Omotayo Okusanya

Omotayo Okusanya questioned Phillips Edison & Company's credit rating, asking what prevents a higher rating and its potential impact on the cost of debt, and also inquired about the strategy for managing variable-rate debt given interest rate forecasts.

Answer

CFO John Caulfield stated that PECO believes it is an underrated credit, with leverage metrics comparable or superior to peers, but rating agencies prioritize scale. He estimated a 25 basis point benefit per credit notch, with current 10-year debt around 5.25%. Regarding variable-rate debt, Caulfield noted the company's 85% fixed-rate position (targeting 90%) and plans to address January 2027 maturities through longer-dated, fixed-rate capital, emphasizing opportunistic refinancing and match-funding acquisitions.

Omotayo Okusanya asked about Phillips Edison & Company's view on being an underrated credit, what factors prevent a higher credit rating from agencies, and the expected impact on the cost of debt. He also inquired about the company's higher percentage of variable-rate debt compared to peers, thoughts on interest rate forecasts, and the strategy for using swaps.

Answer

CFO John Caulfield stated that PECO believes it is an underrated credit, with leverage metrics comparable to or better than higher-rated peers. He noted that rating agencies primarily focus on scale, and PECO's continued scale and acquisition activity are expected to improve debt issuance opportunities. He estimated a 25 basis point benefit per credit notch, though fixed-income investors already recognize PECO's strength. Regarding variable-rate debt, John Caulfield reiterated the long-term target of 90% fixed rate (currently 85%), focusing on the maturity calendar (e.g., Jan 2027 maturities). He plans to access longer-dated fixed capital through refinancing and match-funding acquisitions to add duration and fixed-rate coupons, rather than relying on swaps.

Omotayo Okusanya questioned the Q1 acquisitions, which were done at an implied cap rate in the low 6% range, noting this could be negative-spread to the stock's implied cap rate. He also asked about capital allocation and whether stock buybacks are becoming more attractive at current prices.

Answer

CEO Jeffrey Edison clarified that PECO is not a cap rate buyer and focuses on achieving a 9%+ unlevered IRR, which can cause quarterly cap rates to fluctuate based on asset-specific growth stories. Regarding capital allocation, CFO John Caulfield acknowledged they have a buyback plan in place but have not used it, as they believe net acquisitions currently represent the best use of capital to drive long-term cash flow per share growth.

Omotayo Okusanya asked for the rationale behind providing seller financing on a recent transaction and inquired about the terms of the associated note receivable.

Answer

CEO Jeffrey Edison explained that providing seller financing helped de-risk the portfolio by facilitating the sale of a slower-growing asset at a premium valuation. CFO John Caulfield added that while the specific rate was not disclosed, it offered a meaningful spread over their borrowing costs. The note has a term of 12-24 months, including options, and is prepayable.

Omotayo Okusanya asked for clarification on the slight sequential decrease in in-line occupancy and whether it was related to the company's strategy of taking back spaces from certain tenants.

Answer

President Robert Myers addressed the question, noting the movement in in-line occupancy was minimal (from 95.1% to 95.0%) and was offset by a significant increase in anchor occupancy. He emphasized that the 95% rate is sector-leading and expressed confidence in achieving another 100-150 basis points of upside over the next 24 months, indicating no underlying concerns.

Omotayo Okusanya asked about tenant feedback regarding the ongoing situation with tariffs and how it might be impacting their plans for store openings or overall business strategies.

Answer

Alan Roth, East Region President and Chief Operating Officer, stated that due to the essential nature of Regency's retail portfolio and tenants' agility, there has been very little, if any, feedback about tariff impacts. He noted that many retailers have diversified supply chains or adapted their offerings, such as switching to local products, to manage potential cost pressures.

Omotayo Okusanya inquired about tenant feedback regarding ongoing tariff situations, how tariffs are factoring into their plans (e.g., open-to-buys, store openings), and any near-term trepidation impacting their sourcing strategies.

Answer

Alan Roth, East Region President and Chief Operating Officer, emphasized the portfolio's essential retail nature and insulated tenant base, noting time-tested, agile operators who have diversified supply chains. He reported very little, if any, feedback on tariff impacts, citing an example of a restaurant switching to local sourcing to manage costs.

Omotayo Okusanya asked about the outlook for AvalonBay's expansion markets and the expected pace of growth in exposure to these markets over the next 1-3 years.

Answer

Ben Schall, CEO, described growth in expansion markets as a multi-year journey, currently halfway to their 25% target. He noted that while 2025 saw active repositioning, 2026 plans include less transaction activity and a heavier weighting of development starts towards established East Coast regions. He expects continued movement towards targets over a multi-year period.

Omotayo Okusanya asked about AvalonBay's growth expectations for its expansion markets over the next 1-3 years, specifically regarding increasing exposure to those regions.

Answer

Ben Schall, CEO, reiterated that growing in expansion markets is a multi-year journey, currently halfway to the 25% target. He noted that 2026 is not expected to see significant movement towards this target due to less transaction activity and a heavier weighting of development starts towards established East Coast regions, but the long-term direction remains.

Omotayo Okusanya inquired about the technology initiatives Essex Property Trust is undertaking to enhance customer satisfaction, retention, rent growth, and operating expense management, and the benefits built into the 2026 guidance.

Answer

Angela Kleiman (President and CEO, Essex Property Trust) discussed various technology initiatives in the pipeline, including AI-focused sales/leasing and expense management. She noted that other income contributions are lumpy, taking 1-2 years to monetize, and no new benefits from pilot rollouts are baked into 2026 guidance, as this year is a pilot phase.

Omotayo Okusanya inquired about the technology initiatives Essex Property Trust is undertaking to enhance customer satisfaction, retention, rent growth, and operating expense management, and what benefits from these are built into the 2026 guidance.

Answer

Angela Kleiman (President and CEO) mentioned various technology initiatives in the pipeline, including AI-focused efforts for sales/leasing and expense management. She noted that other income contributions from these initiatives are lumpy and typically take 1-2 years to monetize, citing EV parking as an example that yielded benefits in 2025 from a 2024 rollout. No new initiatives are baked into 2026 guidance, as this year is a pilot rollout phase.

Omotayo Okusanya from Deutsche Bank asked for the specific reason behind the timing of the noncash charge-off for accounts receivable.

Answer

Executive Barb Pak explained that the charge-off was a strategic decision to return to the company's historical, more conservative cash-basis accounting policy for revenues. With delinquency improving significantly and the COVID-era challenges largely in the past, management felt it was a prudent time to write off the remaining accrued balance and eliminate any associated risk from the financials.

Omotayo Okusanya asked for First Industrial Realty Trust's perspective on tariff policy and the potential impact of an upcoming Supreme Court decision, specifically how different scenarios (e.g., striking down current policy) might affect tenant demand, headline risk, or overall market uncertainty.

Answer

Peter Baccile, Chief Executive Officer, reflected on how a previous event on April 2nd significantly slowed new growth investment. He believes that the topic of tariffs is now less acute, as many prospects have had a year to adapt and have moved on. He anticipates a muted reaction if the Supreme Court strikes down current tariff policy, suggesting the market has largely overcome the initial hard part of this issue.

Omotayo Okusanya asked for the company's perspective on the potential impact of tariff policy changes, including a Supreme Court decision, on tenant demand and overall market uncertainty.

Answer

Peter Baccile (CEO) recalled that tariff uncertainty significantly slowed new growth investment in 2025. He believes prospects have since adapted, and any reaction to a Supreme Court decision would likely be muted, as the 'hard part' of adjustment is over.

Omotayo Okusanya from Deutsche Bank (question asked by Sam on his behalf) requested an update on the federal investigation concerning PACS and sought insight into the timing and expected returns from the redeployment of Genesis-related loan proceeds in 2026.

Answer

Vikas Gupta, CIO of Omega Healthcare Investors, stated that there was no new public information regarding the PACS investigation, but noted that PACS's Omega-leased buildings continue to perform strongly. Bob Stephenson, CFO, clarified that the guidance assumes Genesis loans ($137 million, comprising DIP and term loans) will be repaid mid-year 2026, with proceeds first used to pay off credit facility balances, and the remainder invested at approximately 3.5% overnight rates.

Omotayo Okusanya of Deutsche Bank AG commented on the impressive guidance raise and asked what internal factors are enabling Omega to identify and execute on value-creating opportunities more effectively. He also inquired about the company's exposure to operator PACS.

Answer

President Matthew Gorman attributed the success to active portfolio management, which includes optimizing operator-facility pairings and exploring various deal structures for incremental value. Regarding PACS, CIO Vikas Gupta stated that Omega views them as a clinically strong operator with solid coverage, and their situation is considered a non-event for Omega.

Omotayo Okusanya of Deutsche Bank asked if the Genesis ABL lender issue is a Genesis-specific problem or a broader industry trend. He also inquired about the estimated loan-to-value (LTV) on the $118 million Genesis term loan and the potential stabilized run-rate rent for the Maplewood portfolio. He later asked if the government might appeal the minimum staffing mandate ruling.

Answer

CEO Taylor Pickett confirmed the Genesis issue is specific to them and not a broader trend, noting ABL lenders can be notoriously difficult. He also stated that while it's a guess, he believes the term loan is "substantially over-collateralized." President Matthew Gourmand detailed the Maplewood rent, noting the contractual rent outside of D.C. is $69 million, with the D.C. asset having a separate escalating rate structure. SVP Megan Krull stated she has not heard of any appeal on the staffing mandate and expects the issue to be resolved via the budget process.

Omotayo Okusanya inquired about EastGroup's perspective on tariffs, potential Supreme Court rulings, and how the tenant base might react, either by pulling back or continuing to take space.

Answer

CEO Marshall Loeb acknowledged tariffs as a 'noise level' impacting tenant decisions but noted EastGroup's strategy of focusing on metro area distribution in fast-growing 'Smile States' (e.g., Orlando, Atlanta, Dallas, Phoenix). This approach minimizes risk by catering to a sticky customer base that prioritizes quick delivery over product origin, making them less susceptible to tariff volatility.

Omotayo Okusanya asked about EastGroup's perspective on tariffs, including potential Supreme Court outcomes, how the tenant base might react (e.g., 'wait and see'), and the company's strategy regarding port-proximate markets versus metro area distribution.

Answer

CEO Marshall Loeb expressed hope for minimal headline impact from tariffs on tenant decision-making. He noted that tariffs impacted some port-proximate buildings (like Dominguez near LA/Long Beach) in 2025. He reiterated EastGroup's long-standing strategy of focusing on metro area distribution in fast-growing, higher-income 'Smile States' (e.g., Orlando, Atlanta, Dallas, Phoenix) due to a stickier customer base and less volatility compared to port markets, aiming to minimize risk without sacrificing returns.

Omotayo Okusanya sought clarification on the deceleration in mark-to-market spreads this quarter, asking if it was primarily a mix-related issue or indicative of pricing pressure.

Answer

CFO Brent Wood attributed the deceleration primarily to a mix-related issue. He noted that while rental rates are off their peak, they remain 'sticky.' He clarified that EastGroup reports leases signed (35% GAAP for Q3), whereas leases commenced would have shown a 45% GAAP spread. Wood emphasized that vacancy in their target shallow bay space (under 100,000 sq ft) is tight at 4.5%, giving them good leverage on rents once a tenant commits, as options are limited. He concluded that quarter-to-quarter fluctuations of 5% are possible due to mix.

Omotayo Okusanya sought clarification on the deceleration in EastGroup Properties' mark-to-market this quarter, asking if it was primarily a mix-related issue or indicative of pricing pressure.

Answer

Brent Wood, CFO, attributed the deceleration primarily to a mix-related issue. He noted that while rental rates are off their peak, they have moderated only modestly. Wood explained that EastGroup reports leases signed, and if leases commenced were reported for Q3, the GAAP mark-to-market would have been 45% compared to the reported 35%. He reiterated that mid-30s GAAP leasing increases feel sticky, and tight vacancy (around 4.5% for spaces under 100,000 sq ft) provides leverage on rents, making tenant commitment the main factor rather than pricing pressure.

Omotayo Okusanya of Deutsche Bank asked about significant move-outs in guidance, the tenant watch list, and the total square footage of development leasing in Q2.

Answer

EVP & CFO Brent Wood confirmed there are no significant move-outs factored into guidance for the second half of the year; the operating portfolio remains strong. He reiterated that the tenant watch list is stable, with some concentration in 3PLs and California, but no specific retail trend. He estimated that Q2 development leasing totaled approximately 180,000 square feet across five leases.

Omotayo Okusanya from Deutsche Bank asked if any significant tenant move-outs are built into the full-year occupancy guidance and requested the total square footage of development leasing in the second quarter.

Answer

EVP & CFO Brent Wood confirmed there are no significant known move-outs factored into the guidance for the second half of the year. He reiterated that the lower overall portfolio occupancy forecast is driven by the conversion of not-yet-fully-occupied development projects. He estimated that development leasing in Q2 was approximately 180,000 square feet across five leases.

Omotayo Okusanya asked about the potential for onshoring and nearshoring of manufacturing driven by tariffs and whether management believes it could become a significant reality this time.

Answer

Executive Marshall Loeb expressed optimism that any increase in U.S. manufacturing would benefit EastGroup, as suppliers would likely locate in their core Sunbelt markets. He sees nearshoring to Mexico as an even more likely trend, which would directly benefit their properties in Texas, Arizona, and San Diego. He pointed to previously experiencing doubled rents in El Paso as evidence of this trend's powerful impact.

Omotayo Okusanya of Deutsche Bank questioned the 2025 guidance, asking why, given the commentary on 'green shoots' and strong leasing, the occupancy guidance wasn't higher and the acquisition guidance was modest compared to 2024's performance.

Answer

Executive Marshall Loeb addressed acquisitions by stating that they are difficult to forecast and that the distressed opportunities seen in 2024 have largely dried up. On occupancy, he explained the natural lag between leasing activity and rent commencement means the benefits will build through the year. Brent Wood added that two large Q4 vacates, totaling over 1% of occupancy, create an initial headwind that impacts the full-year average.

Omotayo Okusanya questioned the expected ramp-up of the Gateway transaction over the next few years, particularly given the 60% occupancy at acquisition and the fact that Healthpeak is buying from other well-known players. He also sought clarification on which Senior Housing assets would be contributed to Janus Living.

Answer

President and CEO Scott Brinker explained that Healthpeak is being opportunistic with the Gateway acquisition, leveraging its strong balance sheet to acquire an asset with significant upside and a good current yield (low sixes going in). He anticipates high single-digit unlevered return opportunities as the market stabilizes. Brinker clarified that upon completion of the IPO, all of Healthpeak's Senior Housing assets, including both entry fee and rental properties, will be contributed to Janus Living. Healthpeak will retain an ownership interest in Janus Living stock but will not own any Senior Housing real estate directly.

Omotayo Okusanya sought to understand the expected ramp-up and long-term performance of the Gateway transaction, particularly given its 60% occupancy at acquisition and the sellers' exit. He also asked for clarification on whether all CCRC assets, including memory care and skilled nursing, would be contributed to Janus Living.

Answer

President and CEO Scott Brinker explained that Healthpeak's opportunistic acquisition of Gateway, with a strong balance sheet and no large development pipelines, contrasts with the sellers' situation. He highlighted the low 6% going-in yield and high single-digit unlevered return opportunity as the market stabilizes. Mr. Brinker confirmed that all senior housing assets, including entry fee and rental, and the integrated CCRC campuses (which cannot be broken up), would be contributed to Janus Living upon the IPO's completion, with Healthpeak retaining an ownership interest in Janus Living stock.

Omotayo Okusanya of Deutsche Bank asked about the process for assessing cash burn for smaller tenants and how many have less than a year of cash. He also sought to understand the sequential slowdown in CCRC same-store NOI growth and requested a new vs. renewal breakdown for post-Q2 leasing in the lab and MOB portfolios.

Answer

CFO Kelvin Moses explained that cash runway analysis is granular and based on direct communication with tenants, but declined to quantify the number with less than a year of cash, stating it's a small handful being monitored. CEO Scott Brinker attributed the CCRC NOI growth moderation to the accounting for entry fees, noting cash flow remains outstanding. Mr. Moses added that the lab leasing pipeline skews more towards new deals, while MOBs are consistent with their historical 85% renewal rate.

Omotayo Okusanya from Deutsche Bank asked about the process for assessing tenant cash burn, the reason for the sequential slowdown in CCRC NOI growth, and the mix of new versus renewal leasing in post-quarter activity.

Answer

CFO Kelvin Moses explained that tenant cash runway is analyzed using granular, forward-looking data obtained directly from tenants. CEO Scott Brinker stated the CCRC growth moderation was expected, as 15% growth isn't sustainable, and noted accounting for entry fees affects the reported number. CFO Kelvin Moses clarified the post-quarter lab leasing pipeline skews more towards new deals.

Omotayo Okusanya asked about Simon Property Group's deal flow, noting the $2 billion in acquisition activity in 2025, and sought insights into the global outlook and expectations for acquisition activity in 2026.

Answer

Eli Simon, Chief Operating Officer, stated that the company maintains a high bar for acquisitions, focusing on properties that are brand accretive, allow for expertise addition, and are priced correctly. David Simon, Chairman, Chief Executive Officer, and President, emphasized the company's excitement for its growing $4 billion redevelopment pipeline, which raises the bar for external acquisitions. He cited examples like Boca, Fashion Valley, Nashville, Woodbury, Toronto, and Desert Hills as exciting internal projects.

Omotayo Okusanya inquired about Simon Property Group's deal flow, global opportunities, and how to think about acquisition activity in 2026, given the $2 billion in activity during 2025.

Answer

COO Eli Simon stated that the company maintains a high bar for acquisitions, seeking brand-accretive properties where Simon can add expertise and value at the right price. Chairman, CEO, and President David Simon emphasized the excitement around their existing redevelopment and mixed-use pipeline, which sets a high bar for external acquisitions, citing projects like Boca Raton and Nashville.

Omotayo Okusanya of Deutsche Bank questioned the decision to use secured loans at 5.84%, given Simon's A- credit rating and the availability of cheaper unsecured debt for peers.

Answer

Chairman, CEO & President David Simon clarified the financing was for a joint venture partner, for whom Simon would not use its own balance sheet. CFO Brian McDade added that Simon's own 10-year unsecured debt would price around 5%, which is in line with the current market.

Omotayo Okusanya of Deutsche Bank questioned the decision to use secured loans at 5.84% when Simon's A- credit rating would likely allow for cheaper unsecured financing.

Answer

Chairman, CEO & President David Simon clarified that the secured financing was specifically for a joint venture partner, as Simon would not use its own balance sheet for such a purpose. CFO Brian McDade added that Simon's current cost for 10-year unsecured debt is approximately 5%, which is in line with the market.

Omotayo Okusanya asked about the current state of the debt refinancing market, including any changes in terms or lender appetite, in light of the company's recent transactions.

Answer

CEO David Simon and CFO Brian McDade both conveyed that the financing market remains very receptive to high-quality retail real estate and Simon specifically. McDade noted that various lenders, including CMBS and life insurance companies, are actively looking to deploy capital. He emphasized that Simon's conservative leverage provides strong access to capital for refinancing existing debt.

Omotayo Okusanya inquired about the campground membership results, specifically the declining membership count, and what this indicates about overall demand, despite efforts in pricing and upgrades. He also asked to identify the specific factor dragging down membership counts.

Answer

Marguerite Nader (CEO) explained that the Thousand Trails system has about 108,000 members across 80 properties. She highlighted healthy growth (over 5%) in annual membership subscriptions and new upgrade dues. Nader also noted significant annual income growth (7-8% over 5 years) from members seeking more permanent stays and increased conversion of promotional trial memberships. She clarified that the declining count is due to attrition of legacy members paying lower dues, while new members are joining at higher dues amounts.

Omotayo Okusanya inquired about the campground membership results, noting a continued decline in membership count and light upgrade activity, and asked what this indicates about overall demand for transient or seasonal stays.

Answer

Marguerite Nader (CEO) explained the Thousand Trails system's components, including online annual membership subscriptions and new upgrade dues products, which saw healthy growth. She also highlighted the increasing annual income from members seeking permanent stays and the successful conversion of promotional trial memberships. She clarified that the decline in count is due to attrition of legacy members paying lower dues, offset by new members paying higher dues.

Omotayo Okusanya inquired about the FFO guidance range so late in the year, asking what factors drive the higher or lower end of the guidance. He also asked about initiatives to convert transient business to annual, and the success or difficulties encountered in these conversions.

Answer

Paul Seavey, EVP and CFO, explained that the $0.10 range is a convention, not a signal of specific volatility, with potential drivers for the upper/lower end including storm events (not factored), MH occupancy acceleration, or unexpected expense changes. Patrick Waite, President and COO, noted that 15-20% of annual customers previously stayed as transient/seasonal, representing a consistent pipeline, with a focus on high-level customer service and presenting longer-term stay options to guests on site.

Omotayo Okusanya noted that the sequential decrease in total Thousand Trails membership seemed larger than typical seasonality and asked for insight into the drivers during the quarter and the outlook for 2025.

Answer

CEO Marguerite Nader clarified that the decline in member count was primarily driven by two factors: a reduction in members originating from RV dealer leads and fewer on-site camp pass sales due to lower transient activity. She suggested that as these channels recover, the member base would see an increase.

Omotayo Okusanya asked for clarification on the nature of the $5 million distribution from a joint venture that was included in guidance.

Answer

Paul Seavey, EVP and CFO, explained that the income resulted from a refinancing of a loan secured by one of its seven JV assets. He clarified that per GAAP guidance, such distributions are applied to the book investment until the basis reaches zero; any excess cash beyond that point, as in this case, is recognized as income.

Omotayo Okusanya from Deutsche Bank inquired if the elevated repairs and maintenance expense in the quarter was broad-based or concentrated in the legacy Life Storage portfolio, and the outlook for R&M. He also asked about current activity and yields in the bridge loan program.

Answer

CFO Jeff Norman confirmed that some of the outsized R&M growth was driven by legacy Life Storage properties due to catch-up maintenance, which is expected to normalize. CEO Joseph Margolis noted that new development bridge loans have quieted down, replaced by demand from equity partner buyouts or sellers unable to achieve desired prices. He reported over $330 million in originations year-to-date, with A-notes averaging 7.6% and mezzanine notes about 11.3%, aiming to shift the mix towards more B-notes on the balance sheet.

Omotayo Okusanya from Deutsche Bank inquired whether the elevated repairs and maintenance (R&M) during the quarter was broad-based or concentrated on the Life Storage portfolio, and the outlook for R&M. He also asked about the current state of the bridge loan program, including the ability to deploy capital and the yields achieved.

Answer

CFO Jeff Norman confirmed that some of the outsized R&M growth was specifically driven by legacy Life Storage properties for catch-up, with expectations for it to normalize. CEO Joseph Margolis noted that while new development bridge loans have quieted, demand has shifted to other needs like equity partner buyouts. He stated that originations are on a good pace, with A-notes averaging 7.6% and mezzanine notes about 11.3%.

Omotayo Okusanya asked about the expected timing for when stabilizing fundamentals will translate into improved bottom-line earnings growth and what the key drivers for that inflection would be.

Answer

CEO Joseph Margolis listed several factors that could improve the recovery's slope, such as better rates and longer stays, but stated the timing is 'TBD'. EVP & CFO Jeff Norman added that external factors like a housing recovery are not necessary for progress but would accelerate the pace.

Omotayo Okusanya from Deutsche Bank asked for the rationale behind maintaining FFO guidance despite nearly doubling the acquisition outlook. He also inquired about Q1 ECRI trends and the company's interest in international expansion.

Answer

CFO P. Scott Stubbs explained the increased acquisition contribution is offset by a $17 million reduction in equity earnings, stemming from a preferred investment repayment and JV buyouts. CEO Joseph Margolis noted no change to the ECRI program or customer behavior. On international expansion, he stated that any opportunity must be accretive after all costs and be scalable, conditions which have not yet been met.

Omotayo Okusanya asked why the 2025 interest expense guidance appeared high, inquiring about underlying factors like swap maturities. He also asked how recent natural disasters might affect the company's property insurance program underwriting.

Answer

Executive P. Stubbs explained that higher interest expense guidance is due to refinancing maturing debt at current market rates, modeling the forward interest rate curve, and accounting for debt to fund investment activity. Regarding property insurance, he stated they mitigate costs by shopping the policy widely and evaluating the trade-offs of taking on more risk themselves.

Omotayo Okusanya asked about the loans sold during the quarter and the drivers of profitability in the growing third-party management business.

Answer

CEO Joseph Margolis clarified that when selling loans, the company typically sells the senior A-note and retains the mezzanine piece. He attributed the growth and profitability of the third-party management business to having one less competitor (LSI), a challenging operating environment driving owners to seek professional help, and a strong reputation that allows them to command higher fees.

Omotayo Okusanya asked for the company's thoughts on recent regulatory updates, particularly in anticipation of the upcoming election cycle.

Answer

Bryan Smith, Chief Executive Officer, noted that the regulatory environment for single-family rentals has been relatively quiet. He highlighted the company's proactive efforts to engage with local municipalities and government officials, positioning AMH as part of the housing supply solution. Regarding macro-level concerns like a potential federal government shutdown, he expressed hope for a quick resolution and mentioned working with residents affected. He also stated that immigration policies have not impacted development costs, though long-term demand effects are difficult to gauge, concluding that the situation is relatively quiet with proactive messaging and close attention to macro trends.

Omotayo Okusanya asked for insights into recent regulatory updates, particularly in the context of the upcoming election cycle.

Answer

Bryan Smith, Chief Executive Officer, stated that the regulatory environment for single-family rentals has been relatively quiet. He mentioned proactive internal efforts to engage with local municipalities and government officials to highlight American Homes 4 Rent's role as a housing solution. He noted macro-level concerns like a potential federal government shutdown and immigration policies, but indicated no direct significant impact on the company, though they are assisting affected residents and monitoring long-term demand implications.

Omotayo Okusanya from Deutsche Bank asked for an update on any emerging regulatory issues at the federal, state, or local levels that could impact the business.

Answer

CEO Bryan Smith stated there were no significant new regulatory developments to report. He reiterated the company's proactive government affairs strategy, which focuses on communicating AMH's role in providing new housing supply and being part of the overall housing solution.

Omotayo Okusanya asked for an update on any emerging regulatory issues at the federal, state, or local levels that investors should be aware of.

Answer

CEO & Trustee Bryan Smith responded that there was nothing new to report beyond previously discussed topics. He highlighted the company's proactive government affairs strategy, which focuses on communicating that AMH is part of the housing solution by bringing new, needed supply to the market.

Omotayo Okusanya asked for an update on any emerging regulatory issues at the federal, state, or local levels that could be of concern to investors.

Answer

CEO Bryan Smith stated that there were no significant new regulatory developments to report beyond previously discussed items like favorable anti-trespasser laws and changes in Washington State. He emphasized the company's proactive government affairs strategy, which focuses on communicating that AMH is part of the housing solution by bringing new supply to the market.

Omotayo Okusanya of Deutsche Bank asked how repair and maintenance costs are expected to trend given concerns about tariffs and material costs. He also inquired about the impact of a proposed rent control policy.

Answer

CFO Christopher Lau stated that the full-year outlook for controllable expenses, including R&M, remains at mid-single-digit growth, supported by in-house operations and a mature supply chain. COO Lincoln Palmer addressed the rent control proposal, noting it would cap rents but includes a carve-out for newer homes. He reiterated that such regulations could discourage housing investment and negatively impact affordability.

Omotayo Okusanya from Deutsche Bank asked new CEO Bryan Smith if his perspective on the business differs from his predecessor's and what feedback he is receiving from the board.

Answer

CEO Bryan Smith emphasized continuity, highlighting the long tenure and lockstep collaboration of the leadership team. He stated that no major strategic changes are anticipated, with a continued relentless focus on the core business, the development program, innovation, and the resident experience. He expressed optimism for the future based on this sound strategy.

Omotayo Okusanya asked for a breakdown of how much of the forecasted Q4 operating trends could be attributed to supply, weather, and seasonality, respectively, and if there were any significant regional biases.

Answer

COO Bryan Smith pushed back on the premise of disappointment, highlighting that the year has exceeded expectations by focusing on revenue in the first half and cost control in the second. He reiterated that the company executed its plan, leading to multiple guidance raises. He framed the current environment as a setup for a strong finish to the year and another outstanding year in 2025, driven by fantastic demand for their high-quality product, rather than breaking down the specific impacts.

Omotayo Okusanya asked about any states or counties Equity Residential is watching for potential impacts on rent practices due to the upcoming election cycle, specifically regarding the New York mayoral race. He also inquired about other opportunities to contain operating expense growth beyond the 2% year-over-year decline in same-store payroll.

Answer

Mark Parrell (President and CEO) offered an optimistic view on regulation, citing positive zoning changes in California and Florida, and bipartisan support for housing in the Senate. Regarding New York, he assumes Mr. Mamdami will win and noted industry conversations pushing for increased supply and against rent control. Michael Manelis (COO) emphasized continuous operational excellence through automation and centralization. Bret McLeod (CFO) specifically highlighted utility expenses, particularly trash, as an area with opportunities for best practices to drive numbers down next year.

Omotayo Okusanya asked about potential impacts of the upcoming election cycle on rent practices in specific states or counties, and implications of the New York mayoral race. He also inquired about further opportunities to contain operating expense growth, beyond the 2% year-over-year decline in same-store payroll.

Answer

Mark Parrell, President and CEO, expressed optimism about regulation, citing positive zoning changes in California and Florida, and bipartisan federal housing support. He noted focus on the New York mayoral race, emphasizing industry engagement to promote supply-side solutions and caution against rent control. Michael Manelis, Chief Operating Officer, stated that operational excellence is an ongoing pursuit, with continued automation and centralization initiatives leading to reduced payroll and efficiencies. Bret McLeod, Chief Financial Officer, specifically identified trash expenses as an area for further improvement.

Omotayo Okusanya questioned the rationale behind the 25 basis point transaction dilution assumption, asking about the company's comfort with dilutive deals and the expected timeline for these investments to become accretive.

Answer

CEO Mark Parrell clarified that while deals may appear dilutive on an NFFO basis, they are often immediately accretive on a cash flow or AFFO basis because the older assets being sold have significantly higher near-term capital expenditure requirements. CIO Alec Brackenridge supported this by noting the significant age difference between assets bought (average 5 years) and sold (average 35 years) in the prior year.

Omotayo Okusanya asked for an explanation of the straight-line bad debt reversal and the increase in tenant reimbursements. He also inquired about the scale of the opportunity for Kilroy Realty Corporation (KRC) from AI-driven office demand, including potential AI companies at KOP 2.

Answer

Jeffrey Kuehling (EVP, CFO and Treasurer) explained the straight-line bad debt reversal as an assumption change for a tenant moving from cash to accrual, unwinding a prior adjustment, and noted a modest $1.5 million sequential change in reimbursement income. Angela Aman (CEO) highlighted that AI-related companies now represent over 30% of San Francisco's 9 million sq ft market demand, driving activity across the portfolio, including the Pacific Northwest and KOP. She emphasized Kilroy's focus on meeting AI tenants' needs for near-term occupancy and spec suites while maintaining a broad-based tenant profile.

Omotayo Okusanya asked for clarification on the straight-line bad debt reversal and the reason behind the fairly large increase in tenant reimbursements during the quarter. He also inquired about the potential office demand from AI companies, how significant this opportunity is for Kilroy Realty Corporation (KRC), and if AI companies could occupy space at Kilroy Oyster Point Phase Two (KOP2).

Answer

EVP, CFO and Treasurer Jeffrey Kuehling explained that the straight-line bad debt reversal was an assumption change related to a tenant moving from cash to accrual, unwinding a previous adjustment. He noted that the sequential change in tenant reimbursement income was about $1.5 million, not a huge driver. CEO Angela Aman highlighted that AI-related companies drive over 30% of the 9 million square feet of demand in San Francisco, a significant increase. She confirmed AI demand across the portfolio, including SOMA, Pacific Northwest, and KOP, emphasizing Kilroy's focus on meeting their need for near-term occupancy and flexible growth paths.

Omotayo Okusanya from Deutsche Bank sought clarification on the change in the interest capitalization timeline for the Flower Mart project and asked if successful re-entitlement would imply continued capitalization into 2026.

Answer

CEO Angela Aman explained that the updated timeline reflects progress in discussions with the city. She clarified that under accounting rules, capitalization must cease if active development work is not ongoing, regardless of entitlement status. The decision to capitalize into 2026 will depend on specific activities at year-end.

Omotayo Okusanya also asked about NexPoint Residential Trust's long-term strategy to create shareholder value and address the persistent significant discount of its stock price to its self-disclosed Net Asset Value (NAV).

Answer

EVP and CIO Matt McGraner reiterated the company's growth focus, aiming for $170 million in NOI by 2027, emphasizing the portfolio's unique value and the management's significant ownership stake. He noted that while public markets discount multifamily, the transaction market remains strong, and anticipated new lease pricing inflection in Q2 2026 could be a catalyst for stock performance. He also affirmed confidence in the company's terminal value if the discount persists.

Omotayo Okusanya from Deutsche Bank inquired about the sustainability of NexPoint Residential Trust's operating expense improvements, particularly in light of the implied Q4 FFO guidance, and sought quantification of any one-time benefits. Okusanya also questioned the company's strategy for creating shareholder value given the persistent discount of its stock to NAV.

Answer

Executive Vice President and Chief Investment Officer Matt McGraner and Vice President, Asset and Investment Management Bonner McDermett addressed the expense sustainability, noting continued improvement in non-controllable categories like insurance and real estate taxes, and consistency in payroll and R&M. Bonner McDermett clarified an $820,000 one-time real estate tax settlement in Q3. Matt McGraner emphasized the company's growth strategy to reach $170 million NOI by 2027, highlighting alignment with shareholders through significant ownership, and expressed confidence in market inflection in 2026 or a potential terminal value bid for the company.

In a follow-up question, Omotayo Okusanya of Deutsche Bank asked why Q1 operating expenses, property taxes, and insurance were lower than expected and if this represented a new sustainable run rate.

Answer

Bonner McDermett, VP of Asset Investment Management, explained the lower expenses were due to successful cost-control initiatives like payroll centralization and maintenance 'podding'. While he expects more savings to materialize by H1 2026, he noted the Q1 figures were ahead of forecast. He also mentioned a favorable insurance renewal, effective in Q2, will provide further savings.

Omotayo Okusanya of Deutsche Bank asked for clarification on the outlook for interest expense in 2025, considering factors like swap expirations.

Answer

Matthew McGraner, EVP and CIO, explained that despite some swaps expiring in June, a 50 basis point reduction in their borrowing spread results in a net $0.12 benefit for 2025. He noted the guidance conservatively assumes a 'higher for longer' interest rate environment, suggesting potential upside if the Fed cuts rates later in the year.

Omotayo Okusanya questioned the components of NexPoint's 1.7% same-store revenue growth, noting an apparent discrepancy with occupancy and rent figures. He also asked about the drivers and sustainability of the significant decrease in property G&A.

Answer

Bonner McDermett, President of Asset and Investment Management, clarified that revenue growth was primarily driven by a 140 bps year-over-year increase in financial occupancy and a substantial reduction in bad debt from 3.1% to 1.3%. Matthew McGraner, EVP and CIO, added that lower G&A is sustainable due to AI utilization and reduced on-site staffing.

Omotayo Okusanya asked for a high-level description of the group of tenants where rent coverage is less than one time, inquiring about their sector or industry.

Answer

President and CEO Peter Mavoides explained that the group of assets with less than one-time rent coverage does not have a consistent thematic driver across industries or geographies. He described the risks as very idiosyncratic, citing examples such as a childcare center losing a manager, a restaurant affected by road widening, or a new car wash ramping up its membership base. He stressed that there is nothing thematic to point out.

Omotayo Okusanya asked for a high-level description of the group of tenants where rent coverage is less than one time, specifically inquiring about the sectors or industries involved.

Answer

Peter Mavoides, President and CEO, explained that there is no consistent theme; it's a group of assets with specific idiosyncratic risks across all industries and geographies. He provided examples such as a childcare center losing an operator, a restaurant affected by road widening, or a new car wash ramping up, emphasizing that the issues are site-specific and not thematic or terribly material.

Omotayo Okusanya from Deutsche Bank asked for the company's perspective on large portfolio opportunities, such as the recent Starwood transaction, and why they might not pursue such deals.

Answer

CEO Pete Mavoides stated that they did not look at the deal, as they have an ample pipeline of freshly originated opportunities through their own relationships. He emphasized that the bar for acquiring another firm's underwriting is high and would require pricing significantly wider than their current deployment rate of 7.9%, which he did not believe was the case for that transaction.

Omotayo Okusanya of Deutsche Bank asked if the company is considering more structured finance deals given the difficult lending environment for its tenants. He also inquired about the potential impact on the middle-market tenant base from a prolonged period of high interest rates and inflation.

Answer

CEO Peter Mavoides responded that the company's primary goal is owning fee-simple real estate and they do not expect a material shift toward structured finance, though they may use it selectively to support key tenant relationships. Regarding economic risks, he expressed confidence in their selected service-based industries and their senior position as landlords, noting the portfolio's strong 3.5x rent coverage provides a significant cushion against operating pressures.

Omotayo Okusanya of Deutsche Bank asked for an outlook on the overall regulatory environment, questioning whether potential future budget deficits could put pressure on Medicare and Medicaid reimbursement and lead to discussions of sequestration.

Answer

President and CEO Dave Sedgwick expressed confidence in the stability of reimbursement, stating that Medicaid for senior care enjoys broad bipartisan support at both federal and state levels. He believes that if budget pressures were to arise, funding for senior care would likely be prioritized over other Medicaid programs.

Omotayo Okusanya inquired about operators' access to financing, specifically asking if CareTrust is observing any challenges with asset-based lending (ABL) or GSE financing in the industry.

Answer

President and CEO Dave Sedgwick gave a direct response, stating, 'No, we're not seeing anything like that,' indicating no observed financing challenges among their operators or in their dealings.

Omotayo Okusanya asked about state-level Medicaid reimbursement outlooks, the potential impact of shifting Medicaid responsibility to states, the rise of Medicare Advantage, and the company's view on a worst-case scenario for tenant PACs.

Answer

President and CEO David Sedgwick stated they expect no negative surprises on state Medicaid rates and noted the trend of Medicare Advantage is manageable for sophisticated operators. He expressed doubt about a major federal shift in Medicaid responsibility due to political realities. He declined to speculate on a worst-case scenario for PACs, reiterating confidence in their stability.

Omotayo Okusanya of Deutsche Bank questioned the impact of increasing competition in the private credit market on Kennedy Wilson's platform and pricing. He also asked how the company balances using cash from asset sales for deleveraging versus share buybacks, given the stock's discount to NAV, and inquired about the strategy for addressing 2026 debt maturities.

Answer

Matt Windisch, President, acknowledged the competitive landscape but noted KW's focus on residential construction lending without back leverage differentiates their platform. William J. McMorrow, Chairman & CEO, added that all financing is secured by real estate. Regarding capital allocation, Mr. McMorrow stated that after the upcoming bond payoff, they will evaluate all options, including share buybacks, as they see a significant opportunity in their own stock. For 2026 maturities, CFO Justin Enbody and President Matt Windisch explained the plan involves continued non-core asset sales and refinancing, with many maturing loans tied to assets already slated for disposition.

Omotayo Okusanya from Deutsche Bank questioned current loan origination rates and their recent changes, the cause for higher-than-usual loan prepayments in Q1, and the affordable housing portfolio's exposure to Section 8 vouchers or other programs potentially affected by administrative changes.

Answer

President Matt Windisch explained that loan origination spreads have compressed by 30-40 basis points due to competition but remain attractive. He attributed the Q1 spike in prepayments to a large, non-recurring $200 million payoff on an office loan. Regarding the affordable housing portfolio, Windisch stated there is no concern about financing availability and that while about 15% of tenants in that portfolio receive HUD assistance, the company has seen no impact and is not overly concerned, though it continues to monitor the situation.

Omotayo Okusanya inquired about the expected yields and operating model for the U.K. single-family rental platform, the potential run-rate for debt originations, the future of Dublin's rent caps, and the outlook for the co-investment portfolio's fair value.

Answer

President of Europe Michael Pegler stated the U.K. SFR platform targets stabilizing yields in the high 5s to 6% and noted Irish rent caps are under government review. President Matthew Windisch said the firm aims to exceed last year's $3.5 billion in debt originations and expressed cautious optimism for positive fair value marks on the co-investment portfolio if rates stabilize. CFO Justin Enbody added that carried interest opportunities will grow with the investment management business.

Omotayo Okusanya from Deutsche Bank inquired about the ongoing relationship with Discovery Senior Living following recent asset transitions, the rationale for those moves, and the drivers behind recent occupancy softness in the SHOP portfolio.

Answer

Chief Investment Officer Kevin Pascoe affirmed that Discovery remains a key partner with 10 properties in the SHOP portfolio. He explained the transitioned assets were smaller buildings in secondary markets where a different operator could drive more growth. Pascoe attributed the temporary SHOP occupancy softness to local leadership changes and an abnormal level of move-outs, noting that move-in trends remain consistent.

Omotayo Okusanya of Deutsche Bank questioned the weak Q1 SHOP performance, specifically the low RevPOR growth and continued use of heavy incentives. He also asked about the potential NOI upside from the Discovery portfolio conversion and requested an update on the tenant Tex.

Answer

CIO Kevin Pascoe explained that incentives are still needed for a subset of properties not yet at 90% occupancy and to manage turnover. On the Discovery conversion, he stated the portfolio has potential for double-digit NOI growth, with CFO John Spaid adding the goal is to improve the current low 3% ROIC. Pascoe confirmed no new update on Tex beyond public disclosures, noting they continue to pay rent.

Omotayo Okusanya of Deutsche Bank questioned the conservatism of the $225 million acquisition guidance given the larger pipeline, sought clarity on the expected 2025 deferred rent collections versus 2024, and asked about the potential outcomes for the Discovery Senior Living portfolio.

Answer

CFO John Spaid explained the acquisition guidance is conservative as deals under LOI are not yet definitive, and that 2025 deferred rent collections are guided to ~$4 million because large 2024 collections are not repeatable. CEO Eric Mendelsohn outlined that for the Discovery portfolio, all options are on the table, including re-tenanting, selling assets, or converting it to a SHOP structure to maximize NOI.

Omotayo Okusanya inquired about the Board of Directors, asking if the retirement of Chairman Andy Adams creates another opening and requesting an update on the ongoing search for a new independent board member. He also asked about any state-level issues from the recent election cycle that NHI is monitoring.

Answer

President and CEO Eric Mendelsohn clarified that the search for a new independent board member is in its final stages, with a candidate expected to be presented for the next proxy season. A decision on replacing the Chairman's seat has not yet been made. He also noted that NHI is closely watching state-level subsidy and supplemental payment programs for skilled nursing, as their continuation is not guaranteed year-to-year.

Omotayo Okusanya from Deutsche Bank asked about the potential size of the multifamily component in Federal Realty's portfolio, particularly as the company expands into new markets.

Answer

President, CEO & Director Donald Wood reiterated that FRT is primarily a retail company. He explained that multifamily is a tool to enhance mixed-use properties and can be monetized for capital. He expects the residential income share to remain around 11% or potentially decrease, not grow significantly.

Omotayo Okusanya inquired about qualitative initiatives in lease negotiations beyond rent, such as specific terms that help build the business.

Answer

EVP Wendy Seher explained that with high occupancy, they can strategically focus on merchandising to grow tenant sales, which in turn drives future rents. She noted an increased focus on contract control and implementing terms like sales performance hurdles that tenants must meet to exercise renewal options, allowing for finer control over the shopping center's overall productivity.

Omotayo Okusanya from Deutsche Bank inquired whether the tempered outlook and occupancy decline were U.S.-centric or if similar trends were being observed in Lineage's international businesses.

Answer

CEO Greg Lehmkuhl clarified that the negative pressure is primarily a U.S. phenomenon. He stated that inventory levels have held up better in other key regions, such as Europe and Australia. Therefore, the U.S. market is the main driver of the overall year-over-year occupancy decline.

Omotayo Okusanya requested a deeper dive into the unchanged guidance, asking for the moving parts that offset the $0.05 AFFO gain from acquisitions. He also asked about the relative performance of domestic versus international operations.

Answer

CEO W. Lehmkuhl explained that while there are many moving parts amid the current uncertainty, the company has numerous levers to pull and is confident in the guidance range. He noted that the pricing pressure from volume guarantee resets was primarily a U.S. phenomenon, while the Asia Pacific and European businesses are performing very well and are expected to accelerate.

Omotayo Okusanya questioned whether negative macro indicators like USDA data, food cost inflation, and weak consumer sentiment could prolong market pressures beyond 2025.

Answer

CEO W. Lehmkuhl reiterated that Lineage's actual throughput has remained stable despite these pressures, with the main impact being on inventory levels, which have now stabilized. He also highlighted the limitations of the voluntary USDA survey, stating it is not a reliable short-term predictor for their business. CFO Robert Crisci added that recent USDA data reflects the normal seasonality the company expects.

Omotayo Okusanya inquired about the extent of Lineage's operating leverage and its ability to flex labor costs in response to fluctuating demand.

Answer

CEO W. Lehmkuhl pointed to long-term improvements from technology like LinOS. CFO Robert Crisci noted that while Q4 has seasonally higher expenses built into the guide, the company's administrative structure is built to scale, providing leverage as the company grows and they improve their quarterly forecasting.

Omotayo Okusanya of Deutsche Bank inquired about the slight decline in rent coverage for tenant Community Care and asked about any potential risk to Medicare from sequestration due to fiscal deficit concerns.

Answer

CEO Rick Matros and CIO Talya Nevo-Hacohen stated there was no concern regarding Community Care, whose 1.77x coverage is strong, and noted the operator is divesting a few challenging assets. Regarding Medicare, Matros expressed confidence that sequestration is unlikely to be an issue, citing effective lobbying and the overall improved financial health and operating cushion of the healthcare real estate space.

Omotayo Okusanya of Deutsche Bank inquired about the slight decline in rent coverage for tenant Community Care and asked about the potential risk of Medicare sequestration given the fiscal environment.

Answer

CEO Rick Matros stated there was no concern about Community Care, as they are divesting a few challenging assets, and noted their coverage remains strong. Regarding sequestration, he expressed confidence that it is unlikely, citing successful lobbying efforts and the overall financial health and 'cushion' the industry now possesses. CIO Talya Nevo-Hacohen also pointed out that 1.77x coverage is not a concern.

Omotayo Okusanya of Deutsche Bank requested an update on tenant Community Care following a slight decline in rent coverage and asked about the potential risk of sequestration impacting Medicare in the coming years.

Answer

CEO Rick Matros stated there is no concern regarding Community Care, as they are divesting a few challenging assets. He also expressed confidence that sequestration is unlikely to be an issue, citing strong industry lobbying, positive CMS dialogue, and the overall financial health and cushion of the sector.

Omotayo Okusanya of Deutsche Bank AG asked about the probability of potential Medicaid/Medicare cuts affecting programs other than skilled nursing.

Answer

CEO Rick Matros agreed that it is a fair assumption that other programs like CHIP or home-based community programs might be targeted first, which would mitigate the direct impact on SNFs. He also noted that various sectors and groups like AARP would likely unite in lobbying efforts against broad cuts to elderly care.

Omotayo Okusanya of Deutsche Bank asked about Sabra's interest in converting more triple-net senior housing leases to RIDEA structures. He also inquired about the forward-looking regulatory perspective, including the election, the CMS minimum staffing rule, and the impact of the Chevron deference ruling.

Answer

CEO Rick Matros explained that Sabra has already been actively converting assets, and the remaining small triple-net portfolio consists of well-performing assets with operators who have no incentive to convert. Regarding regulation, Matros reiterated his belief that the minimum staffing mandate will ultimately fail. He also suggested the Chevron deference ruling will make it tougher for regulators to arbitrarily impose rules, empowering trade associations to be more aggressive in challenging them.

Omotayo Okusanya from Deutsche Bank asked about management's confidence in Prestige's ability to maintain full contractual loan payments, the process for selecting operators and structuring management contracts for the RIDEA portfolio, and the potential for LTC to pursue value-add transactions.

Answer

Co-CEO Clint Malin expressed confidence in Prestige's ability to meet its obligations, citing performance improvements that were anticipated when the loan was modified. For new SHOP deals, he noted they are retaining existing operators and using management contracts with incentives on both top-line and bottom-line performance. Both Malin and Co-CEO Pam Kessler stated that while not ruling it out, the current strategy is to build a strong base with newer, stabilized assets, which they see as a better risk-adjusted return, rather than focusing on value-add turnarounds.

Omotayo Okusanya asked about remaining steps to institutionalize the SHOP platform, whether ALG received a rent deferral and its current performance, and if any other leases beyond the known portfolio have quarterly market-based resets.

Answer

Co-CEO Pamela Shelley-Kessler confirmed the SHOP platform will scale with investments but is well-supported currently. She stated ALG did not receive a deferral, as its occupancy has improved, aided by a prospective change in North Carolina's Medicaid eligibility rules. She also clarified that only the previously discussed portfolio of 14 properties is subject to market-based rent resets.

Speaking for Omotayo Okusanya of Deutsche Bank, an analyst asked for the circumstances that led LTC to restore two master leases to accrual-basis accounting and whether more such changes were likely in 2025.

Answer

Co-CEO Pamela Shelley-Kessler explained the change was required by GAAP due to sustained strong operational performance in those portfolios, which increased confidence in collecting rent through maturity. She noted that while about half the portfolio remains on a cash basis, no further reversions are anticipated for 2025, though it remains a possibility for future years as other leases approach maturity.

Omotayo Okusanya of Deutsche Bank requested an overview of retail categories facing pressure and how the company's bad debt guidance accounts for these risks.

Answer

EVP & CFO Vincent Chao responded that with 85% of ABR from necessity or service-based retail, the portfolio is somewhat insulated. He emphasized that there are always winners and losers within any category and that stronger tenants are taking market share, highlighting the importance of tenant adaptability.

Omotayo Okusanya inquired about NNN's acquisition and disposition strategy, asking which retail categories the company is looking to increase or decrease its exposure to in the coming year.

Answer

CEO Stephen Horn emphasized that NNN prioritizes real estate fundamentals over specific categories. However, given their relationship-focused model, he anticipates 2025 acquisitions will be similar to the current portfolio, with a focus on convenience stores, auto service, and QSRs. Dispositions are asset-specific, aimed at pruning underperforming locations identified with tenant partners, rather than exiting entire categories. He noted that last year they opportunistically sold some medical urgent care assets.

Omotayo Okusanya of Deutsche Bank followed up on the raised same-store NOI guidance, asking about its key drivers, and inquired about exposure to potentially at-risk tenants like Torrid and Claire's.

Answer

CFO Michael Bilerman explained that the revised guidance reflects a range of variables, not one specific factor. Regarding tenant credit, he stated the watch list is manageable and the named tenants are not in Tanger's top 25. CEO Stephen Yalof added that outlet locations are often highly profitable for retailers and are typically among the last stores to be closed during a restructuring.

Omotayo Okusanya asked about the outlook for the jewelry category given market headwinds and inquired about the company's interest rate swap strategy for upcoming expirations.

Answer

EVP, Leasing Justin Stein stated that the jewelry category has been 'fairly strong,' with positive trends and new business from brands like Pandora. CFO and CIO Michael Bilerman detailed the company's swap strategy, confirming they successfully refinanced swaps expiring next February at a lower rate and will continue to look for opportunities to manage exposure on swaps expiring in August.

Omotayo Okusanya of Deutsche Bank revisited the topic of Camden's expected acceleration in blended lease rates, noting it is an outlier versus peers and asking for the specific drivers behind this confidence.

Answer

President & CFO Alex Jessett reiterated that the expected acceleration from Q2 to Q3 is modest. He emphasized the core reason for optimism is that the market's weakness is supply-driven, not demand-driven. With supply being absorbed at record rates and deliveries declining, he believes a return of pricing power through the second half of the year is a logical progression.

Omotayo Okusanya of Deutsche Bank sought a breakdown of the $50 million NOI opportunity in the lease-up portfolio between occupancy gains and pricing power, and asked about potential NOI disruption. He also requested a reconciliation of the FFO guidance increase and inquired about the impact of recent healthcare legislation.

Answer

President & CEO Peter Scott explained the vast majority of the $50M NOI upside comes from leasing up vacant space from 70% to 90%, with a smaller contribution from higher rates. EVP & CFO Austen Helfrich attributed the guidance raise to G&A savings and higher same-store NOI, which offset increased disposition dilution, noting timing uncertainty on sales. Scott also commented that while it's too soon to tell the full impact of new legislation, it generally favors the lower-cost outpatient model.

Omotayo Okusanya inquired about feedback from health system tenants regarding the macro environment and asked about the tactical plan for managing the significant debt and swaps maturing in 2026.

Answer

CEO Peter Scott and COO Robert Hull both confirmed that demand from health systems remains strong and is increasing, with no signs of a slowdown. On the balance sheet, Scott acknowledged the 2026 maturities are a key focus and stated that the current 6.4x leverage is too high. The plan is to delever, potentially going lower initially to shed underperforming assets before redeploying capital.

Omotayo Okusanya asked about the company's sustainable long-term earnings growth rate, the timeline to achieve it given near-term deleveraging headwinds, and the value proposition for investors during this transition.

Answer

COO Robert Hull noted that while the historical MOB growth rate is around 3%, HR has a near-term opportunity to outperform on a core basis, despite refinancing headwinds. Interim CEO Constance Moore added that management is making a deliberate choice to accept near-term dilution from asset sales to pay down debt, positioning the company for stronger long-term growth.

Omotayo Okusanya of Deutsche Bank requested more concrete details on the operational actions taken to improve the transient RV business, seeking specifics beyond high-level commentary that contributed to the better-than-expected results.

Answer

President John McLaren elaborated that the improvement stems from a hyper-focus on fundamentals, particularly guest retention and encouraging repeat bookings. He highlighted that a key change has been the enhanced use of data and technology, which allows the team to be more 'laser focused' and tactical in identifying opportunities and deploying resources at specific properties, a capability more advanced than in the past.

Omotayo Okusanya requested more detail on the company's inability to flex operating expenses, asking which specific third-party costs were not reduced and what caused the process breakdown.

Answer

Fernando Castro-Caratini, Executive, explained that across over 500 properties, small incremental expenses can add up significantly. The primary expense overages stemmed from landscaping, tree trimming, and pool repairs, which came in higher than forecasted, even as the company met its payroll targets.

Omotayo Okusanya from Deutsche Bank AG asked for clarification on the Prospect California assets, questioning if a sale was the only option. He also sought details on how operators are preparing for legislative changes to the ACA and Medicaid, and questioned why the company's cash and revolver balances remained elevated.

Answer

Chairman, President & CEO Edward Aldag clarified that both leasing and purchasing entities are evaluating the Prospect assets ahead of an auction. On legislative changes, he noted the long-term impact is uncertain but operators are not overly concerned. EVP & CFO R. Steven Hamner explained the elevated quarter-end cash balance was a temporary measure for covenant caution and the revolver was paid down the next day.

Omotayo Okusanya sought confirmation on whether the Prospect California assets would be sold or re-tenanted, asked how operators are preparing for future ACA and Medicaid changes, and questioned why the line of credit balance remained elevated at quarter-end.

Answer

CEO Ed Aldag clarified that both sale and lease options are being explored for the California assets, with a stalking horse bidder to be announced soon. On legislative changes, he noted the long-term impact is uncertain, but operators are not alarmed. CFO R. Steven Hamner explained the line of credit was drawn down in an abundance of caution at quarter-end and was fully repaid in early July.

Omotayo Okusanya of Deutsche Bank sought clarification on the plan for the Prospect California assets, asked how operators are preparing for legislative changes to the ACA and Medicaid, and questioned the elevated balance on the line of credit.

Answer

Edward Aldag, Chairman, President & CEO, stated that the Prospect California assets are being evaluated for both lease and purchase, with a stalking horse bid expected soon. He noted operators are not overly concerned about ACA changes yet. R. Steven Hamner, EVP & CFO, explained the line of credit balance was a temporary measure for quarter-end caution and was repaid in early July.

Omotayo Okusanya of Deutsche Bank sought clarity on the disposition strategy for Prospect's California assets, operator preparations for ACA/Medicaid changes, and the reason for the elevated quarter-end cash and credit line balances.

Answer

CEO Edward K. Aldag Jr. explained the Prospect California assets are subject to an upcoming auction with interest from both potential buyers and lessees. He noted that the impact of ACA changes is uncertain but could be positive for operators. CFO R. Steven Hamner clarified that the high cash and credit line balance at quarter-end was a temporary measure for caution and was reversed immediately in July.

Omotayo Okusanya of Deutsche Bank sought clarification on the mechanics of the cash rent ramp-up for transitional tenants, asking if it was tied to cash flow. He also inquired about the quarter-end drawdown on the credit line to satisfy a covenant, questioning if this action might be repeated in future quarters now that impairment write-downs are settled.

Answer

Chairman, President and CEO Edward K. Aldag explained the rent ramp-up is not based on tenant performance but follows a fixed schedule of increasing percentages (e.g., 25%, 50%, 75%) until it reaches 100% in Q4 2026. EVP and CFO R. Hamner addressed the credit line draw, noting it was a precautionary measure taken while impairment calculations were still in progress and, in hindsight, was not necessary. He stated that while the option remains available, there is no current expectation that it will be needed going forward.

Omotayo Okusanya asked if any new covenants restrict access to the secured credit line's capacity and sought more detail on the composition of the unencumbered asset pool, such as its geographic split.

Answer

CFO R. Hamner confirmed there is full access to the $1.5 billion credit facility, with minimal current drawings. He estimated the unencumbered asset pool is slightly more weighted towards U.S. assets, which provides significant flexibility for future balance sheet strategies.

Omotayo Okusanya from Deutsche Bank asked for clarification on the third-quarter earnings impact from the Steward assets that have not yet been transitioned and how to model their performance going forward.

Answer

CEO Edward Aldag clarified that these properties are largely non-operational (e.g., closed facilities in Youngstown and San Antonio) or are still operated by Steward, not MPT. He stated that these specific assets should not have an additional negative financial impact on Medical Properties Trust.

Omotayo Okusanya questioned why the high end of the FFO guidance was not increased despite strong SHOP results and a higher acquisition outlook. He also asked about growth opportunities in the high-occupancy Canadian SHOP portfolio.

Answer

Debra Cafaro, Chairman & CEO, emphasized the strong 8% FFO growth at the new midpoint. Robert Probst, EVP & CFO, explained that second-half FFO growth from SHOP is partially offset by headwinds from recent dispositions and higher-rate refinancing. For Canada, J. Justin Hutchens, EVP - CIO of Senior Housing, noted there is still occupancy upside, opportunities in higher-RevPOR assisted living, and emerging pricing power.

Omotayo Okusanya from Deutsche Bank raised concerns about the sequential slowdown in SHOP same-store NOI growth and asked about the achievability of the high end of the full-year guidance. He also inquired about the potential impact of NIH funding changes on the Life Science business.

Answer

EVP & CFO Robert Probst noted the 14% Q1 growth was strong and ahead of internal expectations, reaffirming the full-year guidance and expecting a stronger second half. EVP J. Hutchens added that the best is yet to come for growth. CEO Debra A. Cafaro addressed the NIH funding concern, stating the proposal is on hold and would have a manageable mid-single-digit impact on university research budgets if enacted.

Omotayo Okusanya inquired about the drivers behind the strong 2025 same-store NOI guidance for the Medical Office Building (MOB) portfolio, given recent occupancy declines, and asked how Ventas OI (VOI) is strategically used to capitalize on senior housing demographic tailwinds.

Answer

An executive, identified as Bill Grant, explained that a 15% increase in leasing activity during 2024 is expected to drive occupancy and NOI gains in the MOB segment in 2025. J. Hutchens, an executive, added that the Ventas OI platform's hyper-local data analytics are crucial for informing investment, disposition, and operational decisions to capture sustained growth in senior housing.

Omotayo Okusanya from Deutsche Bank inquired about any potential impacts on the senior housing sector stemming from the upcoming election season.

Answer

CEO Debra Cafaro stated that Ventas is well-positioned due to its consumer-driven product, which should see limited impact from election outcomes. She added that as a public company, Ventas currently holds an advantaged position relative to private equity in the capital markets, which is a benefit.

Omotayo Okusanya of Deutsche Bank asked for an update on July operating trends, whether seller pricing is becoming more rational, and how concessions from new Class A supply are impacting IRT's Class B portfolio and its core consumer.

Answer

President & CFO Jim Sebra reiterated that July trends were consistent with Q2, with healthy demand but continued pressure on new lease rates. He confirmed the bid-ask spread is narrowing as sellers become more rational. He acknowledged that aggressive Class A concessions can 'cherry pick' residents and reduce IRT's ability to push rents, a dynamic similar to what was experienced last year.

Omotayo Okusanya asked about the initiatives in place to control operating expenses in 2025 and the factors that would determine performance at the high or low end of the guidance range.

Answer

Executive Janice Richards confirmed that the 'smart spending' fundamentals from 2024 will continue, focused on the resident experience. CFO James Sebra added that their internal procurement team actively renegotiates contracts to manage costs, while unforeseen inflationary pressures could push results toward the high end of the range.

Omotayo Okusanya of Deutsche Bank inquired about the potential for new development starts, the risk of rising insurance costs in 2025, and requested clarification on the FFO impact from a recent JV payoff.

Answer

Executive Scott Schaeffer stated that IRT is not looking to start new developments, preferring to focus on deleveraging and acquiring stable assets. CFO James Sebra acknowledged insurance rate pressure but expressed confidence in IRT's negotiating position due to having no claims this year. He also clarified the JV payoff would add approximately $3 million, or $0.015 per share, to Q4 core FFO.

Omotayo Okusanya from Deutsche Bank AG asked for perspective on the disconnect between strong retail fundamentals and negative investor sentiment, and if future tariff concerns are valid.

Answer

CEO Conor Flynn acknowledged the negative news cycle but emphasized Kimco's focus on delivering top-quartile FFO growth, which is on track for over 5% for a second straight year. He noted that private markets recognize the strong underlying cash flow growth, which contributes to the valuation disconnect.

Omotayo Okusanya of Deutsche Bank asked about the probability of Kimco executing a creative, large-scale value-creation deal, similar to the Albertsons transaction, in the near future.

Answer

CEO Conor Flynn responded that while the team is always looking for unique opportunities, the current healthy market lacks the significant dislocation or mispricing that typically enables such deals. He emphasized that Kimco's strong balance sheet positions it well for when the next cycle of distress occurs. He noted that few of the currently troubled retailers are real-estate rich, limiting opportunities for similar transactions at present.

Omotayo Okusanya of Deutsche Bank asked about the possibility of entering new markets or exiting others besides Pittsburgh, and inquired about any potential move-outs in the 50,000 to 100,000 square foot range that could impact occupancy.

Answer

CEO Ted Klinck affirmed they are pleased with their current market footprint and have no plans for new market entries or additional exits beyond Pittsburgh. CFO Brendan Maiorana addressed occupancy risk by stating that with a 45-50% retention rate and strong new leasing, they expect to more than replace any move-outs, leading to net occupancy gains.

Omotayo Okusanya requested clarification on the components of the FFO guidance increase, specifically the drivers for the $0.01 from operations and the $0.03 from acquisitions.

Answer

Executive Brendan Maiorana explained that the initial guidance did not include the impact of the recently closed Advanced Auto Parts Tower acquisition; adding it to the forecast accounts for the $0.03 of accretion. The $0.01 from operations is a net result of various portfolio-wide adjustments, including a modest increase in the straight-line rent outlook, while core same-store and occupancy guidance ranges remain unchanged.

Omotayo Okusanya asked if there were any regulatory factors across Highwoods' Best Business District (BBD) markets that could potentially impact supply, demand, or leasing economics.

Answer

COO Brian Leary responded that the regulatory environment is a significant advantage for their markets, describing them as 'open for business,' government-friendly, and low-cost. He cited positive, pro-growth developments like major infrastructure spending in Nashville and public-private partnerships in Atlanta and Charlotte as key differentiators that support economic development and, by extension, leasing demand.

Omotayo Okusanya from Deutsche Bank inquired about the potential impact of the New York City mayoral race on commercial real estate development and regulation, and how BXP is preparing for it.

Answer

Owen Thomas, Chairman & CEO, acknowledged that some candidate policies are not constructive but noted the election hasn't occurred and that New York State has significant control over city governance, which could moderate policy. Hilary Spann, EVP of the New York Region, added that major tenants make long-term plans that extend beyond mayoral terms, as evidenced by the 20-year lease commitment at 343 Madison.

Omotayo Okusanya from Deutsche Bank asked about potential opportunities for BXP to exceed its guidance, shifting the focus from risks to upside drivers.

Answer

President Douglas Linde identified accelerated leasing of vacant space as the primary driver for potential outperformance. He highlighted the Manhattan portfolio, including 360 Park Avenue South, and the Embarcadero Center in San Francisco as the key assets with the most opportunity for meaningful occupancy gains that could drive revenue recognition faster than currently modeled. He reiterated that tenant activity in these markets remains robust.

Omotayo Okusanya inquired about BXP's strategy for balancing the certainty of an early lease renewal against the potential for better economics by waiting for a stronger market.

Answer

President Douglas Linde firmly stated that BXP's philosophy is to 'not be market timers.' He explained that the company will always engage constructively with a client interested in renewing. He emphasized that eliminating vacancy downtime creates value that can be shared in a renewal, making it preferable to waiting for a potentially better deal from a new tenant.

Omotayo Okusanya of Deutsche Bank asked about Welltower's philosophy on aligning incentives, noting high insider ownership and a lack of stock sales, and questioned what further steps are being taken.

Answer

CEO Shankh Mitra emphasized the 'all in' culture, confirming that the management team has never sold a share to ensure their interests are fully aligned with shareholders. He explained the goal is to extend this philosophy to operating partners and frontline employees through carefully designed incentive structures that prioritize the resident and employee experience, creating a 'win-win equation' for all stakeholders.

Omotayo Okusanya asked if the SHOP portfolio will continue to grow as a percentage of total NOI and if there is an optimal exposure level, considering potential future downturns.

Answer

Shankh Mitra (CEO & CIO) gave a 'resounding yes' that the SHOP portfolio's contribution will grow. He referenced a past letter to shareholders to explain his philosophy that volatility is not risk; the permanent loss of capital is. He stated the balance sheet is designed to handle the volatility inherent in owning SHOP assets.

Omotayo Okusanya asked about the 3151 Market project, specifically the mix of life science versus office tenant tours and the yield implications. He also questioned if potential 2025 recapitalizations were included in guidance and the size of the Q4 2025 move-outs.

Answer

President & CEO Gerard Sweeney stated the 3151 Market pipeline is majority institutional, academic, and life science, but includes larger office requirements. He noted the economics are similar, as lower office rents are offset by lower capital costs. EVP & CFO Thomas Wirth confirmed a small benefit from potential recaps is in the 2025 guidance. EVP of Operations George Johnstone clarified the move-out is a 70,000 sq. ft. tenant in October, but the company still projects 88-89% year-end occupancy.

Omotayo Okusanya of Deutsche Bank sought to understand the drivers behind the 2025 FFO guidance range of $0.60 to $0.72 per share, noting it was lighter than expected. He asked for clarification on the key negative impacts and the reasons for the wide guidance range.

Answer

CFO Thomas E. Wirth attributed the lower guidance primarily to the development JVs, citing delayed leasing assumptions, no forecasted recapitalizations, higher cash interest expense, and lower development fees. Wirth explained the guidance range is wide because the high end could be reached through faster-than-projected leasing or successful recapitalizations. EVP of Operations George D. Johnstone added that potential upside in spec revenue could also contribute.

Omotayo Okusanya, on for Ohad Bregman, asked about the status of joint venture restructurings, the reason for a low quarterly retention rate despite an increase in full-year guidance, and the differing outlooks for asset sales versus land sales.

Answer

Executive Jerry Sweeney reported that most JV restructurings are complete, with two more expected to be resolved by year-end. Executive Vice President of Operations George Johnstone explained the Q3 retention rate was impacted by a single known move-out, and the full-year guidance was raised due to better-than-expected renewals. Mr. Sweeney clarified that land sales are more challenging due to difficult financing conditions for buyers, which caused previously expected deals to fall through.

Omotayo Okusanya asked about the expected building costs and yields for the new build-to-suit project and requested examples of the alternative, lower-cost opportunities being considered for the 2027 redevelopment projects.

Answer

Joel Marcus, Founder & Executive Chairman, stated that details on the build-to-suit project's costs and yields would be provided in future disclosures. For the 2027 projects, he explained that they are seeing renewed interest from tech companies, particularly in the AI sector, for their campus locations, which presents an alternative use for some sites.

Omotayo Okusanya of Deutsche Bank AG asked for comments on the ag-tech business, the Research Triangle market, and clarification on why some future projects might no longer qualify for capitalized interest.

Answer

Executive Chairman Joel Marcus explained that the ag-tech sector faces challenges with exit opportunities and incumbent dominance. SVP Hallie Kuhn highlighted Research Triangle's strength as a biomanufacturing hub. CFO Marc Binda clarified that interest capitalization would pause on certain projects that are nearing completion, pending tenant-specific fit-outs.

Omotayo Okusanya asked for the timeline on achieving the projected $32 million in G&A savings and inquired about the strategy for the remaining $300 million share buyback authorization, given the current stock price.

Answer

CFO Marc Binda indicated that the Q4 G&A run rate is a good indicator for 2025, suggesting the savings are already materializing. He reiterated that the company has utilized the $200 million allocated for opportunistic purchases in its guidance and will continue to monitor market conditions for further buybacks.

Omotayo Okusanya questioned the accretive nature of selling assets at a ~7.5% cash yield to fund developments at a 6.4% yield, and asked about the risk of future straight-line rent write-offs.

Answer

CFO Marc Binda explained that the assets being sold would require significant capital investment, making the redeployment into new, core developments a superior long-term strategy. Regarding write-offs, both Marc Binda and executive Joel Marcus characterized the recent event as a discrete, one-off situation with a long-term, inherited tenant, underscoring Alexandria's strong underwriting track record.

Omotayo Okusanya from Deutsche Bank asked how the company is planning for a potential change in the NYC mayoral administration and requested an update on the expansion of the Summit observation deck to new locations.

Answer

Chairman & CEO Marc Holliday expressed confidence in SLG's ability to adapt and succeed under any political leadership, citing a history of flourishing through five different administrations. Regarding Summit, he noted active progress in target cities like Tokyo and London, with hopes for an announcement by year-end, and confirmed the Paris location is on track for a Q1 2027 opening.

Omotayo Okusanya asked for an update on the office-to-residential conversion opportunity in New York City and how SL Green is thinking about its own portfolio for potential conversions.

Answer

CEO Marc Holliday stated that the volume of planned conversion deals is consistent with or ahead of prior expectations. He cited several examples on Third Avenue, including SLG's own 750 Third project, and projected that over 25 million square feet of office space will ultimately be converted city-wide, which has a significant firming effect on the office market.

Omotayo Okusanya of Deutsche Bank asked about the growth potential of the DPE (Debt and Preferred Equity) book and how quickly it could scale. He also inquired about any significant tenant move-outs or rightsizing events to be aware of for late 2024 and early 2025.

Answer

CEO Marc Holliday explained that future DPE business will be conducted in a fund format, which differs from the past. SL Green's capital commitment will be a percentage of each fund, making it highly profitable with associated fees but involving less balance sheet capital than before. Executive Steven Durels addressed the second question, stating there are no new, significant move-outs scheduled and that, conversely, the company is seeing more renewals than originally anticipated.

Omotayo Okusanya of Deutsche Bank questioned why the full-year occupancy guidance of 95.5%-96.0% implies a second-half decline, given the Q2 ending occupancy of 96.1%, and asked about potential tenant fallouts.

Answer

CFO Michael Fitzmaurice clarified that the expected deceleration in the second half is driven by planned move-outs within the same-property portfolio, which were anticipated in the original guidance. He also noted that the bad debt reserve for H2 is structurally higher than the unusually low levels experienced in H2 2024, which also impacts the same-property NOI outlook.

Omotayo Okusanya of Deutsche Bank asked why the full-year occupancy guidance of 95.5%-96% implies a decline from the 96.1% level achieved at the end of Q2.

Answer

CFO Michael Fitzmaurice explained that the expected deceleration in the second half of the year is driven by planned move-outs within the same-property portfolio, which was anticipated in the original guidance. He also noted that the bad debt reserve for H2 2025 is structurally higher than the actual low bad debt experienced in H2 2024, which also impacts the same-property NOI growth comparison.

Omotayo Okusanya from Deutsche Bank questioned why the full-year occupancy guidance of 95.5%-96.0% implies a potential decrease from the 96.1% achieved at the end of Q2.

Answer

CFO Michael Fitzmaurice clarified that the guidance anticipates some occupancy deceleration in the second half of the year due to planned move-outs within the same-property portfolio, which was factored into the original outlook. He also pointed to a structural increase in the bad debt reserve for H2 2025 compared to the low actuals from H2 2024, which also impacts the same-property NOI growth comparison.

Omotayo Okusanya from Deutsche Bank questioned why the full-year average occupancy guidance of 95.5% to 96% was not higher, given that the company ended the second quarter with 96.1% occupancy.

Answer

CFO Michael Fitzmaurice explained that the guidance anticipates some occupancy deceleration in the second half of the year due to planned move-outs within the same-property portfolio, which was factored into the original outlook. He also noted that a higher bad debt reserve for H2 2025 compared to H2 2024 contributes to the outlook.

Omotayo Okusanya from Deutsche Bank questioned why the full-year average occupancy guidance of 95.5% to 96% was not raised, given that the company ended the second quarter with occupancy at 96.1%.

Answer

CFO Michael Fitzmaurice clarified that some occupancy deceleration is expected in the second half of the year due to planned move-outs within the same-property portfolio, which was already factored into the original guidance. He also noted a structural increase in the bad debt reserve for the second half of 2025 compared to the actual low expense in the prior year, which also impacts same-property NOI comparisons.

Omotayo Okusanya from Deutsche Bank inquired about the nature of the Q1 lease terminations, the current tenant watchlist, and the company's exposure to 3PL tenants, particularly from Asia.

Answer

CFO Michael Fitzmaurice confirmed the $9 million in termination revenue was expected. COO Laura Clark added the bulk was from an office tenant in a property slated for redevelopment. Regarding 3PLs, Co-CEO Howard Schwimmer stated exposure is limited and that Rexford is highly selective, performing thorough credit analysis on all tenants and avoiding risky operators, even if it means carrying vacancy.

Omotayo Okusanya of Deutsche Bank asked for a breakdown of same-store revenue and expense growth for Q1 2025 and how that composition is expected to change to achieve the 3-4% NOI growth target in 2026.

Answer

Doug Healey, SVP of Leasing, and Jackson Hsieh, President and CEO, explained that Q1 2025 results were for the current portfolio, which saw revenue growth more than offset operating expense increases. They clarified that the 3% to 4% growth target for 2026 applies to the different, go-forward portfolio, on which more detail will be provided soon.

Omotayo Okusanya of Deutsche Bank asked management to reconcile their view that fundamentals have troughed with the ongoing weakness in the housing market, and inquired about trends in online advertising and search rates.

Answer

CEO Dave Cramer explained their confidence in a trough is based on absorbing supply, positive inflections in key markets like Portland and Houston, strong ECRI results, improved operational productivity post-PRO transition, and easier year-over-year comps in the back half of the year. He also noted that search engine data shows a spike in consumer shopping for self-storage, and NSA is using its tools to capture this increased activity.

Omotayo Okusanya of Deutsche Bank asked management to reconcile their commentary about fundamentals troughing with the persistent weakness in the housing market. He also inquired about current trends in online advertising rates from search engines.

Answer

CEO Dave Cramer explained his conviction in a trough is based on several factors: absorbing supply, strength in key markets like Portland and Houston, a healthy consumer base, operational improvements from the PRO transition, and easier year-over-year comps in the back half of the year. Regarding ad rates, Cramer noted that recent Google data shows a significant spike in consumer searches for self-storage, and NSA is using its new tools to spend appropriately and capture this increased activity.

Omotayo Okusanya asked about the potential impact of a softer consumer outlook on storage demand and pricing power. He also inquired about opportunities for further payroll savings and operational efficiencies through technology.

Answer

CEO Dave Cramer stated that while the company monitors consumer health closely, it has not seen any material changes in customer behavior like delinquencies or move-outs. On the expense side, he believes significant payroll savings have already been realized, but sees long-term opportunities for tech-driven efficiencies, particularly in the customer care center and digital transaction platforms.

Omotayo Okusanya questioned how NSA offsets steep street rate declines to maintain profitability and asked if the private market's behavior signals any change in pricing trends.

Answer

CEO Dave Cramer explained that profitability is supported by operational efficiencies, revenue from occupancy gains, a sophisticated ECRI program, and longer customer lengths of stay which increase lifetime value. He noted that sophisticated private operators are following public REIT pricing, while smaller, less sophisticated operators have remained largely static and did not raise rates significantly during the pandemic.

Omotayo Okusanya from Deutsche Bank asked about the key differences between U.K. retail parks and U.S. big-box retail, particularly concerning the threat from e-commerce.

Answer

CEO Sumit Roy highlighted that U.K. retail parks have net-lease-like characteristics where tenants share in common area CapEx costs. He also explained that the tenants in these parks have already adapted their omnichannel strategies to survive, mitigating e-commerce risk. The focus now is on value creation by reconfiguring sites to non-discretionary uses.

Omotayo Okusanya of Deutsche Bank asked for a comparison of tenant credit health and the watch list composition between the U.S. and European portfolios.

Answer

CEO Sumit Roy explained that the European portfolio contributes very little to the credit watch list due to its newer vintage. He noted that some European assets with weaker tenants were acquired intentionally as part of an active asset management strategy to recapture the real estate and re-lease at higher rents, a strategy that has proven successful.

Omotayo Okusanya questioned why Public Storage's move-in rates were down significantly while peers reported flatter trends, asking about the strategy. He also asked if non-housing demand drivers were showing unusual strength.

Answer

H. Boyle explained that PSA optimizes for total long-term revenue, a dynamic process involving rate, volume, and promotions. He noted that while move-in rent was down 4.6% in Q1, strong volume meant net contract rent from move-ins was down only 2.3%, an improvement from Q4. He added that non-housing demand has seen broad-based improvement off the bottom, but no single driver stands out.

Omotayo Okusanya asked how Public Storage is factoring in recent weak consumer sentiment data and commentary from retailers about a softer consumer into its demand and pricing outlook for 2025.

Answer

Executive H. Boyle acknowledged the commentary but noted that the storage customer has remained resilient, with strong cohorts showing low delinquency and move-out trends. While overall demand is down from 2021 peaks, he stated that customer behavior was encouraging through 2024 and into early 2025, with the outlook for the year assuming demand dynamics similar to the previous year.

Omotayo Okusanya asked about the potential impact of tariffs on Brixmor's tenants and its own construction costs.

Answer

CEO James Taylor expressed confidence that strong rent growth would offset potential cost increases. President and COO Brian Finnegan added that retailers are now better prepared to handle tariffs with diversified sourcing. He also noted that value-oriented retailers, a key part of Brixmor's tenant base, can thrive in an inflationary environment.

Omotayo Okusanya of Deutsche Bank asked about the potential impact of tariffs on both tenant businesses and Brixmor's own construction costs.

Answer

CEO James Taylor expressed confidence that strong rent growth would offset potential construction cost increases. President & COO Brian Finnegan added that retailers are now better prepared to handle tariffs by diversifying sourcing. He also noted that value-oriented retailers can thrive in such an environment and that consumer trends remain resilient.

Omotayo Okusanya inquired about UDR's perspective on developing townhouse-style products, similar to the build-for-rent sector.

Answer

CEO Tom Toomey confirmed UDR's familiarity and past experience with the product, noting it fits well in specific, less-dense suburban locations. However, he emphasized that UDR's primary strategy is to pursue density wherever possible to maximize a site's long-term cash flow and capital footprint, making townhome development a niche opportunity rather than a core focus.

Omotayo Okusanya questioned the scale of the opportunity to acquire distressed assets, given that cap rates remain tight. He also asked for an update on fraud-related issues and the effectiveness of MAA's preventative measures.

Answer

Brad Hill, President and CEO, conceded that widespread distress has not materialized but noted they are finding opportunities in lease-up assets where sellers seek an early exit, allowing MAA to acquire properties below replacement cost. Tim Argo, EVP and Chief Strategy Officer, addressed fraud, stating it is not a significant issue for the portfolio due to robust preventative measures, including AI-based tools and specialized staff training. He pointed out that delinquency in Atlanta, a market known for fraud challenges, is in line with the portfolio average.

Omotayo Okusanya from Deutsche Bank requested details on the average ECRI (existing customer rate increase) percentage in Q3 and the trend in year-over-year street rates throughout the quarter.

Answer

President and CEO Christopher Marr stated that the average ECRI has remained consistent, in the 'high teens' percentage range. He reiterated that street rates were down an average of 11% year-over-year for the third quarter, with that gap narrowing to approximately 9.4% in the last two weeks of October.