Independence Realty Trust, Inc. (IRT) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. Welcome to Citi's 2025 Global Property CEO Conference. I'm Eric Wolfe with Citi Research, and we are pleased to have with us Scott Schaeffer of IRT. This session is for Citi clients only and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC25 to submit questions. Scott, I'll turn it over to you to introduce your team, tell people the top 3 reasons to buy your stock, and then we'll go into Q&A.

Thanks, Eric. Again, I'm Scott Schaeffer, Chairman and CEO of Independent Realty Trust. And here to my right is Jim Sebra, our President and CFO. And here on my left is Jason Lynch, who runs our acquisitions group. So I actually had 4 reasons. So clearly, the most important is the makeup of our portfolio. We are at the beginning of a favorable multiyear cycle. Our markets continue to have population and job growth that outpaced the coastal markets and the country as a whole. And now you combine that with a precipitous decline in new deliveries. And clearly, after coming through a number of difficult years with new deliveries, we are at the end of that, which positions us very well for sustained rent growth and presumably higher multiples going forward. We still have from our equity raise last year, $156 million of equity that we will be able to deploy here in the first half of 2025. And we have been deploying that equity accretively and expect to continue. So you'll see some good accretive growth going forward. We recently received a BBB flat rating from both S&P and Fitch. That's new to us. So while it gives us a better cost of capital, it also improves and increases our deleveraging efforts. We have an experienced management team with over 170 years of real estate experience that has managed through all types of markets and cycles. And accordingly, we have a track record that is the best from all the public company peers, we have the #1, both 5- and 10-year total shareholder returns. So those are my reasons, Eric. Thank you.

Good. So we'll talk about a lot of those in a moment. I did want to start maybe with the accretive growth that you mentioned because it does seem like the market has now given a little bit of a green light in terms of your stock price to be able to grow accretively. I know you're still sitting on ATM proceeds. I think you said $150 million, but you have lined up some acquisitions. So I just wanted to understand sort of how you look at accretive growth as we think about the next couple of years if you continue to have a good equity cost of capital, how you'll use that to grow the portfolio?

So we did an equity offering in September of last year on a forward basis, which gave us 12 months to put the capital to use. Since then, we've bought 3 communities. They have been at 5.6%, 5.7% and 5.8% cap rates, all new construction in markets where we have wanted to grow. So those acquisitions are accretive relative to our cost of capital from day 1. And since they're new construction and they're largely through the lease-up, so we're taking a very small amount of lease-up risk. I think they're in the high 80s or 90s when we closed of occupancy. It also gives us that first year turn of leases growth because we'll have the burn off of the concessions, plus typically, when you have a new construction, you're not -- you're leaving a little bit of money on the table as a landlord when you're leasing up. So when those leases turn for us now in the second and third years, we expect there to be some outsized growth.

Got you. But I guess what is the decision framework in terms of, let's say, you find you find a good home for the current equity proceeds that you have, the stock is trading well. Is there a certain minimal level of accretion that you're shooting for? Is there a certain -- a certain increase in growth that you're looking for? Just trying to understand the decision that you make around issuing capital versus deploying that capital.

Well, for us, and I didn't mention it in my reasons to invest, but the best use of capital for us is our value-add program that delivers a high teens unlevered return on invested dollar. But on acquisitions, we're just looking for it to be accretive, somewhat accretive on day 1. It doesn't have to be 2%, 3%, 4%, 5% because we know that over time, especially now that we're at, as I've mentioned, the beginning of what will be a very good cycle for rent growth, we know that, that level of [Technical Difficulty].

Point in time. So if you grow your portfolio by 10% next year, how much would G&A have to go up as a result of that?

Yes, great question. I think generally speaking, when we think about our both property management expense line and our G&A line, we run pretty lean and pretty efficient as it stands today, and we're pretty happy with kind of that. As you look at the G&A and PME, outside of maybe some incremental regional managers or some incremental staff, it's very scalable such that if we were to increase the portfolio like you suggest up to 10%, there would not be a very big increase at all to the G&A or PME lines.

Got it. I want to add something to that, if I may. So we look at -- and this is relative to the G&A as well as just the on-site team. We look at and we monitor the total number of employees that we have per unit, so not just the number of people at the properties. And you'll hear many of our competitors talk about how they've streamlined their operations and they've reduced their staff and they do self-guided tours. But when you look at each of our multifamily peers as a -- or through the light of total number of employees -- or total number of units per employee, we are the third lowest of all the peers. It's just -- who's it UDR and AvalonBay are less than us.

Third highest -- third highest in number of units per employee.

Right. We have the lowest number of employees per unit.

Yes. So what Scott is saying is we're already pretty efficient. And even though we don't have, obviously, the self-guided tours or what others do because fundamentally, at the core, where it's not -- for us, it's not just about increasing NOI growth, it is, but it's also about doing it from a standpoint of smart and having all of that additional savings fall all the way through to the bottom line. So we don't want to move people off-site just into a corporate location and still have roughly the same payroll. We want to make improvements all the way through the, call it, the chain, the value chain to ensure that every dollar of revenue that we generate as much of it as possible falls to the bottom line.

Got it. That's helpful. And then you mentioned that the best dollar spent is on the value-add projects. And there's a slide in your presentation that kind of shows the pipeline of projects that you could work through over time. The only thing I guess I'm still always kind of struggling to understand is that, that increase that you're talking about is sort of relative to an unrenovated comp, right? It's not necessarily an increase that you're getting over the existing rate. It's an increase relative to what you think you would get or what you are getting for the unrenovated units. And so some of that spend does seem a little bit defensive to me in terms of kind of trying to preserve your overall rate. I guess at what point -- first, completely -- feel free to completely disagree with that. But the second part is, at what point does it become a little bit more opportunistic in the sense that it really helps grow your rents going forward, not versus an unrenovated comp, just grows your rents in absolute terms?

So I'm sorry, what was the second part of that question?

Just at one point, do you think maybe it's the dynamic of the industry supply, like at what point does it just grow your rent in absolute terms, not necessarily versus an unrenovated comp, but just your previous rent was $100 and now it's $115 or? Sure.

So the whole theory of comparing on the value add, the rent that we're getting on a value-add unit versus an unrenovated comp for us started very early as part of the process because we wanted to make sure that we weren't letting the market fluctuations justify the spending of capital to do something when you could have gotten it without spending the money. So for us, it was always very much focused on regardless of what's happening in the market, can we invest money and generate the ROI that we would like in terms of being able to justify the cost spending, et cetera. And that's why we do it versus unrenovated comp. So you're right, if you look in our presentation, you look at some of the data points, you might look at the new lease growth on a value-add community is not the, call it, 10%, 12%, 15% premiums that you might have seen in the past, but we're still getting that good sizable premium over what we would have. So yes, some people have used the words that's "defensive type capital." From the standpoint of like what we think about this, though, is you're spending this money upfront on renovating units and then you're ultimately looking at all of the rent growth, all of the cost savings because it's not just in rent, there's also additional earnings that come through lower turn costs, newer kind of clubhouse stuff that you have less renovation work or less kind of maintenance work down the road, that's not factored as part of that ROI. So for us, it's all the way again to that value chain of kind of as you're investing in these communities and really driving incremental ROI, which is why in our presentation, we kind of say that our value-add communities generate roughly that 20% boost to our underlying kind of NOI growth. It really kind of makes sense from both an ROI perspective as well as from a long-term IRR perspective. In terms of the rent growth, your second question, when you renovate a unit, you might not do it, to your point, have a "defensive capital type idea." But on year 2, when that unit renews, we're able to see outsized renewal growth as well. So for us, it's every kind of piece of the pie that really makes sense, does it make sense to continue to renovate. As Scott kind of mentioned earlier today in a few meetings, when we were kind of heading into this year, you did see the supply growth happening, you see kind of the properties you're competing with, yes, we intentionally slowed a little bit of the value add, not because we're overly worried about it long term. It was just might will spend that money in a better time in 2025 when that capital -- when the rent environment comes back and is better.

Got it. And I guess why is 2,500 to 3,000 the magic number now? It seems like that's always sort of the target. How did you kind of come up with that target? I know it might shift in a specific year, but why is that sort of the right run rate to think about and not more if it's the best use of capital?

It's our best estimate. It's trial and error. We've been doing this now for about 7 or 8 years and with a 33,000 unit portfolio, so we're doing about 9% of it each year. And that seems to be the number that we can achieve without being so disruptive to impact the other -- the overall operations.

And then there's a lot of questions around value-add from me and others. But your sort of nonrecurring and sort of revenue-enhancing CapEx is similar in terms of size. Can you talk about what's the difference between those 2 programs and then the return that you're generating on that sort of nonrecurring revenue-enhancing side?

Sure. The categories -- the types of CapEx that go into the recurring bucket are things that are kind of happening each and every year from fixing a retaining wall or improving a retaining wall to kind of very low-level type stuff that's happening on a property. Things that might happen, say, every 50 years, like replacing a roof might go into the nonrecurring category and/or things like putting LED lighting in or low flow toilets or things that really kind of benefit the property for multiple cycles through a lower kind of operating expense load. For purposes of some of the items that are going into the nonrecurring bucket this year in terms of ROIs, we have a few smart home deployments that we're looking at. We're also beginning to roll out some property WiFi costs. So all of those are going into that bucket this year. And again, the ROIs are kind of a little bit over the board. But generally speaking, on the property WiFi, we're seeing a plus 30% kind of ROI. On the smart home, we're seeing kind of, like Scott had mentioned on the value add, a similar kind of ROI in that kind of high teens. And then obviously, LED and others are a little bit -- a little harder to kind of estimate in terms of lower utility costs.

Got it. We're starting to get a few questions on operations. So I'll get to those in a second. And obviously, feel free to ask. Maybe the last question on sort of capital allocation. You don't seem that interested in development today, makes sense. I guess would you ever consider more structured type investments or developer funding program or some preferred something that maybe derisks it a little bit from your perspective and then provides developers with needed capital?

So we have done a little bit of joint venture investment with developers on new construction. It has worked out just fine. And we think we've derisked it a little bit by making the investment when the development was shovel-ready. So all of the predevelopment work was behind us, all of -- there's a construction loan in place. So it really limited the time frame for our capital being exposed to the market. So we did about $100 million of that. It ended up being, I think, 6 communities, all but one of them is now complete. Three of them are on the market to be sold, and we'll do just fine. We have -- actually, we have purchase options in each one of them, and we're still waiting to see what the final bids are from third parties about whether or not we want to buy them ourselves. But it's worked fine, and we're continuing to look at those opportunities going forward. As far as just straight-up development on our own, I'm still of the opinion that our balance sheet is a little bit too small, and I really don't want to add that risk to the company until we're a little bit larger. I mean adding non-income-producing assets that you're going to be holding for -- it could be up to 5 years while you're going through the development process. It just seems like it's something that we're not quite ready for. So maybe when we grow up.

And then in terms of operations, this is an investor question, can you talk about which of your markets will begin recovery more '25 and which are more weighted to 2026? Does it differ for Class B in those markets? Will more of your portfolio begin recovery in '25 because of IRT's Class B focus? Meaning will you see it earlier because of how you're positioned within those markets?

I'm going to let Jason answer this one.

Yes. So we're expecting some of our -- the heavier supply markets historically start to see a rebound. So we're seeing Central Florida as an expected kind of rebound where we've bought 2 assets now in the last 6 months, both in East Tampa and Orlando. And we're continuing to look at the supply pressures across-the-board and looking at what the rebound is going to be there.

In addition to that, I'll just add a little bit. When you look at markets like Tampa, we're really expecting that to rebound quite nicely here in 2025. You have -- like Jason mentioned, a few other high supply markets from '24 that will continue to have a little bit of supply pressure in '25, like a Charlotte or Huntsville, they will certainly continue to kind of experience that. That being said, those markets are both very dynamic, and we really look at what -- if you look at the supply growth in '26 are really going to be setting -- those markets are setting up for additional rent growth in 2026 and beyond.

And I guess some of your peers have -- did you have a question? Some of your peers have been sort of comparing this time period to like coming out of the Great Financial Crisis. Obviously, I don't have all the public data for you at that point in time. But do you agree with that comparison? Do you think it could be as good as that sort of time period or is it just too early to promise that level of growth?

I actually think it's going to be better. I think that there is no real increase in supply projected for some time. I think coming out of the Great Financial Crisis, we had zero -- or I keep saying zero and Jim corrects me, very, very, very low interest rates, free money, which really set the stage for the supply that we've been dealing with. It was the low-cost money along with outsized rent growth that happened during the pandemic that really pushed the supply to, again, what we were dealing with over the last couple of years. Well, those issues aren't there. So with interest rates expected to stay higher for longer and with the cost of construction, I think that we are entering, again, what will be a multiple year period, 3, 4 years of very, very, very low additions to supply, while our markets are expected again to see outsized population and job growth. So we're going to be well-positioned to see some good, strong continuing rent growth going forward.

But I mean, as things recover next year, you don't think we'll see sort of a wave of developers saying, well, look, great, 4% or 5% rent growth, that will probably keep going.

It's not enough. You're going to need 10-plus percent rent growth for a couple of years. And that may happen, but it's not going to happen until the end of '26 at the earliest. And then as we know, it takes 2 years once the shovel hits the ground in order to deliver a new unit. So now you're at '27 and '28, and that's if all the predevelopment work is done. So that's why I say we're really entering what will be a very good sustained period of rent growth.

So those that are still building in your markets today just have a kind of like a super low cost of capital, I don't know, like family office or something, like they're just.

And they're looking at what we're looking at. And they're saying, if we can deliver this community in late '26, we're going to be delivering right into that strength. But there's -- most of the merchant builders out there don't have that ability.

Got it. They got to attract LP capital and.

They have to find the capital and the deal that just doesn't pencil out. Again, with interest rates where they are on construction loans with the cost of construction and with cap rate -- exit cap rates that are -- if you just keep them consistent, you're in the mid-5s. It's just the deal just doesn't pencil out for equity to make that investment.

I'm sorry, I didn't hear you.

I think at a minimum, we go back to the pre-pandemic era. And in our markets, we saw a consistent 5% to 6% annual rent growth. That's at a minimum. And I'm not talking about '25 because '25, we're still absorbing some of the '24 deliveries, but when we get into '26 and '27.

I understand you don't want to get into specifics on each month of rent, but you did provide a sort of first quarter projection in your presentation. It looks like you're predicting, call it, 0.4% blended growth for the first quarter. That feels pretty much on track. I mean, I guess, I think from your call, I came away with the idea that blends would be around flattish in the first quarter. So yes, I mean, tell me where you think you are relative to plan thus far.

Yes. Well, obviously, we put guidance out in mid-February. So we had already seen kind of January and February activity, and we kind of begin to see -- had the beginning pieces of the -- obviously, the March information. I think we're right on track with kind of where we expected in terms of how we set guidance, and we're kind of excited about the trajectory that we're on because when you look at it on a monthly basis, you just continue to see this little upward trajectory from December through January and then up into obviously, the March timeframes. And obviously, March is still a little early, but call it, half of the new leases are already in that we anticipate or expect to need in March. And again, we're seeing that great positive trajectory, not positive rent growth, but just positive trajectory heading north.

Got it. And one of the things that confused me, I think, is that the -- I think the renewals were a little bit lower than the fourth quarter and the new leases were a little bit lower, but the overall blend was higher. So is that just turnover or?

It's just a different retention rate in the kind of the amount of renewals. So I mean, the renewals we have so far in the first quarter were just about 56%.

Okay. So renewals in the first quarter, 56% was just higher than I think it was -- I can't remember, it was like 51% or 52% or something like that in the fourth quarter.

That's right. I think the renewal -- I'm sorry, the retention in the first quarter is 56%. Retention, I think, in the fourth quarter was about 51% or 52%.

Okay. And then I think you made a comment that new lease growth should be sort of flattish by April. You still feel pretty good about that? Because all I can see is sort of that -- well, the projection for the quarter is an average across the quarter. But I guess how do you feel about the trajectory of new lease growth and sort of April being flattish?

Yes. I think we really kind of think about it more for the second quarter being flattish, and it might be more in like the May kind of time frame. But yes, we feel pretty good about that projection of the portfolio getting back to that kind of flattish range on the new lease side in that second quarter time frame.

Got it. And as far as bad debt, I guess, have you started to see that come down in the first quarter? I think you said some of the increase is a little bit due to seasonality. So have you started to see that sort of bad debt come down as you work through that sort of -- I don't know what to call it, but the backlog of inventory or people?

Yes. We're beginning to see some improvement, obviously. We ended 2024 with 1.9% bad debt as a percentage of revenue. And for guidance this year, we assumed that would drop by roughly 50 basis points down to 1.4%. I think the expectation is we kind of end the year in terms of fourth quarter, roughly 1.25%. So we're kind of running right in line with where we guided. Probably we'll probably end the first quarter somewhere in the kind of 1.8% to 1.9% and continue to see more trajectory and more progress. A lot of the new things that we did in terms of the ID verification and income verification tools, it just takes time for them to kind of take hold and work and really get some of the fraudulent residents out and not be replaced by somebody that is fraudulated or can't make their bills.

And then I guess as far as your revenue system, your pricing system, can you maybe talk about sort of how that's changed over time? I think you've made some new hires on the operations side. And then just for our understanding, as you guys are thinking through pricing decisions, what are the main things that you're looking at within your pricing system to come up with that? I know it's algorithmic, but like what are the main things that you guys talk about to analyze the health of your business?

Sure. We used RealPage's LRO tool for a really long time since probably -- since we were public in 2013. In 2024, we tested and implemented a new tool called [ Rriba ] and replaced LRO. So we no longer use the RealPage tools in our rent algorithm pricing. [ Rriba ] is a great tool. We've been really kind of pleased with it. It uses a tool or a philosophy called lease velocity, right, in terms of what is the pace of take rate in terms of how many residents or prospects are coming in? And are they -- is there enough residents coming in, enough prospects coming in that's going to fill the, call it, the vacancy targets or the occupancy targets that we've set. And if it will, then rent will be -- will continue to move upward. And if it doesn't, then rent will begin to move downward, again, depending on that "velocity speed. And that's really the kind of the key element. And the other key element is really looking at when we set renewal rents -- we send renewal notices out roughly 90 days ahead of time. And as we set that renewal notice and that increase, kind of what we think kind of the retention rate will be based on a variety of different metrics from work orders to duration to where that lease is in terms of market rents today. And it gives us the ability to kind of have a forecast around what we think retention is, and we can kind of toggle that retention a little bit to really kind of hit that 55%, if not higher based on our goals. And then at that point, we'll then know kind of how many more new leases we need given our occupancy. And I think as you know, in 2024, we were really seeking to build occupancy, right? So we kind of traded rent, if you will, for occupancy. And this year, now that we have that stability of occupancy, we don't foresee the need to do that.

And so I guess that begs the sort of natural question of where are you sending out renewals today? And are they coming in at a sort of higher retention rate than you would think or basically in line with what you would think or underperforming?

Yes. We're sending renewal notices out in the 3% to 3.5% range. And the expectation is and what we've seen so far in the first quarter, it's coming out above that 55% retention.

On expenses, and I don't mean to like put you in a tough spot with your insurance provider, but I think you said that prop taxes would be like 0% this year, would be flat. I think in your non-controllables, it's only property taxes and insurance. So that would tell you that maybe you're expecting a big insurance increase. Is that effectively what's baked in for this year or am I thinking about that sort of non-controllable partner on?

It's actually quite the opposite. And you're right. In terms of our non-controllable expenses, it's real estate taxes and insurance. The real estate tax growth that's assumed in that 3.1% non-controllable growth is 3.7%. So midpoint of our non-controllable growth is 3.1%. We're assuming taxes are going to go 3.7%.

So taxes will be up 3.7%.

That's right which means, right, you would have your insurance has to be a negative or a decrease year-over-year. Right now, our insurance policy renews mid-May, and we've assumed a 0% increase in the premium. So the real reason it's down year-over-year is just because we have additional savings from our decrease this past May that will kind of play its way into the first 4.5 months of 2025. Sorry, that's a long-winded comp.

No, no, that makes a lot of sense. I think the transcript provider just [ put your hitter ]. I can't read one of something like that.

You're not the only one who have that -- who is confused.

Got you. In terms of other income, can you just talk about sort of what's driving the 25 bps of other income contribution this year? I know it's not a ton, but maybe more holistically, how you're thinking through other income opportunities and making sure that they're not going to just cannibalize your rent.

That's a great question. We obviously look at always providing amenities and services to our residents to really kind of amplify their experience with IRT. Some of the things that we've done over the years is obviously valet trash services and other things to kind of make their life day-to-day easier. That's pretty much been rolled out across the portfolio. And now we're looking at additional things that our peers have already done, but we haven't done necessarily yet, and that's property WiFi. And the big initiative right now for 2025 is launching a property WiFi initiative about across roughly 20 properties. We're currently going through the planning phases. We anticipate having a lot of the work done by the end of the second quarter and then be able to start obviously billing for that service and providing that service to our residents in the second half of this year.

Got you. So when you say most of the -- I mean, I think usually, it's like it takes a couple of years to work through or no, is that -- -- maybe that's just because others were getting off of their previous WiFi agreement or what have you. But I guess my understanding of it was it took a little bit longer to build out the capability or maybe already.

The actual installation of the equipment, it just depends on how intensive it is. Do you have to run new fiber to each of the properties, et cetera. So the actual installation of it is, I won't say quick but thankfully, we've seen others do this and have the experience or their knowledge in terms of how to do it in a quick way. And we've been planning for this, obviously. It's not just we thought about it yesterday, and we're doing it. So this has been probably 6 months in the making. The actual billing of it to the residents becomes a challenge, right, in terms of when do you start billing it? Obviously, you begin to mandate it for all new leases and then for any renewal signed. So you're really kind of looking at the residents that are currently not using it and that may have a renewal that -- a lease expires in December, how do you get them to kind of come on board before the renewal option? And we're looking at different strategies to that, maybe a little offering a little more of a discount they want to come on board because fundamentally, the service that we are planning to provide is a faster speed, a better quality Internet service at a cheaper cost than they pay today, almost in some ways, a no-brainer, a no-brainer.

I think the margin is pretty good. I mean it's usually like what, $60, $70, you can charge and you're -- like the cost to you like $20 or something like that.

Exactly. Right now, depending on different things, we're looking at roughly $60 a month, $70 a month that we would charge and the cost is just under $20. And then obviously, what you currently -- what they currently pay for, they get roughly 100 megabits of speed, and we're offering a gig service or we plan to offer a gig service.

Got you. Maybe as we're getting closer to the cocktail hour here in a second, I guess we'll talk about some of the risks that [indiscernible] out there because it seems very consensus, right, that Sunbelt is going to recover. I haven't heard too many people like say that's not going to happen. I mean maybe some on the investor and hedge fund side a bit. But I guess other than the economy, is there anything else that you could see that would really change this view because it's been a little while, right? Like I think last year, people promised a certain level of rent growth. Most missed that. What's the chance that just the next 1.5 years is just kind of muted because we're still dealing with the supply and then supply comes back a little bit faster than you would think? Just trying to think through like what could go wrong in the scenario other than maybe just like some kind of jobs calamity or economic thing that we can't predict.

Well, it's doomsday stuff you're talking about. I think there's great consensus on the decline in new deliveries. So I don't expect that to change. I mean you can look back to what construction has started, when it started and when it's planned on being delivered, and you can tell pretty clearly that by the middle of this year that most of what has been started will be delivered. So some of it still has to be leased up. So presumably, that could go a little slower than anticipated. And really, what I said earlier, and I truly believe this, is that what drives real estate values ultimately is population growth and job growth. And that's out of our control. So we are in markets that have historically had the highest level of both population and job growth. There's good in the areas with the better, lower tax policy, which is attractive for people moving in. So we firmly expect that demand piece of the equation to continue, while everyone agrees now that the supply part of the equation is also becoming very clear, I should say. So outside of some major economic calamity in the country, I don't think there's anything that's going to get in the way of what we can accomplish.

And I guess maybe just a quick one. I guess have you started to see at all the number of people coming in from out of state slowdown? I mean U-Haul statistics and then other things would suggest that maybe some of that migration to the Sunbelt is closer to sort of pre-COVID average. I don't know if that's showing up in your data.

Yes. we track, obviously, the percentage of our -- over the last 90 days, the percentage of leases that move in -- the percentage of our leases that come from out of state and how much of that comes from different markets, say, Northeast, West Coast, et cetera. And while certainly, it has slowed relative to kind of the post-COVID, it is still continuing at roughly the same pace, especially over the past, call it, year, 1.5 years. And some would say that's a little bit kind of pre-pandemic, but it's still great job -- it's fueling great job and population growth in our markets.

So rapid fire -- well, we had a quick one. What are the assumptions that drive the high and low end of your core FFO guidance? I guess it's probably just same-store mainly, but is there anything else that would be?

It's rent growth. I mean that's what drives it.

Got it. So high end would be like 3 years or something, I don't know, I'm making that number up completely.

Yes, that's about right.

What will same-store NOI growth be for 2026 for the apartment REIT sector?

I misread your question, I read 2025. So I was all prepared. Like, we just gave guidance is the dumbest question in the world. I think probably 4% for 2026.

4%. Sunbelt will be better?

Yes.

Will there be the same more or less apartment REITs at this time next year?

I think they'll be the same.

Thank you.

Thank you everyone. Thanks for joining us.