UDR, Inc. (UDR) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Bank of America's 2025 Global Real Estate Conference. I'm Jana Galan, and I cover the residential REITs at Bank of America, and we're pleased to have with us UDR's President and CEO, Tom Toomey; CFO, Dave Bragg; COO, Mike Lacy; VP of Investment Analytics, Chris Van Ens; and Vice President of IR, Trent Trujillo. Tom will start with a few opening remarks, and then we can jump into Q&A.

Great. And thank you again for hosting us to a lovely facility as well as great investor meetings today. So let me just dive right in. I guess 2 points I'd start off with, is, first, the state of the business, guidance and operations, and then I'll let Mike speak to that in detailed Q&A. But let me start there. We had a beat and raise in the second quarter. We're trending in line with the second half guidance. Year-to-date, we're #2 NOI growth among the public peers, and something that we're very proud of is what we call winning markets. So when we look at revenue and NOI, how do we do -- stack up to our peers, 11 out of 14 markets year-to-date, so good progress head-to-head as well as an overall beat and raise. What we're focused on operations, and Mike will go through it in more detail, what we can control and the things that are influencing our business. On the second topic, capital allocation, investment analytics. You -- many of you have been in the room and hugged UDR and seen it evolve over time. But one of the things we're most proud of and I think is thematic for all businesses in this dynamic time is companies that are able to convert data to cash flow. And you've seen us demonstrate that acumen in our operating platform where we have head-to-head one of the highest cash flow margins in the space. We understand our customer. We anticipate our customer, and we find ways of retaining and growing that relationship in a profitable way. We've brought that same type of mindset, data to cash flow to the investment analytics part of our business and are starting to use that tool, which has been a number of years developing, but we're excited about the early results and the prospects that lie there. And I think Dave and Chris can weigh in on those topics as well. So with that, I'll stop. Gentlemen, is there anything else we'd say before we open it up? All right.

Obviously, anyone jump in at any time, but maybe if you could just kind of start with the kind of spring/summer leasing season this year, a lot of stops and starts. I think the revised job data looking back kind of explained a little bit of what was going on but just kind of curious from your seat how it felt and what was different this year.

Thanks, Jana. I think for us, what you've heard us talk about is the success we had in the first half. And Tom highlighted a couple of main points for us. First, very excited about the #2 in NOI given our diversified footprint and how we got there. We were able to drive our rents in the first half of the year. Originally, we expected rent growth in that 1.4% to 1.8% range. We're able to drive 2% blends in the first half, and that really catapulted us into the back half of the year. So that's where you saw us raise our revenue guidance as well as NOI guidance. Tom mentioned it. Happy to see that. We're on track today. If you open up the slide deck here, you can see on Page 3, we do break this out by region. So you can see where we have about 75% of our NOI is in the coastal markets. East Coast, West Coast continue to put up better results than we would have expected, both year-to-date as well as what we expect for the rest of the year. And then as it relates to the 25% of the NOI down in the Sun Belt, been under pressure a little bit more as it relates to rents and occupancy just given that push for occupancy given demand starting to fall off just with normal seasonality. So Jana, we experienced a little bit more growth in the first half than expected. I think it's slowed down a little bit more sooner than we expected. But we feel pretty good about where we're at today, and we're going to continue to lean into total revenue growth as well as total expenses to drive that NOI.

Maybe if you could kind of talk to just in terms of how you're seeing occupancy and renewal acceptances, how that's playing out into the back half of the year?

Yes, for us, what you've seen from us over the years is we typically run between 96.5% to 97% occupancy over the course of a year. Typically, we try to drive our occupancy up around 97% in the shoulder quarters, where demand starts to come off a little bit. We get into a position of strength. As we go into leasing season, we start to drive our rents. We bring our occupancy down probably between 96.5% and 96.7% as a comfortable range just to be able to test the markets on our rents. That's what you'd expect to see. I think you're going to see more of that from us this year. We're currently running in that 96.5% to 97%. And once we turn the corner, we expect to drive our occupancy back up. What's different this year and one thing that sets us apart is we've really started working on our lease expirations. And typically, on the shoulder quarters, we have about 20% of our leases expiring. This year, we've actually reduced that to about 15%, 16% with the anticipation that we were going to be dealing with a lot of supply in the back half of the year. Demand was going to start to fall off. So we wanted to put ourselves in a position of strength to be able to drive rents and ideally just not need as many leases to sign. So we moved some of those expirations into next year, where we expect supply is going to be in a much better position. We're going to be able to drive rents, and capture it at that point. So we have been proactive on our approach there.

And then maybe just in terms of the markets, would you still expect to kind of see New York and Northern California leading?

Yes. For us, I would tell you, we have winners in all of our regions. And I think specific to the West Coast, my expectation in San Francisco is still going to do well. It's our strongest market today. My expectation is it's going to continue to be strong. We just -- we know the backdrop. We know that supply is coming down. We've had healthy demand there, seeing very strong blends, seeing strong occupancy. So more of the same through the back half of the year into next year. I'd tell you, on the flip side, we have 3% of our NOI in a place like L.A., a little bit less demand coming in a market like that today. We do have more supply coming downtown there, putting pressure on our joint venture assets, but it's a small market for us. We're more Marina del Rey-focused, and it's held up relatively well. Where we have more exposure is a place like Orange County. It's 11% of our NOI, more exposure versus our REIT peers. That market's held up better. And I'm seeing blends actually in that 3% to 4% range in a market like that with occupancy close to 97%. So SoCal is a little bit different story as it relates to Orange County versus L.A. And then specific to the East Coast, New York is still a strong performer. We're still seeing occupancy upwards of 98%, blends in that 3% to 4% range. It's consistently been better than we expected all year. And I expect it will continue to be a good performer for us in the foreseeable future. And then specific to the Sun Belt, Tampa is holding up better than some of the other markets, seeing positive blends in Tampa, decent occupancy in that plus or minus 96.5% range. And then Texas is probably a little bit weaker today, seeing a little bit more concession activity, lower market rents in a place like Austin. Austin, for us is a 2% NOI market, so it's relatively small. But we have seen a little bit more pressure in Texas today.

And then maybe just D.C. and Boston.

Yes. We get lots of questions on D.C. For us, what I would tell you is 15% of our NOI, so a large market. We have a great team. We have a diversified portfolio across Virginia, Maryland, even downtown in the union market area and a team that's very receptive to initiatives. And if you look at revenue growth over the last 3 to 6 months, we've had the highest revenue growth amongst the peers there because they're leaning into those other initiatives in driving that out performance. Over the last probably 4 to 8 weeks, seen a little bit more weakness as it relates to market rents. And what I would equate it to is just more shoppers and buyers today on both incoming potential residents as well as our residents that we have in place today. And so when I say shoppers versus buyers, it's taking those individuals that are shopping the units, they're taking a little bit longer. They're coming in. They're looking at the units. They may be signing an application, and they're just processing it, potentially canceling their release at times, but it's taking them longer from that app process to converting into an actual move-in. And then with our current residents, we're having more negotiations. So those individuals, they see the same news cycle. They're coming into the property. They're just wanting to understand what their renewal growth is going to be, what happens if something were to happen to their job and they want to talk about lease break fees, things of that nature just to get an idea. But overall, D.C. is still above average market, still positive blends, still seeing about 97% occupancy. So it's still performing well. And then you mentioned Boston?

Yes.

Boston, another big market, 11% of NOI. I would tell you it's split between North Shore, South Shore and downtown. What we're experiencing today is a little bit more pressure on the North Shore just given supply pressures. We've got about 2,000 units that were being delivered this year that's supposed to abate next year. South Shore has performed very well. It's been our best submarket in Boston, and I'd tell you, downtown's a close second. So to size it, I'm still seeing blends in that plus or minus 3% range, occupancy above 96%, 96.5%, and it's still a strong market for us.

And then maybe just a little bit more broadly, kind of the urban versus suburban. It seems urban's really kind of caught up this year.

Yes. For us, it's different by market. So what I would tell you is when you get to our coastal markets, and again, you think about San Francisco, Seattle, Boston, New York, D.C., what we're experiencing today is urban assets are outperforming our suburban assets. And I think really it points to a few things. Supply's down for the most part in those areas. You have return to office in a lot of those areas, and you have really good rent-to-income ratios in a lot of those parts of the markets. On the flip side, when you think about the Sun Belt for us, we are more of a suburban B quality assets, not so much in the urban core. And the suburban Bs have been holding up relatively well versus kind of some of those urban assets just given the supply pressures in the Sun Belt.

Mike, really appreciate the overview. Maybe just touching on some recent developments since the quarter. Tom, if maybe you'd want to talk to some of the -- or the management change announcements with Joe's departure.

Sure. Yes. I think a -- let me start off with many of you knew Joe, and Joe was someone I recruited 9 years ago to come to UDR. On the other side, was a buy-side representative. And I like developing talent, and Joe developed a lot of talents, became one of the industry's leading CFOs. And after getting through that part of his journey to develop his set of skills, promoted him, transferred him almost over to become our Chief Investment Officer about 8 months ago. Joe and I have been talking for about the last 3 months about when is the right next step for him and what is that next step. And Joe is eager to become a CEO in the near term. And after weighing it through with the Board and myself and Joe, kind of concluded it was not the right time. And Joe is still eager to put himself into the market and become a CEO someplace. And what I would say is I've always been proud of our track record of growing talent, working in a culture that grows talent. And sometimes you're able to retain that talent, and sometimes you aren't. And in this case, I think the decision that we all reached collectively was let's go find that opportunity for him. And so you'll see on September 2, we announced that Joe was stepping aside and that we would not be replacing the CIO. So I'll talk a little bit more about succession in depth. But I think it's always important to recognize when you grow talent, you can retain it. Sometimes you grow it all the way to its fruition. And other times, you accept that it's time to part ways. So with that said, I look at the group and I've had -- been doing this for a number of years, what is our depth succession and talent. And so I'm a Chief Investment Officer. We're not going to replace that position. We're going to do is the 3 people that run it today are immensely skilled. So let me give you a rundown, Andrew Cantor, 17 years with UDR, does the buy-sell and DPE book. Then you have Andrew Lavaux, who is in charge of development and redevelopment, 15-plus years with me; and then Chris Van Ens, 14 years on the data analytics. Culturally and the way we make decisions as a company is through teamwork. So a lot of people weigh in on the investment side of it, including Mike and Dave. But that's how we organize ourselves. That's how we work. But more importantly, it's how we grow talent and that we'll move people through positions to grow them and create succession paths for all positions, and that's no different than mine. We also looked at and a recent example is Dave Bragg joining us recently as CFO. Dave inherits quite a deep, skilled team, and I'll let him speak to that in his new position. But I tend to think of companies get better through growth of talent, through giving people more opportunities to grow. And you're going to have times when that talent seeks other opportunities. I think you'll look through the contracts and you could see clearly a amiable separation leading to Joe's now in the market looking for that opportunity, and we are protected against our intellectual property and our talent. Dave?

Sure. Thanks, Tom. I was excited to join UDR a couple of months ago. I've known the company for about 20 years from the outside. I've known Tom that long. I've been fortunate to know Chris and Mike for many years as well. I long admired the company from the outside as a terrific operator, a leading operator in the space. A few observations coming in. I was fortunate to inherit a very strong finance team. When I look at the 5 leaders in the finance team, 4 of them have been at UDR for more than 10 years and in their positions for 5 years or more. And so the finance team is firing on all cylinders. The balance sheet is in terrific shape. There will be no change in strategy there. And I was particularly excited when I got in under the hood and took a look to see that the level of innovation that has long existed on the operational front has made its way over to the investment side of the business. And Chris and his team and the platform that they've built will incrementally drive our investment strategy and enhance our investment decision-making prospects in all aspects of the game. So that includes development, DPE, acquisitions and dispositions, and I'm excited to be a part of that as well.

Thanks, Dave. And then in the press, it was reported that UDR is marketing the New York City joint venture portfolio on the Upper West Side. Wondering if maybe you guys can kind of talk to that.

A point of clarification there. UDR is not marketing it. This is an asset held in a joint venture with MetLife, where we have over $2 billion invested together over 12 assets and have been partners with them for over 15 years. And MetLife has concluded that it would like to expose its 50% interest in a project known as Columbus Square, which we've held together now, I believe, 12 years and they'd like to take it to the market and see what their 50% is worth. Our agreement is to listen to that price and decide if we are a seller. I stand pat or a buyer. And so we'll find out what that asset brings to market. What I can report is over 7 NDAs, 30-plus tours already. So it has a high interest level from the marketplace and extremely attractive debt, probably about 8 years, 2.7%, right? So we'll see what the market brings.

Could you potentially be a buyer or is there enough...

I think we'll wait and see what the pricing looks like.

Great. Maybe with that, shifting over a little bit deeper into the transaction market, just kind of what you see out there. It's been a little bit less active but could be picking up.

Yes. I think a couple of things I can share with you, and then I'll ask and weigh in on Chris in how we're looking at the marketplace and tools that we're building there. So one aspect of it, I think we announced 2 years ago a joint venture through JLL with a pension system in the Asia era -- area. To buy assets in America -- and what I'd report is, after a year, our client determined that they were going to do a global mandate revaluation. As part of that, what I'm glad to report is our fund was the #1 performing fund internationally and that you'll probably see us in the acquisition market in the fourth quarter and a number of transactions with that partner. And we believe that we're having a lot of success with the track record there. We'll probably have some more success going into '26 with that program as well. But I think what's important about this is when you think about companies and you think about the challenging marketplace, and I've seen it thematically now for the last 5, 7 years, is investors are sentiment-driven towards where the real estate is and its exposure and not so much about what could occur at the real estate. And that's a natural phenomenon when you go through a 0 rate environment, and I don't think we're headed there anytime soon. But markets normally work where growth rates are different and risk profiles are different. So hence, cap rates are different. And we've set up UDR to be an all-cycle investment with a broad range of exposure so that we could attract capital and invest and deploy it across markets as it made sense. So like you've seen us with operations, bringing data to work to make a better, higher margin for our operating platform, we brought that to our investment platform. And this is something we've been working at for 5 years. I'd characterize it, if it's a 9-inning play, we're in the second inning, whereas I'd characterize operations as probably in the third or fourth. So there's a lot of runway here. But I'll let Chris explain it. He leads this effort. He's making a great deal of progress. And I think the addition of Dave Bragg adds to the team's ability to execute using new tools. But thematically think about the future as all markets moving up and down. How do you pick the right market, the right asset? How do you allocate capital in a disciplined way to get growth is the question at hand, and the answer is Mr. Van Ens.

Well, I hope I live up to that. But no, Tom talked about it. We've been working on this for the last 5 to 7 years really on and off. I would tell you, it was more of a side project for myself and our Head of FP&A, Matt Sherry. Really with the support of Tom and the Board and others over the last year, we've really charged that investment analytics platform. So what does that mean? It means we've invested in some human on capital resources, so some data scientist type people, some software solutions, some technology solutions. And what was the impetus for it while a lot of it was the success that Mike and his team have really seen through the customer experience project, so transforming data into cash flow growth, right? We feel good about where we are right now. I can tell you, one of the biggest takeaways we found, which was probably the most surprising thing, is that, prior to a year ago, we really focused at the market level. We said rising tide market lifts all ships and vice versa, right? What we found through all of our analytical work is that choosing the asset right, choosing the micro market right, that's about 2x more impactful to future rent growth than getting your market right, right? So you got to be right on the asset. You have to be right on the micro market, less important on the market. And that's really interesting because we're in 23 markets. We survey about 35 markets, but that makes every single market investable, and it makes every single market divestible. We're no longer limited to here's our top 5 buy markets. Here's our bottom 5 sell markets, et cetera. We're very excited about where we're going with it. I can tell you, we'll be the first to tell you it's not perfect, right? But it does tilt the odds in our favor, we think, in a pretty big way. And it tilts the odds in our favor, as Tom said, across capital allocation. So it's not just the buy-sell. It's looking at potential development sites. It's saying how do we get more targeted in our redevelopment and NOI enhancing because when Mike spends NOI enhancing dollars, he's got one shot to get that premium, right? No one is paying a premium for a 5-year-old kitchen or anything like that. And so we need to make sure we're using those dollars correctly, we're getting as strong of a return as we possibly can, and a lot of that is going to be at the asset level. A ton of ideas. I can tell you, we're still looking at growing the team with Tom's backing, and we're very excited about hopefully replicating as well as Mike and his team have done on the operating side on the investment side as well.

And Chris, can you maybe talk to like cap rates a little bit? And I can understand maybe in the joint venture, there are some fees and kind of why that could make sense. But could we see you be more active on acquisitions on your whole balance sheet?

I think all of the above is on the menu. What you have is a tool that points to this particular asset in this particular market. The herd might be excited about the market and paying for it. And we may say, no, that's -- that asset for us has a range of values and where do we see the opportunity to lift that capital and move it somewhere else. Also, as we've talked with other sources of capital and you see a tool like this, that's the type of thing we've been waiting for and thinking. And so think in the terms of the future and where we're all headed, we're all struggling with the question what's AI do for our lives in every aspect. And I think that's a broad question, and I can't answer it. But the truth is it's data being converted to decision and then acted out. And if you have a culture that can act on it and a talented team that can act on it, then it's building out the data and the decision matrix and testing it against the marketplace. And so I'd find it enlightening and a discipline that we have, which is to follow the facts and make good decisions. And I think it's going to help us a great deal on the capital. Dave, you want to add?

Yes, Jana. What I would add is that you're likely to see us make smarter capital recycling decisions as a result, not necessarily to be net growers but where we would -- we're interested in seeing what the opportunity set is from here, is to build upon our track record with JV capital.

The principal output of this, the principal metric, NOI growth versus, say, value growth, the 2 often go together, particularly when you're -- when people are looking for guidance on where to invest and how to invest. The tree falls in the forest, do they [indiscernible] the market? And then [ institutional investors don't ] see micro or an asset. They just see market. They have that issue.

Sure. So the key output right now is forward rent growth, what we are working on. And that gets you a 50% to 60% of the way there. What we are working on is can we get down to NOI. We think we can, and then can we move that to forward IRRs, right, which is the ultimate kind of measuring stick that we need to look at.

You've got some valuation, [ net ] valuation.

Yes. Or you just kind of look at past year 6, year 7 is perpetual, right? We're a long-term holder, so you can look at it either way.

So an example, if you're a developer, what's your #1 question? It's not can you build it. What's cost? It's what's rent when you stabilize it. And so you've seen us last year, we were -- we have -- building something in Riverside. Two years in, the rent forecast is right on the trajectory line. The market's acting just like the model suggested. So the risk of development greatly goes down, okay, if you can get that right. Well, now let's do acquisitions, let's -- sells, but more intermediately, we spent $250 million of capital annually on our assets. We know from a customer what the customer thinks of our capital spend and where opportunities are to bring turnover down. Now where do you spend the rest to bring your overall cost structure or revenue-enhancing capability up? So a model that it's going to touch all aspects of our business, focused on revenue right now. We're in the second inning. We will continue to invest and build it out. It will get better. What it's -- interesting is it's 25 years of data, 8 million units.

Yes. So right now, it covers about 30,000 communities across the 35 markets that we monitor in our communities, so that's 7 million to 8 million units. In our communities, we're probably more in the 20,000 to 23,000 range and maybe 5 million to 5.5 million units.

So it's a wide-ranging tool that helps us make a better decision. Chris points out repeatedly that it is gating tool. But if you can narrow your workflow down to things that matter, you kind of usually make better decisions.

When you say rent growth, are you talking about market rent growth, micro [indiscernible] UDR's experience [indiscernible]

Sure. So we are talking about market plus micro market plus asset level. So all of those different pieces are obviously defined by different things, driven by different variables. You have much more fundamental variables at the market level. You have much more asset-specific variables at the asset level. Micro markets are kind of a mix of the 2. So once again, I mean, obviously, you'd always rather have a very strong outperformed market. And it's a 6-year time span. It's kind of what we look at. But strong outperformed market, strong micro market, strong asset, right, they compound on each other. So you get very good growth over that. But once again, what I was talking about earlier is that no market is off limits for investment or divestment because you can have a great performing market in a terribly located asset with bad characteristics, and you are still going to unperform than if you invested in maybe a poorly performing market but a great asset in a strong micro market.

Try to translate that down to [indiscernible] [ monthly rent growth ] that's occupancies.

Yes. Ideally, in our 23 markets, we have a pretty good handle from our existing portfolio what the cost structure looks like.

[indiscernible]

Right. Now what you have to overlay and use judgment still is around the political risk sentiment. It doesn't know what it doesn't know. So if somebody built a new chip plant 10 miles away, it doesn't know that. But it narrows you down your focus to say this. Instead of following the herd, you actually become more disciplined around your existing asset base and your future asset base instead of following the herd.

And I'm sorry, just going back to the joint venture that's going to -- took a pause but now likely to be more active. Was there a geographic constraint? I can't remember if it was...

No.

No?

No, it's a 15-year IRR promote structure with a market rate-driven fee load.

Great. And then just curious on this kind of early work, Chris. Have you identified kind of new markets that you have missed by not applying these types of criteria?

Yes. I mean I would tell you, one of the things -- and once again this taught us is lean away from the market somewhat. Obviously, you do care how the market performs, but it truly is much more of an asset-specific micro market focus. So there's a variety of markets out there that we think are going to outperform potentially that we're not in. But once again, if we were decided to expand the portfolio into those markets, it would be very, very asset specific. But yes, that's kind of how we feel about it right now.

And I guess kind of the way that you're organized now as a company kind of in 23 markets now, is there a risk of becoming too broad? Or, I guess, are you set up to be able to kind of go in and out of these markets?

I think our characterization, comfortable with the 23. Why monitoring 35? You want to seize the future before it happens. And so if we see something that points us, as Chris said, towards a market, then submarket, then individual assets, but we're not going to disperse out. We still have an operating model that works very well on a centric basis. It needs about 2,000 doors to be effective and efficient for human talent, and -- but I think it does broaden the horizon of what we know about the marketplace and where we see the best and highest returns in the future. And like anything else in life, I tend to think of how is the tool growing. How is the talent that's using the tool growing? Is this the future of this industry? And I think I can answer the -- to all 3 is yes. We are all going to be interacting with a more data-driven decision tree in our lives, and we're going to be able to work at a higher velocity and more balanced open light. And these tools give us an edge. And they're going to be very, very hard to build from the ground up. It's taken us 5 years and a lot of talent to bring to bear. So we think we have an advantage. We're going to play to our strengths. We have it in the operations. If I can bring it to the discipline in the investment side of the equation, you really have the 2 pillars that build long-term value for our shareholders. And that's what it's about for us.

I guess maybe a couple of your peers are kind of experimenting with more kind of apartment adjacent, whether it's townhouses or build to rents. Curious kind of like your thoughts of expanding into that.

I've built townhomes over the past, at times, large and small programs. I think housing is a shortage in America, and I applaud them for plowing through that. There's opportunities there. I think we're focused not on necessarily the product today, but ask you this. This is an example question that I asked the team and we're working through. Our average renter today is 36 years old. A decade ago, that average renter was 25. If I go 5 years into the future, my guess is my resident is going to be 40 years old. Knowing what I know about my customer today because of all the data I capture, can I not look at the age cohort today that is 40? And I ask myself, what do they like, how do they spend their time, what are their issues. Five years from now, when that average for the portfolio moves to that cohort, what should be our product look like? How should it appeal to them? What are the things they're shopping for, thinking about? So I have insight with that broad base of data to what the customer might look like 4, 5 years from now on a national level, on a micro market level. So data becomes powerful. The question is are you asking the right questions. And then are you able to execute? And I think this is the future of real estate investing as we know it and that we're an industry that's a little slow to catch up. But boy, when we get ahead of steam, I think we can make a lot of progress here.

I think that brings a really interesting framework. And -- is it quick? Sorry, we're out of time.

[indiscernible] the average age went from 25 to 36. Has the average apartment size or number of rooms grown with that demand?

It's interesting what the model tells us about apartment size. Okay? And again, Chris is talking about individual communities and the attributes of where it works, coupled with Mike. So the micro apartment works in an urban setting, gets a high rent but turns. And so it's a very poor cash performer because of the term rate. Okay? Whereas a one-bedroom den has a lower turnover rate along with retention cycle, a more profitable product over time. And so the smaller apartment of the past have been all building towards 700 feet, sometimes less. Actually, most of our customers, it looks like and where the rent potential growth is, is more back in that 800 plus as an example. So people are staying in their apartments longer. They want a little bit more square footage. And that trend starts to bear out when you look at where rent growth has been and where it's likely to grow better. Is that an oversimplification?

And sorry, I'd just like to quickly conclude with 3 rapid fire questions. So Tom, when the Fed starts to cut, do you expect borrowing rates for long-term debt to decline, stay flat or potentially rise?

Long-term rates? Decline.

And last year, the majority of companies stated they're ramping up spending on AI initiatives. How would you characterize your plans over the next year, higher, flat or lower?

Last 35 minutes. [ Higher ].

Do you believe same-store NOI for your sector will be higher, lower or the same next year?

The same, plus/minus.

Great. Thank you guys so much. Appreciate it.