Independence Realty Trust, Inc. (NYSE:IRT) Q2 2025 Earnings Call Transcript

Independence Realty Trust, Inc. (NYSE:IRT) Q2 2025 Earnings Call Transcript July 31, 2025

Operator: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Independence Realty Trust Q2 2025 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Stephanie Krewson-Kelly. You may begin.

Stephanie Krewson-Kelly: Good morning, and thank you for joining us to review Independence Realty Trust’s Second Quarter 2025 Financial Results. On the call with me today are Scott Schaeffer, Chief Executive Officer; Jim Sebra, President and Chief Financial Officer; and Janice Richards, Executive Vice President of Operations. Today’s call is being recorded and webcast through the Investors section of our website at irtliving.com, and a replay will be available shortly after this call ends. Before we begin our prepared remarks, I’ll remind everyone we may make forward-looking statements based on our current expectations and beliefs as to future events and financial performance. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially.

Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and IRT does not undertake to update them, except as may be required by law. Please refer to IRT’s press release, supplemental information and filings with the SEC for further information about these risks. A copy of IRT’s earnings press release and supplemental information is attached to IRT’s current report on the Form 8-K that is available in the Investors section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most direct comparable GAAP financial measure. With that, it’s my pleasure to turn the call over to Scott Schaeffer.

Scott F. Schaeffer: Thanks, Stephanie, and thank you all for joining us this morning. Second quarter same-store NOI and core FFO per share results were in line with our expectations as operating expense savings offset lower-than-expected revenue growth. Same-store revenues increased 1% over the prior year. We finished the quarter modestly ahead of expectations on renewal leasing due to another quarter of strong retention. Bad debt continued to decline and average occupancy rose modestly versus a year ago. However, our blended rent growth in the quarter lagged our expectations due to market conditions that were softer than anticipated. Lingering supply pressures in some markets and potential residents being more discerning due to continuing macroeconomic uncertainties pressured market rents to a greater degree than we originally anticipated as we sought to continue to maintain occupancy during this time frame.

Jim will cover our revised outlook for 2025 with respect to leasing spreads and overall revenue growth. On the positive side, same-store operating expenses decreased 60 basis points over the prior year quarter and fully offset softer revenue growth. Lower repair and maintenance and turnover costs, lower real estate taxes and a reduction in our insurance premium renewal all contributed to this improvement in expenses. We completed 454 value-add renovations during the quarter and a total of 729 completions for the first 6 months of the year, achieving a weighted average return on investment of 16.2% for both periods. As Jim will discuss later, given our stronger-than-planned retention rates year-to-date, we expect to complete about 650 fewer renovations this year as compared to our original goal, which is still a 26% increase over 2024 completions.

In terms of investment activity, we are seeing opportunities to deploy capital accretively by trading out of older vintage assets with higher future CapEx needs and to newer communities with lower CapEx profiles. On the disposition side, during the quarter, we identified 3 assets that we expect to sell during the fourth quarter. For new investments, we are under contract to acquire 2 communities in Orlando during the third quarter for an aggregate purchase price of $155 million. Both properties are in close proximity to existing IRT communities, which improves our market presence and should enable us to realize meaningful operating synergies. Beyond these pending transactions, our acquisition pipeline remains strong. Our updated guidance implies an additional $315 million of acquisitions before year-end, and we have ample liquidity to fund these accretive investments on a leverage-neutral basis through capital recycling.

Regarding our markets, the good news is that deliveries in general are tapering off across our portfolio, with permitting and starts data supporting our outlook for more muted supply growth for the next few years. Looking at market level data from CoStar, Yardi Matrix and Green Street, we’re seeing a reduction in deliveries settling out to less than 2% supply growth in our markets in 2026, which represents a 43% reduction from 2024 actual deliveries. As a result, we believe things continue to set up nicely for a stronger leasing environment in 2026 as demand for apartments in our markets is expected to remain strong. I’ll now turn the call over to Jim.

James J. Sebra: Thanks, Scott, and good morning, everyone. Core FFO per share was $0.28 in the second quarter of 2025, up from $0.27 per share in Q1 of this year. Same-store NOI grew 2% in the quarter, driven by a 1% increase in same-store revenue and a 60 basis point decrease in operating expenses over the prior year. Same-store revenue growth was supported by a 10 basis point increase in average occupancy, a 90 basis point increase in average effective monthly rents and a 20 basis point improvement in bad debt compared to the prior year. The decline in same-store operating expenses reflected a 90 basis point increase in controllable expenses and a 3% decline in noncontrollable expenses both as compared to Q2 of last year. Within controllable expenses, we attribute the below inflationary increase to stronger-than-expected retention rates that led to a 6.7% reduction in R&M and turn costs.

Within noncontrollable expenses, we saw lower real estate taxes and a reduction in our property insurance premium of 18%. In terms of leasing trends, renewal rate increases of 3.9 coupled with 58% retention support the 70 basis points of blended rent growth in the quarter. New lease trade-outs during the first half improved sequentially each month, albeit at a slower pace than anticipated in our original guidance. For the second quarter, new lease trade-outs were down 3.1%, with supply-heavy markets like Atlanta, Dallas, Denver, Raleigh and Charlotte contributing heavily to these negative new lease trade-outs. On the capital recycling front, during the second quarter, we classified 3 wholly-owned communities located in Denver, Memphis, and Louisville as held for sale.

Additionally, last week, our JV partner in Richmond completed the sale of Metropolis in Innsbrook. We received $31 million in cash, consisting of a return of our investment and a $10.4 million gain that we will record in the third quarter within income from unconsolidated real estate investments. This gain will be excluded from core FFO since it is associated with a property sale. We will recycle proceeds from asset sales into newer communities with higher growth profiles. As detailed in our press release last night, we have 2 communities under contract in Orlando, Florida. Later today, we expect to close on the first of these communities, a 240-unit property built in 2024 for a purchase price of $60 million. The community is close to an existing IRT community.

We expect to close the second property later this quarter. It is a 403-unit community built in 2019 that is directly adjacent to an existing IRT community. The blended economic cap rate on both of these acquisitions is at 5.9%, which includes operating synergies from our increased scale in the market. We canceled our pending acquisition of a community in Colorado Springs because the lease-up slowed and signed rents were lower than our underwriting. While we like this market long term, we do see other opportunities where we can put that capital to work. The $315 million of other acquisitions included in our updated guidance should further enhance our operating efficiencies and be accretive to AFFO. We will fund Orlando and other pending acquisitions using $162 million of forward equity commitments outstanding and proceeds recycled from asset sales, all done on a leverage-neutral basis.

Our balance sheet remains flexible with strong liquidity. As of June 30, we have only $337 million or 16% of our total debt maturing between now and year-end 2027. Nearly 100% of our debt is fixed rate or hedged. With respect to our full year 2025 guidance, we are adjusting some of our underlying assumptions to reflect our performance in the first half of this year and expectations for the second half. From a big picture perspective, our reduced outlook for revenue growth is offset by lower expense growth, resulting in slightly higher same-store NOI growth and the same midpoint for core FFO per share. The guidance updates for our operating metrics are as follows: our 2025 same-store portfolio now consists of 105 properties, reflecting the removal of the 3 properties held for sale.

Our updated outlook assumes full year same-store revenue growth of between 1.5% to 1.9%, which represents a 90 basis point reduction at the midpoint. The decrease is driven primarily by lower new lease growth, offset by slightly better occupancy as compared to our original guidance. On the new lease growth front, in our original guidance, we assume that effective new lease growth would improve throughout the year such that for the year, effective new lease growth would be flat. We are now assuming that new lease growth for the second half of 2025 will be down 2.7%, which when coupled with the negative 4.4% new lease growth in the first half of 2025, means that our full year new lease growth is now estimated to be down 3.4%. Overall, our renewal rental increases are still expected to be approximately 3.5% for the year, which leads to approximately 50 basis points of blended rent growth for 2025.

Just to summarize, our revised revenue guidance is based on the following inputs for the second half of 2025: average occupancy of 95.7%; blended rental rate growth of 60 basis points on our remaining lease expirations that total 53% of our available units; bad debt of 1.3% of revenue; and 2.7% growth in other income over the second half of 2024. With regards to property operating expenses, we have a more favorable outlook due to the reductions in both controllable and noncontrollable expenses. On controllable expenses, higher retention is reducing our R&M and turnover costs while our site teams are continuing to manage expenses for contract services and others exceedingly well. Overall, controllable expenses are now estimated to grow by 1.9%, which is down 190 basis points from the previous midpoint of 3.8%.

On noncontrollable expenses for real estate taxes and insurance, we now expect these expenses will decline in 2025 by approximately 40 basis points, which is down 345 basis points from the previous midpoint due to the 18% savings we secured on our 2025 property insurance premiums and further improvements in real estate taxes. In total, the 1% midpoint of our revised guidance range for total operating expenses for the full year 2025 is 245 basis points better than the midpoint of our previous guidance range. From a same-store NOI perspective, the midpoint of our NOI growth increased by 5 basis points to 2.1%. Additionally, we expect lower G&A and property management expenses for the year and our new midpoint of $55 million is $1 million less than our prior midpoint, driven by efficiency savings from our recent rollout of AI leasing tools.

Finally, from a core FFO per share perspective, our midpoint of $1.175 is unchanged. Scott, back to you.

Scott F. Schaeffer: Thanks, Jim. We continue to believe we are at the beginning stages of a multiyear period of improving fundamentals and growth in the multifamily sector and for IRT. Supply growth should remain muted in the next few years and support positive new lease growth as we head into 2026. Additionally, occupancy is stable, renewals and retention are strong, bad debt is declining, and year-to-date tour volumes are up over 2024 levels, all which point to continued strong demand for our communities. Given these improvements, we believe our markets and our company remain positioned to outperform as fundamentals continue to improve. We thank you for joining us today, and operator, you can now open the call for questions.

Q&A Session

Operator: [Operator Instructions] Your first question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Todd Wurschmidt: Jim, I appreciate all of the detail you provided around the second half outlook. I guess, given some of the lingering supply challenges and change in renter behavior that you and Scott highlighted in the prepared remarks, I mean, can you share how you approached your revised outlook versus maybe historical or typical seasonality and month-to-month trends? Just trying to get a sense here of kind of the implied acceleration in lease rate growth and what’s driving that.

James J. Sebra: Yes. No, good question. Thank you, Austin, and certainly, Scott and Janice, feel free to chime in. I would say the way that we went about kind of our, call it, expected kind of new lease trajectory for the back half of the year was just looking at what is the average, call it, effective rental rate of the leases that are expiring each month, what we know today based on who has renewed and who hasn’t renewed or who is “likely to renew”, and then comparing those kind of expiring rents versus what we think would be an asking rent based on where our asking rents are today and kind of our expectations for kind of how that will move month by month through the rest of the year. And then obviously, as you and I have talked about, it’s just math, right, in terms of just calculating what that kind of implied trade-out would be.

Austin Todd Wurschmidt: So should we think that you’re going to see kind of a seasonal slowdown or things flatten out or does it assume any additional reacceleration? And then just secondarily, I guess, have you seen any change in sort of traffic or conversions versus what you were seeing play out in the spring and early summer, and just kind of high level for how July operating conditions?

James J. Sebra: Yes. What we expect is that as you look at the new lease trade-outs heading into the back half of the year, there’s going to be some continued improvement month by month as compared to kind of where we were in the first half of the year. I think the assumption right now is that the new lease trade-out was going to be a negative 2.7% in the second half of the year where it was negative 4.4% in the first half of the year. So again, continued improvement. In terms of leasing trends, yes, we continue to see good lead volume. I think lead volumes are up roughly 3% to 4% over the same time last year, which last year was up, call it, 20% of the year before that, so we see really great demand. And we’re seeing, as we mentioned in our NAREIT deck, we continue to see really good kind of tour velocity as well in terms of converting those leads tours.

So we are seeing really good kind of solid demand even in the back half of the year as we see July and what’s developing for August.

Operator: Your next question comes from the line of Eric Wolfe with Citi.

Eric Jon Wolfe: Maybe just a sort of broader follow-up to that. I’m just curious, why do you think you’re not seeing, I guess, a big pickup sort of in new lease growth when you have 60% retention, 4% renewals? Is it just that private peers aren’t seeing the same dynamic? I guess I would just think that with retention high across the industry, occupancy high, your expectation for occupancy to increase, you’d see better market rate growth. So like what is sort of holding it back right now?

James J. Sebra: Yes. It’s not so much the, I mean, certainly, the market rate growth. I think as we’ve all kind of talked about, we are seeing continued supply pressure. And as we said in our prepared remarks, some of the macroeconomic uncertainties are kind of holding market rates down a little bit. What we are seeing from our standpoint on the trade-outs is our average renter stays with us, call it, 2 to 2.5 years. So the leases that are expiring and are not renewing, they’re just coming from a higher kind of rent that they signed 2 to 2.5 years ago, and that’s what’s causing the negative trade-out.

Eric Jon Wolfe: Got it. And I think you said that you expect occupancy to increase to 95.7% in the back half. I think it came down a bit in 2Q. Just curious what gives you the confidence in that prediction. Have you already started to see occupancy rise in July? Are you seeing sort of forward indicators that would suggest that, that occupancy is sustainably going to be higher? Just trying to understand why you’re predicting higher back half occupancy.

James J. Sebra: Sure. Yes. No, as we mentioned, obviously, the May, June and early part of July months were, obviously, I would say, a difficult — a little bit of a difficult environment operating to. But we did see occupancy in the back half of July continue to click up closer to that kind of 95.6%. So we feel confident about being able to drive that a little further north of mid-teen into the back half of the year.

Operator: Your next question comes from the line of Brad Heffern with RBC Capital Markets.

Bradley Barrett Heffern: For the assets you guys have held for sale, is there any common thread there between either the 3 markets or the 3 assets? And then in those markets, would you continue to downsize in any of them?

James J. Sebra: Thanks, Brad. In terms of the common thread, I would just say that generally speaking, 2 of the assets, the 1 in Memphis and the 1 in Louisville, 2 legacy IRT assets that have gone through the value add program and we feel that we’ve kind of maximized value there. They’re a little — also a little older on the vintage side and a little more expensive to run from a CapEx load. The deal in Denver, the legacy Steadfast deal, again, a little older on the vintage side and certainly a little higher on the CapEx load. So the common theme is kind of higher CapEx load, more expensive to run older deals. And the goal is to continue to recycle that capital out of those types of assets and into newer assets with better growth profiles.

Bradley Barrett Heffern: Okay, got it. And then on the increase in the acquisition guidance, you obviously have the $155 million under contract already. For the rest of that, are those assets identified already? Any color you can give on what the rest of the volume might look like?

Scott F. Schaeffer: Yes, this is Scott. Yes, assets are identified. We do have a very fulsome and active pipeline, and it really is matching up with the dispositions of the communities that are held for sale. Obviously, as we work through the process and consider alternatives and better allocation of capital or potentially better allocation of capital, we will make a decision when those sales happen of the 3 that are held for sale. We’ll make a decision as to what’s the best use of that capital at that time. But we have an active pipeline and at values that will be accretive to what we’re selling and at below replacement cost. So we’ll just continue to work that and we’ll see where we are, again, as those 3 properties sell.

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

James Colin Feldman: I just was hoping you could get a little bit more granular on the market. Where would you say conditions have moved the fastest against your expectations? Where do you think you have kind of the lowest visibility or even the best visibility on your outlook for the back half of the year?

Janice Richards: Absolutely. What we’ve seen against our expectations is kind of balanced boost of pricing with the amount of increased supply in the first half of the year. The McKinney area, especially, we saw increased concessions, sequential rent reductions. Occupancy is stable but it’s at the price — it’s at the consequence of pricing power and also just slugging through that supply that’s in the market. We’ve seen really strong absorption so it’s a promise that we’re getting towards the end of the line at the end of the tunnel. And we’ve noted extended pre-leasing time frames from delivery to occupied but at a pace in which we’re comfortable with that eventually we will get back to a normal supply level in Dallas. So that one was a bit of a slow start versus our anticipation.

Tampa also was a bit of a slow start on the pricing power side. First quarter, we saw not an inflection of supply but we saw some hangover high occupancy due to maybe some of the weather events that happened in the third and fourth quarter. And then so people were staying put. And then as we started to trade, we weren’t able to accelerate that rent as quickly as we anticipated. We do feel that Tampa’s second half of ’25 into ’26 is very strong, and we’re seeing strong absorption in that market. And then lastly, obviously, there’s Denver. So Denver has had an onslaught of new supply and will continue to do so through most ’25 into ’26. And so it’s really just making sure that we are maximizing where we can and ensuring that we’re hedging the bet on occupancy but also looking for opportunity on the rent side.

So those are the 3 markets that probably were a challenge comparably to what is anticipated. Charlotte, again, is still high with supply, and so we’re working through that but that was anticipated. We’ve seen some great movements in Lexington, Columbus and Oklahoma City, and so we’re hoping to capitalize on that for the rest of the year as well.

James Colin Feldman: Okay, great. And then given the expectation for improvement, can you give an update on your July numbers, like where new, renew and blend rents? And then what are you going out for renewals on for August?

James J. Sebra: Sure, Jamie. So we’re obviously staying away from giving monthly data, but I would just tell you that the information that I mentioned earlier on occupancy was kind of in that 95.6%, I would say new lease trade-outs are kind of largely in line with June. There is obviously a little bit of, again, a peak of expirations. And then when you get into kind of renewals, August renewals, we set out a long time ago, we set them out at roughly a 3%, 3.5% renewal rate and that’s what we see developing. And then as you look at kind of September and October, we’re closer to that 3% range.

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

Wesley Keith Golladay: Do you anticipate buying any of the JV assets? And can you give us an idea of the size of the asset recycling bucket? How many older assets do you have left?

Scott F. Schaeffer: So good question. On the JV front, we have, as we announced, the Richmond asset was sold to a third party. We looked at it and it would have been our only asset in Richmond so we decided not to buy it through our option. We’re pleased with the way that it turned out. One of the JVs in Nashville, we were just alerted by the developer-partner that we will be paid off in either late August or early September. We are not going to acquire that one at this time. I mean, we’re not going to be able to acquire that one. There’s 2 more in Texas that are complete and leased-up, and we have about a year from now before we have to make a decision. So we will continue to watch the progress of lease-up and market conditions and we’ll make a determination when we have to. Sorry, what was the second part of your question?

Wesley Keith Golladay: Yes. And the second one was just like you’re using the, I guess, the noncore older assets to, I guess, fund acquisitions. Just kind of curious what is the size of that bucket. How much more asset recycling can you do?

Scott F. Schaeffer: There’s always recycling that we can do. I mean, every year, the assets get a year older. So really, it’s not just the age. It’s changes in markets and it’s CapEx cost. And what is an alternative use for that capital? Is it buying back stock? Is it redeploying in newer, better long-term assets? Is it deleveraging? And as I said in my earlier remarks, that’s a determination that we’ll make when we know the capital is coming back.

Operator: Your next question comes from the line of Ami Probandt with UBS.

Ami Probandt: So supply is typically pretty well known at the start of the year. So what would you say surprised you about supply trends this year? And have you seen any indications that supply of single-family rentals may have also been a factor in addition to apartment deliveries?

James J. Sebra: Thanks for the question. Yes, I think the biggest surprise that we’ve just experienced relative to kind of our expectations from the earlier in kind of how the year has developed is really just kind of 2 parts on supply: one, just the lingering pressure and how long it’s kind of been hanging around for; and then B, the volume of incremental deliveries relative to expectations. We were obviously using CoStar data that suggested end of last year, early this year, that the deliveries across our submarkets in our portfolio was going to be roughly 2% to, I think, 2.6% of existing stock. That number is now 3.5%. And it appears that deliveries are being pulled forward from 2026 into 2025. So it makes 2026 even better, but it is a little bit more of a surprise that we’ve been having to kind of wrestle with.

And as Janice mentioned, when you look at specifically the Dallas market, CoStar was originally anticipating a lot of deliveries in Q4 of 2025, and they seem like they’ve moved all into Q1 and Q2 of 2025. So that’s been the biggest surprise. And then I think from the single-family rental standpoint, we don’t believe that is really affecting us. Our reasons for move-out to rent a home continue to be in that 2% to 3% of our move-outs. It hasn’t increased so we don’t believe that’s been really a factor for us.

Ami Probandt: Great. And then just a quick one. For the assets held for sale, what do you expect for the cap rates on those? And I assume you’re quoting economic cap rates.

James J. Sebra: Yes, we’ll quote economics. So obviously, we haven’t obviously nailed down final sales prices and all that so it’s still a potential moving, but it’s in the low to mid-5s.

Operator: Your next question comes from the line of Ann Chan with Green Street.

Ann Chan: So first one just on the current transaction environment. Could you give us a sense of the bid-ask spreads you’re seeing on both the buy and sell side? Are there any signs that price discovery is starting to reset or that distress-driven opportunities are emerging?

James J. Sebra: I’m sorry, it broke up a little bit. Your bid-ask spreads on the transaction market?

Ann Chan: Yes.

Scott F. Schaeffer: So the acquisitions — the properties that we have under contract in Orlando are in close proximity to existing IRT communities, which generate significant operating synergies. So as we look at those 2 assets, we’re expecting them to generate a 5.9% cap rate yield in year 1. So that’s very healthy. I think as far as bid-ask, what we’re seeing is that especially in the newer, more recently completed communities, that the sellers have now come to their senses and recognize where values are and that bid-ask gap has narrowed. There is some pressure from continuing high interest costs. There’s pressure because lease-up is taking a little longer on the newer communities. And for those reasons, sellers are being more reasonable or realistic.

Ann Chan: And you highlighted Orlando as one of the growth markets with opportunities to drive scale and synergies. Are there any other MSAs in the pipeline where you’re seeing similarly compelling fundamentals or where you look to build additional scale?

Scott F. Schaeffer: Well, we still believe in the Sunbelt. We like the Midwest generally. Indianapolis and Columbus have both been strong for us. Indianapolis, a little more — a little stronger more recently. My plan is to keep our ratio of Sunbelt exposure to Midwest exposure somewhat consistent. So as you see us continue to grow in Sunbelt over time, expect that growth in the Midwest as well to keep that ratio consistent. We haven’t announced any additional acquisitions in other markets than Orlando, so at this time, I would just stick with that. Orlando has been at the top of our list for growth for some time. We’ve never been able to or we haven’t been able to, I should say, find something that’s fit within the area in Orlando that we wanted also at a price that made sense.

These 2 assets that we’re buying fit our strategy completely. The second one that will close, we expect later here in August, is literally across the street and phase 2 of our existing Orlando asset. So that’s why there’s great operating synergies for us to acquire that one. And the other one is within a 5-minute drive of an existing IRT community. So we’re excited about adding this to the portfolio, and we continue to analyze markets and we’ll act accordingly as, again, capital is to be deployed into new assets.

Operator: And your next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Omotayo Tejumade Okusanya: Apologies if I missed this earlier on, but could you talk a little bit just around like July operating trends and what you’re seeing in terms of kind of demand? There’s kind of a lot of supply pressure, if you’re kind of seeing that easing, what does that mean for your blended lease rate?

James J. Sebra: Sure. Yes, we did talk a little bit about this earlier. Obviously, occupancy has been building throughout the month of July. Our lead volume, tour volume continue to be kind of really healthy and above levels of last year. New lease trade-outs are, I would say, relatively consistent with what we experienced in the month of June, and renewal spreads are also very consistent. We think that for the second half of the year, our new lease trade-outs will be kind of negative 2.7%. And that for the year, our renewal increases will be kind of averaging out about 3.5%. So all of those — all the July metrics are in line with those — that trajectory.

Omotayo Tejumade Okusanya: Got you. That’s helpful. And then just on the supply front, again, I mean, it just looks like based on your results and some of your peers, it just feels like — I don’t know whether that’s the private owners or who was it in 2Q, but in larger market that owners have got a little bit more aggressive with pricing. Maybe it’s just concerns about tariffs or things like that. Just kind of curious if you could just kind of talk about if that’s still the feeling in the air, if pricing is getting a little bit more rational at this point as you’ve kind of moved beyond that point.

James J. Sebra: Yes. No, great question. And I think as we just kind of were chatting with Ann about, we do think that sellers are becoming more rational and that kind of bid-ask spread is narrowing for all the reasons you suggest, macroeconomic uncertainty around tariffs, et cetera, as well as what the current forward curve has applied for the 10 years. We do think that, generally speaking, that gap is narrowing.

Omotayo Tejumade Okusanya: Okay, that’s helpful. And one last one from my end. Again, as I kind of think about the consumer today and again, maybe on the rental end of things, the kind of more attractive concessions and rates they’re kind of getting, given the oversupply on the Class A side, can you just talk a little bit about, again, how much that’s impacting your predominantly Class B portfolio? Again, whether you kind of feel like you’re losing customers to the Class A space, where they’re offering 2 months of rent free and just those kind of dynamics? What’s kind of happening to your core consumer and kind of how are they looking at your building?

James J. Sebra: Sure, yes. I think generally speaking, when you have new supply delivered where a developer is behind the lease-up or lease-up isn’t kind of going at the pace that he or she would like it to go, they do offer obviously more aggressive concessions to get the lease-up done. As those concessions get more aggressive, that tends to potentially cherry pick residents away from the Class B. But fundamentally, it just requires more, obviously, work for us, right, to continue to maintain occupancy and drive rents. And when that happens, it just reduces our ability to manage rents higher through time. So I think just fundamentally, as we saw last year, the whole kind of Class A to Class B transition, especially on the new supply, certainly impacted us and it impacted a lot of players out there. And we see a little bit of that stickiness and stodginess continuing in the first half of this year.

Operator: There are no further questions at this time. Scott Schaeffer, I will turn the call back over to you.

Scott F. Schaeffer: Well, thank you all for joining us today and we look forward to speaking with you again next quarter. Have a good day.

Operator: Thank you. This concludes today’s conference call. You may now disconnect.