 52.2%, at the end of the third quarter.
• Total Liquidity -- $59.9 million, available at quarter end to support ongoing operations and initiatives.
• Average Interest Rate -- 4.1%, across all loans and borrowings with a weighted average term to maturity of 3.2 years.
• Platform Efficiency Savings -- $0.02 of FFO per unit, representing the annualized benefit generated by centralization efforts implemented during the second quarter.
• Incremental Growth Target -- $0.13 per unit to $0.22 per unit, which management expects to generate by early 2028 through organic growth and platform efficiency initiatives.
• Austin Same Community Occupancy -- 95.6%, which increased to 96.1% as of the date of the earnings call.
• Dallas Same Community Occupancy -- 95.1%, compared to 94.6% at the end of the prior-year quarter.
• Houston Same Community Occupancy -- 93.5%, reflecting a decrease from 94.9% last year due to lower-than-anticipated absorption in the Northwest Houston submarket.
• Resident Amenity Expansion -- 7 properties, representing the initial live rollout of bulk internet services across the 26-property portfolio.
• Finance Costs -- $9.2 million, an 8.3% increase driven by interest rate resets in the derivative portfolio and slightly higher relative leverage.

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RISKS

• Oberste stated, "The volume to be absorbed this time was far greater," referring to the unprecedented housing supply delivered in core markets between 2022 to 2024.
• Koehn stated, "North Dallas submarket, continues to be a bit of a challenge when it comes to absorption," as the company works to stabilize recently acquired assets in that area.
• Cirbus stated that net finance costs increased 8.3% year over year "driven by rate resets in the derivative portfolio and slightly higher relative leverage levels."

SUMMARY

BSR Real Estate Investment Trust (NYSE:BSRT) completed its registration with the SEC and listed its units on the New York Stock Exchange during the third quarter. Management stated that the listing aims to streamline trading dynamics and attract a broader base of institutional and individual investors. The company reported continued progress in stabilizing its 2025 acquisition class, which drove a year-over-year increase in total portfolio revenue despite a seasonal slowdown in market rental rates. Operations are currently focused on three core initiatives: the lease-up of recent acquisitions, the expansion of resident amenity programs like bulk internet, and the realization of platform efficiencies through centralization. Management indicated that these efforts are designed to drive incremental growth in funds from operations over the next two years as supply-demand dynamics in core Texas markets normalize.

• Daniel Oberste stated that future results will reflect "maximization of NOI" from the five properties acquired in 2025 as management burns off concessions and normalizes expenses.
• Thomas Cirbus noted that the company successfully pushed rates for the first two months of the quarter before shifting focus to occupancy when the market dictates that rate had "maxed out" in September.
• Susan Rosenbaum Koehn indicated that physical occupancy between 94% to 96% is considered a healthy level for the portfolio as the company manages its revenue drivers.
• The company expects five additional properties to begin their bulk internet ramp-up by the end of the year, with the balance of the portfolio expected to be live by the first quarter of 2027.
• Management confirmed that the Northwest Houston and North Dallas submarkets have presented challenges for absorption, leading to a focus on pushing occupancy over rental rates in those specific areas.
• Thomas Cirbus reported that centralization efforts are meeting their target of generating $0.02 of annualized FFO per unit in savings while enhancing operating efficiency.

INDUSTRY GLOSSARY

• FFO: Funds from Operations is a non-GAAP financial measure used by real estate investment trusts to define the cash flow from their operations.
• AFFO: Adjusted Funds from Operations is a measure used to estimate the amount of cash available for distribution to unitholders by adjusting FFO for recurring capital expenditures.
• NOI: Net Operating Income is a formula used to calculate the profitability of income-producing real estate properties by subtracting operating expenses from total revenue.
• NAV: Net Asset Value represents the total value of an entity's assets minus its liabilities, often expressed on a per-unit basis.
• MSA: Metropolitan Statistical Area is a geographical region with a relatively high population density at its core and close economic ties throughout the area.
• Same Community: Properties that have been owned and operated for the entirety of both the current and comparable reporting periods.
• Blended Lease Trade-outs: The weighted average rental rate change for both new and renewal leases during a specific period.

Full Conference Call Transcript

Operator: Good morning, everyone, and welcome My name is Jim, and I will be your conference coordinator today. It is my pleasure to welcome everyone to the BSR REIT Q3 26 Financial Results Conference Call. After management's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star and the number 1 on your telephone keypad. If you would like to withdraw your question, repeat the steps of star and 1. Thank you. Now pleasure to turn the conference over to Spencer Andrews, Vice President of Investor Relations and Marketing. Please go ahead, sir.

Spencer Andrews: Thank you, Jim, and good day, everyone. Welcome to BSR REIT's conference call to discuss our financial results for the third quarter ending 09/30/2026. I am joined on the call today by our Chief Executive Officer, Daniel Oberste; our Chief Financial Officer, Thomas Cirbus; and our chief operating officer, Susan Rosenbaum Koehn, 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. 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 11/11/2026. Daniel, over to you.

Daniel Oberste: Thanks, Spencer. It was an exciting third quarter here at DSR. Our financial results reflect the continued progress towards our long term goals we set out in December 2025. Our operations continue to fire on all cylinders, and have now made tangible progress across each of our key initiatives. Our platform took the next logical step by registering with the SEC and subsequently listing on the New York Stock Exchange. And we ultimately streamlined our trading dynamics all in an effort to make BSR a more attractive investment to more people and institutions.

To put specifics to a few of our third quarter numbers, occupancy finished the quarter at a healthy 94%, Non same community occupancy increased to 93.6% from 83.6% 1 year ago. Reflecting the progress we are making towards stabilization of those properties. NOI from these properties increased 36.5%. Our retention rate in Q3 was a record 60.3%, an increase of 210 basis points from last year and up 20-basis-points from Q2. FFO grew 3.5% from Q2 26 and blended lease trade outs finished Q3 nearly flat at minus 0.2%. With renewal rates higher across all markets. Sequentially, we generated expected growth in FFO and AFFO on both an absolute dollar and per unit basis.

We continue to make steady progress in our organic growth initiatives, including both the stabilization of new communities and our high return resident amenities program. To that end, let me provide an update on our 3 initiatives we laid out in December of last year. First, the lease up of our 2025 acquisition class. Current results reflect the concessed but occupied revenue potential of those assets. Future results will reflect the maximization of NOI from this cohort of assets. You saw the first hint of what is to come in our Q3 non same community NOI margin, which was 49.2%, compared with 44.7% last year. Day basis, non same community NOI margin sits approximately 400-basis-points behind our same community level.

This is low hanging fruit that we expect to harvest in the short to medium term. Between collecting rent on physically occupied assets for an entire year, burning off concessions, and normalizing the expense level at each of these 5 assets we expect the margin differential to compress and drive sustained NOI growth. Second, our resident amenity programs. Currently highlighted by our bulk Internet and valet trash initiatives, Bulk Internet continues to expand across our portfolio. We are live on 7 of our 26 properties, and ramping ahead of schedule in the ground at 5 additional properties, all of which we expect to be delivered and begin their ramp up by year end.

The balance of the properties will have accelerated time lines and should be live by Q1 of 2027. As new properties continue to come online, we expect material benefits to our other income line. Third, platform efficiencies. As I reported in our last call, we implemented our centralization effort in Q2, and I am pleased to report that this initiative is meeting its target of generating annualized expense savings of $0.02 of FFO per unit while concurrently enhancing our operating efficiency. We remain highly confident that these initiatives will meet our target of generating incremental growth of $0.13-$0.22 per unit by early 2028. There is no change to our operational growth story.

We have an outstanding property portfolio in top tier markets that performed at a high level through very challenging times, and is now positioned for renewed growth as market dynamics turn. And we are adding further value through high return organic growth initiatives across the portfolio. Accordingly, we continue to be very confident that the REIT will produce strong sustained returns for unitholders. I will now invite Tom to review our third quarter financial results in more detail. Analyst?

Thomas Cirbus: Thanks, Daniel. Our financial performance in the third quarter was in line with internal expectations and continued to primarily reflect our progress in stabilizing the cohort of properties that we acquired in 2025 as revenue from non-same-community properties increased 23.9% year over year and 4.4% sequentially from Q2. As Dan highlighted, we expect margins in this portfolio to steadily expand and to eventually exceed those in our same community portfolio. Beginning with leasing, Effective rates on new leases declined by 4.4% in the quarter, while renewals increased 2.6% resulting in a 0.2% decrease in blended rates. The trade out data reflects a concerted effort by management in the third quarter to maximize revenue through pushing rate while maintaining occupancy.

For the first 2 months of the quarter, we were able to successfully push rates on new leases while generally maintaining occupancy. In September, concurrent with the seasonal slowdown that always occurs in September, the market clearly dictated that we had maxed out on rate, and thus, we shifted the focus on occupancy. I say all that to remind everyone of 2 key points. First, our ability to dictate rate in the third quarter is an extremely positive sign of overall market health. Second, we will continue to maximize earnings through fluidly moving our 2 primary drivers of revenue, that is occupancy and rate, based on whatever the market dictates is possible.

Ultimately, same community revenue finished Q3 at $26.4 million down slightly compared to last year and essentially flat to Q2. The year over year decline was primarily due to a decrease of lower average occupancy of 94.1% versus 94.3% last year and lower average monthly in place rent of $1430 versus $1450 last year. These revenue declines were partially offset by an increase in other property income primarily related to the continued ramp of our bulk Internet initiative. Total portfolio revenue of $34.5 million increased 4.3% from last year and 90-basis-points from Q2.

The increases were primarily the result of the well telegraphed continued lease up of our 2025 acquisitions class as occupancy in the non same community portfolio increased 10-percentage-points year over year. This trend will continue into the fourth quarter. Same community NOI in Q3 26 was $13.7 million a 4.5% decrease from last year. The decline was attributable to the timing of real estate tax refunds the slowdown in same community revenue I just described and higher overhead and administrative expenses. Sequentially, same community NOI decreased 1.5% reflecting high repair and maintenance expenses primarily due to timing and seasonality.

More importantly to the overall trend in the business, total portfolio NOI of 17.7 million in Q3 increased 2.4% from last year, Similar to revenue, the increase was primarily attributable to the lease up of our non same community portfolio. As Dan indicated in his remarks, total portfolio NOI will continue to improve as we have now graduated from a focus on physical occupancy to a focus on full economic stabilization of our non same community properties as reflected in the opportunity to materially enhance our non same community NOI margin. Below NOI, G&A was down 20-basis-points, excluding the onetime costs incurred associated with our U. S.

Listing, and net finance costs increased 8.3% year over year driven by rate resets in the derivative portfolio and slightly higher relative leverage levels. All in all, FFO in Q3 was $0.19 per unit, flat to the $0.19 per unit last year and steadily accelerating from the $0.18 per unit in the second quarter. G&A savings drove the sequential increase in FFO. AFFO in Q3 was $0.16 per unit, compared to $0.17 per unit last year. And $0.15 per unit in Q2. The variations in AFFO primarily related to small notional shifts in absolute FFO and timing related to CapEx expenditures and straight line rental adjustments.

On the balance sheet, the REIT's debt to gross book value as of 09/19/2030 was 52.2%. Our debt carries an average interest rate of 4.1% and a weighted average term to maturity of 3.2 years. Total liquidity at quarter end was 59.9 million Finally, you will note that our guidance is unchanged from the revised level we provided in Q2. We remain confident in that range and look forward to delivering our full year results in March. I will now turn it back to Daniel for his closing remarks.

Daniel Oberste: Thanks, Tom. The volume of new housing supply that was delivered into our core markets from 2022-2024 was unprecedented. 2 years on from those deliveries, the markets still is not completely finished absorbing it all. The process has taken longer than in past cycles, and the volume to be absorbed this time was far greater. As we look ahead, we do so with full confidence that the unmatched economic growth fundamentals of Texas economy combined with a return to supply demand balance, will drive a return to superior rental rate growth. In the meantime, we are already achieving steady growth through significant momentum down the P&L. Our non same community properties are stabilizing nicely.

The resident amenity programs are fueling expected growth in other income. And centralization efforts are saving operating and personnel costs. Our platform efficiency initiatives are taking hold. So even before the top line improvement kicks in, we are as well or better positioned than anyone else in our peer group. And when market forces turn positive, our operating leverage is substantial. We demonstrated that in the 2021 and 2022 period. Accordingly, we remain very well positioned to generate consistent superior returns for unitholders. That concludes our prepared remarks. Tom, Susan and I would now be pleased to answer your questions. Please open the line for questions.

Operator: And a quick reminder to our phone audience today that it is star and 1 on your telephone keypad if you would like to ask a question. We will hear first from Kyle Stanley at Desjardins.

Kyle Stanley: Thanks. Good morning, everyone.

Daniel Oberste: Morning. Morning, Kyle.

Kyle Stanley: Just going to your guidance and then the maintenance of the guidance, I think you just set towards the end of your remarks there, Tom. Maintaining the 0%-1% growth Yet on a year to date basis, I mean, same property NOI is running in the in negative territory. So I am just wondering, what is it you are seeing in the fourth quarter that is allowing you to kind of hold firm on the outlook? And would there be any change to the same property pool that might also be helping a little

Thomas Cirbus: Yeah, Kyle. Sure. I will take that. So I will remind everyone of the anomaly that was the fourth quarter of 25, which we discussed at length at the time and in the in the months following that. So just to kind of put it clearly, if same community NOI was flat, to Q3 and Q4, that is already, call it, 9 ish percent growth year over year. So the vast majority is largely related to, the anomaly that was 2025 Q4. So the question really is the sequential improvement that our guidance assumes and here's what I would say on that.

The guidance assumes that revenue continues at our expected climb higher through a function of both rate and occupancy. We are confident in the early reports of what we are seeing in October and November, particularly on the occupancy side as I am sure as I am sure Susan will get into. And we also obviously have our bulk Internet initiative that is ramping and will continue to take outsized share and growth. On the other income.

So we feel good on the total revenue side and then down you work down the p and l. there is a bunch of green shoots we are seeing in my prepared remarks talked to the timing in Q2 related to R&M expenses, There will be some normalization of that in the fourth quarter. Payroll, taxes, turn costs all have various green shoots that when we looked at guidance in totality, we were confident with keeping it flat kind of across the board.

As it relates to the same property pool, look, we look at, the performance of same property pool, on the comparable basis and adhere to our policies. there is not an immediate initiative to change the same property pool, though we are very close. On a couple of properties making its way into the same property pool If not in the fourth quarter, certainly, looking into next year.

Kyle Stanley: Okay. No. that is that is clear. Thank you. Looking at maybe the nonsame property pool for a second, obviously, great progress on a year over year basis. First quarter is still relatively flat, I think last quarter, you would noted, you know, the stabilization at Owens being more specifically, taking a bit longer than expected. Can we just get an update on how that stabilization process has gone? And, you know, is it to plan at this point?

Susan Rosenbaum Koehn: Yeah. Hey, Kyle. So, the North Dallas submarket, continues to be a bit of a challenge when it comes to absorption. So we have 2 sub markets actually with absorption that is Northwest Houston and North Dallas. We were able to continue to try to push rents in those markets and others all the way through the end of August, which I think points to the health of our market. Then we pivoted in September and started to push on, reverse on versus rental rates. At this point, we saw a decline in rental rates as we pushed on occupancy, and that is continued through October. I am happy to report that today, now occupy.

Occupancy is gone up in all of our markets to where at 96.1% in Austin, 94.9% in Dallas, and 94.6% in Houston. So now that we are back to an occupancy level that I am comfortable with, we will start pushing on rates again. I would also like to highlight here that, often now, which also has a non same community property in it, is, seems to be out of the woods at this point. Their trade outs improved quarter over quarter, and we continue to expect to see that going forward.

Kyle Stanley: Okay. Thank you for that. And then just last 1, as it relates to kind of the run rate G&A. Obviously, you highlighted some of the efficiencies realized that $0.02 of FFO. Obviously, the transition over the New York Stock Exchange comes with a cost. What are you expecting in terms of run rate for G&A?

Thomas Cirbus: Yeah, Kyle, I think the expected run rate for G&A will be, relatively similar to where we are at for a whole host of reasons. The New York Stock Exchange itself will add, call it, $0.01 to $0.03 depending on how everything ultimately shakes out. In, in 2027. I think there is a bunch of other initiatives Daniel talked to, the centralization initiatives. there is a whole host of others. We are obviously not rolling out 2027 guidance today where I would expect that to maybe not be fully impacted. But the G&A associated with the stock exchange alone is probably

Kyle Stanley: Okay. Thank you for that. I will turn it back.

Operator: Our next question will come from Jonathan Kelcher at TD Cowen.

Jonathan Kelcher: Thanks. Good morning. Just going back to the blended rent growth in what we can expect for the cadence on that. Looks like you took a step back in Q3, and it sounds like that was mostly September related. How should we think about that in Q4 and into 2027?

Susan Rosenbaum Koehn: Yes. Jonathan, it is hard to tell right now. September and October, we focused more on occupancy. And now that occupancy is in a place that I like for to start pushing on rates again, but it is hard for me to say how much we will be able to push through the remainder of the quarter and into 2027.

Jonathan Kelcher: Okay. Fair enough. And then just secondly, 1 of your levers you talked about was incentives burning off. On the on the non stabilized portfolio. How would incentives on the non stabilized to incentives on the stabilized portfolio or same property portfolio?

Susan Rosenbaum Koehn: So our concessions are pretty. We are pretty much the same between Q2 and Q3. So I do not think that they had that big of a bearing of the differences between the quarter. I do see, though, in our properties as we get closer and closer to stabilization that we are using them less and less. And as of November, we have all but eliminated

Jonathan Kelcher: On both the same property and the non same property?

Susan Rosenbaum Koehn: Yeah. They are sparse on the same property and the non same property as well at this point. Today.

Jonathan Kelcher: Okay. that is helpful. I will turn it back. Thanks.

Operator: Our next question today comes from Bradley Sturges at Raymond James.

Bradley Sturges: Just on. I guess you highlighted the difference in margin between same store and non same store. a 400-basis-point gap. what is the time line at this stage to kind of further close that gap? Are we looking in kind of pro 2027 before we think that gap kind of fully closes, or how should we think about that?

Daniel Oberste: Yeah. Hey, Bradley. This is Daniel. I think I would go back to our 2025 kind of, strategic deck on operating strategy. You know, it is always been our experience outside of probably a year or 2 in 2020 and 2021. That the stabilization process of a lease up takes anywhere between 18 and 30 6 months. I think what we are seeing in this market is probably somewhere in the middle of that. Right? So I think as Tom hit on and I hit on earlier, we would expect that NOI margin to begin that compressing between non same store and same store. it is. We have seen it compress quarter over quarter sequential.

It will drive more of our FFO growth in the fourth quarter. And we will just continue to start seeing it stabilize into that 54% range that we like to see throughout the course of 27. Ending 2027 and walking into 2028 at probably the traditional margin that we see over on stabilized assets.

Bradley Sturges: that is perfect. And just on the occupancy front, you highlighted that as a green shoot. Just kind of where do you think that trends over the next quarter or 2? Of same store occupancy? And obviously, you still got a bit more upside on the non same store side.

Susan Rosenbaum Koehn: Yeah. So, at as I just said, you know, right now, we are at a same store of around 94.7% and the total portfolio. Well, the non same store is at 94.1%. So it is also up from where we ended the third quarter. I like that level. And so when we start pushing rates, right, we will have to watch it to make sure it does not dip too much further down or then we let our foot off the gas there. As I have said on our calls before, though, I think anywhere between 94-96%, physical occupancy is good. Yep.

Bradley Sturges: Questions is maybe switching gears. Just like we have seen interest rate volatility, you know, borrowing costs are up I think just in terms of what you are seeing in the direct property market from other players in the space, are you seeing any pressure on valuations, whether it is cap rates price per door, and any signs of distress in the market right now from, like, developers or other owners that might be over levered?

Daniel Oberste: Yeah. Through the quarter, Bradley, in Q3, we did not see many significant trades to speak of. I think there were a few outliers on the low and the high cap rate zone that when we looked into them, there were some value add components to them. There were some lender workouts. There were unique circumstances that probably drove those outliers. I think since then, in the third-- or, I guess, in the fourth quarter, what we have seen in October in particular is it. I mean, we have all seen a massive run up in treasury yields and borrowing costs. So I think that is reflected anecdotally and probably, 5% decrease in bid ask spread.

Favoring the bidder and not the seller. So we have not seen many of those transactions closed yet. I think we have we have seen, an attempt very publicly by a buyer to re trade on value and to the seller's chagrin, I am speaking about 1 of our public competitors. The seller refused to negotiate and the buyer dropped 3 or 4 of those purchases in the Sunbelt. So you know, if that pricing holds, then we would expect cap rates to slightly tick up in the back half of the year. But we do not see any evidence of that in closings as of November 12.

Bradley Sturges: Okay. Appreciate the color, and I will turn it back.

Operator: Thank you. Our next question will come from Himanshu Gupta at Scotiabank.

Himanshu Gupta: Thank you and good morning. So on Houston market, Houston was supposed to be the most stable market out of the Texas Triangle. Are you surprised by the further weakness or softness you have seen in new leasing spreads in the Houston market?

Daniel Oberste: I am not. I am not really, Himanshu. I think what we talked about is that Houston had held up best for us to the supply wave between 2022-2024. I would note that it had our strongest Q2 blends at plus 1.5% in of 94 point 7. I think that is what we meant when we said it probably recovers first and before Dallas and Austin, I think it did exactly that. I think our viewpoint on Houston is that in 2022, 2024, 2025, and then year to date 2026 as Dallas and Austin. And I think we have seen just that. Now we come out of this and it looks like.

I will I will quote costar's expected growth rate for revenues in Houston over the next 2 years is probably somewhere between point 51%. And that would compare somewhat unfavorably to our other 2 portfolios in Dallas and Austin, which are expected to grow by 2.6% in effective rate next year 2.2% in Dallas respectively. So what we thought and what we expected out of Houston is exactly what we got, which is probably not as violent of a drop in effective rates as you saw in, for example, Austin. Right? Just purely a function of supply and demand. Now it.

Because it did not have that big of a supply hit coming in 22 to 24, 2025, We did not see a big drop off in rate. But it still had some supply. And that supply is continuing to be absorbed. Right? Where you look over at Austin and you saw that supply deliver rather significantly in 2024 and 25, you saw a rapid drop off in rates. So if we are sitting here last year, Himanshu, I have not looked at the transcripts, but I am pretty sure we probably talked about the concern with Austin's quite a bit. It was probably the worst performing market. In 2025 as it relates to rental. Now we look at 26.

Deliveries fell off a cliff. it is a supply and demand story. And what has Austin done? Austin has massively decelerated its rent its rent decrease, and we are starting to see it-- we have our highest occupancy in Austin. We maintain that through this cycle. And it looks like next year, we are gonna have a role reversal with Austin. So we are pretty bullish on our expectations for Austin. And we expect Houston to continue doing what it is historically done, which is kind of produce revenue growth just a bit below Dallas and Austin.

Himanshu Gupta: Super detailed and thank you so much, Daniel, for all the color, and I will turn back.

Operator: Next, we will hear from Matt Kornack at National Bank of Canada.

Matt Kornack: Hey, guys. I just wanted to quickly go back to Kyle's question on the G&A and confirm. When you talk about the run rate being similar to Q3, is that net of the $1.1 million onetime charge? Or just yeah, is it net?

Thomas Cirbus: No. Not net. So 3-point, call it, low 3 millions quarterly going forward.

Matt Kornack: Yeah.

Thomas Cirbus: Sorry. I do not have the Notional in front of me. I think Yeah. It was, 3.2 or something. Yeah.

Matt Kornack: Okay. Fair enough. And then just on the ancillary revenue opportunity, Can you give us a sense I mean, there was a nice uptick in ancillary revenues this quarter, but how we should think about kind of that on a dollar basis, and how it will evolve? Excuse me.

Thomas Cirbus: Sure. So, I do not have the dollars in front of you with me, Matteo. I will. I can come back to you on that. I would think of it this way. On the 5 properties that began. So it is. The ancillary revenue is almost exclusively bulk Internet. And the gains at bulk Internet. On the 5 properties that have that started beginning of this year, call it January, February of this year, They are currently, call it, high sixties, low seventies, penetrated, from a ramp up perspective. of bulk. As a reminder, we do not push it all on day 1 We have to let the rent roll turn. It will take.

When 1 comes online, it takes whatever, 12 to 14 months. To ramp. So the change in ancillary revenue over the last 9 months has reflected call it, percent ramp in bulk Internet on 5 properties. Daniel mentioned that another, if you will, 7 are going to come online in early 2027, and another 5 will come online shortly thereafter. So you can kind of extrapolate a per property assumption there. And I can come back to you on the specific dollars. But that is that is how I would think about the ramp heading into 2027. And it will probably leak into 2028, early 28 before it is fully quote unquote stabilized.

Matt Kornack: Okay. Perfect. that is helpful. And then on the property tax refunds, Should. You have provided the detail, I think, only for the year and then half of 2 years. But is the 3.1 million that you got in refunds last year kind of what we should expect on a regular-- I know it is hard to predict. But, like, on a regular basis or is this quarter the first 2 quarters of the year kind of what you would expect on a quarterly basis from a property tax refund standpoint?

Thomas Cirbus: Yeah. Again, impossible to prognosticate. I think we have tried to make a concerted effort as best as you can when dealing with state and local municipalities to smooth tax refunds for the purposes of not making it as volatile as it has been historically. I do not necessarily see a massive step up or step down from say Q3 and Q4 as it relates to real estate tax refunds. And so I do not I do not see a material change there. Any given year, the. You know, where appraisals come in, where we are-- where we are able to appeal them.

It Impossible for me to prognosticate whether the 1 or whatever you referenced is high, low, or the right outlook. So I will I will punt on that 1, but that is how I am thinking about taxes for at least the rest of this year.

Matt Kornack: that is helpful and fair enough. And then maybe, last macro 1. Politically, Texas has given Massachusetts a run for its money, and terms of how it voted in these midterm elections. Does that, you think, change any of the dynamics within the state in terms of business friendliness, etcetera?

Daniel Oberste: No. Matteo, we do not expect material change in the near term. You know, I would say that for the most part, law preempts a lot of local municipalities on say, any positives or negatives to our business related to politics. And the state legislature of Texas remains divided. So with the Republicans holding the senate, I think what is important is that Texas' growth story rests on jobs, affordability, migration, And the leaders of both sides of the aisles has said they intend to protect that growth story.

So in the near term, we would not expect any massive moves in housing policy that would affect our 2027 outlook or to that end, our strategic outlook for being owners and operators in the state of Texas.

Matt Kornack: Fair enough. And I guess on the margins, although government split on the federal side, maybe it is a little bit more immigration friendly. But I will leave it there. Thanks, guys.

Daniel Oberste: Yeah. We would agree with you, Matteo, that it would be a bit more immigration friendly from last Tuesday on in the state of Texas with the national elections. For a lot of reasons, think our that our investors can understand as well. I mean, you are now gonna have somewhat of a check on a unilateral enforcement of no immigration laws. In The United States. I think I think that is probably created some headwinds in housing and parts of the country. Arizona, Texas, Houston, and South Florida notwithstanding. We would expect to look forward a bit more of a measured approach. Khing I think the.

I think president Trump and the Republican have openly acknowledged that they might have gone too far on that. I look forward. I do not think I would expect you would not if they acknowledge they went too far, and they are at almost a 60/40 minority on a look forward that immigration policy may favor those same markets that it has harmed in the past year and a half.

Matt Kornack: Fair enough. Thanks, guys.

Operator: We will move forward to Jimmy Shen at RBC Capital Markets.

Jimmy Shen: Yeah, Himanshu, I just have 1 follow-up question on Houston. Just specific to the quarter, though, Houston did weaken a decent amount in terms of occupancy and spreads. So was there anything specific within the portfolio of specific assets that may have contributed to that?

Susan Rosenbaum Koehn: Yeah. Hey, Jimmy. that is that is specifically related to the Northwest Houston submarket that I previously referenced that has non same store and same store properties in it where absorption has frankly just been much lower than we originally anticipated.

Jimmy Shen: Okay. Do you expect that like, what is your expectation then in terms of that improving in the next little while?

Susan Rosenbaum Koehn: Yep. We are gonna continue to try and push occupancy there versus rate in 2027. I think at this point, it looks like things should certainly shape up thereafter. With nothing new coming online in that market as of now.

Jimmy Shen: Okay. And then in terms of Austin, it sounds like your comment is a little bit more bullish on Austin. What are you seeing on the concession side just broadly in the market? With respect to that market?

Susan Rosenbaum Koehn: Well, for the properties in all that are still in lease up, they are still offering some pretty big concessions. We have pretty much reached stabilization with our development property there, and we are no longer offering concessions. And we are continuing to see our occupancy and rental rates improve there. I am excited about the Austin market.

Jimmy Shen: Okay. that is it for me. Thanks.

Operator: Sure. We will hear from Sairam Srinivas at ATB Capital Markets.

Sairam Srinivas: Thank you, operator. Good afternoon, everybody. Just going back to the Austin discussion, both Austin and Dallas saw a sequential improvement in same property occupancy. But I guess, you know, how much of that is coming from incentives versus a general improvement that you have been referencing to?

Susan Rosenbaum Koehn: Yeah. The concessions were pretty much the same in Q2 versus Q3. So none of the change that you are referencing has anything to do with concessions. I think it has to do with the overall health of the markets.

Sairam Srinivas: That is good to hear, Susan. And then maybe just looking at SPNOI, because Houston and Austin, there is a bit of a diverging trend over there. Is that primarily the function of the tax refunds over there?

Thomas Cirbus: So I do not have the breakdown of where the tax refunds came from in front of me, which assets it was. So I can, I can follow-up with you there? The astute question, I am not I am not a 100% sure in front of me.

Sairam Srinivas: Alright. And, maybe just finally, this probably is for you, Tom. Looking at the swaps, you know, into next year, I noticed a bunch of them have optional termination dates in 2027. How should we think about that as we head into the year?

Thomas Cirbus: Yeah. If the swap-- if the-- if the swap rate market rate market does not move from where we are today, we expect to get called out of both there is a 175 and a 150 that have a call option in July 2027. If we were obviously closely monitoring that market and looking to potentially re hedge those markets, those swaps in the relative near term. Depending on the tenor we wanted to take in today's market, if we took 6 months of term, it is probably in the 3.20s. And if we took, call it, 18 months of term, it is probably in the 3.50s, 3.60s. So that is the bell curve of where the market is.

I would tell you 4 days ago that those numbers were 10-20-basis-points inside of what I just referenced. So, obviously, the curve has been a little volatile here. We will continue to see where we shape and where we ultimately execute on continuing those hedges.

Sairam Srinivas: Alright. Thanks, everybody. I will turn it back.

Operator: And we have no further signals from our phone audience today. Mr. Oberste, I am happy to turn it back to you, sir, for additional or closing remarks.

Daniel Oberste: Well, thank you for that. That concludes our call today. Thank you all for joining us. We look forward to speaking with you again following the release of our Q4 results in early March.

Operator: Ladies and gentlemen, this does conclude today's BSR REIT Q3 26 Financial Results Call. Thank you all for your participation. You may now disconnect your lines. Have a great day.

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