Brad Heffern

Brad Heffern asked if the guidance assumes significant year-over-year improvement in Los Angeles performance and when it might become a positive contributor, as well as any noticeable impact from immigration trends on demand.

Answer

Angela Kleiman (President and CEO, Essex Property Trust) stated that guidance assumes gradual improvement in LA, with hopes for a return to normal delinquency rates by year-end 2026, noting potential upside from the jobs environment and decreasing supply. She reported no direct impact from international immigration, which has returned to pre-COVID norms.

Brad Heffern asked if Essex's guidance assumes significant year-over-year improvement in Los Angeles and when the market is expected to become a positive contributor. He also inquired about any noticeable impact on demand from the lack of immigration.

Answer

Angela Kleiman (President and CEO) stated that Los Angeles is assumed to improve gradually, with hopes of returning to normal delinquency rates by year-end 2026, noting potential upside from the job environment and decreasing supply. She reported no direct impact from international immigration, observing a return to pre-COVID historical norms and no adverse effects from H-1B legislation.

Brad Heffern of RBC Capital Markets inquired about concession trends in Los Angeles and the financial benefits of the new commercial paper program.

Answer

President & CEO Angela Kleiman stated that concessions in Los Angeles remain elevated and are slightly higher year-over-year but are not worsening dramatically. EVP & CFO Barb Pak explained that the new commercial paper program offers approximately 70 basis points in savings compared to the credit line. She clarified that it will be used similarly to the revolver—as a temporary bridge for financing, not as a permanent source of capital.

Brad Heffern inquired about the medium-term outlook for the Oakland submarket, which has shown recent improvement. He also asked about the rationale for using the At-The-Market (ATM) equity program during the quarter.

Answer

Executive Angela Kleiman expressed optimism for Oakland, stating they see 'a light at the end of the tunnel' as 75% of new supply is delivering in the first half of the year, which should lead to market normalization. Executive Barb Pak explained that a small amount of equity was issued via the ATM at a premium to NAV to prudently match-fund a new development, and the program was halted when the stock price moved.

Brad Heffern of RBC Capital Markets inquired about the potential impact of shifting immigration policies on demand, particularly from H-1B visa holders. He also asked for an explanation of the large growth contribution from non-same-property NOI in the 2025 FFO forecast.

Answer

Executive Angela Kleiman stated that she doesn't expect a meaningful impact from immigration policy shifts, noting the administration's focus is on illegal immigration and that H-1B visa holders are a small, transient part of their tenant base. Executive Barb Pak explained that the significant non-same-property NOI growth is primarily driven by the full-year contribution from 2024 acquisitions, including consolidated joint ventures.

Brad Heffern asked about the timeline for MAA to achieve positive new lease growth, noting it was previously expected in mid-2025, and whether high renewal rates might pressure new lease performance in 2027.

Answer

Brad Hill, President and CEO of Mid-America Apartment Communities, did not provide a specific target for positive new lease growth in 2026, but expects acceleration from current levels. He anticipates sustained momentum and potential positive new lease rates in 2027, as supply further subsides and demand solidifies, with 2026's backloaded new lease rate acceleration impacting 2027 revenue.

Brad Heffern asked about the projected timeline for MAA to achieve positive new lease growth, noting that 2026 guidance doesn't imply it and questioning potential pressure on 2027 new lease rates from sustained high renewal rates.

Answer

Brad Hill, President and CEO of Mid-America Apartment Communities, stated MAA is not targeting positive new lease growth in 2026 but expects acceleration. He anticipates sustained momentum and potential positive new lease rates in 2027, driven by further distance from the supply peak and declining new starts.

Brad Heffern of RBC Capital Markets asked for the new expected timing for positive new lease spreads and requested the current loss-to-lease figure.

Answer

EVP Timothy Argo stated that while difficult to predict, positive new lease spreads are most likely to return in the spring or summer of 2026. He also provided a current loss-to-lease figure of approximately 2% as of July, noting this is typically the annual peak.

Brad Heffern questioned the full-year new lease spread target, asking if it was still achievable or if stronger renewals were offsetting a lower new lease expectation. He also asked about any impact from government job cuts in the D.C. market.

Answer

EVP & COO Tim Argo responded that while the overall blended pricing forecast is unchanged, they have slightly lowered new lease expectations and increased renewal expectations due to economic uncertainty and strong retention. Regarding D.C., he stated they are seeing no impact from job cuts, with high occupancy and strong performance, particularly in Fredericksburg, and noted their exposure is limited and diversified within the region.

Brad Heffern questioned whether the better-than-normal start to the year in leasing was a true fundamental market inflection or simply the result of easier prior-year comparisons. He also asked about the potential impact of changes in U.S. immigration policy on the portfolio.

Answer

Tim Argo, EVP and Chief Strategy Officer, responded that it's a combination of factors, but noted the sequential acceleration from Q4 to January was stronger than typical, suggesting a real strengthening in fundamentals. Brad Hill, President and CEO, addressed immigration, stating they foresee minimal direct impact on their same-store resident base but acknowledged potential effects on new development labor, which could further constrain overall market supply.

Brad Heffern from RBC Capital Markets asked if MAA plans to use leverage to fund growth to reach its target leverage metrics and when new lease spreads might turn positive.

Answer

A. Holder, EVP and CFO, confirmed that MAA is currently leaning more into debt financing over equity due to the relative cost of capital. Tim Argo, EVP and COO, clarified that the current gain-to-lease is about 0.7% and that the earn-in for 2025 is slightly negative. He expects better new lease pricing in 2025 compared to 2024 but did not provide a specific timeline for it turning positive.

Brad Heffern asked about the current go-forward yield for American Homes 4 Rent's development program and its expected evolution.

Answer

Bryan Smith, Chief Executive Officer, stated that the 2025 development yield, initially expected to accelerate from low 5% in Q1 to mid 5% for the year, might be slightly lower than mid 5% due to short-term changes in REITs. He highlighted the team's success in managing costs, with vertical construction costs flat over 2024. He expects Q4 and Q1 yields to be consistent with current levels, with potential for acceleration in rents during the spring leasing season.

Brad Heffern asked about the current go-forward yield for the development program and how the company anticipates its evolution.

Answer

Bryan Smith, Chief Executive Officer, stated that the 2025 yield was expected to accelerate from low 5% in Q1 to mid 5% for the year, but due to short-term changes in REITs, it might be slightly lower for 2025. He noted that the team has done an excellent job managing costs, with vertical construction costs remaining consistent or flat over 2024. He expects yields for Q4 and Q1 to be consistent with current levels, with hopes to accelerate rents during the spring leasing season.

Brad Heffern from RBC Capital Markets inquired about current opportunities for portfolio or scattered-site acquisitions and asked for commentary on the land market, noting the decline in lots under control.

Answer

CFO Christopher Lau stated that while they are optimistic about future portfolio deals, current market activity has slowed. CEO Bryan Smith explained that the reduction in the land pipeline was intentional to right-size it for their current development pace. He added that while land prices are resilient, they are seeing higher quality opportunities and more flexibility from sellers.

Brad Heffern asked for observations on the market for portfolio deals and scattered-site acquisitions. He also inquired about the land market and the reason for the consistent decrease in the number of lots under control.

Answer

CFO Christopher Lau noted that while large portfolio deal flow has slowed amid market uncertainty, they remain optimistic about future opportunities. CEO Bryan Smith explained that the reduction in the land pipeline was a deliberate strategy to align it with a sustainable annual delivery pace of around 2,300 homes. He added that the land market is now presenting higher-quality opportunities with more seller flexibility.

Brad Heffern asked for observations on portfolio or scattered-site acquisition opportunities and inquired about the decline in lots under control in the land pipeline.

Answer

SEVP & CFO Christopher Lau noted that while scattered-site activity is low, they are optimistic about future portfolio deals as assembled portfolios eventually seek liquidity. CEO & Trustee Bryan Smith explained the reduction in the land pipeline was by design to align with a delivery pace of about 2,300 homes per year. He added that they are now seeing higher-quality land opportunities and more flexibility from sellers.

Brad Heffern of RBC Capital Markets asked how the leasing spread trajectory so far this year compares to a typical year. He also questioned the yield premium required for the development program versus other growth options like acquisitions.

Answer

CEO Bryan Smith noted that while recent years have been atypical, the current trajectory of rate improvement from January into the spring leasing season is normal, though the curve may be flatter this year. He argued that the development program delivers a superior, purpose-built product in locations that cannot be bought, justifying the investment with at least a 100-basis-point premium over comparable acquisition opportunities.

Brad Heffern of RBC Capital Markets asked for statistics on 'days to re-resident' and its recent trend, noting that lower turnover but falling occupancy in the fall implied homes were sitting vacant longer.

Answer

CEO Bryan Smith confirmed that the analyst's observation was correct, explaining that the expansion in re-tenanting time in Q4 was a direct result of the slowdown in activity seen at the end of Q3. He stated this was a catch-up period as occupancy was rebuilt in November and December, and he expects the metric to compress and return to consistent levels during the upcoming spring leasing season.

Brad Heffern asked for the underwritten loss-to-lease on the acquired portfolio and questioned why the revised expense guidance implies a reacceleration in Q4 after a low Q3.

Answer

CFO Chris Lau declined to provide a specific loss-to-lease figure but reiterated that it is just one component of the value-add opportunity, alongside improving occupancy and implementing AMH's expense controls. Regarding Q4 expense guidance, he explained that the implied acceleration is partly due to a very efficient expense comparison in the fourth quarter of the prior year, emphasizing overall satisfaction with the controllable expense results driven by platform investments.

Brad Heffern asked for Equity Residential's outlook on Washington, DC for the next 6-12 months, including the historical and expected impact of government shutdowns. He also questioned whether San Francisco is entering a multi-year period of above-average growth due to the rent-to-income differential, or if current trends represent a catch-up from past fundamentals.

Answer

Michael Manelis, Chief Operating Officer, detailed a slowdown in DC demand since late September, with increased concessions and lower net effective prices in urban areas, though retention remains strong. He expects this to continue short-term but sees a strong long-term position due to declining competitive supply. For San Francisco, Michael Manelis believes the market is set for several years of outsized growth, driven by tech advancement, migration, rising incomes, and rents still at a discount to historical standards.

Brad Heffern asked for Equity Residential's perspective on Washington, DC over the next 6 to 12 months, including the historical and expected impact of government shutdowns. He also asked if San Francisco's rent growth is a multi-year above-average growth environment or a catch-up from past fundamentals.

Answer

Michael Manelis (COO) detailed observed softness in demand and pricing power in Washington, DC, particularly in the district and Northern Virginia, due to federal job cuts and government shutdown. He expects continued slowdown through year-end but anticipates a strong position for 2026 due to a significant decline in competitive supply. He stated that given advancing technology, migration patterns, rising incomes, and current rent levels, they expect outsized growth for the next couple of years in San Francisco.

Brad Heffern of RBC Capital Markets asked for a long-term perspective on Los Angeles, noting concerns about the entertainment industry's health and its potential impact on the market.

Answer

CEO Mark Parrell acknowledged that Los Angeles is performing weaker than hoped, partially due to the entertainment industry finding cheaper production alternatives. He also cited a need for improved public policy and quality-of-life initiatives compared to other West Coast cities. Consequently, he expects Equity Residential to reduce its holdings in the L.A. market over time, despite its size and diversification.

Brad Heffern asked about the potential impact of immigration policy on the business and requested the base case for market rent growth in the West Coast tech markets for 2025, along with the potential scale of outperformance.

Answer

COO Michael Manelis stated they have seen no operational impact from immigration policy, noting that foreign move-ins constitute a very small portion (2-3%) of their resident base. For 2025, he projected Seattle to be their strongest market with ~4% revenue growth and San Francisco in the mid-3% range. He said outperformance would depend on achieving stronger pricing power early in the leasing season.

Brad Heffern questioned whether the guidance assumes Canadian bookings are actually down 40% or if customers are just waiting longer to book. He also asked how much the fourth-quarter expectations for seasonal and transient revenue should be read into the first quarter of the following year.

Answer

Paul Seavey, EVP and CFO, clarified that the $2.7 million unfavorable development in fourth-quarter guidance is primarily due to lower Canadian seasonal reservations, with the current pace down approximately 40%. He added that the reservation pace from Canadian customers for the first quarter of 2026 is similar to the pace seen for the fourth quarter of 2025.

Brad Heffern questioned the potential impact from reduced travel by Canadian customers and a new visa fee. He also asked about the dynamic causing annual and seasonal site counts to decrease while transient sites increased.

Answer

President & COO Patrick Waite noted a lower early-bird take rate from Canadians but expects demand to return for the winter season. EVP & CFO Paul Seavey stated the visa fee should have a modest impact as many visitors don't require one. Regarding site counts, Mr. Seavey confirmed that when a site is not occupied by an annual or seasonal customer, it is reclassified as available for transient use, explaining the shift in numbers.

Brad Heffern questioned the potential impact from reduced Canadian customer travel and a proposed $250 Visa Integrity Fee. He also asked about the dynamic causing annual and seasonal RV sites to decrease while transient sites increased.

Answer

President & COO Patrick Waite noted a lower early-bird take rate from Canadians but expects demand to recover. EVP & CFO Paul Seavey suggested the visa fee's impact would be modest. Seavey also confirmed that when an annual or seasonal site is not renewed, it is reclassified as available for transient use, which explains the shift in site counts.

Brad Heffern questioned the potential impact of reduced travel from Canadian customers and a proposed Visa Integrity Fee. He also asked about the dynamic behind the shift in site counts, where annual and seasonal sites decreased while transient sites increased.

Answer

President & COO Patrick Waite noted a 20% decline in early-bird reservations from Canadians for the winter season. EVP & CFO Paul Seavey added that the visa fee's impact is expected to be modest. Seavey also confirmed that when an annual or seasonal site is not renewed, it is reclassified into the transient bucket, explaining the shift in site counts.

Brad Heffern questioned the potential impact of reduced travel from Canadian customers and a proposed Visa Integrity Fee, and also asked about the dynamic causing annual and seasonal site counts to decrease while transient sites increased.

Answer

President & COO Patrick Waite noted a lower early-bird take rate from Canadians but expects demand to return. EVP & CFO Paul Seavey anticipates a modest impact from the visa fee. Seavey also confirmed that when annual or seasonal sites are not renewed, they are reclassified as available for transient use, explaining the shift in site counts.

Brad Heffern questioned the potential impact of reduced travel from Canadian customers and a proposed $250 Visa Integrity Fee on demand. He also asked about the dynamic causing annual and seasonal RV site counts to decrease while transient sites increased.

Answer

President & COO Patrick Waite noted a 20% decline in an early-bird program for Canadian seasonal customers but expects demand to normalize as winter approaches. EVP & CFO Paul Seavey stated the visa fee's impact is likely modest. He confirmed that when an annual or seasonal site is not renewed, it is reclassified as available for transient use, explaining the shift in site counts.

Brad Heffern asked for details on the composition of the 50% of MH residents who have not yet received 2025 rent increase notices and questioned the strategic rationale behind using equity to pay off a term loan.

Answer

Paul Seavey, EVP and CFO, explained that the remaining 50% of the portfolio is more heavily weighted towards market-based increases and CPI-linked rent control, as opposed to the first 50% which had more long-term agreements. Regarding the term loan, he stated that the company saw an opportunity to sell shares at an attractive price, enhancing financial flexibility.

Brad Heffern inquired about the differences in underwriting for travel centers compared to traditional small format stores, including their risk profile, and asked about the puts and takes on the new guidance, specifically how late-year deal activity impacts AFFO per share.

Answer

Mark Olear, COO, explained that travel centers have a smaller land component relative to total investment, but Getty Realty uses a total value approach, highlighting larger land and store sizes, broader services, and interstate-adjacent locations. Brian Dickman, CFO, attributed the guidance increase primarily to the magnitude of acquisition activity ($140M+ since last guidance) relative to the company's size, and crystallizing expenses at the lower end of estimates.

Brad Heffern asked about the differences in underwriting for travel centers compared to traditional convenience stores, specifically regarding asset retention and risk profile, and for a breakdown of the factors contributing to the new AFFO guidance.

Answer

Mark Olear, COO, explained that Getty Realty is developing a total value underwriting model for travel centers, highlighting their larger footprint, broader services, and strategic locations. Brian Dickman, CFO, confirmed that significant acquisition activity, especially the $100 million deal, is the primary driver for the updated AFFO guidance.

Brad Heffern inquired about the drivers behind the accelerating investment activity and the company's comfort level with the car wash sector following the Zipps Car Wash portfolio resolution.

Answer

EVP & COO Mark Olear attributed the increased investment pace to operators' growing willingness to transact for growth capital. President & CEO Christopher Constant affirmed the company's comfort with the express car wash model, noting there is nothing of concern on the watch list and that rent coverage in the sector has improved for two consecutive quarters.

Brad Heffern from RBC Capital Markets inquired about the drivers behind the accelerating investment activity and Getty's comfort level with the car wash sector following the Zips portfolio resolution.

Answer

EVP & COO Mark Olear attributed the increased activity to operators' growing willingness to transact for growth capital. President & CEO Christopher Constant affirmed their comfort with the car wash sector, noting there are no new watch list items and that improving fundamentals, like rising rent coverage, are positive signs.

Brad Heffern from RBC Capital Markets asked for details on Zips Car Wash's rent coverage both before its bankruptcy and pro forma after the resolution. He also questioned why the company might not have acted more proactively, given its access to site-level financials.

Answer

CFO Brian Dickman stated that Zips' pre-bankruptcy coverage was stable in the 1.0x to 1.5x range and that it was premature to provide a pro forma figure, though improvement is expected. CEO Christopher Constant added that the Zips situation was viewed primarily as a balance sheet issue rather than a problem with the underlying real estate, which they still consider to be long-term productive assets.

Brad Heffern asked why cap rates have remained stable despite declining costs of debt and increased competition. He also inquired about the attractiveness of equity and the timing for future issuance, given current liquidity.

Answer

President and CEO Joey Agree clarified his comments on cap rates were limited to 2025 visibility, reiterating no material change year-to-date or expected in Q4. He emphasized sticking to their word about not constantly flooding the equity markets, highlighting ample liquidity ($1.9 billion, growing to $2.2 billion) and low leverage (3.5x pro forma), indicating no immediate need for equity.

Brad Heffern questioned why acquisition cap rates have not materially changed despite a decrease in the cost of debt and anecdotal reports of increased competition. Heffern also inquired about Agree Realty's current view on equity attractiveness and future issuance plans, given a self-imposed hiatus since April.

Answer

Joey Agree, President and CEO, clarified that he is not predicting 2026 cap rates but has observed no material change year-to-date 2025, nor does he expect one in Q4. Agree and Peter Coughenour, CFO, emphasized that with strong liquidity and low leverage, they do not need to raise equity, adhering to their commitment to investors not to frequently access the equity markets.

Brad Heffern asked why retailer demand for new brick-and-mortar stores is so strong despite macro uncertainty and whether the projected second-half AFFO ramp is due to acquisition volume or other factors like lumpy expenses.

Answer

President and CEO Joey Agree attributed strong retailer demand to market share consolidation by large operators and the strategic realization that physical stores are the profitable hub of an omnichannel strategy. CFO Peter Coughenour confirmed the second-half AFFO ramp is driven by increased investment activity and a lower assumption for treasury stock method dilution, not by any lumpy expense items.

Brad Heffern from RBC Capital Markets asked about the investment opportunity in Poland and questioned why the high end of AFFO guidance was not raised despite an increase in accretive acquisition guidance.

Answer

CEO Sumit Roy highlighted Poland's strong economic fundamentals and successful initial transactions in the industrial and distribution sectors. He explained that the AFFO guidance range reflects conservatism amid economic uncertainty and the back-loaded timing of new acquisitions, with their full accretive impact expected in 2026.

Brad Heffern from RBC Capital Markets questioned why investment guidance remained unchanged despite a strong first quarter and asked if any specific portfolio sectors are expected to be impacted by tariffs.

Answer

CEO Sumit Roy stated the company is being "cautiously optimistic" and chose not to extrapolate the strong Q1 results due to macroeconomic uncertainty, including interest rates and geopolitical factors. He confirmed that the potential impact from tariffs is already reflected in the company's guidance and bad debt expense, and he does not anticipate any new impacts.

Brad Heffern of RBC Capital Markets asked about the quality versus spread trade-off in the 7-Eleven sale-leaseback, its suitability for the private fund, and details on the office tenant move-out mentioned in guidance.

Answer

CEO Sumit Roy noted the 7-Eleven portfolio was acquired at a significant discount to market rates and, while suitable for the fund, is a strong addition to the balance sheet. CFO Jonathan Pong clarified the office move-out impact is about $0.05 for 2025 and was a known, underwritten issue from a prior M&A transaction, not a new surprise.

Brad Heffern of RBC Capital Markets asked about the new private fund, inquiring if its target would be a lower cap rate opportunity set, whether there would be investment overlap with the public REIT, and if there is a target size for the fund.

Answer

CEO Sumit Roy confirmed there will be overlap as Realty Income will be a large co-investor, ensuring aligned interests. He explained the fund would pursue deals that work for both entities long-term but might not meet the public REIT's short-term accretion hurdles. Roy emphasized the fund is a way to monetize the company's existing scalable platform with minimal incremental cost, and while it's too early to set a target size, the vehicle will be perpetual and fully consolidated.

Brad Heffern from RBC Capital Markets inquired about Centerspace's capital recycling strategy, asking about the guardrails on earnings dilution, requesting July leasing statistics, and seeking clarification on the net FFO impact from recent transaction activity on 2025 guidance.

Answer

President & CEO Anne Olson explained that the primary guardrails are maintaining balance sheet health and ensuring year-over-year earnings growth, even if it means accepting some dilution. EVP & CFO Bhairav Patel noted that July leasing trends continued from June, with Denver showing early signs of recovery, and clarified that the net impact of transactions on 2025 guidance is a dilution of $0.06 to $0.08 per share.

Brad Heffern from RBC Capital Markets asked if Centerspace's guidance was conservative, given that Midwest apartment markets and the company's own occupancy levels are showing a very strong start to the year. He also questioned the guidance for flat full-year occupancy after a 120 basis point year-over-year increase in Q1.

Answer

President and CEO Anne Olson responded that the strong performance in the Midwest was anticipated and is aligned with their internal plan. She explained that while current occupancy is high at 96%, the full-year guidance assumes an average of 95%, which positions them well to push rental rates during the peak leasing season while allowing for some normalization.

Brad Heffern of RBC Capital Markets asked if Centerspace's internal portfolio data aligns with external market data showing improving fundamentals in Minneapolis and weakening trends in Denver, and requested an outlook for the company's smaller markets.

Answer

CEO Anne Olson confirmed the trends, stating that supply pressures have eased in Minneapolis earlier than in Denver, though both markets exhibit strong absorption and positive prospects for 2025 and 2026. CFO Bhairav Patel added that the smaller markets are expected to see performance in 2025 similar to 2024, with healthy blended lease spreads due to limited new supply.

Brad Heffern of RBC Capital Markets inquired about the extent of market rent softening, the drivers for the Q4 revenue guidance reduction, and preliminary leasing statistics for October.

Answer

President and CEO Anne Olson confirmed that rent softening was slightly more than seasonal expectations, attributing it to supply and demand dynamics. She noted that October's performance was factored into the new guidance, with blended rates expected to be flat. CFO Bhairav Patel explained the Q4 revenue guidance implies lower NOI growth primarily due to higher expected non-controllable expenses, not a significant drop in leasing performance.

Brad Heffern of RBC Capital Markets questioned whether the current high supply and attractive pricing could be pulling forward future apartment demand, which might then soften as prices recover.

Answer

Chairman & CEO Ric Campo disagreed, arguing that apartment demand is driven by fundamental household formation, not market timing. With new lease rent-to-income ratios at a low 18.9%, he believes residents have significant capacity to absorb future rent increases, meaning current demand is sustainable and not being pulled forward.

Brad Heffern from RBC Capital Markets asked about the on-the-ground impact of federal government job trends in the Washington D.C. market and whether Camden plans to market assets there in the near term.

Answer

Chairman and CEO Ric Campo stated there is "absolutely 0 evidence on the ground" of a negative impact, citing strong occupancy and lease growth. President and CFO Alex Jessett added that D.C. has the highest occupancy (97%) and blended rent increases in the portfolio. Regarding dispositions, Campo said it makes sense to slow down sales in D.C. given the current uncertainty, as investors are in a "wait-and-see" mode.

Brad Heffern asked if Camden is currently observing tangible, on-the-ground signs that the negative impact of new supply is beginning to fade in its markets.

Answer

President and CFO Alexander Jessett confirmed that the company is seeing clear indicators of fading supply pressure. He cited the steady improvement in signed new lease rates throughout the fourth quarter and continuing into January as the most significant evidence.

Brad Heffern noted that Camden's leasing spreads fell significantly in October after outperforming peers through September and asked if this was due to a strategy change toward occupancy.

Answer

President and CFO Alexander Jessett confirmed this was the case. He stated, 'What you saw in the third quarter was absolutely a drive more towards occupancy, and you're seeing that impact roll over into the fourth quarter. So that's exactly what it is.'

Brad Heffern of RBC Capital Markets asked if Sun Communities was experiencing increased turnover in its annual RV business, similar to a peer. He also inquired about the impact of Canadian customers on the business during the summer months.

Answer

President John McLaren stated that unlike peers, Sun's annual RV business grew during the quarter. He acknowledged some impact from fewer Canadian cross-border travelers in northern markets like Maine but noted that the team has been successful in backfilling those vacancies with domestic customers, keeping performance within their guidance range.

Brad Heffern from RBC Capital Markets requested more details on the CEO succession process and its timeline, and asked for an update on the potential tax leakage from the Safe Harbor transaction.

Answer

Executive Gary Shiffman confirmed the CEO search committee is actively working with an outside firm and that an announcement is possible anytime between now and year-end. He stated the process has been a top priority alongside the Safe Harbor closing. On the tax question, Executive Fernando Castro-Caratini said he could not provide a range at this time but affirmed the company is employing tax minimization strategies and will provide updates as they are finalized.

Brad Heffern asked if the Safe Harbor sale would likely trigger a special dividend to comply with REIT rules and questioned the logic of paying down debt with a ~4% interest rate when cash could be held at a similar yield, suggesting other assets could be acquired.

Answer

Executive Fernando Castro-Caratini reiterated that the company is evaluating all alternatives for the use of proceeds, including debt paydown and shareholder distributions, and will provide an update closer to the transaction's closing date. He did not offer a specific commitment on a special dividend or debt paydown strategy.

Brad Heffern of RBC Capital Markets asked about the fundamentals of the single-family rental market in Southern California, noting INVH's strong results there seem to contrast with weakness seen in multifamily.

Answer

President Charles Young confirmed Southern California has been a strength, with high occupancy and blended rent growth. He explained that new lease growth benefits from a built-in loss-to-lease, as renewal increases are capped by AB 1482. The limited supply of single-family homes in the region and improving bad debt trends have contributed to the portfolio's strong performance.

Brad Heffern of RBC Capital Markets asked for an overview of the fundamentals in Southern California, noting that the market appears strong for Invitation Homes' SFR portfolio while being a challenge for multifamily REITs.

Answer

President Charles Young confirmed that Southern California has been a strength, characterized by high occupancy and strong blended rent growth. He explained that new lease growth benefits from a 'built-in loss-to-lease' because state law (AB 1482) limits renewal increases. The lack of single-family home supply in the region and improving bad debt trends contribute to the portfolio's strong performance.

Brad Heffern of RBC Capital Markets asked about the third-party management business, noting a lack of new announcements since mid-last year and questioning if this lull was significant.

Answer

CEO Dallas Tanner reiterated that their approach to the third-party platform is highly strategic and selective. He stated they are not pursuing growth for its own sake and will only partner with clients whose portfolios are a strong strategic fit. While conversations are ongoing, no new deals have met their specific criteria, and he is comfortable with the current scale of the business.

Brad Heffern from RBC Capital Markets requested more detail on the storm costs, asking how the insurance policy works and how the total exposure reached such a large figure.

Answer

CFO Jon Olsen explained that the large exposure was due to four separate named windstorms affecting markets with high concentrations of homes. He detailed that the insurance program has a $200 million per-occurrence limit for named windstorms. The deductible varies by location, being 5% of total insured value in Texas and Florida and 2% in other markets like Georgia.

Brad Heffern of RBC Capital Markets asked about the common characteristics of the assets held for sale and whether IRT plans to further downsize in those markets. He also questioned if the assets for the increased acquisition guidance have been identified.

Answer

President & CFO Jim Sebra described the assets held for sale as older vintage properties with higher CapEx needs. Chairman and CEO Scott Schaeffer confirmed that the assets for the additional $315 million in acquisitions are identified within a fulsome pipeline, with decisions on capital deployment to be made as dispositions close.

Brad Heffern inquired about the reasons for Q1 leasing spreads being below guidance, its impact on the full-year outlook, and any signs of tenant stress from macroeconomic factors.

Answer

President and CFO Jim Sebra explained that as a Class B portfolio, IRT did not see the same rental rate declines as Class A peers. He noted positive month-over-month trends in leasing spreads and a 50 basis point year-over-year decrease in bad debt, indicating no new tenant stress. EVP of Operations Janice Richards added that the company has not yet felt effects from tariffs but is monitoring the situation.

Brad Heffern requested a qualitative comparison of leasing spreads at the start of 2025 versus 2024 and a normal year, and asked why IRT's blended rate guidance wasn't higher than Sunbelt peers given its Midwest exposure.

Answer

CFO James Sebra noted that while new lease spreads started 2025 lower than 2024, rents are rising into February. He acknowledged the 1.6% blended rate guidance could be seen as conservative, explaining that the company is focused on maximizing total revenue through a balance of rent growth and high occupancy.

Brad Heffern of RBC Capital Markets inquired about IRT's appetite for further acquisitions in 2025 given its current cost of capital and whether the significant spread between new lease and renewal rate growth is sustainable.

Answer

Executive Scott Schaeffer explained that IRT will remain patient and judicious with capital, pursuing only accretive deals, though opportunities do exist. He also expressed confidence in maintaining strong renewal rates, noting that signed renewals for December were already tracking in the high 5% to 6% range.

Brad Heffern from RBC Capital Markets asked if the company's improved equity cost of capital makes equity issuance an attractive funding source, or if dispositions will remain the primary plan. He also requested the company's AFFO sensitivity to changes in the euro.

Answer

CEO Jason Fox responded that despite the stock's momentum, the company does not need to issue equity in 2025 and is comfortable funding investments with non-core asset sales, though he did not rule out an opportunistic issuance. MD & CEO Toni Sanzone explained that due to a robust hedging program, the net impact of currency fluctuations is minimal, with a 10% change in the euro affecting AFFO by only 1-2 cents, making it an insignificant factor in the guidance raise.

Brad Heffern of RBC Capital Markets asked if the improved equity cost of capital makes equity issuance an attractive funding option, or if dispositions will remain the primary source. He also requested quantification of the stronger euro's impact on the guidance raise.

Answer

CEO Jason Fox stated that despite stock price momentum, the company does not need to issue equity in 2025 and will stick to its plan of funding investments with non-core dispositions. MD & CEO Toni Sanzone clarified that the net impact of currency fluctuations is minimal due to their hedging strategy, with a 10% change in the euro affecting AFFO by only 1-2 cents.

Brad Heffern of RBC Capital Markets asked if the improved equity cost of capital makes equity issuance an attractive funding source for 2025, or if dispositions will remain the primary plan. He also requested quantification of the stronger euro's impact on the raised guidance and a reminder of the AFFO sensitivity to currency changes.

Answer

CEO Jason Fox stated that despite the stock's momentum, the company does not need to issue equity in 2025 and will continue funding investments with proceeds from non-core asset sales. MD & CEO Toni Sanzone explained that the net impact of currency on AFFO is minimal due to their hedging strategy, with a 10% change in the euro resulting in only a 1-2 cent impact on AFFO.

Brad Heffern asked about the potential impact of tariffs on W. P. Carey's portfolio and investment strategy, and also requested updates on tenants Jo-Ann Stores and Advance Auto Parts.

Answer

CEO Jason Fox addressed the tariff question, noting the company's diversification and potential long-term benefits from onshoring, while maintaining a rigorous underwriting approach. Head of Asset Management Brooks Gordon provided updates on tenants, stating a conservative liquidation assumption for Jo-Ann Stores is factored into guidance, and that there is no near-term impact expected from Advance Auto Parts' warehouse closures due to the long-term master lease.

Brad Heffern requested an update on the tenant watchlist, noting recent credit issues with unlisted companies, and asked about the current status of the Hellweg turnaround plan.

Answer

CEO Jason Fox disclosed that the watchlist has increased to the 6% of ABR range and stated the company will now provide more proactive commentary on top-25 tenants and a forward-looking estimate for total rent loss. Head of Asset Management Brooks Gordon added that Hellweg is still facing headwinds but is taking appropriate actions to execute its turnaround, and WPC remains confident in the underlying real estate value.

Brad Heffern from RBC Capital Markets asked about the risk-reward balance of the $2.5 billion commitment to Bally's Bronx project and sought clarity on the give-and-take involved in the Casino Queen lease combination.

Answer

Senior VP & Chief Development Officer Steven Ladany explained the New York commitment was a 'highly confident' letter for the application process and that GLPI is open to dialogue with multiple parties, not just Bally's. CFO & Treasurer Desiree Burke clarified that the parent guarantee remains on Bally's Master Lease 2; the change only affected the residual Casino Queen lease to accommodate Bally's credit facility structure.

Brad Heffern inquired about the project-level breakdown of the $400 million in 2025 development funding and whether any project timelines had slipped. He also asked for management's perspective on the now-closed Bally's Casino Queen deal.

Answer

CFO Desiree Burke stated the $400 million is a total figure, with a large portion for the Chicago project, and noted funding timing depends on tenant reimbursement requests, not project completion. CEO Peter Carlino added that while the projects are committed, the pace of draws is an estimate. SVP & Chief Development Officer Steven Ladany characterized the Bally's Casino Queen deal as a "huge success" and a positive that expands their relationship with all parties involved.

Brad Heffern of RBC Capital Markets asked if the Ione lease would convert at the same 11% rate, whether tribal deals would generally require higher yields, and for an update on the Cordish relationship regarding projects in Louisiana and Virginia.

Answer

President and COO Brandon Moore stated the Ione lease rate would be slightly below 11% but higher than a typical regional deal. SVP & Chief Development Officer Steven Ladany added that tribal deals would command a higher cap rate since GLPI won't own the asset long-term. Ladany also clarified that while Cordish is self-funding its Louisiana project, GLPI holds a 20% co-investment right on other developments, like in Petersburg, Virginia, and discussions are ongoing.

Brad Heffern from RBC Capital Markets asked for the underlying drivers of the recent stabilization and improvement in Google search demand. He also questioned if tariffs could have a direct impact on small business tenants who import goods.

Answer

CEO Joseph Margolis attributed the steady demand to normal life events (divorce, etc.) that occur in all economic cycles, rather than pricing. Regarding tariffs, he stated that tenants directly impacted represent a very small part of the business and that any negative effects would likely be offset by other businesses downsizing into storage, resulting in no significant net impact.

Brad Heffern inquired about NNN REIT's ability to achieve 2% AFFO growth in its 2025 guidance, considering headwinds from lower lease termination fees and the impact of the Badcock and Frisch's vacancies. He also asked for specifics on the rent recovery for the re-leased Frisch's properties.

Answer

CFO Kevin Habicht explained that better-than-expected outcomes and faster timing on resolving the Badcock and Frisch's situations are key drivers. He noted that the $2.8 million in new base rent for the first batch of Frisch's properties is roughly 50% of the prior rent, a trade-off made to secure significant potential percentage rent upside and expedite the re-leasing process.

Brad Heffern inquired if political and regulatory uncertainties were risked in the guidance and asked how UDR isolates the benefit of its customer experience project from general market trends of low turnover.

Answer

CFO & CIO Joe Fisher stated that such uncertainties are not explicitly factored in, which is why a guidance range is provided, noting they could have both positive and negative impacts. COO Mike Lacy explained that UDR tracks turnover on both an absolute and relative basis, showing a 200 bps outperformance versus peers since Q1 2023. He expressed confidence in further improvement driven by data analytics, targeted CapEx, and the new Funnel CRM.

Brad Heffern of RBC Capital Markets asked for the current loss-to-lease figure for the portfolio. He also inquired about the company's recent expansion into the build-to-rent (BTR) sector, particularly through its Developer Funding Program (DFP).

Answer

COO Sean Breslin stated that as of November 1, the portfolio-wide loss-to-lease was approximately 100 basis points. An unnamed executive explained that the move into BTR is a formal expansion of their existing business, leveraging their development and operational expertise. The initial focus will be on townhome communities acquired through channels like their DFP.