BSR Real Estate Investment Trust

Good morning. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the BSR REACH third quarter 2025 fiscal results conference call. All lines have been placed on mute to prevent any background noise. After the management's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the star, then the number two. Thank you. I would now like to turn the conference over to Spencer Andrews, Vice President of Investor Relations and Marketing. Please go ahead, sir.

Thank you, Tina, and good morning, everyone. Welcome to BSR Reef's conference call to discuss our financial results for the third quarter ending September 30, 2025. I'm joined on the call today by our CEO, Dan Oversee, our Chief Financial Officer, Tom Serbis, and our Chief Operating Officer, Susie Rosenbaum, who are all available to answer your questions after our prepared remarks. Before we begin, I want to remind listeners that certain statements made on this conference call about future events are forward-looking in nature. Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. In addition, we will reference certain non-GAAP financial measures that we believe are useful supplemental information about our financial performance. For more information, please refer to the cautionary statements on forward-looking information and a description of our non-GAAP financial measures in our news release and MD&A dated November 5, 2025. Dan, over to you.

Thanks, Spencer. The third quarter represented a significant inflection point for BSR as the REIT completed its redeployment of capital midway through the quarter, continued the integration of our newly acquired assets, and, frankly, powered through a softer leasing environment than most anticipated. Despite some continued challenges in the macro-level operational backdrop, the REIT's capital allocation and stewardship has positioned our unit holders for upcoming growth. The results will speak for themselves, as they have many times in the past. when we have executed similar capital allocation decisions. The most recent example being our cancellation of approximately 20 million units, or 39% of the outstanding units in the REIT since 2022. To that end, in the third quarter, same community NOI increased 2.7% compared to Q3 last year. Same community weighted average occupancy was 94.3%. Our retention rate was 58.2% at quarter end. a further 80 basis point expansion from 57.4% at the end of Q2. Leasing momentum at Austin lease up Aura 3550 continued, with occupancy reaching 86.6% at quarter end, up from 59.7% at the end of Q2. We also experienced continued green shoots on the rate front. Blended same community rental rates increased 0.4% over prior leases. representing the first time that blended rental rates have increased since the third quarter of 2024. And we acquired the Ownsby for $87.5 million during the quarter. The Ownsby, which comprises 368 apartment units, is located in the Dallas suburb of Salina, which was the fastest growing city in the U.S. in 2023 and grew by a further 19% in the 12 months ending July of 2024. The fundamentals of our business are undeniable. Though continuing to percolate a little longer than originally anticipated, supply will materially exit the picture in the relative near term. As I highlighted last quarter, CoStar and several other data providers have adjusted their expectations for new deliveries from Q4 25 through 27, which should ultimately yield additional elasticity and pricing power for our apartment units. Therefore, we believe that This is just the beginning of a period of consistent growth in rental rates. Above and beyond rental rates, we have significant internal growth opportunities in front of us, given the going-in occupancy of the assets we acquired in 2025. As our team stabilizes these new properties and optimizes our existing best-in-class Texas portfolio, unit holders stand to benefit. I'll now invite Tom to review our third quarter financial results in more detail. Tom?

Thanks, Dan. Our operational performance in the third quarter was in line with management's expectations as our blended tradeouts continued to improve and, as Dan highlighted, turned positive in the quarter. Blended rates increased 40 basis points in the third quarter, which follows a 3.2% and 0.7% decline in Q1 and Q2, respectively. Clearly, we are seeing the results of the market absorption of previous deliveries. More broadly, the same community revenue was $26.5 million in Q3 2025, a decline of 1% from last year. This was primarily driven by the negative trade-outs we have experienced up to the third quarter, which resulted in a 1.2% year-over-year decline in average monthly in-place leases. That decline was partially offset by an increase in other property income driven by enhanced resident participation in our credit building service, an increase in utility reimbursements, and an increase in properties receiving valet trash service over the prior year. We're thrilled to see these internalization activities help drive results and believe it is a case study of the value-add potential embedded in our portfolio. It's worth noting that there are several of these internalization activities, including expansions of our valet trash, and bulk internet initiatives, which will provide meaningful acceleration to expected organic growth and will begin to materialize in 2026 and beyond. Same community NOI for Q3 2025 was $14.4 million, a 2.7% increase from Q3 2024. Our acceleration in same community NOI was mainly driven by a 5% decline in same community expenses the primary drivers of which were a $0.6 million decrease in real estate taxes and a $0.2 million decrease in property insurance. Below NOI, G&A improved by approximately $0.1 million, or approximately 5%, and net finance costs declined 2.7%, largely due to our net pay down of debt following our 2025 disposition and acquisitions activities. In total, FFO in Q3 was $0.19 per unit compared to $0.23 per unit last year. On an AFFO basis, total AFFO per unit was $0.17 per unit compared to $0.21 per unit last year. The year-over-year declines in FFO and AFFO per unit are primarily driven by, one, the time lapse in redeploying our disposition proceeds into new acquisitions, and two, the occupancy concentration of our development and new acquisitions, which we expect to stabilize to similar levels of our same community properties in the coming quarters. In addition, during the third quarter, the REIT declared cash distributions totaling 14 cents per unit, a 2.5% year-over-year increase. Turning to our balance sheet, the REIT's debt to gross book value as of September 30th, 2025, was 51.3%. This amounts to $726.6 million of debt outstanding with a weighted average interest rate of 4.0%, 99% of which is either fixed or economically hedged to fixed rates. On the liquidity front, total liquidity was $63.4 million as of September 30th, including cash and cash equivalents of $6.6 million and $56.8 million available under our revolving credit facility. As usual, we have the ability to obtain additional liquidity by adding properties to the current borrowing base of the facility. During the quarter, we amended our $3.27, $105 million interest rate swap to lower the fixed interest rate to 3.1% and extend the counterparty optional termination date to January 1, 2027. Note that, as I highlighted last quarter, we have undergone some material changes to our derivative book this year as we were called out of in the money swaps. Accordingly, ongoing finance costs will reflect the higher cost replacement of these derivative instruments, particularly evident when viewed on a per-unit basis. However, as a reminder, our use of swaps to hedge our interest rate exposure was laddered by design when we initiated this program. We continuously monitor and adjust various hedges with a goal of achieving the best cost of capital for the REIT. Finally, our financial and operating results continue to be affected by very recent property acquisitions, lease-ups, and the replacements of swaps. So with so many moving pieces, we are continuing our suspension of more detailed annual guidance at this time. I will now turn it back to Dan for his closing remarks.

Thanks, Tom. As we quickly approach the holiday season, I will remind everyone that 2025 has been a transformative year for the REIT. We've sold 10 fully stabilized department communities at extremely attractive pricing to best in class buyers. Once again, underlining the veracity of our NAV. In turn, we have traded those 10 stabilized communities for recently developed assets with higher embedded growth potential, while increasing our relative concentration to Houston. With the acquisitions of the Owensby and Venue Craig Ranch in Dallas, Ferena Vintage Park and Botanic Living in Houston, and the lease of Bevor 3550 in Austin, we have now added a tremendous new cohort of assets to the REIT. These new communities will help us capitalize on the improving market fundamentals and generate sustained cash flow growth that results in increased value for unit holders. While we have now redeployed our 2025 disposition proceeds, it doesn't mean we're out of the acquisition business. We continue, as always, to examine acquisition opportunities in markets where the external growth environment is improving. However, we're not in the business of taking unnecessary risks with our investors' capital. To that end, we want to see a future return profile in excess of our weighted average cost of capital. Before wrapping up, I would like to call your attention to the fact that BSR was recently named one of the best places to work in multifamily for the fourth consecutive year. This is a tremendous achievement and speaks to the culture and team we have built at BSR as we approach our 70th year in the real estate business. We're proud of our management platforms. and firmly believe that it represents the secret sauce that brings us the best team in the business. That concludes our prepared remarks this morning. Tom, Susie, and I would now be pleased to answer your questions. Operator, please open the line for questions.

Thank you, sir. And everyone, once again, that is Star 1 if you have a question today. The first question will come from Tom Callahan from BMO Capital Markets.

Thanks, Operator. Good morning, everyone. Maybe just to start, nice to see the blended leaf spreads turn positive there this quarter. Just wondering if you can add some color in terms of the cadence of those spreads and what you saw on the market really over the course of the quarter, just given I think it does imply a bit of a slowdown from the July levels that you talked about last call.

Sure, yeah, I'm happy to answer. So as you're aware, we've got two levers that we can pull when it comes to maximizing cash flow for the portfolio. And what we did is we start, those levers are obviously occupancy and rate. And what you saw was we pushed rates in both July and August. And then we saw occupancy slightly drop in September, which made sense because the kids had gone back to school. and you have less people looking for an apartment. So you've got some seasonality blended in, which is completely normal. We're still in that 94% to 96% occupancy, which I've said before is our sweet spot.

Got it. That's helpful. And that was actually going to be my next question there, just in terms of kind of that push versus pull on occupancy and rate. How are you thinking about that into Q4 and 2026?

Yeah, I mean, I'll jump in, and we're thinking through all the budgeting things real time here, Tom. And so let me say, you know, it's one of those things where the data providers, we could sit here and quote it to you, are all over the map. And I don't know that that's a productive exercise. We have our best data providers of our in-house team working through it real time. So we don't have a great forward look answer there. What I tell you is at our analyst day here in December, we're looking to give you more color there. So let me punt to that.

Okay, that sounds good. I look forward to that. Maybe one last one for me is just on capital allocation. Dan, you did mention in the press release you're now fully redeployed in terms of the 2025 disposition capital. So I guess just in that vein, how should investors think about your approach to early capital allocation over the next 12 months and part and parcel of that is just balance sheet leverage? Are you comfortable with where that is right now or do you have kind of a target in mind?

Yeah, Tom, we like the players we got on the field in our portfolio right now. You know, we bought the five assets that we've talked about in our prepared remarks, and you're seeing the performance and the lease-up expectations in some cases in Austin exceeding our lease-up velocity expectations, and in others, pretty much leasing up as we underwrote and expected. You know, I think the team should focus right now on the occupancy potential from here on out and its potential to generate revenue. That's priority number one. Our investors are in luck because that's something we've been doing going on 70 years, so we feel pretty confident that we'll be able to obtain the revenue generated from those lease-ups. When we think about additional acquisitions, step one is we always underwrite our properties on their return on fair market value, and we rank them from 1 to 26. If we see a rotation opportunity, I think you've seen us take advantage of those opportunities in the past. Number two, if we see there's an opportunity to deploy capital through leverage, equity, or other creative means to drive a higher return for our investors, I think you've seen us work in creative and predictable patterns in the past to deliver those returns. But back to our current portfolio. We like the team we have on the field. We like the five new players that we've put on our team this year. Operationally, I think we do what we're equipped to do, which is be a manager, and I think that's how we can maximize returns. We don't have any near-term plans to use credit to acquire, nor do we have near-term plans to rotate, I would say, through the end of the year. As the year approaches, or if anything changes in our portfolio, we certainly take advantage of rotation acquisition opportunities, as well as as other opportunities fueled by one or all means of capital.

Okay. That's great. Appreciate all the call, guys.

Kyle Stanley from Desjardins has the next question.

Thanks. Morning, everyone. Just going back to the leasing spread front, it was encouraging to see the improvement on the new leasing side in Austin. Could you just speak to maybe what's driving that improvement in Austin? Is it the mix of leases? Is it maybe less competition in the market today? Just love your thoughts on that.

Sure, Kyle. So exactly. Austin, for the first time in a while, we saw the total percentage of properties offering concessions drop slightly. And so that certainly would account for the fact that we were able to push rates a little more often than we have in the past. Dallas, Fort Worth and Houston were the exact opposite. We saw concessions actually tick up slightly in Dallas and in Houston as far as properties go that are offering these.

Okay, perfect.

Next, so I think Tom mentioned the kind of look forward and maybe updating us at the investor day. Can we expect annual guidance for 26 provided at that point, or at least, you know, getting back to providing annual guidance for the year ahead?

Yeah, Kyle, I think we have every intention of bringing back annual guidance in the future. I think we'll give some forward looks in December, you know, TBD on to what extent, but we're moving in that direction for sure.

Okay, perfect. And then just the last one for me, Dan, you've mentioned the lease-up opportunity of your recently acquired assets and that being a key focus today. On average, where would the in-place occupancy at those five newly acquired assets or the five new assets in the portfolio, where would that be today? And how quickly do you expect stabilization to occur over the next several months or quarters?

Yes, so I'll take a first stab on it and then invite Susie to add some more color and details. You know, typically when we underwrite, well, first of all, where are they ending today? You know, the occupancy on each of those five assets is going to be higher today than it was on September 30th when we reported those numbers. We see the upside opportunity in occupancy from here on out. We can value that at about $4.5 million of revenue. in 2026. Now, what margin that revenue falls on, it's naturally going to be higher. I mean, it makes sense that the top end of your stack is at a significantly higher margin than the first lease you get. Whether it's 65%, 75%, 80% margin is what we're working through right now, incrementally, as you can understand the challenges of rotating and then providing guidance on lease-ups. Some, well, all of them are exceeding our expectations on occupancy and leasing velocity. Did that answer the first part of your question?

It did. I guess the one, just clarification, the $4.5 million of revenue, that's incremental to what's already being generated today upon lease-up, correct?

Yeah, that's incremental to what we're probably depicting for September numbers. I mean... We see that as the occupancy. I'm not going to say low-hanging fruit because it's difficult to lease apartments. That's a specialized task. But to our people, they consider that low-hanging fruit because that's what they do every day. Occupancy is something that comes when, as Susie mentioned earlier, you have the product. Susie, are there any other details that you'd like to add on to that?

Yeah, as you pointed out, they were 90% occupied at the end of the quarter. But as Dan pointed out, that doesn't mean that that was 90% the entire time. So we do have a lot of room to pick up there. I'd like to point out, though, that we would expect three of these assets to be stabilized from an occupancy standpoint by the end of the year, and the other two would be in the first half of next year. But, you know, we get two bites at the apple. Here's the thing that's important to remember. Occupancy is number one, but then we still have to or get to burn off concessions, which will also raise rental revenues.

Okay, thank you for that clarification. Very helpful. I'll turn it back.

Up next, we'll hear from Sairam Srinivas, Cormark Securities.

Thank you, Abreta. Good morning, everybody.

Just looking at the acquisition market, and you guys have obviously been active in that, are you seeing additional participants now actually come into these assets versus what you would probably see six to eight months before?

I think the acquisition market is relatively healthy.

I think the same participants are happening as were happening six to eight months ago. I think it's a confluence of all the typical parties. I don't think that there's been a material change in the type of buyer over the course of the last six months, but I welcome Dan's thoughts as well.

No, I think Tom summarized it very well. I mean, the acquisition market continues to present opportunities. And, you know, as we see the movement of the interest rate curve from a historically flat curve over the last year or 18 months, or five years, depending on if you're counting, to some volatility, I'll look forward to the interest rate curve. The volatility creates opportunities to finance a risk against a desired return. We think there's an improved outlook next year, the following year, and the following year. all the way into 28 for just the fundamentals of the cash flow, the ability of properties to deliver cash flow in our business. We don't think, and I know our investors can share our opinion, we don't think the markets are accurately underwriting the revenue potential and the upside in net operating income that the sector is probably going to drive, and we empathize with that. Our partners in the market that are private, that are attempting to sell their projects right now For the most part, people that are selling have a difficulty and they have a little bit higher leverage, well, significantly higher leverage than us and other public REIT participants have. And that higher leverage and that higher interest burden certainly creates challenges in that private developer earning the cash flow that they had underwritten. Now, above leverage, I think the operations, if I was, you know, I think many of our operating partners, when you remove interest rate and when you remove cap rate from their underwriting in 21, are experiencing pro forma net operating incomes in line with what they expected their developments to achieve. I think the difficulty that our private sellers are seeing right now is the cap rate placed on that cash flow stream, that net operating income that they underwrote. It's not that the cap rates have risen beyond – I think our NAV is a great depiction of the market cap rate for the market. It's that the expectations in 21 and 22 for those private developers who raised private capital were not a 5.1 or a 5.2 exit cap. They probably aligned more closely to a sub-4 cap. And so when you build a property and it operates and the trains come in on time and the revenue and occupancy and the net operating income, matches your pro forma, but your reversion cap for your investment went from a 3.9% cap to perhaps a 5% cap, that's a significant deterioration in your sales proceeds. As we discussed in prior quarters, those developers face challenges and they've decided to, in some cases, sell their properties. Some of our good partners have sold properties to us that we are totally excited about from a purchase price standpoint and from an operational standpoint. Other potential sellers and developers have decided to refinance that risk and wait for better days, which I'm in their camp on because we just bought five properties and we're looking at the same fundamental economics in our markets that those developers are. They might just be willing to take a substantial amount of risk with a with their private capital investment dollars that maybe in the public markets we're not comfortable with from a leverage standpoint.

That makes sense, Dan. And maybe, you know, we've spoken about that cliff of supply earlier and how essentially once that runs out, it actually just plummets all the way down. When you look at the market right now and what you're seeing post-quarter, How much time do you think it actually takes for all that supply to eventually get absorbed and for you to actually come to that precipice where you could probably see rent start jumping again?

Yeah, sure. So if the supply that has occurred in the past is met with the same relative absorption that we've seen this year so far, not very long, Sai. And I want to reiterate that. The first nine months of 2024 was the best first three quarters for apartment absorption in history outside of a little blip in the post-COVID era. So if we see that same pace of absorption, then, you know, you can count the supply problem being a problem. You could count that on your watch. I think most people think that with population growth muting a little bit, driven by perhaps a lack of international immigration nationally, that absorption may taper down a little bit in the future, though it will still well outpace in our markets and many others. The demand and absorption is going to top supply in these markets for the foreseeable future. So I think you could probably continue to see a pace of absorption in line relative with deliveries that you've seen in the first nine months. As you see deliveries drop by 50% next year and 40% the year after that, you may also see absorption drop just a tad next year and just a tad the year after that from a gross standpoint. But from a net standpoint, that's an extremely healthy indicator as absorption is set to outpace supply for the foreseeable future.

That makes sense, Dan. And my last question is, when you look at October last year versus what you've seen the past month, how would you characterize the leasing trends as, and do you, like, is there a sustained improvement that you're seeing?

I think October looks pretty similar right now to what Q3 looks like.

Thanks, Ruby. I'll turn it back, guys. Thank you so much for the call.

Okay, thanks. Himanshu Gupta from Scotiabank has the next question.

Thank you, and good morning, everyone. So if I look at occupancy, a bit softer in Q3, and I know you did mention some seasonality. And when I look at rental spreads, I think they were a bit better. So just wondering, is there like a shift in focus maybe a bit more on rents than defending occupancy in the near term.

Yeah, like I was saying earlier, we did start pushing rents in July and August intentionally, right? And then we started to see occupancy slightly drop off in September, which is normal with seasonality, but also probably has to do with the fact that we're more aggressive on rates. We have these two levers that we use to balance our cash flow, which we believe the team is really good at doing. And as long as we're staying in between what we call our sweet spot, 90-40, 96% occupancy, we think we're doing the right thing.

Got it. And thanks, Susie, for that. And then Houston, I think, and I think Dallas as well, you mentioned concessions have picked up a bit. Can you elaborate? I mean, is that a function of like job growth being slower than expected or some still lingering impact from supply?

So with Dallas, that's mostly the North Dallas market, and that's a supply issue right now. But there are still a lot of people moving into these North Dallas markets as well. So we know it's going to be absorbed. The question, as everybody is asking, is just when is that over? But that certainly has to do with the slight uptick in the number of properties offering concessions there.

Okay, fair enough. And maybe my last question would be, I mean, Houston is your, you know, largest market, biggest market. Are you comfortable keeping this as your highest exposure market in the medium term? And I know, you know, Houston has less supply pressures for now, but can Houston, you know, outperform rent growth compared to the other markets in the near term or in the medium term, rather?

Yes, certainly, Sai. Houston this year and next year, We're very comfortable with our market concentration in Houston. And then our viewpoint that we've made in the past on future rotations is evidence that our future acquisitions is evidenced in Q3 is that we plan to backfill and grow probably in Dallas to be in shape to take advantage of some mid-market economics in the latter half of 26 moving into 27, 28. So the short answer is absolutely 100% yes, incredibly comfortable with Houston right now for this setup. And then, again, as you've heard us say before, we get right in the path of growth, and thus rent increases relative to other markets and occupancy and potential residents, and we'll always keep our investors' money in that path.

Fair enough. Thank you, guys, and I'll turn it back. Thank you.

Your next question comes from Jonathan Kelcher, TD Cowen.

Thanks. Good morning. Just going back to the five new assets, stabilized occupancy, that's 94% to 96%, correct? Correct. Okay. In order to get there, what are you currently offering on concessions that will hopefully start to burn off next year as you hit the occupancy?

Sure, yeah. So I'm happy to say that in October, we're not offering concessions anymore on the Aura 3550 development in Austin. In Dallas, it's still 10 weeks free.

Okay. That is helpful. And then just lastly, the decrease in same property taxes this quarter, were there any one-time property tax rebates in there or was it just lower assessed values that drove that?

It's a combination of both, Jonathan. We saw some opportunities to settle some tax rebate appeals in the quarter. and we accelerated some of those settlements. And I think you've seen us do that in the past. We try to smooth out those settlements for earnings, but we don't let that tail wag the dog. If we see an opportunity to settle sooner than later, we certainly take advantage of that. I'd put that in the tune of a couple hundred thousand dollars or a quarter of a penny, a half a penny for the quarter. We talked about that in the past. So it comes and goes, but it's generally not incredibly disruptive to the performance kind of on an FFO basis.

Okay, that's helpful. I'll turn it back.

Thanks. Everyone, just a reminder, it is Star 1 if you have a question today. We'll go next to Jimmy Shan, RBC Capital Markets.

Thank you. So just to follow up on the revenue contributions from the five new assets acquired, the $4.5 million of incremental revenue, so is that relative to the Q3 run rate revenue or is that relative to their 2024 contributions when they were acquired?

Yeah, I see it as relative to the Q3 revenue. We thought that there would be some questions about the acquisition impact on a run rate. And we do empathize with the choppiness of the return that we generated in the third quarter. And so we really wanted to communicate the revenue upside from Q3. So that's about $4.5 million. And then I'll finish that with, I'd rather take a choppy 15 than a smooth 10, Jimmy.

Sure, sure. And the concessions, can you quantify those as well on those five assets? I guess as they burn off, would that be in addition to the $4.5 million?

Yes, the $4.5 million just assumes that we put people in vacant units today. So there's a bunch of upside, which we're not ready to quantify sitting here today, in addition to the $4.5 million for all the ancillary things that Susie's team does really well, including but not limited to the burn-off of concessions. That is the second bite at the apple in, you know, whatever, eight to 16 months or whatever the numbers are.

Okay, so if I heard correctly, in Dallas you're offering about two and a half months free rent, so we could ballpark it from that standpoint?

Yeah, I think that's fair, Jimmy.

Yeah, okay. And then the leasing spreads, you know, the softer leasing environment, I don't think you're the only one saying that. So can you, yes, there's some seasonality, there's some rate push, but what do you think that is attributable to this software leasing environment?

We think it's entirely attributable to macroeconomic volatility, which is why we didn't acquire until, you know, I'll say after the end of April when you think about when we started closing on these assets. So I think the tepid response by the customer right now, driven by volatility in the macroeconomic environment, whether it's tariffs, whether it's a Federal Reserve banking policy, has a whole lot to do with politics and global politics and United States politics. I think we've all seen that. You know, we were cautious when we decided to acquire assets coming out of the Avalon Bay transaction. We're very cautious with our investors' monies. We underwrote in a very cautious manner, so... I think that might be what's driving the overall macro environment, but it doesn't necessarily surprise us from our returns against our expectations.

Tom, you mentioned all these swaps. How should we model the interest expense going forward?

Yeah, so similar to what Dan was saying earlier, I'll empathize that it's a little bit challenging to do because the third quarter numbers do have some relative uncomparability there in the sense of Don't forget that we have two, really five, our 25 acquisition class are all in some form of stabilization that are carrying the full expense load and thereby being a little bit of a drag on earnings. Now that said, as it relates to the swap book more generally, we've continued to monitor that and you saw us this quarter increase our the tenor on one of the cancellation options out another year and to the breed holder's benefit by a lower rate.

So if I want to read that, this quarter looks about right for the next quarter or two?

Yeah, I think that's fair, Jimmy. But with that said, our REIT has historically taken the view of about 80% hedged to fixed rates and 20% exposure to the short end of the curve. That's been what we've discussed with our investors since our IPO. As you know, in March of 22, and that quarter right after that second quarter of 22, we began increasing our fixed debt to 100%. of hedging. Now our investors have enjoyed the cash flow benefit of this decision for the last three years. Now we kind of see the opportunity in the interest climate moderating and that affords us the opportunity to accretively decrease our hedging exposure back to what we think is fair which is about 80 from its current position at 99. Now this may create a little bit of complexity in the forecasting of interest expense in Q4 and Q1 But we think any disruption is to the benefit of our investors. And we believe that the decision is going to, you know, what to do with the $102 million of call options in January and February will impact Q4 in the positive, if possible, and Q1 and Q2 in the positive. But I think I would model a little bit more short-term exposure to our hedges. And we see the opportunity to do so. And by short term, I mean zero to two years, not 30 days.

Right. Okay. Thank you.

And everyone, at this time, there are no further questions. I'll hand the call back to Dan Oberst for any additional or closing remarks.

Thank you for listening, everyone, and we hope you enjoyed the call. If you have any additional questions, management's available at your convenience to discuss. We look forward to seeing some of you at our investor and analyst presentation day in early December during NARIT in Dallas. Otherwise, have a good rest of the month. Thank you very much.

Once again, everyone, this does conclude today's conference. We would like to thank you all for your participation. You may now disconnect.