Independence Realty Trust, Inc. (NYSE:IRT) Q3 2025 Earnings Call Transcript

Independence Realty Trust, Inc. (NYSE:IRT) Q3 2025 Earnings Call Transcript October 30, 2025

Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to the Independence Realty Trust Q3 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Stephanie Krewson. You may begin.

Stephanie Krewson-Kelly: Good morning, and thank you for joining us to review Independence Realty Trust’s Third Quarter 2025 Financial Results. On the call with me today are Scott Schaeffer, Chief Executive Officer; Jim Sebra, President and CFO; 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 Schaeffer: Thanks, Stephanie, and thank you all for joining us this morning. Third quarter results were in line with expectations due to our continued focus on managing revenues and expenses. During the third quarter, our average occupancy remained stable as we continue to prioritize occupancy over rental rate in this competitive leasing environment. We finished the quarter at 95.6% occupancy, a 20 basis point improvement from the end of the second quarter. Our resident retention of 60.4% helped support this stable occupancy. Same-store revenue also increased in the quarter, driven by higher average rents per unit and improved bad debt versus a year ago. We outperformed expectations on bad debt in the quarter, which now represents less than 1% of same-store revenues and demonstrates the effectiveness of the improved processes and technology we have implemented since early 2024.

Our value-add renovations contributed to revenue growth as well. We completed 788 units during the quarter, achieving an average monthly rent increase of approximately $250 over unrenovated market comps, which equates to a weighted average return on investment of 15%. During the quarter, same-store operating expenses decreased over the prior year, driven primarily by lower property insurance and turnover costs. In terms of transactions, during the quarter, we acquired 2 communities in Orlando for an aggregate purchase price of $155 million. These acquisitions more than double our number of apartment units in Orlando, improving our market presence and our ability to realize meaningful operating synergies. We currently have 3 communities held for sale, one of which is expected to close later this year, the other 2 early next year.

While we maintain an active pipeline of acquisition opportunities, we recognize the current disconnect between our implied cap rate and market cap rates. We will continue to evaluate all investment opportunities, including value-add renovations, acquisitions, deleveraging, and share buybacks as we allocate capital to drive long-term shareholder value. Market dynamics remain competitive, but green shoots are emerging in several of our markets as supply pressures ease. Signs of market recovery are most evident in Atlanta, where occupancy has increased 60 basis points since January 1, all while our asking rents have increased 5%. Jim will provide more detail on other markets, but the point here is that we are seeing early and encouraging signs of recovery.

New deliveries in IRT submarkets have declined 56% from the 2023, 2024 quarterly averages and supply is forecasted to grow by less than 2% per year for the next several years, which would be meaningfully below the trailing 10-year average of 3.5% per year. Against these improving supply fundamentals, we expect apartment demand to remain steady in our markets, driven by employment opportunities, quality of life dynamics, and a rent versus buy economics that will continue to favor renting. We have seen positive net absorption in our markets for 2 consecutive quarters. During the third quarter, over half of our markets, encompassing 60% of our NOI exposure registered positive net absorption. Atlanta, which is our largest market, moved into positive net absorption for the 9 months ended September 30, with occupancy increasing 50 basis points.

Other markets like Coastal Carolina and Charleston are also seeing positive net absorption, while markets like Tampa, Denver, and Dallas are still working through their supply challenges. Before I turn the call over to Jim, I just wanted to reiterate a few things. Market fundamentals are improving. And while it’s taking longer than we all expected, there is light at the end of the tunnel, and we see pricing power increasing. We will remain focused on optimizing near-term performance through stable occupancy, managing expenses, and investing in our value-add program with its consistent outsized returns. Over the long term, the 3 factors that underpin our cash performance will drive our future outperformance. First is our differentiated portfolio of Class B apartment communities in markets that will continue to outperform the national average for employment and population growth.

Second is the efficiency of our management platform, which has a proven track record of optimizing revenues while also diligently managing expenses. And third is our disciplined approach to allocating capital. We will continue to be deliberate, patient, and nimble in deploying capital to the highest best uses, including our value-add program, capital recycling, deleveraging, and share buybacks. And with that, I’ll turn the call over to Jim.

James Sebra: Thanks, Scott, and good morning, everyone. Third quarter 2025 core FFO per share of $0.29 was in line with our expectation. Same-store NOI grew 2.7% in the quarter, driven by a 1.4% increase in same-store revenue and a 70 basis point decrease in operating expenses over the prior year. During the third quarter, our point-to-point occupancy increased 20 basis points against the slower-than-normal leasing season, while our new lease trade-outs were lower than we anticipated at negative 3.5%. We’ve been clear about our desire to maintain stable high occupancy to position us well as we head into 2026. Our renewal rate increases of 2.6% came in line with our general expectations as we expected lower renewal increases to support retention and help maintain and grow occupancy during the third and fourth quarter.

That strategy is working as expected with retention at 60.4% in the third quarter. We’re beginning to see signs of stabilization across several of our markets through improvement in asking rents, along with the ability to maintain occupancy. Let’s look at a few of our markets that are experiencing these green shoots since the beginning of this year through the end of September. As Scott mentioned, Atlanta’s occupancy has increased 60 basis points since January, new lease trade-outs were 410 basis points better, and asking rents are up 5% this year. Indianapolis asking rents are up 3.5%, while maintaining stable occupancy at 95.3%. Oklahoma City’s asking rents are up 80 basis points and new lease trade-outs have improved 260 basis points, all while maintaining stable occupancy of 95.5%.

Nashville asking rents have improved 240 basis points this year with stable occupancy of 96%. Cincinnati’s asking rents have increased 11 percentage points with occupancy increasing 100 basis points to 97.5%. The Coastal Carolina market has seen asking rents improving 5.7% and occupancy has grown 2.1% to 95.9%. And lastly, Lexington, Kentucky asking rents are up 22% this year with occupancy growing 70 basis points to 97%. These markets highlight that fundamentals are firming and pricing power is beginning to return in key regions of our portfolio. For the third quarter, bad debt was 93 basis points of same-store revenue, which represents a 76 basis point improvement over Q3 of last year, as well as a 46 basis point improvement sequentially from second quarter.

Our team’s efforts and the technology enhancements we implemented since early 2024 are the drivers behind this improvement as underlying collection fundamentals have improved such that overall charge-offs as a percentage of revenue were down 40 basis points compared to third quarter 2024. In addition, accounts receivable balances were 40% lower at September 30 as compared to Q3 of last year and recoveries from our third-party collection firm were also higher. All in all, the improved performance on our bad debt is exciting to see, and we expect to see continued progress in the coming quarters as we focus on stabilizing our bad debt sustainably below 1% of revenues. Same-store operating expenses decreased 70 basis points over the prior year quarter, reflecting our continued focus on managing expenses.

Within controllable expenses, which were flat year-over-year, higher advertising spend was offset by lower repairs and maintenance expenses. Our strong resident retention contributed to lower repairs and maintenance expenses in the quarter. Within noncontrollable expenses, the 2.3% decrease over the prior year quarter reflected our favorable renewals on our insurance premiums from earlier this year. During the quarter, we further enhanced the long-term growth prospects of our portfolio by acquiring 2 communities in Orlando for an aggregate purchase price of $155 million at an average economic cap rate of 5.8%. One of these properties is Phase 2 of an existing IRT community and the other is in close proximity to another IRT community, such that we expect to realize meaningful operating synergies.

We used $101 million of our forward equity proceeds to fund these acquisitions and now have $61 million of forward equity remaining. On our assets held for sale, we now expect 1 asset to transact in 2025 and the 2 remaining assets will be sold in 2026. On our asset held for sale in Denver, we recorded a $12.8 million impairment in the third quarter due to the recent pressures observed in the Aurora submarket and its impact on the performance of this community. The third quarter was also busier than normal with respect to our joint venture investments. In July, our JV partner enrichment completed the sale of Metropolis at Innsbrook. We received $31 million in cash, which included a $10.4 million gain in our income from unconsolidated real estate investments line item.

This gain was excluded from core FFO since it is associated with a property sale. In October, our partner in Nashville redeemed our preferred investment, which resulted in the return of our initial investment and the receipt of $3.3 million in preferred return, which we will recognize in the fourth quarter. This preferred return will be included in core FFO consistent with historical treatment as it is not associated with an asset sale. From a capital allocation perspective, we will continue to prioritize our value-add program as it represents the best use of capital given the steady mid-teen returns and the margin expansion renovated units create from increased rents and reduced turn costs. We will continue to evaluate other capital allocation decisions between buying back shares, pursuing acquisitions, and/or deleveraging.

Our balance sheet remains flexible with strong liquidity. As of September 30, our net debt to adjusted EBITDA ratio was 6x, and we are on track to further improve this ratio in the fourth quarter to the mid-5s as expenses decline seasonally. We continue to have very manageable debt maturities with only $335 million or 15% of our total debt maturing between now and year-end 2027. And nearly all of our debt is either fixed rate or hedged. With respect to our full year 2025 guidance, we are narrowing our ranges on same-store revenue and expense growth while keeping the midpoint unchanged. With respect to transactions, we are reducing our acquisition and disposition guidance ranges due to timing. Our updated acquisition guidance of $215 million reflects only the acquisitions that have closed to date.

Our updated disposition guidance of $161 million reflects the disposition that closed earlier this year and the sale of one asset expected to close in November. These reduced volumes are the primary driver behind our lower expected interest expense and the lower weighted average shares for 2025. And lastly, from a core FFO per share perspective, we have narrowed our guidance range and our midpoint of $1.175 is unchanged. Scott, back to you.

Scott Schaeffer: Thanks, Jim. For the past few years, the residential sector has navigated historic levels of apartment deliveries. While supply pressures are receding, it’s too early to call a broad market recovery, but we are cautiously optimistic that 2026 will be a better operating environment than 2025. With our differentiated portfolio of Class B assets in highly desirable markets, our efficient management platform, proven value-add program, and strong balance sheet, we are well positioned to generate attractive core FFO per share growth. 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 Brad Heffern with RBC Capital Markets.

Brad Heffern: You talked about the green shoots in the prepared remarks. Can you just talk through how the pressure of supply today feels different than it did last quarter or earlier in the year? And when do you expect things to get back to something resembling normal?

Janice Richards: Well, we have some markets that were a little softer than anticipated, such as Raleigh, Dallas, Denver and Huntsville. Raleigh was more of a lingering effect of the supply that was produced. And so we’re seeing stable occupancy. Asking rents are a little bit lower than anticipated, feeling the pressure of supply and concessions. We feel that this one is rather short-lived, and we’ll start to see some movement early next year. Dallas, obviously has had some pretty heavy supply entering in the market. Occupancy has been stable above that 95.5% that we’re looking for, but still feeling some supply from — or pressure from supply and competitive market with concessions entering in and making a major play. Denver, Denver is challenging occupancy decline of about 200 basis points as well as asking rents feeling the pressure from supply.

There’s 7.5% delivered in ’25. So we’ll work through that and make sure that we are definitely being patient as well as disciplined within all of our strategies in Denver to maximize. And then Huntsville, one of our smaller markets, has seen an occupancy decline year-over-year, but holding stable above that 95%. Asking rents are feeling pressure from the supply, and we’re working through that 5.7% that was released. We feel that each one of these markets has potential to start movement on the asking rents and work through the supply. We do see 2026 supply decreasing in all of these markets, which is the light at the end of the tunnel that we’re going to be working through. And I think we’ll start to see some benefit in the second half of 2026.

Scott Schaeffer: Yes. And Brad, just to kind of bring it all full circle, I think the supply pressures we definitely feel are waning. We definitely see a light at the end of the tunnel coming. If you look at some of the most recent CoStar forecast for fourth quarter now of 2026, the forecast now in 2026 are much lower than what they were earlier this year because as we’ve been all highlighting, it does seem like supply was delivered earlier this year than what was supposed to be delivered next year. So again, really great positive opportunity here in 2026. The one thing we do watch in terms of, obviously, each day and each quarter and each month is just this kind of the conversion, right, from leads to leases, and that has been improving for us, right, from month to month to month throughout the third quarter. So that tells us that the pressure of new supply is certainly waning and we’re being able to see more throughput into the leasing.

Brad Heffern: And then, Jim, on the forward equity, you obviously need to settle that by the end of the year, but there’s no additional acquisitions contemplated in the guide. Are you planning to extend that? Or is there a chance that you’ll let that expire?

James Sebra: So we can obviously always extend it. We do have 2 forward equities, one from September that got closed out, and that will be kind of closed out this quarter. And then the one that we did in the first quarter of 2025, we actually have until the end of the first quarter of 2026. So the $61 million that’s left remaining is primarily that, and that we have until March 31 to close that one out.

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

James Feldman: Given the sequential moderation in blends, especially on the renewal side, can you talk about what your latest thoughts are on earn-in for ’26 and your current loss to lease?

James Sebra: Jamie, that was a good one. Great to see you. Loss to lease today is actually a gain to lease of about 1.5% and that our earn-in right now for 2026 looks to be about 20 basis points. Obviously, we have to finish the year before the earn-in is actually locked in, but it’s about 20 basis points.

James Feldman: And then I guess just thinking about renewals down so much sequentially. I think if you look across the peer group, it’s at the lower end. I know you said you wanted to keep occupancy at the expense of rate. Are there certain markets where you’re really kind of surprised at how hard you have to fight to keep people? Just maybe talk us through the different regions, if it’s any — or different markets? Or is it pretty similar to what you said before on the renewals?

James Sebra: Yes. I would say similar to the markets that Janice went through before in terms of the more supply-heavy markets certainly have a little more competition that we have to work harder to keep people at blend. I would say, generally, the retention rate that 60% has been a focus of ours. And we baked into our original guidance early this year, a steady decline in that renewal rate because we knew that we wanted to keep occupancy high heading into the slower seasonal periods of the fourth quarter. So I would say, even though it’s sequentially lower, we’ve been pretty clear about we’ve expected this all throughout the year. What we see right now so far for fourth quarter, that renewal rate is actually about 40 basis points higher. So we see a little bit of strength redeveloping. But the difficulties in terms of really we’re having to “work hard”, we’re working hard every day, right? But no, it’s definitely in those markets that Janice mentioned.

James Feldman: You’re saying renewals are up 40 basis points already in the fourth quarter off of the ’26?

James Sebra: The spread, yes.

James Feldman: Okay. And what about new leases and blends?

James Sebra: New leases are pretty much in line with what you saw in the third quarter and blends are about, call it, 50 to 60 basis points. And about 90% of our expectations for renewals for the fourth quarter have already been signed.

Operator: Next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: So going back to some of the green shoots that you referenced in your prepared remarks, coupled with, I guess, the softness in the back half of this year and just broader uncertainty, I mean, how do you approach the 2025 outlook and kind of the sequential improvement in fundamentals and think about sort of that ramp in the first part of next year?

Scott Schaeffer: Be a little more specific in terms of ramping because obviously, we’re staying away from really talking about any kind of 2026 guidance. I would say that our expectation is to continue to drive occupancy here in the fourth quarter. As I just mentioned, we’re definitely seeing some improvements on the renewal spreads and just continue to manage the business for the long-term value creation of our shareholders.

Austin Wurschmidt: I guess there was this expectation for lease rate growth to inflect in many of the Sunbelt markets late this year. So is that more likely a first half of ’26? Do you see new lease rate growth, which I think you referenced are kind of in line with where they’ve been trending. Does that begin to improve over the several months ahead? What’s sort of the thought on how that trajectory looks from here?

Scott Schaeffer: Yes. So as we’ve mentioned, the desire that we have is to continue to keep occupancy at a nice stable high level for us as we end the year and get ready for 2026. That’s always been our goal, and we’ve been talking and been pretty vocal about trading rate, especially on new leases to accomplish that goal. So as a result, right, new leases have kind of flattened out, right, where they are today in the third quarter when we were expecting them to continue to get better. We do see some progress in future months. They are getting better, but we’re obviously being cautious because, again, we want to continue to maintain this high stable occupancy. If you look at our expiration schedule, you look at what leases are expiring month by month for next year, and again, without kind of prognosticating on market rent growth and so on and so forth, yes, we do expect that new leases should begin to kind of hit that breakeven point in the first half of next year.

Austin Wurschmidt: And then can you just talk about how concessions have trended in some of the markets where you’re seeing sort of some of that competition, Janice, you highlighted some details in the market. But I mean, are concessions getting worse? Are they stable, getting better? Just trying to get a sense high level of that competition that you’re facing from the new lease-ups.

James Sebra: Yes. So I don’t have — Janice will in a moment, talk about maybe individual markets. I would say, generally speaking, if you look at all of our leasing activity, so renewals, new leases, everything, in the third quarter of this year, 23% of all of our leases had some type of concession associated with it. That is down from 30% in Q3 of last year. The average concession is up slightly to $735 per, call it, lease, and that’s up from $710 in Q3 of last year. As you look at it kind of looking from sequentially from quarter-to-quarter, that 23% is slightly higher from second quarter. But if I look at in October, we’re down from where we were in the third quarter in terms of overall volume. So hopefully, that helps.

Janice Richards: And as we monitor our competition very closely in the 4 softer markets that we talked about, we are seeing some ebbs and flows in concession, obviously, based on the lingering supply and/or what we would consider stalled lease-up. Nothing that has been outlandish or very surprising. However, we’ve seen a slight increase of concession usage in what I would say Dallas and possibly in Raleigh in specific pockets. Denver is definitely a concessionary market and will probably continue to be so as we work through that 7.5% of supply that was released in ’25 and doesn’t anticipate to add as fast as some of the other markets that we are in.

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

Eric Wolfe: It looks like your net acquisition guidance came down and you got some assets that teed up for early next year. So can you just talk about your appetite for buybacks and how you think about the spread between where your stock is trading today versus where you can sell assets?

Scott Schaeffer: Thanks. This is Scott. So the acquisition guidance came down because we had a small portfolio under contract. And in due diligence, we became aware of some significant structural issues, and it was an all or nothing. So we walked away from it. And at this point, we clearly recognize the disconnect between where markets are trading and where properties are trading relative to our implied cap rate at our share price. So we have a strong appetite for buybacks. We want to be disciplined, obviously. Clearly, it’s a very good use of capital at this point. But we also continue to work down our leverage. So we’re going to do it with retained earnings and other capital that won’t impact our EBITDA.

Eric Wolfe: Yes, I guess I was trying to think through like to what extent you could sell additional assets and try to take advantage of that spread if you thought it was material. I know there’s sometimes tax implications from that. There’s also sort of a descaling of the enterprise that you have to be sort of careful about. But I was just curious to what extent we could see you sort of ramp up the dispositions next year and then try to use those proceeds to be a bit more aggressive on the buyback in a leverage-neutral manner.

Scott Schaeffer: Well, I think it’s a balance, and it’s a balance with the deleveraging strategy. And we still want our leverage to come down, which it has been doing, and we want it to continue to come down. So the thought of selling assets and giving up the EBITDA of that asset and then using the capital to buy back stock, while it might be a great return, it’s going to increase our leverage, and I’m not sure anyone wants to see that. So we have the $60-some million on the forward available to us, and we also have some of the JV programs that are not EBITDA producing during the construction. So as those funds come back to us, that’s available for us to use as capital for share buybacks.

James Sebra: And just to clarify, the $61 million on the forward, we can net share settle that today. So we don’t actually issue a bunch of shares and have to buy back a bunch of shares. But to Scott’s point, that forward was issued at, I think, an average price of $20.60, and we’re trading well below that. So there’s an opportunity there to take some of that “gain” and buy back incremental shares.

Operator: Next question comes from the line of John Kim with BMO Capital Markets.

John Kim: I wanted to go back to your renewals you signed this quarter. Back in September, in your presentation, you talked about the renewal trade-out being in line or tracking expectations. So I’m wondering if something happened in September where it decelerated quicker than you had thought? Or was this the 2 what you anticipated?

James Sebra: No, I think the point I was trying to make earlier is that we actually anticipated the renewals to go down in the third quarter. So when we kind of talked about them tracking in line with our expectations, that was clear that, that was our expectations. Certainly, as we’ve mentioned earlier, we are obviously working in a very competitive environment, and we are obviously looking to renew and retain as much of our residents as possible because not only are you saving a negative lease trade out, but you’re also saving the vacancy costs, turn costs and all the other stuff that goes along with it. So no, I would say that the 2.6% was very much in line with our expectations.

John Kim: And just to clarify, that 40 basis point improvement, is that what you’re sending out sending renewals out today or what you’re signing€¦

James Sebra: What we signed.

John Kim: My second question is the cap rate on the Aurora sale. I’m wondering if you could disclose that. And I think you said in the prior call that this was related to the Steadfast portfolio. But I’m wondering if you’re looking at Denver as a market that you’re looking to potentially sell more assets out of just given the supply pressures.

James Sebra: Yes. I don’t have the cap rate on the Aurora Denver held-for-sale asset. That is not closed yet, obviously. It’s not even under contract. So I would say it would be a cap rate based on our internal view of valuation, but I can get back to you on that specifically.

John Kim: And then Denver as a market?

Scott Schaeffer: We’re not looking to exit the Denver market. The property in Aurora was a steadfast property. It’s an older property, expensive to run, high CapEx, and that’s why it was identified as up for sale.

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

Wesley Golladay: I just want to look at your #2 market, Dallas. It looks like your same-store revenue growth is accelerating. But I believe I heard you in the commentary talking about more concessions in the market. So I’m just trying to see what’s going on there.

Janice Richards: Yes. I think in Dallas, what we’re seeing is targeted markets and submarkets that have had high supply are becoming more concessionary as we go into the slower seasonal months in order to maintain that occupancy. And so we’re just making sure that we’re staying competitive within the market. Concessions are increasing as we’ve kind of seen a lingering effect of that supply. We’re still able to maintain our occupancy. So the demand factor is still stable. It’s just making sure that we can work through that supply and a timing factor.

James Sebra: Yes. And I think yes, specifically with Dallas, I think you saw the average occupancy this quarter, up 40 basis points over the third quarter of last year. So that’s a contributor to the acceleration.

Wesley Golladay: And then looking at this year, you talked about your tech contributions being a bit of a tailwind. Do you think that momentum continues into next year? And then will the bad debt expense coming down lower be a tailwind again next year?

Scott Schaeffer: I’ll start with the last one, bad debt. Yes, we expect that the bad debt will continue to be, as I mentioned in the prepared remarks, we’re working to keep that sustainably below 1%. So that should be a nice tailwind or support to 2026 and beyond. I would say that on the technology side, yes, obviously, we’ve implemented a series of pieces of technology, both on the kind of front of house leasing and sales and tours and as well as back of the house, so payables processing, other things that we are definitely working on, and we’re going to continue to expand that to continue to drive lower expenses and better property improvements throughout the chain.

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

Ami Probandt: I’m wondering, were there any moving pieces within the same-store revenue guide such as blended rent assumptions, occupancy changes, bad debt?

Scott Schaeffer: Ami? Ami, are you there?

Ami Probandt: Can you hear me now?

Scott Schaeffer: Yes. Okay. Great. Would you mind restating that? You broke up there.

Ami Probandt: Yes. Sorry about that. I was wondering if there were any moving pieces within the same-store revenue guidance such as changes in blended rent occupancy or bad debt?

Scott Schaeffer: For what, fourth quarter?

Ami Probandt: Yes, within the guidance. If you had maybe, yes, increased your assumptions on occupancy and decreased on rent, any moving pieces to get you to that the guidance midpoint?

James Sebra: Yes, sure. So the assumptions in guidance for occupancy was 95.5% in the fourth quarter, blended rent growth of 20 basis points, other income growth of about 3%. And then we’ve assumed a similar improvement in bad debt as we saw in the third quarter. Bad debt in fourth quarter last year was about 2%. So if you kind of reduce that by that roughly 70, 80 basis point improvement we saw this quarter, that’s kind of what’s factored into Q4.

Ami Probandt: And then you mentioned materially lower supply delivery levels, but I’m wondering if you think that we may see extended lease-up periods and if you’re factoring that into your thought process at all?

James Sebra: We are thinking about that. We are — as you can imagine, we have not put out 2026 guidance yet. So we are evaluating that with respect to what those — what that budget will look like for next year and how significant it will be. The deliveries have come down quite significantly even throughout 2025. Even though the deliveries are higher than we all anticipated, the level of deliveries in ’25 are still significantly under 2024. So we are expecting to see a lot of the lease-ups if not done. But if there is some extension, it should be a very small effect in the kind of early to mid part of 2026.

Operator: Next question comes from the line of Omotayo Okusanya with Deutsche Bank.

Omotayo Okusanya: Really good color in regards to kind of supply and what’s happening in your markets. Curious if you could just talk a little bit on the demand side. I mean is some of the pressure on blended rates really more because there’s just a lot of supply and people have options? Or is there like an actual demand issue where whether it’s because of slowing job growth or things like that, you’re getting a little bit more pushback as well in terms of asking rents and renewals.

James Sebra: Sure. I mean I think that you’ve heard us previously as well as a lot of our partner peers, the leasing season kind of started a little earlier, ended a little earlier. I would say, just generally speaking, on the demand side, if you look at just our submarkets and you look at absorption levels and demand levels, it’s — in second quarter and third quarter, their peaks, right, over historical recent history in terms of what they were. Obviously, that’s because of lease-ups, everything else. So I would say the demand is still quite healthy for apartments. A lot of our resident base that we cater to in our differentiated Class B product is not the white collar jobs that might be experiencing job losses that it’s hospital workers, it’s nursing home workers, it’s retail workers, it’s, again, not the typical white collar, including we have factory workers and blue collar workers.

So it’s a much — what we think more defensive in the AI era than what folks appreciate or think might be affecting apartments down the road. We do track reasons for move-outs because of job losses. And I would say there’s really no elevation there over the past 6 to 9 months. So it’s not something we are watching. It’s not something that we’re overly concerned about at the moment, but we are watching and paying attention to it.

Omotayo Okusanya: And then last one for me, just this election season at this point. Anything on any ballots in any of your key markets that you’re kind of watching that could potentially impact your business?

James Sebra: Well, the school district in my local town, I like very much, but that’s a different story. No, we’re not aware of anything in our markets where we should be concerned.

Operator: Our final question comes from the line of Ann Chan with Green Street.

Ann Chan: So are you seeing any labor availability issues we service for any type of employees or geographic markets?

James Sebra: You mean inability for us to hire employees?

Ann Chan: Yes.

James Sebra: Yes. No, I would say, generally speaking, from our renovations team to our on-site teams to our corporate teams, jobs are filling kind of in the expected time frame. So there’s no real concern or issue there with availability.

Scott Schaeffer: We’ve also seen a marked reduction in the turnover within our on-site teams, which is encouraging going forward.

Ann Chan: And second question for me. I know you mentioned earlier that you haven’t seen any larger demand shift with the tenants. I’m just wondering if you’ve observed in 3Q and over 2025, any kind of emerging shifts in just general tenant behavior that might influence rent growth different between the markets, such as like shorter lease terms or higher concessions move-in timing, shifts towards the Class B product type or anything like that. And from that perspective, which markets appear more resilient versus more vulnerable to these types of tenant behaviors?

James Sebra: Yes. We haven’t seen, I would say, tenant behaviors in terms of payment patterns or work order developments that would cause us any level of concerns. I would say that the one thing that continues to shift, and we continue to try to be on the leading edge of it is the whole — how does the prospect find us, right? The whole marketing engine, the advertising engine. You see us spending more money on advertising dollars between iOS services, paid search as well as just pure organic SEO and then also getting deeper into kind of how the AI tools are working where you can type into ChatGPT, show me an apartment for whatever in Atlanta and how do we show up in that list of each and every time. Today, we’re ranking on page 1 of some of the Google searches, just organic searches on — for many, many keywords. We still have more room to go, and we’re going to keep pushing on that, but it’s — that’s an area that we’re spending a lot of time and energy on.

Operator: Seeing no further questions, I would now like to turn the call back over to Scott Shaffer for closing remarks.

Scott Schaeffer: Thank you all for joining us this morning, and we look forward to speaking to you again next quarter.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.