NexPoint Residential Trust, Inc.

Good day and welcome to the NextPoint Residential Trust, Inc. third quarter conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jackie Graham. Please go ahead. Thank you.

Good day, everyone, and welcome to NextPoint Residential Trust's conference call to review the company's results for the third quarter ended September 30, 2021. On the call today are Brian Mist, Executive Vice President and Chief Financial Officer, Matt McGrainer, Executive Vice President and Chief Investment Officer, and Bonner McDermott, Vice President, Asset Management. As a reminder, this call is being webcast through the company's website at nsrt.nextpoint.com. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on management's current expectations, assumptions, and beliefs. Listeners should not place undue reliance on any forward-looking statements and are encouraged to review the company's most recent annual report on Form 10-K and the company's other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statements. The statements made during the conference call speak only as of today's date, and accept as required by law, NXRT does not undertake any obligation to publicly update or revise any forward-looking statements. This conference call also includes an analysis of non-GAAP financial measures. For a more complete discussion of these non-GAAP financial measures, see the company's earnings release that was filed earlier today. I would now like to turn the call over to Brian Mitch. Please go ahead, Brian.

Thank you, Jackie, and welcome to everyone for joining us this morning. Appreciate your time. I'm Brian Metz. I'm joined by Matt McGrainer for our prepared remarks. I'll kick off the call with some commentary on the quarter and year and cover our results, wrap up with guidance, which we are, again, revising upward. I'll then turn it over to Matt to discuss specifics on the leasing environment and metrics driving our performance and leading us to revise guidance and add upward. With net migration continuing into our core Sunbelt markets and continued shortage of high-quality affordable housing, NXRT continues to enjoy enormous pricing power, with new lease rates increasing 23.8% for the quarter and renewal rates increasing 10.5% for the quarter across the portfolio. Net migration into our markets continues pretty much unabated. This continues to track capital and send cap rates to historic lows in our markets as reflected in our revised NAV calculations. We continue to find attractive deals despite the competitive acquisition market and have acquired three assets this year. The current environment also allows us to sell assets that have been fully renovated at a premium and recycle that capital into new value-add products where we can achieve higher rates of return and move out of slower-growth assets. Yesterday, we closed on the sale of two assets in Nashville, achieving a combined IRR of 36.1% and a multiple on invested capital 3.55 times. As we've discussed before, our growth prospects are not dependent on acquisitions. We continue to achieve significant returns from our value-add strategy, where we can move cap rates 75 to 150 basis points over three to five years from acquisition, which makes us less sensitive to the absolute cap rate levels. The ongoing and widening shortage of affordable housing in the U.S., which is more acute in our Sunbelt markets, as new household formation outpaces new housing deliveries, gives us plenty of runway to continue implementing our value-add strategy across the portfolio and on new acquisitions. The increased net migration coupled with the shortage of housing allowed our portfolio to achieve all-time high occupancies, It sets us up to continue to aggressively push rates for the remainder of the year and into 2022 while still maintaining high occupancies. That loss in the second quarter was $5.4 million or negative 21 cents per diluted share on total revenues of $56.4 million as compared to $29.6 million or $1.19 per diluted share in 2020 on total revenues of $51 million. For the quarter, same-store rent increased 6.8%, and same-store occupancy was up 40 basis points at 95.4%. This, coupled with an increase in same-store expenses of 5.2%, led to an increase in same-store NOI of 1.9 million, or 6.6%, as compared to Q3 2020. Reported Q3 core FFO of 16.4 million, or $0.65 per diluted share, compared to $0.53 per diluted share in Q3 2020, or an increase of 22.6 percent. That loss the nine months into September 30th was $15.7 million, or minus $0.62 per diluted share, as compared to a $48.2 million gain, or $1.91 per diluted share of the same period in 2020. For the year, same-store NOI has increased 2 million or 2.4 percent as compared to 2020. Year-to-date, we reported core FFO 44.7 million or $1.78 per diluted share compared to $1.64 per diluted share for the same period in 2020, or an increase of 8.5 percent. We continue to execute our value-add business plan by completing 290 full and partial renovations during the quarter, and leased 349 renovated units, achieving an average monthly rent premium of $172 and a 21.2 percent return on investment during the quarter. Conception to date in the current portfolio is a 930. We've completed 5,979 full and partial upgrades, 4,554 kitchen upgrades and washer-dryer installments, and 10,134 technology package installations. achieving an average monthly premium of $134, $47, and $43, respectively, and a return on investment of 21.5 percent, 72.7 percent, and 35 percent, respectively. Based on our current estimate of cap rates in our markets and forward NOI, we're reporting an NAV per share range as follows, $75.03 on the low end, $86.22 on the high end, and $80.62 at the midpoint. These are based on average cap rates ranging from 3.5% on the low end to 3.8% on the high end. The third quarter, we paid a dividend of $34.125 per share on September 30th. The board declared a dividend per share of $0.38 per share payable on December 31st, representing an 11.4% increase over the prior dividend. Since inception, we've increased our dividend to 84.5%. Near to date, our dividend was 1.74 times covered by core FFO with a payout ratio of 58% of core FFO. For 2021, we're revising guidance upwards as follows. Core FFO per diluted share, $2.36 on the low end, $2.41 on the high end for a midpoint of $2.38. Same-store revenue, 4.7% on the low end, 5.1% on the high end, 4.9% on the low end. Same-store expenses, 5.4% on the low end, 4.6% on the high end, and 5% on the midpoint. For same-store NOI, 4.4% on the low end, 5.6% on the high end, and 5.5% on the midpoint. That's up from 4% from prior guidance, and our core FFO is up 3 cents from $2.35 per share previously. If we achieve our midpoint of 2021 core FFO guidance, this will represent an 8.2% increase over our 2020 core FFO of $1.93 per share. So with that, I'll turn it over to Matt.

Thanks, Brian. As those of you who follow our company know, our goal is to consistently generate high single to low double-digit growth in our same-store NOI, core FFO, and annual dividends. And as Brian mentioned, we're pleased to announce our sixth consecutive increase in our annual dividend as well as material increases in both same-store NOI and core FFO. NXRT continues to benefit from our market and asset selection as well as on-the-ground operational performance. Population inflows into our Sunbelt communities continue to accelerate, with net migration from California and New York dominating our leasing applications, year-to-date continuing to increase 20% year-over-year. Low migration outflows from our markets and consistent resident retention also explain the material strength in occupancy. Our Q3 same-store occupancy ended at 95.4%. That's up 37 basis points from a year ago. And as of November 1st, Our portfolio is 95.1% occupied, 96.8% leased, with a 92.5% trend. Renewal retention for the quarter was 58.4%, and accelerated throughout the quarter, with July being 55% and ending in September at 62%. These historically high occupancies and trends are driving material rent increases and revenue growth across all of our Sunbelt markets. Our same-store revenue growth, for example, exceeded 3.2%, and six out of our 10 markets in Q3 with every market experiencing positive rental revenue growth. In addition, both new leasing and renewal spreads remain elevated. New leases ended the quarter at a robust 24%. That's almost 10% higher than last quarter. Renewals finished at a positive 10.5% for a Q3 blended rental growth of just under 16%. Here are the numbers by month, which demonstrate another acceleration throughout the quarter and into October. July new leases were up 23.2% with renewals being 8.4% for a blended increase of 14.2%. August new leases were up 24.1% with renewals being 10.1% for a blended increase of 15.4%. And September new leases were up 24.4% with renewals being 13.5% for a blended increase of almost 18%. Q3 new lease growth continues to be strongest in Atlanta. Tampa, Orlando, South Florida, Phoenix, and Las Vegas, with each of those markets clearing at least 25% new lease growth. Every market in the portfolio is up at least 14%. So far in October, new leases are up 26.9%, with renewals being 15% for a blended increase of over 21% on roughly 1,000 leases. On the transaction front, yesterday we completed the sale of Beechwood and Cedar, generating $49 million of net proceeds. As a reminder, these dispositions generated roughly an 80 basis point positive cap rate ARB, funded and completed our reverse 1031 into two new Charlotte acquisitions, Creekside at Matthews and the Verandas at Lake Norman. Both of these replacement assets are performing ahead of our expectations and already beating Q3 NOI budgets by over 10%. On September 10th, as Brian mentioned, we closed the previously announced Six Forks transaction in RTP for $74.8 million. at a year-one economic cap rate of 4.1%. In addition to generating a cap rate ARB, we also upgraded our portfolio's location and quality with these transactions. We recycled capital out of a Nashville sub-market with $56,000 in annual median income, averaged within a one-mile radius of the assets, and into Charlotte and Raleigh sub-markets with $118,000 annual median income within a one-mile radius of these assets. As you might have noticed, we updated our cap rate range, as Brian mentioned, to be 3.5% to 3.8% from 4% to 4.3% last quarter. We continue to see aggressive capital compressed cap rates as demand for quality, affordable housing assets in our markets has never been stronger. During Q3 2021, we ourselves underwrote many deals in our target markets and finished as a bridesmaid on several that went multiple rounds and ultimately culminated in a sealed bid process. During these processes, pricing often moved 20% from initial broker guidance, and in some cases, pricing went into the sub-three cap rate land. We witnessed the same process as a seller of Beechwood and Cedar, which culminated into a sealed bid ourselves and ultimately sold for a tax-adjusted 3.5 cap rate. Given the underlying growth and fundamentals of Class B multifamily and Sunbelt markets, coupled with how resilient these assets performed during the pandemic, we don't see an investor appetite abating anytime soon. On the redevelopment front, we completed 290 total rehabs in Q3. So far in October, we started 132 and completed 42. We're budgeted to complete an additional 253 full and partial upgrades, as well as 141 washer and dryer installs during the quarter. We stand ready to complete these upgrades, but we'll adjust the number lower to the extent we retain more tenants at elevated pricing during the winter months. This will allow some of the supply chain issues to abate, which are there, but aren't detrimentally material at the moment, at least for us, as they relate to delays in appliance deliveries and paint sourcing, both of which we can navigate over the near term. As Brian mentioned, we're pleased to announce another meaningful increase in core FFO to the midpoint of $2.38 a share. This guidance improvement is largely driven by revenue growth and expense savings and not acquisitions, as was the case for the prior quarter. Our portfolio's revenue component has been well documented here, but wanted to briefly provide an update regarding property taxes. We've now received preliminary value notices for all assets and are presently appealing or filing suit on 24 of the 41 property values largely concentrated in our Florida, Georgia, North Carolina, Tennessee, and Texas markets. We've seen some favorable value notices issued and protests settled due to date and are continuing to aggressively pursue further tax expense reduction on the open protest properties. Our approved full year 2021 same-story NOI guidance forecast incorporates all known reductions, refunds, and settlements booked to date We're still mildly optimistic about realizing further reductions in the fourth quarter and into early 2022. In closing, I wanted to address questions routinely being asked by our investors regarding how long we can generate this degree of revenue growth. As those of you that follow us know, our goal is to provide an affordable but upgraded housing experience that post-renovation can still be at a price point comfortably underneath the next best housing option in our markets, which mainly is a new garden deal or a single-family rental. Today, this delta is still as material as it has ever been. We routinely analyze Class A effective rent data from Axiometrics and RealPage, as well as SFR rents reported by the public REITs and our own internal SFR platform. NXRT's Q3 effective whole-dollar portfolio rent is $1,183. In our markets, Axio's Class A average rent is $1,684, and Invitation's Homes is $1,974. That leaves roughly a $500 and $800 per month effective rent differential respectively between our upgraded product and these next best options. We believe this headroom in rents will continue to provide a tailwind for our company's revenue growth over the near and intermediate terms. That's all I have for prepared remarks. Thanks to our teams here at NextPoint and BH for continuing to execute. Back to you, Brian.

Yeah, thank you. We'll turn it over for questions.

Thank you. If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star 1 to ask a question. We'll pause for just a few moments to allow everyone an opportunity to signal for questions. We'll take our first question from Amanda Switzer with Baird.

Thanks. Good morning. Can you provide an update on where you currently stand with lost to lease in the portfolio?

Yeah. So, hey, Amanda, it's Matt. So we are currently roughly at call it $824,000 across the portfolio for the year.

Absolute dollars, just a gap.

Yeah, that's right.

Okay, that's helpful. And then as you think about same store growth into next year, where do you stand in resolving some of those prior casualty events and When do you expect those units to be back fully online and no longer impacting same-store growth?

Yeah, I think for us, we're expecting to have cutters be up and running during the first, probably toward the end of the first quarter. And then along that same timeframe from the ice storm, the Houston assets and the Dallas assets should be hitting in the first quarter as well. So kind of key to everything should be back in the pool.

Okay, that's helpful. And then last one for me, you did talk in the press release about how you continue to evaluate the portfolio for additional capital recycling opportunities. Can you talk about the potential magnitude of that recycling activity and potential locations you're considering for sale today?

Yeah, I think, I don't know if we said on the call, but definitely an investor one-on-one is that our probably next coaling of the portfolio will occur in Houston, our three assets in Houston, specifically Old Farm and Stone Creek are probably the first two that would go. The thinking there is Houston has been a market that has sort of underperformed the rest of our core markets, both on the revenue side and then the tax assessors and the municipalities are very aggressive in terms of raising taxes, so you kind of get the worst of both worlds. And then we want to continue to overweight markets that have robust growth and lower property taxes and other not controllables. So those markets for us right now are in North Carolina, Charlotte, and Research Triangle, which we're spending a lot of time there, and especially the Six Forks. And then Phoenix is another market that's probably performed as well as any for us with robust leasing growth. And then obviously they have the statutory limit on property tax increases. So that's helpful there. So I would say continue to focus on those two markets.

Thanks. Appreciate the time.

You bet.

Again, to ask a question, please press star 1. As a reminder, only analysts may ask a question. We'll take our next question from Gaurav Mehta with National Securities.

Yeah, thanks. Good morning. First question I have is on cost of material. I'm wondering if you could comment on what you're seeing as far as the cost of materials and if that's impacting your returns on redevelopment at all.

Yeah, for us, the cost of materials is really probably focused in two areas, appliances and paint. we're seeing the most increase. And it's not necessarily an increase that we can't pass along. It's just really getting access to the appliances and goods, which is about eight to 10 weeks behind schedule. And I think in terms of that's timing and in terms of cost, roughly 15 to 20% more. But again, we've been able to pass that on for the upgraded product and for the rents.

Great. And second question, I have maybe a big picture on the macro side. I was wondering, you know, what your view is on sustainability of the mid-three cap rates in the event we have tightening of monetary policy in 2022?

Yeah, I mean, I think you kind of said it in the NAV table discussion, but we don't see investor appetite abating and then just a wall of sheer cash and capital out there for assets. Notwithstanding inflationary pressures, most of the world is in a negative interest rate environment. And we just think that those issues coupled with the cash, how well the growth is in these assets, double digit increases, the ability to pass along inflation, reset on a monthly base for rent, and then particularly how well these assets performed, specifically garden affordable B assets and Sunbelt performed during sort of the worst of times over the past 18 months. Had some bad debt issues and collection issues, but generally performed well and were occupied and people paid rent. and the revenue didn't turn materially negative. So I think investors from all aspects, from all capital allocation perspectives, took side of that, and we're seeing it pour in in spades right now.

Okay, thank you. That's all I had.

Thank you.

We'll take our next question from Buckhorn with Raymond James.

Hey, good morning, guys. I'm curious, you know, these new lease, I mean, the pricing power you guys are generating is just almost unprecedented right now. Certainly, incomes and wages across the economy seem to be improving quite a bit. But I don't know if they're keeping up with, you know, 24%, 25% new lease rate increases. So I wonder if you can provide some context around where your rent to income ratios stand for your new applicants who are coming in. Maybe what the, you know, what kind of income are those out-of-state applications bringing with them? You know, how sustainable are these levels of rent increases given the, you know, the credit quality of the applications?

Yeah, I think our portfolio average is roughly, I think, 26% as it sits today, a buck. And that's been, it's usually been, I think, for us, 23% to 25%. So it's a little bit, I think, elevated. It doesn't really tell the whole story, though, because as I mentioned, from the capital recycling of the assets, our median household income is going up with the location upgrades. So $118,000 for the Charlotte and RTP deal versus $55,000 for the Nashville deal. We've been upgrading our demographic and our job quality throughout the past three or four years. I just harken it back to just the headroom and rents between what the options are. Again, our rents are $1,200, New Garden is $1,700, and then SFR is $2,000. I just think we'll have the ability. Once we get, I think, a $100 coin flip between us and the next best option, I'd get worried, but $500 and $800, respectively. And it's not like Class A and SFR aren't doing the same thing. I mean, you see record increases in both of those property types as well. So, yeah, I think it's sustainable certainly over the near term because there's just not going to be enough supply versus the demand for affordable housing.

Great. That's great, Paula. Thank you. Thank you for that. And with the certainly improved cost of capital, with how you're underwriting new deals, how are you thinking about where your current leverage targets stand? And as you're continuing to pursue new acquisitions, do you think about over-equitizing some of those new deals to bring the total leverage down?

Yeah, I think so.

I guess the dispositions are going to be our probably the highest near-term currency to the extent that we funded acquisitions, the Houston assets, for example, because I think that there's going to be at least a net cap rate, especially if you look out through year one or year two and a new acquisition, just given the drag in taxes and revenue growth in Houston. And then as we've said from our From our NAV table, we think we're relatively cheap right now, the private market values and transaction activity, and so we're not necessarily looking to raise a bunch of equity here. Again, we don't see that this is gonna stop anytime soon. To the extent we found a new deal, we'd probably add less leverage on the replacement asset and over-equitize it that way, instead of issuing equity But comfortable with where our swaps are, with where our all-in interest rate are and where we're hedged, you know, over the next, you know, four and a half, five years. Brian, do you have anything to add to that?

Yeah. Perfect.

Perfect.

All right. Thanks, guys. Appreciate it. Thanks, both.

We'll take our next question from Teo Ocasanio with Credit Suisse.

Yes. Good morning, guys. Congrats on another great quarter. First question, could you just talk a little bit about Vegas, Atlanta, and Charlotte, specifically kind of negative year-over-year and quarter-over-quarter occupancy trends and what may be happening in those three particular markets, just kind of given how strong everything else was?

Yeah, you bet. So Vegas is primarily related to one asset, that's Bloom, in which there's there were a little bit more concentrated late payers. So when you saw the kind of uncertainty in the eviction moratoriums, you know, they stopped and started again and stopped again in July and August. I think that property in particular was hit hardest with skids. And so that's primarily a driver of bad occupancy. Since then, we've upgraded a ton of units there. We just made the decision to go ahead and upgrade them all you know, are achieving new leases, you know, in the 20%, 20, 25% range there. So that's going to, I think, work itself out to be a net positive. Atlanta, kind of the same story with the preserve at Terrell Mill, concentrated issues. Again, because the eviction moratorium was off, then on again, and then off again. So had the same issue there. We cleared out a lot of the skips and late payers. and have upgraded units there. And again, same story, 30% plus new lease growth at that asset. And then by the way, in those two assets, we've also received a ton of rental assistance that will make their way through the income statement through the year. Finally, Charlotte, primarily related to Timber Creek. So again, one asset there. Same story, had some skips, plus there's some bad, or not bad debt, but some units down there due to casualties. So those are all kind of the three, I guess, problem children, if you will, in those markets that cause, I think, overall relatively minor issues, but not anything that we're worried about long term.

Great. Okay, that's helpful. Then the second question, I mean, then just from someone's prior comments, the spreads on the new leases and the renewals are pretty eye-popping. I'm assuming, you know, the benefits from, you know, the tech packet upgrades and the unit upgrades are all built into those numbers. And if they are, is there a way we can just kind of separate the benefits from those big rent jumps you get when you've done that versus just kind of standard kind of rent increases for renewals and new leases?

Yeah, I mean, you're talking about X kind of value add. Right, exactly.

16% all in, as you mentioned before, kind of X all the value add if we're just kind of really looking at you know, a similar unit, quote, unquote, what would that number be?

Yeah, I think the best indicator is your, you know, your renewal rate, perhaps, which is, you know, 10, 12, 15%. But then again, like, if we didn't upgrade as many units, we signed probably, you know, I'd say probably 500. Actually, I have a reminder of it. We had 390 new leases and then for Q3, or excuse me, 390 upgrades. 349 upgrades for Q3, but we signed 1,459 new leases during the quarter at 23.81% for an average increase of $225. I guess backing out the premium, you're probably still in the mid to high teens, but that's something we can definitely pull and get for you following this call.

Irrespective of the numbers, this is some pretty aggressive increases. It's pretty impressive that there wasn't any kind of major impact on occupancy, so well done.

Appreciate it.

We'll take our next question from Michael Lewis with Tris Securities.

Thank you. I want to follow up on the cap rate discussion a little bit. So the disposition cap rate, the two Nashville deals, I think I missed it. Did you say that was a 4-1 cap?

No, those were 3.54% tax-adjusted cap rate.

Okay. And that's on – is that on forward 12-month NOI, or is that in place?

In place, T3 over T12.

Okay. So assuming that there's any loss to lease there, that's an even lower forward cap rate. Okay. I was going to say if I was comparing apples to apples with the cap rates you're using for your NAV analysis, but I assume when you calculate your NAV, you're capping forward 12-month NOI as well? Or is that in place like the cap rate you just gave?

Yeah, it's forward, but it's nominal. So it's sort of net-net neutral. So the nominal cap rates we – or the cap rates that we quote for the NAV table are nominal cap rates and aren't tax-adjusted or CapEx-adjusted. The cap rates that we just quoted, the 3.54 for Nashville, are tax-adjusted and are post-CapEx.

OK, that's helpful. And I wanted to ask about, you know, the Raleigh acquisition. I assume that's probably a market that you wouldn't mind growing in, you know, maybe thoughts on looking to do more there. And I'm also wondering, you know, other target markets, you know, how many how many markets are kind of in your, you know, in your playpen here that you would, you know, that you kind of survey and are poking around?

Yeah, I mean, Raleigh-Durham is the biggest focus for us. Right now, we're spending a lot of time, effort, energy, money, and resources in that market. The latest research we've seen and being on the ground there, there's over 10,000 jobs over the next 12 months with an average median income of $150,000 or more and only plus or minus 3,000 units of new stock delivered. That's an incredible dynamic that just doesn't exist in most places. The problem is capital is also seeing the same things we are, so it's just a tough market to enter. Other than that, frankly, there's not a ton of new places or new markets that we're focused on. We've studied Salt Lake City a little bit and the Mountain West region. Probably not going to spend a ton of time there, but other than Raleigh, where we are spending time, and Salt Lake could be interesting later in the future. We're really happy with our core markets.

Okay, great. And then just lastly for me, following up on an earlier question about the leverage, it looked to us like the leverage did come down a little bit this quarter, but you've got, I think, you ended the quarter, I think, with $275 million drawn on the credit facility. You know, it sounds like maybe you would use some sale proceeds to pay that down a little bit, but how do you kind of think about know sometimes you run a little bit tight on the facility you know how do you think about um what it might be worth to you to free up a little bit of dry powder or thoughts on the way you know you use that facility or or how you might do some permanent funding um and bring that balance down i don't know yeah um i'll start and i'll let brian finish i think uh you know for us we

Well, first of all, we just paid 50 of it down yesterday, so it balances a little bit lower from our dispositions. But you're right, we do run generally drawn and hot on the revolver and then utilize the portfolio as currency. We started to do that when we issued a little bit of stock on the ATM, but then realized the market environment where we were and stopped because we just saw pricing that it was going to run uh incredibly uh far we still believe that so um you know we're not in in a a mad dash hurry to um to issue equity and uh and pay down two and a half percent debt right now um when you know when our growth rates are are increasing so um i think that i think the current thinking is if we if we can you know, reach a position where our new NAV table is, then we might utilize the ATM to de-lever. Otherwise, it's going to be the dispose. Do you have anything?

Yeah.

Yeah, sorry, go ahead. No, I was done. We can go to the next question.

We'll take our next question from Rob Stevenson with Janie.

Good morning, guys. The guidance has same-store expense growth coming down from 5.6% down to a midpoint of 5.0 now. Is this just timing of year-over-year comps? Are you really starting to see any material relief? in the expense increases on the big items like taxes, people, and insurance as we move into 2022?

Yeah, I think, Rob, it's largely taxes. We realized a pretty good reversal in the second half of the year in the Houston taxes. I think it's almost half a million bucks. And so we think that, you know, Houston optimistic on some Tarrant County assets and Dallas and Atlanta. I think those are the main drivers.

Okay. And so as we start thinking ahead, I mean, is it likely to be in the sort of high fours is where same store expense growth is likely to be given the current market environment and the inflationary pressures across the board?

Yeah, I mean, I think we're optimistic it can come in lower, but it wouldn't be, you know, I don't think it would be largely driven by, you know, a big number in repair and maintenance savings or payroll. I think it's just largely tax driven.

Okay.

Thanks, guys. Appreciate it. Thanks, Rob.

Again, if you would like to ask a question, please press star 1. As a reminder, only analysts may ask a question. Again, that is star one. We'll pause for just a few more moments to allow everyone an opportunity to signal for questions.

I'm showing we have no more questions in the queue at this time.

That concludes today's question and answer session. Speakers, at this time, I will turn the conference back over to you. for any additional or closing remarks.

Yeah, I appreciate everyone's time. We'll talk after you're in. Thank you.

That concludes today's call. Thank you for your participation. You may now disconnect.