BSR Real Estate Investment Trust

Good afternoon. My name is Ludi and I will be your conference coordinator today. At this time, I would like to welcome everyone to the BSRV Q4 2024 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press a star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, please press a star followed by the number 2. Thank you. I would now like to turn the conference over to Dan Obersty, President and Chief Executive Officer of BSR REIT. Please go ahead, sir.

Thank you, Ludi, and good day, everyone. Welcome to BSR REIT's conference call to discuss our financial results for the fourth quarter and year-ended December 31st, 2024. I'm joined on the call by Susie Rosenbaum, the REIT COO and Interim Chief Financial Officer. Susie has been doing double duty for a while now, so I'm very pleased to report the appointment of Tom Service as the REIT's new chief financial officer, effective next week. Tom joins us after 10 years at Wells Fargo, where he most recently served as an executive director in real estate, gaming, lodging, and leisure investment banking, and also worked in equity capital markets. Prior to his time at Wells Fargo, he worked at KPMG Corporate Finance as an investment banking analyst in healthcare and technology mergers and acquisitions. We welcome Tom and his family to our BSR team and look forward to working with him as we enter another exciting chapter of BSR's growth and evolution. I'll begin the call with an overview of our Q4 performance and highlights. Susie will then review the financials in detail and I'll conclude by discussing our business outlook. After that, we'll be pleased to take your questions. To begin, I want to remind listeners that certain statements about future events made on this conference call are forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please refer to the cautionary statements on forward-looking information in our news release and MD&A dated March 5, 2025 for more information. During the call, we will reference certain non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meaning under IFRS. Please see our MD&A for additional information regarding our non-IFRS financial measures, including reconciliations to the nearest IFRS measures. Also, please note that all dollar amounts are denominated in U.S. currency. The fourth quarter featured challenging market dynamics that were consistent with the latter stages of the absorption of an unprecedented supply of new multifamily housing. Given this external environment, our financial and operating performance was in line with our expectations. While lease rates were down as expected, we maintained strong occupancy of 95.6% and retired another $4.5 million of long-term debt, bringing the total amount retired in 24 to $8.8 million. For the quarter, same community revenue was essentially flat compared to Q4 last year. Same community NOI decreased 2.6%, which was almost entirely attributable to an increase in property tax due to timing and treatment of tax refunds received during the back half of last year. And FFO and AFFO each declined by 2 cents per unit, reflecting this tax issue as well as the timing of the recognition of health insurance expenses. Given the external operating environment in Q4 that I described, these results were gratifying and attributable to the resilient BSR platform and the strong performance of our team. In addition, our results for the full year were in line with the guidance that we provided in November, with FFO and AFFO per unit right in the midpoint of their guidance ranges. Looking at the latest national supply numbers underlines the challenging conditions that were emerging from and the opportunities ahead. After two years in which new starts substantially outnumbered completions, the number of completions over the last 12 months has outnumbered starts by 262,000. As we get closer and closer to the full absorption of the 2022 and 2023 starts, conditions for rental increases are excellent. And according to national data from Colliers, Austin, Dallas, and Houston are ranked first, second, and fourth respectively in forecast declines in new apartment completions in 25 versus 24. At the same time, while new supply is drying up in our core Texas rental markets, robust economic growth and continued population migration in these MSAs continues unabated. So, as we come off the bottom of the new supply cycle in these markets, it's going to be an excellent time to be in acquisition mode. And as I indicated in our call last week, the pending sale of nine stabilized properties to Avalon Bay positions us to potentially complete approximately $200 million in acquisitions while still maintaining a debt-to-gross book value ratio of about 45%. That represents a lot of potential AFFO when the new assets are stabilized. I'm not going to dwell on these property sales today as we discussed them in detail just last week. I'll simply note that we believe the transaction will be highly beneficial for unit holders and position us to create a very significant value moving forward. If investors have any questions about them that we haven't addressed, I encourage you to reach out to our team. In December of 2024, construction was completed on Aura 3550, our new 238-unit apartment community in the Austin MSA. Despite the challenges in the Austin market, lease-up is proceeding well, and we expect the property to be stabilized in contributing to AFFO by early 26. And for the third year in a row, BSR was named one of the best places to work in multifamily and best places to work in multifamily for women at the Multifamily Innovation Awards held in December of 2024. We're proud of this achievement and recognize that a great workplace is fundamental to generating great results. In January, subsequent to the end of the quarter, we acquired the venue of Craig Ranch Apartments in McKinney, one of Dallas-Fort Worth's rapidly growing submarkets. It's a Class A property with 277 apartment units, and we see opportunities to enhance operating income from it. The purchase price was $61 million. As you know, this was our first notable acquisition in a long time. and it is evident that the market for transactions on high-quality properties in the Texas Triangle markets is ripening. Finally, we have continued to strengthen our balance sheet. During Q4, we took further action to mitigate interest costs through a $42 million interest rate swap and also extended $160 million of mortgage notes. And as I highlighted, we retired an additional $4.5 million in Q4 2024 with cash flow generated from operations. I will now invite Suzy to review our fourth quarter financial results in more detail. Suzy?

Thanks, Dan. Same community revenue decreased marginally in Q4 2024 to $42 million compared to $42.1 million in Q4 last year. The decline was primarily due to a decrease in the average rent per unit from $1,503 last year to $1,488 in Q4 2024. partially offset by a $0.2 million increase in other property income related to resident credit building services and utility reimbursements. Same community NOI decreased 2.6% to $21.9 million compared to $22.5 million in Q4 2023. This was primarily attributable to an increase in property tax expenses of $0.5 million due to higher refunds received in the same period last year, as well as slightly lower revenue. FFO in Q4 was $11.9 million, or $0.22 per unit, compared to $13.3 million, or $0.24 per unit, last year. The decrease reflected lower NMI and an increase of $0.5 million in G&A expenses due to the timing of recognition of health insurance expense. and a $0.1 million increase in finance costs. On a per-unit basis, FSO benefited from the repurchase and cancellation of approximately 3.5 million REIT units in 2023 under our NCIB programs. FSO in Q4 was $10.9 million, or 20 cents per unit, compared to $12.4 million, or 22 cents per unit, last year. The decrease reflected the lower FFO and a $0.1 million increase in maintenance capital expenditures. FFO per unit benefited from the buyback of units I referenced a moment ago. The REIT declared quarterly cash distributions of $0.14 per unit in Q4 compared with $0.13 last year, representing an FFO payout ratio of 68.9% in Q4 2024, and 58.3% in Q4, 2023. All distributions were classified as a return of capital. I'll now review our results for the 12 months in the December 31st, 2024. Same community revenue increased 0.4% in 2024 to 168.5 million compared to 167.8 million in 2023. The slight increase was primarily due to an increase of $0.6 million in other property income related to resident credit building services and utility reimbursements. Bank Community NOI increased 1.3% to $92.3 million from $91.1 million last year. This was attributable to the higher revenue as well as a decrease in real estate tax expense of $0.7 million due to higher refunds and a $0.1 million reduction in property insurance expenses. These factors were partially offset by higher renting expenses of $0.4 million associated with the cost of new services to generate additional income. These include items such as smart home technology and the resident credit building program. FFO in 2024 was $51.7 million, or $0.96 per unit. compared to $52.6 million, or $0.93 per unit, last year. The dollar value reduction compared to 2023 was primarily due to a $2 million increase in finance costs, partially offset by higher NOI. The increased finance costs reflected a higher average interest rate and an increase in total loans and borrowings due to draws in 2023 to fund the REITs unit buybacks, These repurchases resulted in a higher FFO per unit in 2024. AFFO in 2024 was $47.6 million, or $0.88 per unit, compared to $48.4 million, or $0.85 per unit, last year. The dollar value decrease reflected the lower FFO partially offset by a $0.2 million decrease in maintenance capital expenditures. ASFO per unit increased year over year due to our unit buybacks. The REIT declared quarterly cash distributions of 53.7 cents per unit in 2024 compared with 52 cents last year, representing an ASFO payout ratio of 60.3% in 2024 and 60.7% in 2023. All distributions were classified as a return of capital. Turning to our balance sheet. The REIT's debt to gross book value as of December 31, 2024, was 46.5%. Total liquidity was $136 million, including cash and cash equivalents of $8.7 million and $127.2 million available under our revolving credit facility. We have the ability to obtain additional liquidity by adding properties to the current borrowing base of the facility. As of December 31st, we had total mortgage notes payable of $496 million, excluding the revolving credit facility, with a weighted average contractual interest rate of 3.5% and a weighted average term to maturity of 3.7 years. In aggregate, the mortgage notes payable and revolving credit facility totaled $787.5 million at year end, with a weighted average contractual interest rate of 3.8%. excluding the convertibles to ventures that were then outstanding, and 100% of our debt was fixed or economically hedged to fixed rates. As Dan highlighted, during the fourth quarter, on November 1st, we entered into a new interest rate swap of $42 million at a fixed interest rate of 3.13%, effective February 2nd, 2025, and maturing on February 1st, 2030, subject to the counterparty's optional early termination dates of February 2nd, 2026. These swaps have been a very useful tool to help us mitigate interest rate risk. Back in September, we extended 160 million of mortgage notes by one year to September 13th, 2025, with no other contractual changes. In December, we further extended these notes to December 11th, 2026, with no related contractual changes. As of December 31st, Our availability under the credit facility is sufficient to refinance the $48 million of mortgage debt maturing over the next 12 months. We are also considering other refinance options, including new mortgages. Subsequent to year-end, in early January, we redeemed all the issued and outstanding convertible debentures in the aggregate principal amount of $41.5 million, plus accrued and unpaid interest of $0.5 million. This will result in interest savings for the REIT. We funded the redemption withdrawals from the credit facility. Overall, as Dan highlighted, we retired $4.5 million in debt in the fourth quarter and $8.8 million in the full year with cash flow generated from operations. We will continue to carefully manage our debt with a focus on maximizing our flexibility. I will now turn it back over to Dan for closing comments. Dan?

Thanks, Susie. I can't tell you enough how proud I am of the job our team did in 2024. Despite the temporary pressure on rents from the surge of new supply, we maintained our track record of solid financial performance. In fact, when we apply this platform, our people and capital allocation, track record, and most importantly, our culture to this sector, good things happen. Our operating performance throughout 2024 was another example of this. We knew supply would be a temporary challenge in our Texas triangle markets, but looking ahead, the outlook is much stronger. The rapid absorption of supply should create constraints by later this year, and I can't overstate how few new apartment buildings are on the horizon. In 2024, apartment starts in Dallas were at the lowest level since 2014. In Austin, they were the lowest since 2013, and in Houston, they were the lowest since 2010. As I noted last quarter, we expect deliveries to decline by more than 40% through 2026. Meanwhile, migration into our core Texas markets continues at a very strong pace. In 2024, Texas led all states in net domestic migration and was among the highest in net international migration as its population surpassed 31 million people. With its booming economy, affordable housing, and low tax regime, Texas will continue to be highly attractive to people and corporations eager to exit higher tax areas. As new apartment deliveries in our core markets wind down and the supply is fully absorbed, we expect to resume robust organic growth. After completing the sale of nine properties to Avalon Bay, we will have very substantial dry powder for property acquisitions. You all know how slow it was on the M&A front once interest rates started rising in early 2022. we are finally seeing plentiful opportunities to add high-quality assets to our portfolio on an attractive basis, on an accretive basis. And once we have them, we can put our proven BSR management platform to work and really drive enhanced growth. Finally, I just want to note that we have not provided financial guidance for 2025. We really wish that we could. However, There's simply too much short-term variability as we work to complete the property sales to Avalon Bay and then redeploy the proceeds into other assets. We will look to provide guidance once the dust settles a bit and we have more certainty regarding our results. That concludes our prepared remarks this morning. Susie and I would now be pleased to answer your questions. We'd like to respect everyone's time and complete our call within an hour while giving all of our analysts the opportunity to ask a question, so please, Limit your initial questions to one and then rejoin the queue if you have additional items to discuss. If we don't have time to address everything, we can respond to additional questions by phone or email afterwards. Ludi, please open the line.

Thank you. And ladies and gentlemen, we will now begin the question and answer session. To ask a question, simply press store followed by the number one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, simply press Restore followed by the number 2. Once again, please press Restore 1 to ask a question. And your first question comes from the line of Kyle Stanley with . Please go ahead.

Thanks. Afternoon, everyone. You know, it looks like in the fourth quarter there was a definitive focus on occupancy. I'm just curious, has that continued so far in the first quarter? I mean, would you be able to disclose maybe where we sit today versus the 95.6% occupancy level at year end?

Sure, Kyle. You know, I think that there's a little bit of a seasonality component to the Q4 that we're seeing. So Q4 has historically been the lowest kind of leasing months in U.S. apartment leasing. May through August generally tend to be high velocity months. So what we were thinking about and what we talked about in November was an operator with a superior portfolio of properties can better set up occupancy rates. in November and December, a better creative rate in November and December through occupancy. And that sets us up nicely to attack rate in May, regardless of where the organic market sits. So I think that I'm proud of our team and their ability to increase occupancy in a supply-heavy environment. That's pretty amazing. And I do think that that positions us to take advantage of the high leasing months in May through August with, I'll say, attacking from a position of strength.

Okay, that makes perfect sense. I will turn it back. Thanks.

And your next question comes from the line. I've got Jonathan Culture with TD Telecom. Please go ahead.

Thanks. Just looking back at the transaction that was announced last week, How were the assets picked for that?

Jonathan, that's a good question. There was a process that was conducted. We reviewed several assets before both parties identified the portfolio that was announced. The REIT intends to file a material change report on the transaction as early as tomorrow, Friday afternoon, and I would think that a more detailed description of the process conducted by the special committee and the board here would be disseminated in that MCR. So, you know, one thought here is let's review the MCR. It's going to be incredibly accurate and detailed. And then we're happy to entertain any questions following the review of the MCR.

Okay, fair enough. And then just to follow up on that, you obviously have some cash to deploy. How should we think about going in cap rates for the roughly 200 million that you need to do in the next little bit?

Yeah, I think it's a fair range is five to six going in. And the one thing that hasn't changed about the way we acquire assets is we talked about it before. We like to drive NOI years one through three. We did it in a value add market when we went public and we did it with new lease up construction between 19 and 21. We like to see that 75 basis point look back cap rate on year three, regardless of what going in cap rate we buy. And I think going in cap rates right now look to be five to six for the kind of product that we want to see, probably airing closer to five. I do want to note here that an economic cap rate for an internal manager looks a little bit different. So if I'm quoting a 525 cap for an acquisition, I want to remind everybody that we have an internal manager. So we do not have to pay a management fee to anyone other than our shareholders in order to operate our properties. That generally creates a competitive advantage for us in the marketplace. And if the read-through cap is 525, our shareholders might enjoy a 540 on account of us not having to pay anybody who manages the asset. Okay.

It's helpful. I'll turn it back. Thanks.

Your next question comes from the line of Brad Sturgis with Women's Leasing. Please go ahead.

Hey there. Just to, I guess, follow on to Kyle's questioning, just on the leasing side of things, Given what you experienced in Q4 and prioritizing occupancy to be in the best position for the spring and summer, how should we think about your leasing rent spreads? Would Q1 be more similar to Q4? And then where do you think the spreads can recover to into the stronger spring and summer leasing season?

Yeah, hey, Brad. So, you're right. Q4, well, Q1 right now is looking very similar to Q4. And as Dan just spoke about, we've chosen to push occupancy in Q4 to set ourselves up to take advantage of the leasing season coming forward. Now, with that being said, things are still going to be tough. We still have a lot of supply to absorb. Not as much new, not coming online now, but you still have to absorb what is there. And so that's still going to continue into the second quarter and even into the third. I'm not expecting the rates to start going up of any significance probably until the latter half of the year, maybe starting in October. Okay. I'm thinking about all three of that and primarily those.

And that, like, how would you compare renewal versus new leasing spreads in that manner? Would you see a quicker recovery on either, on renewal versus the new leasing spreads?

Right. So, obviously, right now our mark-to-market is flat, which is good because it was slightly negative last quarter. And that, yeah, that points to things getting better, though, of course, we'd love to see it roll positive again. Again, I don't think that's going to be it. I don't think that's going to happen until around Q4 of this year.

Okay. Thank you very much.

Your next question comes from the line of Pimanshu Gupta with Scotiabank. Please go ahead.

Thank you, and good afternoon. So based on the commentary so far on fundamentals, do you think, you know, 2025 failure is likely to look very similar to 2024? And we should expect, you know, kind of recovery in 2026?

Are you talking specifically to net operating income, Manchu?

Then I'm talking about the rental spreads. You know, if you look at the same store, revenue growth was almost flat this year, you know, 2024. And how should we think about in 2025? Yeah.

Yeah. Again, we're still absorbing a lot of the supply. And so it's still going to look pretty flat throughout most of the year. However, when we get to the back half of the year, that's when I expect it to start to turn, where we'll start seeing blended positive spreads again for the portfolio in 2026.

Okay. Yeah, and Himeshu, I think another critical factor to our deliberate decision to focus our investments in Dallas, Austin, and Houston. are the stats that those three cities put up last year. When you think about supply, you also have to think about demand in the equation. Dallas, Houston, and Austin, in that order, led the nation in absorption last year, right? I think Dallas and Houston were the only two cities last year and the year before to grow by more than 100,000 people. I think it's our view this year, as Susie mentioned, that the department that was delivered in September of last year as part of that massive supply wave that apartment complex might be 40% occupied. It's still going to need to be leased up, and that's going to create a little bit of slack in the rate market. Ultimately, I would say the injured party in a supply wave is the B-, the B- and the C-owner, the value-add owner. The operator that has the superior product generally takes it on the chin early in a lease-up cycle, similar to what you saw from, I'll say, the 2024 numbers. Our look forward is somewhat insulated by the fact that we are in the three highest absorbing markets in the country right now. So even though supply was an issue in 2024, I think that headline starts to go away on a look forward as we move further into the year. And the issue kind of reverts to Manchu. It becomes one of an undersupplied market. And I got to tell you, our investors should be happy that our three largest markets are the largest markets for net absorption in an undersupplied market. So we like what we look on what looks to be a good short, medium and long term run for the Texas Triangles.

Thank you. I have a couple of follow-ups, but I'll join the queue and we'll come back. Thank you.

Thank you. And your next question comes from the line of Saranth Raneva with Coremark. Please go ahead.

Thank you, operator. Good afternoon, everybody. Dan, just going back to your comment on, you know, recovery expected towards the back end of the year, are you seeing that reflected as well in asset pricing? And secondly, you know, do you see a bit of a cap rate differential between, you know, some of the repositioning assets versus more Class A newer assets, something similar to what you saw in 2019, 2020?

A gap between the repositioned assets that we bought in 19 and 20, is that what you said, Sai?

No, basically, like, if you remember, like, back in 1920 when BSR made the effort to actually get into Class A, you did see a differential in cap rates, right, between older assets and newer ones. Do you see something similar happening right now?

Yeah, we do. I'll tell you what we're not seeing is compression of value-add cap rates on the street. That is a phenomenon that we saw in 2019. We saw what we thought was an irrational compression of value-add assets in 19. And we obviously sold value-add portfolio into that market. We were fortunate that at the same time we saw an irrational expansion of cap rates in new construction lease-ups. that ended up being a very good investment decision for our investors that the platform made, as is evidenced, 19 to 21. What we're seeing now is probably a little bit less of an appetite for the value add or the older asset. And that makes a lot of sense, driven by no liquidity in the marketplace and, if it's available, high interest rates. So a high interest rate, low liquidity market does not necessarily favor a value-add underwriting, regardless of whether that property is a good investment or not. So we're not seeing that phenomenon take place right now, but what we are seeing is probably a little bit of a fair market discount for a really good asset that's owned by a developer that's not an experienced manager. So we do see an opportunity to pick up assets at less than their construction value, or they're below replacement costs for new, let's say, 22, 23, all the way up to the end of Q4, 23 constructed assets, we see there's a bit more of a willingness of a developer to let go of an asset that may be 60% to 80% occupied to really hand it off to a permanent apartment manager like VSR who is skilled at the lease up and the stabilization that last quarter, that last third of the occupancy to stabilization that's needed to create a product. So we're seeing that phenomenon exist, much like we saw in 19 to 21 on the buy side. What we're not seeing is a compression of cap rates on the value add. It's quite the alternative, or quite the opposite.

Awesome. Thanks, Ben.

And your next question comes from the line of Matt Kornack with National Bank Financial. Please go ahead.

Hi, guys. Just wanted to get your sense on expense growth, given your commentary on the revenue side. Obviously, I think there's more inflation creeping into the system, and then maybe also just on demand growth. I think the expectation was hopefully for a more business-friendly administration. We're getting the less business-friendly stuff up front, but are you seeing any impact on demand as a result of that?

Hey, Matt, I'll take the first part of the question regarding operating expenses. And so for everything except for real estate taxes, I think that's pretty much in check. And I'm thinking anywhere between 2% to 3% growth. Next year, now real estate taxes are a different story. I'm looking at more like 6% growth in real estate taxes, primarily related to the fact that we got a lot of refunds, frankly. in 2024 that won't replicate themselves again in 2025.

Yeah, and Matt, as it relates to new administration, old administration handoff, I'm assuming you mean the recent presidential election. And, you know, I think it's our view that both administrations saw a, they see a need for housing in the United States. They're not looking at You know, the fourth quarter of 24, the third quarter of 25. What both administrations were looking at are the massive undersupply of housing in the United States, particularly in fast-growing markets that will exist in 25, 26, 27, 28, 29. I could go on and on. What neither administration can do is to control the 10-year Treasury. to control the borrowing costs that a private developer has to pay to build a new project. And what we're seeing shape out is an increase to building costs. So where we might see certain municipalities be more favorable towards zoning and acceleration of permitting for development of built rent or multifamily or any other high density or low density housing product. That's nice, and that's a great sweet gesture by the municipality, but it's simply not going to overcome an elevated interest rate yield and an increase, a massive increase to the uncertainty now related to the hard building costs to construct a project. Both of those issues are going to create, I think, headwinds would be a nice way to say it. I think a hurricane of headwinds on new housing starts in the United States. is probably the more appropriate way to say it.

Fair enough.

Appreciate the call, guys. Thanks.

Thank you. And once again, if you would like to ask a question, seem to press a star, followed by the number one on your telephone keypad. Your next question comes from the line of Dean Wilkinson with CIDC. Please go ahead.

Thank you. Good afternoon. Dan, don't know if you can get this granular, but on the leasing, Was there a marked difference between the portfolio that is proposed to go to Avalon versus what you're keeping? Kind of just going to the sort of the new lease renewal spread, the minus 8.3 number.

Yeah, that's a good question, Dean. So, you know, it is a granular question. We can go as deep into the weeds as you want to, but I – I don't think I'm prepared today to parse out any impact of potential future dispositions on the Avalon Bay transaction. I would say that the Avalon Bay transaction represents a cross-section of our portfolio, and we try our very best to be very fulsome and detailed with our disclosures and our MD&A. And I think at this time, we don't expect any impact to our expectations of performance in Dallas, Houston, or Austin. as a result of any inflow or outflow of any acquisitions or dispositions. All that to say, we're very happy about the announcement last week. We think it validates the value of a cross-section of our portfolio. And I, for one, love repatriating capital into the REIT and putting it in the hands of my partners and Susie and our team to deploy that capital and earn cash flow per unit for our investors.

The markets are the markets. And even selling certain assets in those markets don't change the nature of the assets we still have there because our portfolio is pretty homogenous. But with that being said, we do have some great ideas for ways to increase organic rent growth while we're in this sort of flat period. And we started rolling out bulk internet. Dane, you want to talk about that?

Yeah, happy to talk about bulk internet. So the fun, I think the fun thing about, you know, Dane, as you know, and you'll follow this for a while, the BSR platform, pre and post public has been owned and operated just about every piece of real estate under the sun. We deliberately picked this portfolio. And what we like about newer construction, suburban class A path of growth is it's that they're less capital intensive. And that is to say we don't necessarily have to take 3,000 suites in this apartment business down every year to generate organic revenue increases in line with our peers. It's a very transparent balance sheet. But what we can do is take advantage of increased resident demand for certain items. Susie referenced the bulk Internet initiative that we're doing in our company. It's simply thinking of Internet as a utility in the United States and the fact that our residents, all of them, want Internet, taking advantage of the scale of a platform to negotiate lower bulk Internet rates and then passing on some of those savings to our customers and then passing on some of that profit to our investors. That is an initiative that it doesn't cost any money or relatively any money for any apartment owner. But what Class A can take advantage of is driving really to us 100% margin-driven revenue growth by rolling these initiatives out to our brand new properties, to our entire portfolio. We think there's going to be an impact, a positive impact to our revenue. Again, 100% straight down to the margin on NOI. in 2025, and we would expect the full impact to be a two to three to four magnitude of the 25 impact, and that should roll in in 26 as well. And I want to reiterate, we don't have to take any units down for three months. We don't have to non-recur CapEx to do this. We just have to apply this concept to our portfolio. Susie and the teams originated this idea in think tanks with some of our other colleagues in the United States and our partners last year. And we look forward to rolling that out this year and seeing the benefit this year and next year in our NOI margins and our cash flow for our investors.

Well, that's fantastic. I mean, it looks like a very sophisticated acquirer seems to agree with you on that. So thanks for the color. Appreciate it.

Thank you. And we do have a follow-up question coming from the line of Himanshu Gupta with Scotiabank. Please go ahead.

Thank you once again. So just for dry powder, I think $190 million of cash available. Just to clarify, is that equity competent? So, you know, technically you can buy $350 million acquisitions, you know, layer some debt as well on it.

Yeah, that's one way to think about it, Himanshu. I think the way we're currently thinking about it is, you know, we're going to use proceeds from a disposition to retire debt, and then we're going to use debt to lever up to acquire assets. I got to tell you, I wish that we had equity availability, but it doesn't look, I mean, given the print of last week, and we're still miles away from from, I think, really making a risk-based decision to lever the portfolio over and above the single-digit debt to EBITDA that Susie and I like and the mid-40s on leverage. So if you infer from that answer a dry powder number, we have plenty of dry powder to buy $200 million or $300 million, $350 million worth of assets. I think our intentions right now are not to catch a falling knife and to make measured acquisitions in our markets of between $155 million and $200 million between now and, let's say, the end of May. And after those are completed, we'll have another opportunity to speak to you and the investors to talk about any additional acquisition or disposition plans.

Awesome. Thank you, Dan, and I'll turn it back.

And I'm showing no further questions at this time. I would like to turn it back to Dan Oversee for closing remarks.

That concludes our call today. Thank you all for joining us. We look forward to speaking with you again in the spring following the release of our first quarter results. Goodbye.

Thank you, presenters. And this concludes today's conference call. Thank you all for joining. You may now disconnect.