Independence Realty Trust, Inc.

There will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press star and 1. Please limit your questions to one initial and one follow-up question. I will now turn the call over to Stephanie Cruz and Kelly. You may begin.

Good morning and thank you for joining us to review Independence Realty Trust Second Quarter 2025 Financial Results. On the call with me today are Scott Schaefer, Chief Executive Officer, Jim Sieber, President and Chief Financial Officer, and Janice Richards, Executive Vice President of Operations. Today's call is being recorded and webcast through the Investors section of our website at irtliving.com and a replay will be available shortly after this call ends. Before we begin our prepared remarks, I'll remind everyone we may make forward-looking 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 8K that is available in the Investors section of our website. They contain reconciliations of non-GAP financial measures referenced on this call to the most direct comparable GAP financial measure. With that, it's my pleasure to turn the call over to Scott Schaefer.

Thanks Stephanie and thank you all for joining us this morning. Second quarter same store NOI and core FFO-preciado results were in line with our expectations as operating expense savings offset lower than expected revenue growth. Same store revenues increased 1% over the prior year. We finished the quarter modestly ahead of expectations on renewal leasing due to another quarter of strong retention. Debt continued to decline and average occupancy rose modestly versus a year ago. However, our blended rent growth in the quarter lagged our expectations due to market conditions that were softer than anticipated. Lingering supply pressures in some markets, with potential residents being more discerning due to continuing macroeconomic uncertainties, pressured market rents to a greater degree than we originally anticipated as we sought to continue to maintain occupancy during this timeframe. Jim will cover a revised outlook for 2025 with respect to leasing spreads and overall revenue growth. On the positive side, same store operating expenses decreased 60 basis points over the prior year quarter and fully offset softer revenue growth. Lower repair and maintenance and turnover costs, lower real estate taxes, and a reduction in our insurance premium renewal all contributed to this improvement in expenses. We completed 454 value-add renovations during the quarter in a total of 729 completions for the first six months of the year, achieving a weighted average return on investment of .2% for both periods. As Jim will discuss later, given our stronger than planned retention rates year to date, we expect to complete about 650 fewer renovations this year as compared to our original goal, which is still a 26% increase over 2024 completions. In terms of investment activity, we are seeing opportunities to deploy capital accretively by trading out of older vintage assets with higher future capex needs and to newer communities with lower capex profiles. On the disposition side, during the quarter, we identified three assets that we expect to sell during the fourth quarter. For new investments, we are under contract to acquire two communities in Orlando during the third quarter for an aggregate purchase price of $155 million. Both properties are in close proximity to existing IRT communities, which improves our market presence and should enable us to realize meaningful operating synergies. Beyond these pending transactions, our acquisition pipeline remains strong. Our updated guidance implies an additional $315 million of acquisitions before year end, and we have ample liquidity to fund these accretive investments on a leverage neutral basis through capital recycling. Regarding our markets, the good news is that deliveries in general are tapering off across our portfolio with permitting and starts data supporting our outlook for more muted supply growth for the next few years. Looking at market level data from Costar, Yardy Matrix, and Green Street, we're seeing a reduction in deliveries settling out to less than 2% supply growth in our markets in 2026, which represents a 43% reduction from 2024 actual deliveries. As a result, we believe things continue to set up nicely for a strong releasing environment in 2026, as demand for apartments in our markets is expected to remain strong. I'll now turn it over to Jim.

Thanks, Scott, and good morning, everyone. Core HFL per share was $0.28 in the second quarter of 2025, up from $0.27 per share in Q1 of this year. Same store NOI grew 2% in the quarter, driven by a 1% increase in same store revenue and a 60 basis point decrease in operating expenses over the prior year. Same store revenue growth was supported by a 10 basis point increase in average occupancy, a 90 basis point increase in average effective monthly rents, and a 20 basis point improvement in debt compared to the prior year. The decline in same store operating expenses reflected a 90 basis point increase in controllable expenses and a 3% decline in non-controllable expenses, both as compared to Q2 of last year. Within controllable expenses, we attribute the below inflationary increase to stronger than expected retention rates that led to a .7% reduction in R&M intern costs. Within non-controllable expenses, we saw lower real estate taxes and a reduction in our property insurance premium of 18%. In terms of leasing trends, renewal rate increases of .9% coupled with 58% retention support the 70 basis points of blended rent growth in the quarter. New lease tradeouts during the first half improved sequentially each month, albeit at a slower pace than anticipated in our original guidance. For the second quarter, new lease tradeouts were down 3.1%, but supply-heavy markets like Atlanta, Dallas, Denver, Raleigh, and Charlotte contributed heavily to these negative new lease tradeouts. On the capital reception front, during the second quarter, we classified three whole year communities located in Denver, Memphis, and Louisville as held for sale. Additionally, last week our JV partner in Richmond completed the sale of metropolis in Innsbruck. We received $31 million in cash consisting of a return of our investment and a $10.4 million gain that we will record in the third quarter within the income from unconsolidated real estate investments. This gain will be excluded from core fulfill since it is associated with the property sale. We will recycle proceeds from asset sales into newer communities of higher growth profiles. As detailed in our press release last night, we have two communities under contract in Orlando, Florida. Later today, we expect to close in the first of these communities a 240 unit property built in 2024 for a purchase price of $60 million. The community is close to an existing IRG community. We expect to close in the second property later this quarter. It is a 403 unit community built in 2019 that is directly adjacent to an existing IRG community. The blended economic cap rate on both of these acquisitions is a 5.9%, which includes operating synergies from our increased scale in the market. We canceled our pending acquisition of a community in Colorado Springs because the lease up slows and signed rents were lower than our underwriting. While we like this market long term, we do see other opportunities where we can put that capital to work. The $395 million of other acquisitions included in our updated guidance should further enhance our operating efficiencies and be a CREDIS AXL. We will fund the Orlando and other pending acquisitions using $162 million of forward equity commitment testing and proceeds recycled from asset sales, all done on a leverage neutral basis. Our balance sheet remains flexible with strong liquidity. As of June 30, we have only $337 million, or 16%, of our total debt maturing between now and year end 2027. Nearly 100% of our debt is fixed, rate or hedged. With respect to our four year 2025 guidance, we are adjusting some of our underlying assumptions to reflect our performance in the first half of this year and expectations for the second half. From a big picture perspective, our reduced outlook for revenue growth is offset by lower expense growth, resulting in slightly higher same-sore NLI growth and the same midpoint for core FFO per share. The guidance updates for our operating metrics are as follows. Our 2025 same-sore portfolio now consists of 105 properties, reflecting the removal of the three properties held for sale. Our updated outlook is in its full year, same-sore revenue growth in between .5% to 1.9%, which represents a 90 basis point reduction at the midpoint. The decrease is driven primarily by lower new lease growth, offset by slightly better occupancy as compared to our original guidance. On the new lease growth front, in our original guidance, we assumed that effective new lease growth would improve throughout the year such that, for the year, effective new lease growth would be flat. We are now assuming that new lease growth for the second half of 2025 will be down 2.7%, which, when coupled with a negative .4% new lease growth in the first half of 2025, means that our four year new lease growth is now estimated to be down 3.4%. Overall, our renewal rental increases are still expected to be approximately .5% for the year, which leads to approximately 50 basis points of blended rent growth for 2025. Just to summarize, our revised revenue guidance is based on the following inputs for the second half of 2025. Average occupancy of 95.7%, blended rental rate growth of 60 basis points on our remaining lease expiration that totaled 53% of our available units, bad debt of .3% of revenue, and .7% growth in other income over the second half of 2024. With regards to property operating expenses, we have a more favorable outlook due to the reductions in both controllable and non-controllable expenses. On controllable expenses, higher retention is reducing our RNA internment costs, while our site teams are continuing to manage expenses for contract services and others exceedingly well. Overall, controllable expenses are now estimated to grow by 1.9%, which is down 190 basis points from the previous midpoint of 3.8%. On non-controllable expenses for real estate taxes and insurance, we now expect these expenses will decline in 2025 by approximately 40 basis points, which is down 345 basis points from the previous midpoint due to the 18% savings we secured on our 2025 property insurance premiums and further improvements in real estate taxes. In total, the 1% midpoint of our revised guidance range for total operating expenses for the year 2025 is 245 basis points better than the midpoint of our previous guidance range. From the same-store NOI perspective, the midpoint of our NOI goes increased by 5 basis points to 2.1%. Additionally, we expect lower G&A and property management expenses for the year, and our new midpoint of $55 million is $1 million less than our prior midpoint, given by efficiency savings from our recent rollout of AI leasing tools. Finally, from a core facility per share perspective, our midpoint of $1.175 is unchanged. Scott, back to you.

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

At this time, I would like to remind everyone in order to ask a question, press star and the number one on your telephone keypad. Please limit your questions to one initial and one follow-up. Your first question comes from the line of Austin Werschmidt with KeyBank Capital Markets. Your line is open.

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

Yeah, no, good question. Thank you, Austin. And certainly Scott, Janice, feel free to chime in. I would say the way that we went about our expected new lease trajectories for the back half of the year was just looking at what is the average or call it effective rental rate of the leases that are expiring each month, what we know today based on who has renewed and who hasn't renewed or who is quote unquote likely to renew, and comparing those expiring rents versus what we think would be an asking rent based on where our asking rents are today and our expectations for how that moves month by month through the rest of the year. And then obviously, as you and I have talked about, it's just math in terms of just calculating what that implied tradeout would be.

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

Yeah, what we expect is that as you look at the new lease tradeouts heading into the back of the year, there's going to be some continued improvement month by month as compared to kind of where we were in the first half of the year. I think the assumption right now is that the new lease tradeout is going to be a negative 2.7 percent in the second half of the year, where it was negative 4.4 percent in the first half of the year. So again, continued improvement in terms of leasing trends. Yes, we continue to see good lead volume. I think lead volumes are up about three to four percent over the same time last year, which that last year was up called 20 percent of the year before that. We see really great demand and we're seeing, as we mentioned, that our neighboring debt will continue to see really good kind of tour velocity as well in terms of converting those leads tours. So we are seeing really good kind of solid demand, even in the back end of the year, as we see July developing for August.

Great. Thank you.

Your next question comes from the line of Eric Wolf with Citi. Your line is open.

Hey, thanks. Maybe just a sort of broader follow up to that. I'm just curious, you know, why do you think you're not seeing, I guess, a big pick up sort of a new lease growth when you have 60 percent retention or percent renewals? Is it just that private peers aren't seeing the same dynamic? I guess I would just think that with retention high across the industry, occupancy high, their expectation for occupancy to increase, you see better market rate growth. So what is sort of holding it back right now? Yeah, it's not so much that. I mean, certainly the market rate growth. You know, I think as we've all kind of talked about, we are seeing, you know, continued supply pressure. And as we said in our prepared remarks, you know, some of the macroeconomic uncertainties are kind of holding market rates down a little bit. What we are seeing from our standpoint on the tradeouts is, you know, our average renter stages, let's call it two to two and a half years. So the leases that are expiring and are not renewing, they're just coming from a higher kind of rent that they signed two to two and a half years ago. And that's what's causing the negative tradeout. Got it. And I think you said that you expect occupancy to increase to 95.7 percent in the back half. I think it came down a bit in two Q. Just curious, you know, what gives you the confidence in that prediction? Have you already started to see occupancy rise in July? You've seen sort of forward indicators that would suggest that that occupancy is sustainably going to be higher. Just trying to understand why you're predicting higher back half occupancy. Sure, yeah, as you mentioned, obviously, the May, June and early part of July months were obviously, you know, I would say a difficult little bit of a difficult environment operating to what we have. We did see occupancy in the back, kept July, you know, continue to click up closer to that kind of ninety five point six percent. So we feel confident about being able to drive that a little further north and maintain it in the back half of the year.

Thank

you. Your next question comes from the line of Brad Herfren with RBC Capital Markets. Your line is open.

Yeah, everybody. Thanks for the assets you guys have held for sale. Is there any common thread there between either the three markets or the three assets and then in those markets, would you continue to downsize in any of them?

Thanks, Brad. In terms of the common thread, I would just say that generally speaking, you know, to the assets, the one in Memphis and the one in Louisville, two legacy .R.T. assets that have gone through the value add program and we feel that we've kind of maximize value there. They're a little also a little older in the vintage side and a little more expensive to run from a capex load. The deal in Denver, the legacy steadfast deal, again, a little older on the vintage side and certainly a little higher in the capex load. So the common theme, the common theme is, you know, kind of higher capex load, more expensive to run, older deals. And the goal is to continue to recycle that capital out of those types of assets and into newer assets with better profiles.

OK, got it. And then on the increase in acquisition guidance, you obviously have the one hundred fifty five million under contract already for the rest of that. Are those assets identified already? Any color you can give on on what the rest of the volume might look like?

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

you.

Thank you.

Your next question comes from the line of Jamie Feldman with Wells Fargo. Your line is open.

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

Absolutely. What we've seen against our expectations is kind of Dallas was surprising with the amount of increased supply in the first half of the year. The McKinney area, especially we saw increased concessions, you know, sequential reductions occupancy is stable. But is that the price? Is that the consequence of pricing power and also, you know, just slugging through that supply that's in the market? We've seen really strong absorption. So it's a promise that we're sitting towards the end of the line at the end of the tunnel. And we've noted extended pre-releasing timeframes from delivery to occupy. But at a pace in which we're comfortable with it, eventually we will get back to a normal supply level in Dallas. So that one was a bit of a slow start versus our anticipation. Tampa also was a bit of a slow start on the pricing power side. You know, first quarter, we saw not an influx of supply, but we saw some hangover high occupancy due to maybe some of the weather events that happened in the third and fourth quarter. And then so people were staying put. And then as we started to trade, we weren't able to accelerate that rent as quickly as we anticipated. We do feel that Tampa's second half of 25 into 26 is very strong and we're seeing strong absorption in that market. And then lastly, obviously, there's Denver. Denver has had an onslaught of new supply and will continue to do so through most 25 into 26. And so it's really just making sure that we are maximizing where we can and ensuring that, you know, we're hedging the bet on occupancy, but also looking for opportunity on the rent side. So those are the three markets that probably were a challenge comparatively to what is anticipated. Charlotte, again, is still high with supply. And so we're working through that. But that was that was anticipated. We've seen some great movements in Lexington, Columbus and Oklahoma City. And so we're hoping to capitalize on that for the rest of the year as well.

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

Sure, Jamie. So we're obviously staying away from giving monthly data, but I would just tell you that the information that I mentioned earlier on occupancy was kind of in that 95.6. I would say new lease tradeouts are kind of largely in line with June. There is obviously a little bit of, you know, again, a peak of expirations. And then when you get into kind of renewals, you know, August renewals we sent out a long time ago, we sent them out and roughly three, three and a half percent renewal rate. And that's what we see developing. And then as you look at kind of September and October, we're closer to that three percent range. OK,

thank you.

Your next question comes from the line of West Coladay with Baird. Your line is open.

Hey, good morning, everyone. Do you anticipate buying any of the JV assets? And can you give us an idea of the size of the asset recycling bucket? How many older assets do you have left?

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

Oh, yeah, in the second one, we're just like you're using the I guess the non-core older assets to fund acquisitions. Just kind of curious, what is the size of that bucket? How much more asset recycling can you do?

There's always recycling that we can do. I mean, you know, every year the assets get a year older. So really, it's not just the age, it's changes in markets and it's it's half X cost. And what is an alternative use for that capital? Is it buying back stock? Is it redeploying in, you know, newer, better long term assets? Is it is it de-leveraging? And as I said in our earlier remarks, you know, that's the determination that we'll make, you know, when when we know the capital is coming back.

Got it. Thank you.

Your next question comes from the line of Amy Probunt with UBS. Your line is open. Hi, thanks.

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

Hey, Amy, thanks for the question. Yeah, I think the biggest surprise would be just experience relative to kind of our expectations from the earlier year and kind of how the year is developed is really just kind of two parts on supply. One, just the lingering pressure and how long it's kind of been hanging around for and then B, the volume of incremental deliveries relative expectations. You know, we were obviously using coastal data that suggested, you know, end of last year, early this year, that the deliveries across our sub markets in our portfolio was going to be roughly two to, I think, two point six percent of existing stock. That number is now three and a half percent. And it appears that it's, you know, in for, you know, deliveries are being pulled forward from two thousand twenty six in the twenty twenty five. So it makes twenty twenty five twenty twenty six even better. But it is a little bit more of a surprise that we've been having to kind of wrestle with. And as Janice mentioned, you know, you look at specifically the Dallas market, you know, Coastal was originally anticipating a lot of deliveries in Q4 of twenty twenty five. And they seem like they've moved all into Q1 and Q2 of twenty five. So that's been the biggest surprise. And I think from the single family rental standpoint, we don't believe that is really affecting us. You know, our reasons for move out to rent a home continue to be in that two to three percent of our move out. It hasn't increased. So we don't believe that's been really a factor for us.

Great, thanks. And then just a quick one for the assets held for sale. What do you expect for the cap rates on those? And I assume you're quoting economic cap rates.

Yes, we'll quote economics. So obviously we have an obviously nailed down, you know, final sales prices and all that. So it's still a potential moving, but it's in a low to mid fives.

OK, great. Thank you very much. Your next question comes from the line of Ann Chan with Green Street. Your line is open.

Hey, morning. Thanks for taking my question. So first one, just on the current transaction environment, could you give us a sense of the bid as spreads you're seeing on both the buy and sell sides? Are there any signs that price discovery is starting to reset or that distress driven opportunities are emerging?

So I'm sorry, if your bid ask spreads on just the transaction market.

Yes.

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

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

Well, we still believe in the Sunbelt. We like the Midwest generally. Indianapolis and Columbus have both been strong for us. Indianapolis a little more, a little stronger more recently. My plan is to keep our ratio of Sunbelt exposure to Midwest exposure somewhat consistent. So as you see us continue to grow in Sunbelt over time, expect that growth in the Midwest as well to keep that ratio consistent. You know, we haven't announced any additional acquisitions in other markets than Orlando. So at this time, I would just stick with that. Orlando has been at the top of our list for growth for some time. We've never been able to, or we haven't been able to, I should say, you know, find something that's fit within the area in Orlando that we wanted. Also, at a price that made sense. These two assets that we're buying fit our strategy completely. The second one that will close, we expect later here in August, is literally across the street and phase two of our existing Orlando asset. So that's why there's great operating synergies for us to acquire that one. And the other one is within a five minute drive of the existing IRT community. So we're excited about adding those to the portfolio and, you know, we continue to analyze markets and, you know, we'll act accordingly, you know, as again, capital is to be deployed into new assets. Thank you. Thank you.

And your next question comes from the line of Omoteo Okusano with Deutsche Bank. Your line is open.

Yes, good morning, everyone. Apologies if I missed this earlier on, but could you talk a little bit just around like July operating trends and what you're seeing in terms of kind of, you know, demand. Is there kind of a lot of supply pressure that you're kind of seeing that easing? What does that mean for your blended lease rate?

Sure. Yeah, we did talk a little bit about this earlier. Obviously, occupancy has been building throughout the month of July. Our lead volume, tour volume, continue to be kind of really healthy and above levels of last year. You know, new lease tradeouts are, I would say, relatively consistent with what we experienced in the month of June. And renewal spreads are also very consistent. We think that for the second half of the year, our new lease tradeouts would be kind of negative 2.7 percent. And then for the year, our renewal increases will be kind of averaging out about three and a half percent. So all of those, all of the July methods are in line with those, that trajectory.

Gotcha. That's helpful. And then just on the supply front, again, I mean, it just looks like based on your results and some of your peers, you know, it just feels like, I know that the private owners or who was it in superior, but in all of your markets, that, you know, owners have got a little bit more aggressive with pricing, maybe just again, concerns about tariffs or things like that. It's kind of curious if you can just kind of talk about if that's still the feeling in the air, if pricing is getting a little bit more rational at this point, as you kind of move beyond that point.

Yeah, no, great question. And, you know, I think as we just kind of were chatting with Anne about, you know, we do think that sellers are becoming more rational and that kind of bid-ass spread is narrowing. You know, for all the reasons you suggest, you know, macroeconomic uncertainty around tariffs, etc., as well as, you know, what the current forward curve has applied for the 10 years, we do think that, generally speaking, that gap is narrowing.

That's helpful. And one last one from my end, again, as you kind of think about the consumer today, and again, maybe on the rental end of things, the kind of, you know, more attractive concessions and rates that kind of getting given the oversupply on the Class A side. Let's just talk a little bit about again, how much that's impacting your, you know, your predominantly Class B portfolio. Again, whether you kind of feel like you're losing customers to, you know, the Class A space where they're offering two months to rank three and just those kind of dynamics of what's kind of happening for your core consumer and kind of how are they looking at your building?

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

And there are no further questions at this time. Scott Schaefer, I'll turn the call back over to you.

Well, thank you all for joining us today. We look forward to speaking with you again next quarter. Have a good day.

Thank you. This concludes today's conference call. You may now disconnect.